schroder gaia ii nga turnaround · 2016 onwards, performance is provided for schroder gaia ii nga...

October 2016 | For professional investors and advisers only. This material is not suitable for retail clients

Schroder GAIA II

NGA Turnaround

October 2016

Baily Dent| Portfolio Manager, New Generation Advisors

Schroders Alternatives

Conference

May 2015 ** Remove from final presentation **

Fund Strategy Geographic focus Portfolio manager Launch date AUM (USD)

Schroder GAIA Egerton Equity*

Equity long short Global John Armitage, Egerton Capital

25 Nov 09 1,377m

Schroder GAIA Sirios US Equity

Equity long short Predominantly US John Brennan,

Sirios Capital Management 27 Feb 13 1,366m

Schroder GAIA Cat Bond**

Catastrophe bonds Global Daniel Ineichen,

Schroders 21 Oct 13 1,099m

Schroder GAIA Paulson Merger Arbitrage

Merger Arbitrage US, Canada and Western Europe

John Paulson, Paulson & Co.

25 Jun 14 503m

Schroder GAIA

BSP Credit Credit long short Predominantly US

Thomas Gahan, David Ren and Josh Passman,

Benefit Street Partners 17 Jun 15 35m

Schroder GAIA BlueTrend Trend Following Global

Leda Braga,

Systematica Investments 9 Dec 15 350m

Schroder GAIA

Indus PacifiChoice Equity long short Pan Asian including Japan

Sheldon Kasowitz,

Indus Capital Partners, LLC 6 Jul 16 92m

Schroder GAIA

Two Sigma Diversified

Equity Market Neutral / Systematic Macro

Predominantly US Geoff Duncombe,

Two Sigma Advisers, LP 24 Aug 16 325m

Fund Strategy Geographic focus Portfolio manager Launch date AUM (USD)

Schroder GAIA II NGA Turnaround Liquid distressed Predominantly US

George Putnam, New Generation Advisors 2 March 16 12m

Total AUM 5,159m

Schroder GAIA II

Schroder GAIA

Schroder GAIA and Schroder GAIA II Overview of sub-funds

*Hard closed, but subject to Capacity Restricted Dealing. **Soft closed.

Source: Schroders as at 30 September 2016.

1


Overview

Distressed securities have characteristics that make them a valuable component of an investment portfolio

– Inefficient niche in the markets which offers outsized return potential

– Often move independently of other asset classes

New Generation Advisors (NGA) focuses solely on distressed securities

NGA has a successful 26+ year track record of outperformance

NGA’s approach provides a level of liquidity that is rarely found in the distressed sector

Schroder GAIA II NGA Turnaround is off to a strong start

Conditions in the credit sector suggest that we are entering a favorable multi-year period for investing in

distressed securities

2

Source: NGA as at 30 September 2016.


What is a distressed security?

A distressed security is a stock, bond or other debt instrument of a company experiencing financial or operating difficulty

Distressed bonds typically trade well below par, often at a small fraction of face value

Distressed securities include bonds that are in default and the securities of companies in bankruptcy, but unlike in

Europe and other parts of the world, in the US and Canada default and bankruptcy do not necessarily lead to liquidation

of the business

Chapter 11 of the US bankruptcy code is designed to give companies breathing space to solve their problems.

Companies are often rejuvenated in Chapter 11 and emerge as lean and powerful competitors that provide significant

value to the holders of their securities

Because distress and bankruptcy are not well understood by investors, distressed securities often fall in price well below

their true value creating an attractive investment opportunity

There is a large, active, liquid market in distressed securities in the US

Source: NGA, as at 30 September 2016.

3


The complexity of the bankruptcy

process and the scarcity of information

make distressed securities less efficient

than other asset classes

Many institutional investors (such as

insurance companies in some

jurisdictions) are not permitted to hold

defaulted bonds, which can cause

prices to fall excessively when a default

occurs

The performance of distressed

securities is usually driven by case

specific issues rather than by broad

market movements or the general

economy

Historically distressed securities have

had a low degree of correlation to both

stocks and bonds

Less efficient market Low correlation to other

asset classes

Record low quality issuance

since 2009

Face amount of debt trading below

$0.50 on the dollar has increased to

levels not seen since 2009

2014/2015 decline in distressed debt

market largest since 2008 – 2009

Historically distressed sector rebounds

sharply after down years

Why distressed now?

