omnis investments limited investor briefing€¦ · valuations now more attractive, but structural...
TRANSCRIPT
OMNIS INVESTMENTS LIMITED Investor briefing
October 2014
WELCOME
Philip Martin, Marketing Director Gerry Aherne, Non-Executive Director
AGENDA
o UK Equity Fund and US Equity Fund - Schroders | The Boston Company
o The outlook for bonds and alternative investments - Schroders | Octopus | Threadneedle
o UK Bond Fund and Global Bond Fund – Threadneedle | Schroders
o The outlook for Equity markets - Jupiter | Schroders | The Boston Company
o Developed Markets Equity Fund - Thomas White International (VT)
o Emerging Markets Equity Fund and Alternative Strategies Fund - Jupiter | Octopus
o Questions
o Close
FP Omnis UK Equity Fund
Sue Noffke, Schroders
STOCK CONTRIBUTIONS
o Positive contributions from • Pharmaceutical company Shire which was subject to a bid and which we
subsequently sold
• Zero weight in the underperforming food retail sector
• Stock selection in travel & leisure (Intercontinental Hotels Group)
o Negative contributions from • Overweight in life assurance sector was negatively impacted by changes
announced in the budget in March. Companies have since recovered from their lows at the end of March
• Underweight the more defensive areas of the market (utilities, beverages and tobacco) which performed well
For illustrative purposes only and not a recommendation to buy or sell shares Source: Schroders, performance is gross of fees for Omnis UK Equity Fund based on end of day prices. Performance will be reduced as a result of fees Benchmark is FTSE All Share index. Performance shown from inception date 3 March 2014 to 30 September 2014
Valuations now more attractive, but structural issues remain
-200.0
-150.0
-100.0
-50.0
0.0
50.0
100.0
150.0
Jan 12
May 12
Oct 12
Mar 13
Jul 13
Dec 13
Apr 14
Aldi Lidl Sainsbury's Asda Morrisons Tesco
Discounters are winning1 Tesco UK trading margin2
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Share price relative to FTSE All-Share
Source: 1Kantar 12 week data, ONS, Exane BNP Paribas, 2Company reports, Bernstein analysis, 3Thomson Datastream, data shown from 2 January 2012 to 30 September 2014
Annual share change - basis points
30
40
50
60
70
80
90
100
110
120
Jan
12
Mar
12
May
12
Jul 1
2 Se
p 1
2 N
ov 1
2 Ja
n 13
M
ar 1
3 M
ay 1
3 Ju
l 13
Sep
13
Nov
13
Jan
14
Mar
14
May
14
Jul 1
4 Se
p 1
4
Sainsbury's
Tesco
Food retail sector - positive contribution from not owning
CSR
For illustrative purposes only and not a recommendation to buy or sell shares Source: Schroders, Thomson Datastream, 1 January 2012 to 17 October 2014
75 100 125 150 175 200 225 250 275 300 325 350 375 400
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14
CSR relative to the FTSE All-Share Index
1 January 2012 = 100
Omnis initial purchase at launch on 3 March 2014
Case study: CSR, 0.9% of fund at 30 Sept
The business
A mid-cap semiconductor company focussing on design of connectivity (Bluetooth, WIFI etc.) chips
Investment case
o Management have disposed of / run down legacy businesses, returning cash to investors
o Focussed now on market-leading positions in growing Bluetooth Smart applications for automotive / music sectors
o Long-term opportunity in ‘Internet of Everything’ where everyday objects are able to interact with each other and the internet
o Recently received several takeover approaches culminating in an agreed deal from Qualcomm at £9 a share in cash
For illustrative purposes only and not a recommendation to buy or sell shares Source: Schroders, FactSet 30 September 2014. Length of bars is illustrative and not a true representation of the underweight or overweight position
Underweighting Market Overweighting
Prudential +2.5%
Rolls Royce +2.4%
Carnival +2.2%
BG Group +2.2%
Legal & General +1.9%
Reed Elsevier +1.6%
Friends Life +1.6%
Rio Tinto +1.6%
Daily Mail & General Trust +1.6%
ICAP +1.5%
Royal Dutch Shell -2.9%
Diageo -2.2%
British American Tobacco -1.9%
Reckitt Benckiser Group -1.7%
National Grid -1.6%
SABMiller -1.6%
Shire -1.5%
