portfolio performance summariesquantumbarbados.com/pdf/quantum quarterly report q3 2016.pdf · 2016...

Q3 2016

Quarterly Reporting Portfolio Performance Summaries

www.quantumbarbados.com [email protected] Tel: (246) 421-8600 Fax: (246) 421-8610

The portfolio aims to preserve capital and generate long-term returns relative to the Citigroup 1-10 year AAA / AA credit index. The minimum credit ratings are S&P A- / Moody's A3 with a maximum term to maturity of 10 years and a minimum issue size of $500 million. The universe consists of CP, Government guaranteed, agency, sovereign, supranational, corporate US Bonds and Eurobonds.

FIXED INCOME PORTFOLIO September 30, 2016

Quarterly Reporting

About Us: Quantum Investment Management Inc. is an independent Investment Advisor, registered in Barbados, regulated by the Financial Services Act. With over 60 years of collective experience, we offer expert wealth management services; including construction and management of fixed income, public equity, options, private equity, hedge fund, mutual fund and gold portfolios. Our overriding goal is to offer clients a fully personalized and superior service in terms of both wealth management and client communication.

Investment Team: Heinrich N. Funk, BA CA TEP Duane E. Francis, CA CFA Selena L. McDonald, MBA Jabari D. Banfield, CFA FRM

Contact:

0%

10%

20%

30%

40%

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60%

Under 1 Yr 1 Yr - 3 Yrs 3 Yrs - 5 Yrs 5 Yrs - 7 Yrs

26.8%

62.0%

8.4%2.8%

0.0% 10.0% 20.0% 30.0%

Consumer Discretionary

Consumer Staples

Energy

Industrials

Information Technology

Regional Government

Health Care

Supranational

10.7%

26.6%

5.3%

9.6%

27.7%

2.7%

8.1%

5.4%

AAA20%AA+

4%

AA11%

AA-33%

A+9% A

9%

A-1+7%

A-17%

Other14%

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Portfolio Citigroup 1-10 Yr AAA/AA Credit Index 2 Yr US Treasury Note Yield

Annualised

QTD YTD 1 Year 3 Year 5 Year 10 Year Inception*

Portfolio

Performance-0.04% 1.41% 1.35% 1.03% 0.79% 2.66% 2.87%

2 Year Treasury

Performance-0.11% 1.20% 0.74% 0.82% 0.61% 2.38% 2.54%

Citigroup 1-10

Yr AAA/AA Perf.0.20% 3.88% 3.63% 2.98% 2.70% 3.91% 4.19%

Portfolio Std.

Deviation0.31% 0.78% 0.73% 0.60% 0.58% 1.69% 1.58%

2 Year Treasury

Std. Deviation0.55% 1.03% 0.99% 0.72% 0.60% 1.45% 1.57%

Citigroup 1-10

Yr AAA/AA Std.

Dtn.

0.61% 1.62% 1.62% 1.79% 1.99% 3.34% 3.44%

PORTFOLIO CHARACTERISTICS PERFORMANCE COMMENTARY

Sector Diversification S&P Rating Composition Maturity Profile

CUMULATIVE PERFORMANCE ROLLING PERFORMANCE

Since Management Inception

Bond yields were somewhat volatile during the third quarter and eventually finished the quarter at higher levels than where they began. Yields initially moved lower in early July on continued ‘Brexit’ concerns before investors came to the conclusion the near term fallout from the vote was limited on financial markets and the global economy thereby allowing yields to move higher again as investors moved away from the relative ‘safety’ of bonds. As economic reports continued to demonstrate a gradual increase in U.S. growth as we moved through the quarter, bond yields also slowly increased. Yields then spiked higher in mid-September over concern that the Federal Reserve may be required to increase interest rates sooner than expected. This anxiety quickly abated and yields decreased somewhat again into quarter end after the FOMC meeting showed the Fed is still willing to be cautious in raising interest rates. As a result of the shorter duration of the portfolio, it has underperformed its benchmark in 2016 as it increased in value by 1.40% whereas the Citigroup 1-10 Year AAA/AA Credit Index increased in value by 3.87%.

*Portfolio Inception Date: Nov 2001


The portfolio aims to track the performance of the S&P 500 Index within a 2.5% tolerance, while

holding 80 stocks. This is achieved through the use of the proprietary modeling software, and

rebalancing the portfolio as required.