Why invest in distressed securities? Potentially high absolute returns with low correlation to other asset classes


4

Schroder GAIA II

NGA Turnaround


Seeks to maximise returns from bankruptcies, distressed companies and turnaround situations

New Generation Advisors (NGA) is a US based liquid distressed manager founded

by George Putnam in 1990

NGA currently manages USD 816m*

100% employee owned with partners’ capital constituting the third largest investor

in the company’s fund

Experienced and stable investment team with one of the longest and most

successful track records in the industry**

Fundamental bottom-up, long/short liquid corporate distressed debt and equity fund

Based upon NGA’s flagship fund** which has a 26 year track record

Seeks to maximise returns from bankruptcies, distressed companies and

turnaround situations

Broad diversification across issuers, sectors and level within the

capital structure

Firm overview Fund overview

Schroder GAIA II NGA Turnaround A seasoned, proven investor in the distressed space

*AUM data is estimated and sourced from NGA as at 30 September 2016.**Performance is provided for NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to April 2016. From 1 April

2016 onwards, performance is provided for Schroder GAIA II NGA Turnaround C Acc USD. Performance is shown net of fees and on a NAV to NAV basis. Source: NGA, Schroders as at 30 September 2016.

Investment highlights

Aims to deliver annualised return of 8 – 12% net of fees over a cycle with expected

volatility of 10 – 12%

Absolute return focus with low to medium correlation to equity and investment

grade indices

A distinct and liquid way to invest in a very niche and inefficient asset class

Performance analysis**

Strategy has achieved an annualised return of 10.9% net of fees

since inception

The fund has produced this with an annualised volatility of 11%

Correlation of 0.5 to the S&P 500 and 0.7 to the BofA Merrill Lynch High Yield Index

and the Altman-Kuehne Index of Defaulted Public Bonds

Positive performance in 20 of the 26 year track record

6


0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

George Putnam IIIPortfolio Team Leader

Baily DentPortfolio Team, Analyst

Daan GoedkoopPortfolio Team, Analyst

Michael WeinerPortfolio Team, Analyst , CRO

Mark KoontzPortfolio Team, Head Trader

Christopher McHughCAO / Treasurer

R. Michael HenryCCO, Accounting & Tax

Darren BealsCFO & Client Services

Colin PageAssistant Trader / Analyst

Steve KovacsPortfolio Team, Analyst

Years in Industry Years at NGA

New Generation Advisors Highly experienced team with strong alignment of interest with clients

7


George Putnam III

Portfolio Team Leader

Baily Dent

Portfolio Team, Analyst

Daan Goedkoop


Michael Weiner

Portfolio Team, Analyst , CRO

Mark Koontz

Portfolio Team, Head Trader

Christopher McHugh

CAO / Treasurer

R. Michael Henry

CCO, Accounting & Tax

Darren Beals

CFO & Client Services

Colin Page

Assistant Trader / Analyst

Steve Kovacs


Years experience

Multiple decades of bankruptcy

experience Culture of collaboration and collegiality

Strong alignment of interests:

Nine partners in the firm


The team has produced strong risk-adjusted returns through three credit cycles

NGA Flagship Fund* track record Cumulative performance since inception of NGA strategy

*NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to April 2016. From 1 April 2016 onwards, performance is provided for Schroder GAIA II NGA Turnaround C Acc USD.** AUM

data is estimated as at 30 September 2016. ***Performance from May 1990 to August 1996 is provided for New Generation Limited Partnership, a substantially identical fund. Performance is shown net of fees and

calculated NAV to NAV. Indices used are Bank of America Merrill Lynch High Yield Index (J0A0), Altman-Kuehne Index of Defaulted Public Bonds, and S&P 500 TR.

Source: Schroders and NGA as at 30 September 2016.

$816m** Strategy AUM

+1,434% Cumulative net return since inception***

8 – 12% Target net return

+10.9% Annualised return since May 1990***

8

-100%

400%

900%

1400%

1900%

1990 1993 1996 1999 2002 2005 2008 2011 2014

NGA Altman MLHY S&P500


Annualised return Annualised volatility Sharpe ratio

NGA Flagship Fund* Performance vs. indices since 1990 inception**

* NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to April 2016. From 1 April 2016 onwards, performance is provided for Schroder GAIA II NGA Turnaround C Acc USD.

**Performance from May 1990 to August 1996 is provided for New Generation Limited Partnership, a substantially identical fund. Performance is shown net of fees and calculated NAV to NAV.