BP -1.4%
Standard Chartered -1.1%
HSBC -1.1%
Portfolio positioning vs the FTSE all-share index
Underweighting Market
For illustrative purposes only and not a recommendation to buy or sell shares Source: Schroders, PRISM (Style Research), FactSet 30 September 2014. Length of bars is illustrative and not a true representation of the underweight or overweight position *ex Index comprised of holding in Daily Mail & General Trust
Overweighting
Index Portfolio FTSE All-Share
FTSE 100 72.2 82.0
FTSE 250 21.4 14.6
FTSE Sm Cap 0.8 3.4
AIM 0.8 -
ex Index* 1.6 -
Cash 3.2 -
100% 100%
Life insurance +4.9%
Media +4.8%
Financial services +2.7%
Industrial engineering +2.3%
Aerospace & defence +2.3%
Beverages -4.0%
Equity investments instruments -3.5%
Gas, water and multi-utilities -3.0%
Support services -1.9%
Real estate investment trusts -1.8%
Portfolio Risk
Predicted tracking error p.a. 2.1%
Beta 1.0
# of stocks 55
Sector positioning vs the FTSE all-share index
FP Omnis US Equity Fund
George Saffaye, The Boston Company
As of September 30, 2014
Where applicable, includes assets managed by investment personnel of The Boston Company Asset Management, LLC acting in their capacity as officers of affiliated entities. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
Total Assets Under Management: $48.8 Billion Total Staff: 157
Total Clients: 200 Total Investment Professionals: 79
Boston Safe Deposit Company incorporated 1867, The Boston Company Asset Management established 1970
Independent teams focused on a fundamental research approach to global equity management
US Equity Non US Equity Alternative
All Cap
Large Cap
Mid Cap
Small/Mid Cap
Small Cap
Sector Specific
Global
Developed Markets
Emerging Markets
Region/Country Specific
Small Cap
Equity Long/Short
Short Extension
The Boston Company Asset Management LLC
U.S. Market Environment at Fund’s Launch • The U.S. market correction that began in March and continued into April spurred a rotation away from 2013’s leaders.
• Correlations rose during the rotation into defensive names (primarily Energy, Utilities and Consumer Staples), absent any
fundamental changes.
• Growth stocks were affected by headline events, such as cold weather, Fed tapering, the Russia/Ukraine conflict, but the decline still had no fundamental basis.
• Sentiment and valuation drove the decline, with biotech, retailers, social media and technology among the hardest hit. The Boston Company’s Reaction • We reduced risk and repositioned into fundamentally stronger companies with less valuation risk.
• We favored cheaper beneficiaries with current fundamental tailwinds, such as Apple and UnitedHealth Group. Into the summer • We bought/added to growth stocks that were more attractively valued and sold stocks with potentially extended valuations.
• We also identified new opportunities that benefited, especially as the market broadened out.
• Notable sectors of activity were Consumer, Industrials, Health Care and Technology.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Statements made herein reflect the current opinion of The Boston Company Asset Management, LLC and are subject to change.
9423
PERFORMANCE DRIVERS
Individual Stock Contributions to Equity Return - March 1, 2014 - September 30, 2014
Where applicable, excludes cash, ETFs and futures. Performance history of less than two years may not provide an adequate basis from which to determine the performance of a strategy. Past performance is not a guarantee for future performance. It should not be assumed that securities identified were or will be profitable or that decisions we make in the future will be profitable. Certain securities may not remain in the portfolio at the time that you receive this report. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. The information shown above is supplemental to the GIPS presentation that can be found at the end of this book along with other important disclosures.
Stock Sector
Ad
ded
Val
ue Apple Inc.
Microsoft Corporation
Gilead Sciences, Inc.
PepsiCo, Inc.