INDEXATION PORTFOLIO September 30, 2016

Quarterly Reporting



Contact:

0%

1%

2%

3%

4%

AAPL MSFT XOM AMZN JNJ

3.25%2.39%

1.93% 1.76%1.72%

0% 5% 10% 15% 20% 25%

Materials


Consumer Staples

Financial

Energy

Industrials


Utilities

Health Care

Telecommunication Services

2.9%

12.2%

10.7%

14.6%

6.7%

10.7%

21.5%

3.5%

14.5%

2.5% Company Ticker %

Apple Inc AAPL 3.68%

Microsoft Corp MSFT 2.86%

Johnson & Johnson JNJ 2.48%

Exxon Mobil Corp XOM 2.13%

Home Depot HD 2.07%

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Portfolio Standard & Poor's 500 Index

Annualised


Portfolio

Performance3.11% 7.78% 16.29% 11.29% 15.14% 6.68% 6.07%

S&P 500 Index

Performance3.31% 6.09% 12.94% 8.85% 13.89% 4.96% 5.00%

Portfolio Std.

Deviation6.57% 10.38% 12.51% 10.66% 10.87% 14.87% 13.96%

S&P 500 Index

Std. Deviation7.36% 10.96% 12.47% 10.78% 11.12% 15.26% 14.43%


Sector Diversification Portfolio Top 5 Holdings S&P 500 Top 5



After a sizeable move higher in equities early in the third quarter, the S&P500 Index meandered in a trading range near all time highs for the rest of the three month period as equity market volatility remained low other than a brief spike in mid-September. The early quarter move higher in stocks occurred as investors reassessed their initial ‘Brexit’ concerns and realized the short term implications of this move by the U.K. were limited thereby sending investors back into the equity markets in July. From here, the S&P500 settled into a tight trading range from mid-July through to early September before concern over a need by the Federal Reserve to raise rates sooner than expected sent the Index lower for a brief period in mid-September. Stocks moved higher again into quarter end as investor concerns over an imminent Fed rate increase abated somewhat. This portfolio has performed very well in 2016 as it has increased in value by 7.8% on a year to date basis whereas the S&P500 Index increased by 6.08%.

N.B. Benchmark reflects gross capital returns only, due to differences in taxes and reinvestment policy. *Portfolio Inception Date: May 2002


The portfolio aims to achieve long-term capital growth, with a value-style bias. It concentrates on the selection of specific stocks which meet our quantitative and qualitative investment criteria. Portfolio companies are drawn from the Russell 1000 index, our stock universe. The portfolio is structured to hold between 15 and 30 positions on an ongoing basis.

US VALUE EQUITY PORTFOLIO September 30, 2016

Quarterly Reporting



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Portfolio Russell Value Index Russell 1000 Index

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Materials


Consumer Staples

Financial

Energy

Industrials


Health Care

2.7%

19.3%

5.3%

4.9%

7.1%

17.6%

19.9%

23.1%Security IRR %

% of

Portfolio

Autodesk Inc 33.6% 3.4%

Quanta Services Inc 21.1% 2.9%

Apple Inc 18.8% 2.4%

Amazon.com Inc 17.0% 6.0%

Fedex Corp 15.3% 4.1%

Security IRR %

% of

Portfolio

Dollar General Corp -25.3% 3.7%

Cognizant Technology Solutions Corp CL A-19.0% 2.7%

CVS Health Corp -6.7% 3.9%

Exxon Mobil Corp -6.2% 3.0%

Walt Disney Co -4.5% 2.2%

Annualised


Portfolio

Performance4.74% 5.24% 12.70% 11.37% 16.04% 7.55% 9.38%

Russell Value

Index Perf.2.81% 7.82% 13.14% 7.04% 13.29% 3.16% 5.37%

Russell 1000

Index Perf.3.50% 6.21% 12.52% 8.57% 14.04% 5.21% 6.31%

Portfolio Std.