Indices used are Bank of America Merrill Lynch High Yield Index (J0A0), Altman-Kuehne Index of Defaulted Public Bonds S&P 500 TR and HFRI Distressed/Restructuring Index


Maximum drawdown

9

0%

2%

4%

6%

8%

10%

12%

NG

A

ML

HY

Altm

an

S&

P 5

00

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

NG

A

ML

HY

Altm

an

S&

P 5

00

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

NG

A

ML

HY

Altm

an

S&

P 5

00

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

NG

A

ML

HY

Altm

an

S&

P 5

00


Schroder GAIA II NGA Turnaround YTD performance +13.9% since launch

10

Performance is shown for Schroder GAIA II NGA Turnaround C Acc USD share class and is shown net of fees and calculated NAV to NAV. Indices used are Bank of America Merrill Lynch High Yield Index (J0A0),

Altman-Kuehne Index of Defaulted Public Bonds and S&P 500 TR. *Inception date is 2nd March 2016. March performance numbers shown since 2nd March for all but Altman, which is shown for the entirety of March. **

Since Inception performance for Altman is provided for the entirety of March (as the performance data is only calculated on a monthly basis). Source: Schroders, NGA as at 30 September 2016.

Returns March* April May June July August Sept Since

Inception*

Schroder GAIA II NGA Turnaround 2.10% 3.12% 3.38% -1.04% 1.72% 3.76% 0.21% 13.93%

ML HY 2.88% 3.95% 0.66% 1.07% 2.54% 2.23% 0.65% 14.81%

Altman** 0.89% 3.54% 18.58% 9.36% 2.07% 9.19% 3.45% 56.18%

S&P 500 3.85% 0.39% 1.80% 0.26% 3.69% 0.14% 0.02% 10.50%

-5%

0%

5%

10%

15%

20%

March April May June July August Sept

NGA MLHY Altman S&P500


Scalable, repeatable and proven investment process Bottom-up approach to distressed investing augmented by 26 years experience

11


Firm has 26 years’ distressed experience

Traders integrated into

investment team

Wide network of brokers

Daily risk and liquidity monitoring at

security and portfolio level

Leverage 26 years of sell side brokers

and specialist industry contacts

Proprietary bankruptcy research and

external databases

Extensive financial statement screens/

“largest loser” lists

Team investment approach; no

individual P&Ls

Collectively over 100 years’

distressed experience

Collaborative culture fosters effective

decision making

Rigorous financial modelling/capital

structure analysis

Examination of covenants and

legal issues utilising bankruptcy and

sector specialists

Industry/company specific analysis

Constant evaluation of risk vs. reward

Sirios invesment processs

Execution Idea

Generation

Fundamental

Analysis

Decision

Making

NGA

Investment process


Schroder GAIA II NGA Turnaround Portfolio construction

Portfolio constructed from the “bottom up” – no attempt to time market or credit cycles

Fundamental valuation approach

– Going concern value

– Liquidation value

Look up and down issuer capital structures for best risk/return tradeoff

– Looking for “fulcrum” point in capital structure

Diversified by issuer, industry and level within capital structure

Focus on ongoing liquidity

Short positions principally chosen for return potential

– Avoid shorts based purely on valuation – looking for a negative credit event


12


Lifecycle of a typical distressed investment

0

2

4

6

8

10

12

01/jan 01/fev 01/mar 01/abr 01/mai 01/jun 01/jul 01/ago 01/set 01/out 01/nov 01/dez 01/jan 01/fev 01/mar 01/abr 01/mai 01/junBond Stock

13

Source: NGA as at 30 September 2016. Used for illustrative purposes.

Before chapter 11

• Market slow to recognize severity of

problems

• NGA identifies catalyst for default

In chapter 11

• Most investors don’t understand bankruptcy

process; some institutions cannot hold

defaulted debt

• NGA finds best risk/return tradeoff in capital

structure (“fulcrum” security)

Post reorganization

• Most investors’ views still tainted by

bankruptcy; new stock often

underfollowed for some time

• NGA often holds until stock becomes

more widely followed or fully valued

Buy bonds

Short bonds or

OLD stock Bonds exchanged

for NEW stock

Sell stock

Bankruptcy filing Emergence from bankruptcy Price

Time

Opportunities in different levels of the capital structure at different stages of the bankruptcy process


Historical long/short exposure of NGA Flagship Fund* Long bias; debt/equity exposure shifts to maximise returns

*NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to March 2016. From 1 April 2016 data is provided for Schroder GAIA II NGA Turnaround C Acc USD. Data from May 1990 to

August 1996 is provided for New Generation Limited Partnership, a substantially identical fund. Source: NGA as at 30 September 2016.