Vertex Pharmaceuticals Incorporated
Information Technology
Information Technology
Health Care
Consumer Staples
Health Care
Sub
trac
ted
V
alu
e
Whole Foods Market, Inc.
Las Vegas Sands Corp.
LinkedIn Corporation Class A
ServiceNow, Inc.
Michael Kors Holdings Ltd
Consumer Staples
Consumer Discretionary
Information Technology
Information Technology
Consumer Discretionary
Omnis: Since inception performance Contribution Analysis
0.1
2.4
4.2
5.1
5.7
11.9
10.3
13.6
18.2
28.4
0.0
0.0
4.0
5.8
5.8
10.2
10.5
16.6
17.0
30.2
0 5 10 15 20 25 30 35
Utilities
Telecommunication Services
Materials
Financials
Energy
Industrials
Consumer Staples
Health Care
Consumer Discretionary
Information Technology
Openwork Omnis
Russell 1000 Growth
Economic Sector Weights (%)
Characteristics
Price/Earnings Ratio 18.9x 18.2x
Price/Sales Ratio 2.2x 2.1x
LT Debt/Capital 29.1% 39.6%
IBES Long Term Growth Rate 15.6% 14.7%
Wtd. Avg. Market Cap $121.6B $118.0B
Openwork Omnis
Russell 1000 Growth
Five Largest Holdings (%)
Company Sector
Apple Inc. Information Technology 6.33 5.94 Microsoft Corporation Information Technology 3.41 2.42 PepsiCo, Inc. Consumer Staples 2.85 1.38 Gilead Sciences, Inc. Health Care 2.75 1.60 Schlumberger NV Energy 2.49 1.29
Five Largest Active Positions (%)
Company Sector
Verizon Communications Inc.Telecommunication Services 0.00 2.02 IBM Corporation Information Technology 0.00 1.75 Coca-Cola Company Consumer Staples 0.00 1.66 PepsiCo, Inc. Consumer Staples 2.85 1.38 Praxair, Inc. Materials 1.79 0.37
R1000G Omnis
R1000G Omnis
Where applicable, excludes cash, ETFs and futures. Performance history of less than two years may not provide an adequate basis from which to determine the performance of a strategy. Past performance is not a guarantee for future performance. It should not be assumed that securities identified were or will be profitable or that decisions we make in the future will be profitable. Certain securities may not remain in the portfolio at the time that you receive this report. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. The information shown above is supplemental to the GIPS presentation that can be found at the end of this book along with other important disclosures.
PORTFOLIO CONSTRUCTION As of September 30, 2014
FP Omnis Global Bond Fund
Thomas Sartain, Schroders
2014 so far
Investment roadmap views stand firm
Investment Theme True? Year to date
US and UK outperformance Global growth momentum is positive led by US and UK signalling higher rates
ECB Policy Error Downward pressures remain, ECB is yet to implement monetary policy
Emerging market differentiation is key Currency volatility declining, local rates
attractive
FX as a monetary policy tool ECB has yet to act, strength of the Euro stifling growth
Source: Schroders
THEMES WE ARE LOOKING TO EXPLOIT
Trade expression
Investment Theme Trade Rationale YTD Performance
US and UK outperformance
Underweight duration in the US/UK
Global growth increasing, inflation increasing, allocate duration away from US/UK into Europe
ECB Policy Error
Tactical exposure to periphery, country allocation of US/UK into Europe, short EUR
Peripheral spreads have tightened, positioned to benefit if ECB does finally act on strength of EUR
Emerging market differentiation is key
Long select EM currencies
“Former fragile five” continue improving, offering investment opportunities
FX as a monetary policy tool Long USD vs. short EUR
Strength of the EUR remains too strong, the ECB will need to act to weaken the currency
Source: Schroders
THEMES WE ARE LOOKING TO EXPLOIT Themes in action in the portfolio
-10
-5
0
5
10
15
20
Jun
80
Jun
82
Jun
84
Jun
86
Jun
88
Jun
90
Jun
92
Jun
94
Jun
96
Jun
98
Jun
00
Jun
02
Jun
04
Jun
06
Jun
08
Jun
10
Jun
12
UK Nominal GDP UK Base Rate
-5
0
5
10
15
20
Jun
80
Jun
82
Jun
84
Jun
86
Jun
88
Jun
90
Jun
92
Jun
94
Jun
96
Jun
98
Jun
00
Jun
02
Jun
04
Jun
06
Jun
08
Jun
10
Jun
12
US Nominal GDP Fed Funds Target
UK nominal GDP vs. base rate US nominal GDP vs. Fed funds
Source: Schroders, Bloomberg as at 1 May 2014
WHY ARE INTEREST RATES SO LOW?