Deviation8.50% 12.15% 13.30% 12.11% 12.57% 15.56% 14.32%

Russell Value

Index Std. Dtn.5.62% 11.20% 12.20% 10.69% 11.32% 16.10% 14.48%

Russell 1000

Index Std. Dtn.7.56% 11.46% 12.64% 10.83% 11.26% 15.54% 13.99%


Sector Diversification Best 5 Performers in Quarter Worst 5 Performers in Quarter



Other than a brief spike in mid-September, volatility was very subdued in the equity markets for the majority of the third quarter as stocks remained in a trading range after an initial surge higher in early July. This initial move higher was in reaction to the aftermath of the “Brexit” vote as sentiment recovered very quickly once investors came to the realization that the decision by the U.K. to leave the E.U. was not going to have an immediate effect on the global economy and financial markets. Once investors calmed down, stocks meandered along close to their all time highs for the remainder of the quarter except for a brief sell off in mid-September in reaction to the possibility of the Federal Reserve having to raise interest rates sooner than expected. As this concern subsided though, markets gradually moved higher again into quarter end. The value portfolio increased in value by 5.12% on a year to date basis, but underperformed its benchmark, the Russell 1000 Index, which increased in value by 6.22%. N.B. Benchmarks reflect gross capital returns only, due to differences in taxes and reinvestment policy. *Portfolio Inception Date: June 2003

QUANTUM INVESTMENT MANAGEMENT INC. 4th Floor, Williams Tower Warrens, St. Michael BB 22026 BARBADOS, West Indies

Telephone: (246) 421-8600 Facsimile: (246) 421-8610 E-mail: [email protected]

MANAGEMENT TEAM BIOS

HEINRICH N. FUNK BA CA TEP

President & Managing Director

Building on the success of prior experiences in the investment arena, Heinrich established Quantum Investment Management in January 2015. As President/Managing Director he has responsibility for overall management and strategic development of the business. Having spent 24 years working in the international financial services sector in multiple jurisdictions, Heinrich brings significant experience to the company. Prior to developing Quantum, he spent 18 years combined as the Managing Director of two private Barbados international banks, the latter of which he was instrumental in establishing, controlled by clients of reputable Canadian wealth. These private banks provided investment and other services to high net worth clients and corporations. He also spent 5 years as a senior manager with PricewaterhouseCoopers – 3 years in Jersey, Channel Islands and 2 years in Barbados, as well holding management positions with two large accounting firms in the UK.

DUANE E. FRANCIS B ADMIN CA CFA

Senior Investment Manager

Duane joined Quantum Investment Management at its inception. As Senior Investment Manager, he has responsibility for the development of investment management strategy for Quantum along with execution and supervision of day-to-day trading activities in the investment management department. Duane has 21 years experience in the international financial services sector. Before joining Quantum, he spent 17 years combined as an Investment Manager in two (2) private international banks in Barbados. He was instrumental in the success of his previous employer, a private international bank, prior to its dissolution for strategic reasons. His responsibilities included the management of portfolios for both institutional and high net worth clients. Prior to this, he was a Manager with Deloitte & Touche for 2½ years in the Barbados office. He also worked with Deloitte & Touche in Regina, Canada for 2½ years.

IDA V. TAYLOR TEP

Senior Investment Accountant

Ida joined Quantum at its inception. She has responsibility for the operational, financial and reporting functions of the company. Further, she plays a key role in the compliance, procedural and development aspects of company, as a growing business. Prior to joining Quantum she was the Senior Investment Accountant for 14 years at a private international bank with responsibilities for financial and reporting functions, along with ensuring regulatory and legislative compliance, and the developmental aspects of the bank. Prior to this she was also Senior Trust/Account Officer in another private Barbados international bank for 6 years where she was responsible for overseeing all aspects of clients’ affairs, ranging from investment portfolio monitoring and reporting to trust and corporate administration.

JABARI D. BANFIELD CFA FRM

Investment Manager

Jabari joined the firm from inception after spending 8 years combined at two other international banks in Barbados. He holds a BSc Honors Degree in Economics, has the FRM designation as

well as his CFA designation, which was achieved in September 2012. He has 8 years experience in investment management and he is involved in all aspects of our investing activities

including fixed income, equities, hedge funds and derivatives.

NOTES & DISCLAIMERS i. Performance presented herein reflects the team’s management history and includes periods prior to the formation of Quantum

Investment Management Inc. (“Quantum”). ii. Past performance is no guarantee of future results.

iii. Indices are used for comparison of past performance only. iv. This document is confidential and intended only for the recipient. It should not be distributed without the prior consent of Quantum. v. This document is under no circumstances to be used or considered as an offer to buy/sell any security.

vi. Nothing herein constitutes investment, legal or other advice and is not to be relied upon in making an investment decision. vii. While every care has been exercised in compiling and publishing the data contained in this document, Quantum accepts no

responsibility for any errors or omissions.

CONTACT

BIOS & ENDNOTES

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