Country breakdown (in CTD)
1.4 1.1
0.7 0.6 0.5 0.4 0.2 0.2 0.2 0.1 0.1
2.0
1.3
0.6 0.4 0.3 0.3
0.2 0.2 0.1 0.0 0.1 0
0.5
1
1.5
2
2.5
USA Japan UK France Italy Germany Spain Canada Global Sweden Switzerland
Portfolio Benchmark
Source: Schroders / Barclays as at 30 September 2014. Based on un-audited data Note: Countries where the portfolio exposure is less than 0.1 and -0.1 years have been excluded. Breakdown of corporates by Barcap level 3 Note: Sectors with active DTS allocation of of less than 0.03 have been excluded
41.9
26.4
16.4
6.1 2.8 1.3 1.2 0.7 0.5 0.5 0.4 0.3
42.0
26.5
16.1
6.2 2.8 1.4 1.2 0.8 0.5 0.4 0.3 0.2
0
10
20
30
40
50
USD EUR JPY GBP CAD AUD KRW CHF SEK MXN DKK PLN Portfolio Benchmark
Currency breakdown (in mv%)
POSITIONING AS AT 30 SEPTEMBER 2014
Source: Schroders / Barclays, as at 30 September 2014. Based on un-audited data
26.5 24.0
27.0
16.1
0.7 0.2 5.3
40.5
19.3 23.1
15.8
0.0 1.2 0 5
10 15 20 25 30 35 40 45
AAA AA A BBB Below BBB- NR Cash
Rating breakdown (in %Assets)
Credit sector breakdown (in DTS)
0.02
0.10
0.04
0.15
0.10
0.60
0.09
0.06
0.14
0.09
0.13
0.03
0.04
0.24
0.13
0.04
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Consumer Cyclical
Consumer Non Cyclical
Electric Energy Technology Transportation Banking Insurance Finance
Portfolio Benchmark
POSITIONING AS AT 30 SEPTEMBER 2014
20
Source: Schroders
Alpha:
Active management to access global opportunity set
1. Investment themes: Not position driven
2. Integrated: Specialists’ input
3. Truly global: No domestic bias
4. Focused portfolios: Facilitates risk management
SHRODERS GLOBAL FIXED INCOME Distinguishing features
Tactical
Sentiment & Positioning
Drawdown Limits
Correlations
1. Strategic roadmap: generation of 3 – 5 investment themes
Investment horizon : 3 months – 1 year | Forum: Quarterly Investment Forum
Global growth Global Inflation
Monetary and economic policy
2. Tactical views: reflects market sentiment and positioning
Investment horizon: 1 month – 3 months | Forum: daily, weekly and monthly meetings
3. Risk budgeting and portfolio construction: focus on catalysts and effective offsets
PORTFOLIO
4. Risk management: embedded within portfolio management and additional independent oversight Daily monitoring of P&L – Correlation of trades – active drawdown management
Global inflation
INVESTMENT PROCESS OVERVIEW
FP Omnis UK Bond Fund Dave Chappell, Threadneedle
FP OMNIS UK BOND FUND
Bonds continue to play a crucial role in the Multi Asset Portfolio
o Providing Income (and capital return)
o Diversification from (& low correlation to) riskier asset classes
o Necessary for the more cautious investor (lower volatility)
We have actively allocated to the ‘best’ areas of fixed income
o Different areas of the market perform differently at different times
o Gilts / Corporate bonds
o Duration management to protect / enhance returns
In a flexible fund format
o Incorporate the best ideas from across fixed income
Active Allocation
Crucial Role
Flexibility
FP OMNIS UK BOND FUND
Well-resourced fund management team
o Over £80bn under management with 150 Investment Professionals.
o Depth of analytical resources to generate better ideas across the Fixed Income Spectrum
o Resource-rich global IG research team; 15 members strong with over 13 years average experience
Highly experienced fund management team
o Fund Manager has 25 years market experience
o In both Government and Corporate bond fund management
Proven track record
o Threadneedle have strong performance in similar mandates
o Pooled Pension Fund / Insurance Co Mandates
Experience
Resources
Track record
BONDS IN A MULTI-ASSET PORTFOLIO
Adding Bonds provides Diversification Benefits Low Historic Correlation of Bonds and Equities
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
0.0% 5.0% 10.0% 15.0% 20.0%
Retu
rn
Risk
100% Equities
Historical Optimal Portfolio Mix of Stocks and Bonds
100% Bonds
-0.8
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
ρ
Correlation of UK Corporate Bonds with UK Equities. (Annual rolling windows of weekly correlation between total returns of UK00 and FTSE 100)
Source: (Left) Threadneedle Investments, December 2013.
(Right) Bloomberg, Merrill Lynch August 2014
FUND STRATEGY - SEPTEMBER 2014
What we like
o Corporate bonds spreads are historically around average
o But still represent better risk/return than Gilts
What we don’t like
o The UK economy is recovering
o Interest rates will need to normalise should this performance continue
How we are positioned
o The UK Bond fund is invested with less Gilts and a lower duration than the benchmark
o Allocation to Gilts is around 10% less than the benchmark
o Offset by an overweight to cash and corporate bonds
PORTFOLIO SUMMARY
Top 6 positions
Bottom 6 positions
Issuer Industry Sector Fund (%) Active (%)
National Grid Utilities 1.34 1.04
Eversholt Finance Securitised 1.09 1.01
Linde Basic Materials 1.05 1.00
Verizon Telecommunications 1.08 0.98
BHP Basic Materials 1.05 0.94
AB InBev Consumer Goods 1.05 0.92
Issuer Industry Sector Fund (%) Active (%)
UK Gilts Gilts 54.92 -12.35
EIB Sovereign (non UK) - -2.01
KFW Sovereign (non UK) - -1.30
HSBC Banks 0.03 -0.53
Network Rail Sovereign (non UK) - -0.46
RWE Utilities - -0.33
Source: Threadneedle as at 30 September 2014. Figures are relative to BofA ML Sterling Broad Market.
FP Omnis Emerging Markets Equity Fund
Edward Bonham Carter, Jupiter
THE WORLD - but NOT as we know it
Source: Renaissance Capital, 08.10.14.
THE WORLD - but NOT as we know it
Shanghai 1990
THE WORLD - but NOT as we know it
Shanghai 2010
“Times they are a changing” Bob Dylan
INVESTMENT PROCESS - A CLEAR FRAMEWORK
Qualitative judgement
o Best in class profitability /sustainability, strategic vision, integrity
o Capital allocation, M&A potential
o Market dominance
o Pricing power
o Cost discipline
o Strong governance
o Upside vs. expectations
o Business risk assessment
o Peer comparison
Fundamental measurement
o Positive evolution of FCF, EPS and DPS
o Low P/E high ROE
o Sensible leverage
o Interest cover
o Stable / rising EBITDA margins
o Strong ROEs
o Accretive capex
o Return on capital > Cost of capital
o Positive revisions
Targeting best in class growth companies benefiting from structural trends at reasonable valuation Not fund restrictions, represents fund manager style. The views expressed are those of the presenter at the time of presenting and may change in the future. Note: Jupiter has purchased the copyright to use these images.
Reasonably priced quality
Low balance sheet risk
Operational efficiency
Attractive, sustainable CFROI
Ref
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PORTFOLIO SUMMARY
Fund %
Index %
Asia 62.2 59.5 Hong Kong and China 23.7 19.2 South Korea 13.0 15.0 Taiwan 10.0 12.0 India 8.5 7.1 Thailand 2.6 2.4 Indonesia 2.6 2.7 Philippines 1.8 1.2 EMEA 10.0 14.2 South Africa 7.3 7.4 Russia 1.4 4.6 Turkey 0.7 1.6 Greece 0.6 0.7 Latin America 19.8 16.0 Brazil 12.4 10.3 Mexico 4.9 5.4 Peru 1.4 0.3 Panama 1.1 – UK 0.7 – Other 1.6 9.6 Cash 5.2 –
Geographical split Relative sector weighting
29.2
17.1
15.7
8.0
4.9
4.8
4.3
4.2
3.5
1.6
1.6
1.6
0.4
7.3
-0.9
1.3
-3.5
-3.4
4.2
-3.1
-0.5
-8.6
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35%
Financials
Technology
Consumer Services
Consumer Goods
Utilities
Basic Materials
Telecommunication
Oil & Gas
Industrials
Healthcare
Other
Fund Relative weighting
Source: Jupiter, in GBP, 30.09.14. Index: MSCI Emerging Markets.
Ris
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po
wer
Emer
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Ref
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CASA productivity forecast to improve by ~25%*
34
160
0
40
80
120
FY 2013 FY 2014 FY 2015CL FY 2016CL FY 2017CL
360
200
240
280
320
CA / branch (Rsm) (LHS) SA / branch (Rsm) (RHS)
ICICI Bank
Key characteristics**
Indian private bank founded in 1994
Leader in retail banking with ~30% market share in consumer financing segment
Good execution in a challenging asset quality environment
Improving ROA and ROE
Among the best capitalised Indian banks
P/B 1.9x FY 2016E
*Source: Company data, CLSA, 02.07.14. **Source: Jupiter, Citigroup Global Research, 24.07.14. Any stock examples are used for illustrative purposes only and should not be viewed as investment advice.
Well priced quality
Strong balance sheet
Operational efficiency
Attractive / sustainable
CFROI
Stock example
SUMMARY
o 2 billion people joining the capitalist system
o Active management to identify opportunities in multiple countries and stock markets
o Jupiter working in collaboration with Omnis Investments
FP Omnis Alternative Strategies Fund
Colin Lunnon, Octopus
OBJECTIVE: DOUBLE DIVERSIFCATION
o Add diversification to the overall Graphene portfolios
o Control the manager and the market risk exposure
o Target a positive return over 12 months
OBJECTIVE: STABILITY IN A COMPLEX WORLD
Source: Octopus Investments
OPPORTUNITY SET
How you invest
Traditional investment process
Non-traditional investment process
Where you invest
Traditional assets
Non-traditional assets
Past performance is no guide to future performance and may not be repeated. The value of your investment, and any income derived from it, may go down as well as up and you may not get back the full amount invested. This update is intended to provide you with a look back at the events that have affected the performance of this fund and investment markets in general over the past quarter. This is a general market update and should not be considered a comprehensive or sufficient basis for making decisions. The Authorised Corporate Director of the FP Omnis Portfolio Investments ICVC is Fund Partners Limited which is authorised and regulated by the Financial Conduct Authority, Registered Office: Cedar House, 3 Cedar Park, Cobham Road, Wimborne, Dorset, BH21 7SB. Approval has been granted by the FCA for Omnis Investments Limited to be appointed as the Authorised Corporate Director (ACD). Should Omnis be appointed as ACD, if you invest in an Omnis fund, Openwork will retain some income from administering the fund after any charges. This is not an additional cost to you but will be paid out of the fund charges detailed in the relevant key features document. The full prospectus is available from the ACD, Fund Partners Limited at the above address. Omnis Investments Limited is not able to provide advice. Omnis Investments Limited is registered in England and Wales under registration number 06582314. Registered Office: Washington House, Lydiard Fields, Swindon, Wiltshire, SN5 8UB.