14

-60,0

-40,0

-20,0

0,0

20,0

40,0

60,0

80,0

100,0

120,0

140,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Fixed Income (Long) Equity (Long) Fixed Income (Short) Equity (Short) Gross Net


Liquidity: A proven attribute of our investment strategy NGA’s liquidity terms are unchanged since inception and have been met without exception

*Investor breakdown based upon NGA firm wide clients. Source: NGA as at 30 September 2016.

Target liquid debt and equity of publicly traded companies

Generally passive investment style with a preference for avoiding trading restrictions

Liquidity of positions and overall portfolio liquidity proven by history and consistently monitored to ensure

portfolio redemptions can be met

Typical position size is <5% of a bond issuance; <2% of an equity in a given stock

Maintain well-diversified portfolio with available cash and little or no leverage

Maximum 85% gross exposure/minimum 30% highly liquid securities

Track record of meeting all redemptions on a timely basis without gating or side pocketing

Long standing and well diversified investor base (largest investors makes up less than 10% AUM)

Diversified by investor type – good balance of individuals, endowments and fund of fund

100% of portfolio in Level I or II assets (as at 30/7/16; as defined by ASC 820)

Securities are priced using active broker quotes and cross checked by recent trades

Investor level*

Portfolio level

Accounting level

Active integrated liquidity monitoring system Monitoring

15


New Generation Advisors Why distressed securities now?

Always inefficient niche with low correlation to traditional equity and debt markets

Particularly attractive in 2016 and for several years to come:

– Massive amounts of lower quality debt have been issued in recent years.

– Some reasonable fraction of that debt will need restructuring as it approaches maturity over the next few years.

– These restructurings will provide both long and short opportunities.

– Commodity volatility and interest rate changes are likely to create additional opportunities

– Demand side of distressed sector is showing improvement as is typical following a weak year such as 2015


16


Market opportunity Record high yield issuance creating increasing distressed opportunities

*Bankruptcy assets include only non-financial companies, as at 30 September 2016.

Source: Thomson Reuters and www.bankruptcydata.com as at 30 September 2016.

Issuance in $bn

2010 to 2016 2003 to 2009 1993 to 2002 1982 to 1992

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

1982 to1992

1993 to2002

2003 to2009

2010 to2015

Cumulative US HY Issuance PrecedingBankruptcy Peak

$bn

97%

17

0

50

100

150

200

250

300

350

400

450

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

YT

D 2

01

6

US High Yield Issuance US Bankruptcy Assets*

http://www.bankruptcydata.com/


Original rating 1 year after issuance 2 years after issuance 3 years after issuance 4 years after issuance

B yearly 2.85% 7.72% 7.85% 7.80%

B cumulative 2.85% 10.35% 17.39% 23.83%

CCC yearly 8.13% 12.43% 17.89% 16.32%

CCC cumulative 8.13% 19.55% 33.94% 44.72%

Low quality issuance rebounds ($bn)*

Market opportunity Growth in low quality issuance foreshadows growing defaults

*Source: JP Morgan, as at December 2015.

**Source: Edward I. Altman-NYU Salomon Center, as at December 2015.

Mortality rate – large percentage of lower rated debt defaults within four years**

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total HY Issuance $149 $148 $53 $181 $302 $246 $368 $399 $356 $293

CCC Issuance 31 54 14 19 55 43 64 75 65 37

B Issuance 58 49 17 62 117 94 152 107 109 81

18


Loans issuance now greater than bonds* Maturities remain significant

Market opportunity Signs suggest a new bankruptcy wave is approaching with increased opportunities in distressed

19

Source: Thomson Reuters as at 30 September 2016, includes all tranches of leveraged bank loans. *JP Morgan as at 4 April 2016.

0

200

400

600

800

1.000

1.200

1.400

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

High Yield Leveraged Loan

0

100

200

300

400

500

600

2016 2017 2018 2019 2020 2021

HY Bonds Leveraged Loans

Issuance in $bn $bn


Market opportunity Rapid drop in commodity prices is having significant impact on the largest segment of high yield market

*Source: Bloomberg, JP Morgan as at 31 August 2016.** Source: Bloomberg, JP Morgan as at 31 August 2016.

$ bn

20

High yield energy – market value and % of index* $70 billion of energy bonds currently trading below

$0.70 or recently defaulted**

39,7

7,3

22,7

0

5

10

15

20

25

30

35

40

45

Defaulted2015-2016

$0.50 and below $0.50-$0.70

$ bn

6%

8%

10%

12%

14%

16%

18%

20%

0

20

40

60

80

100

120

140

160

180

200

4

200

5

200

5

200

6

200

6

200

7

200

7

200

8

200

8

200

9

200

9

201

0

201

0

201

1

201

1

201

2

201

2

201

3

201

3

201

4

201

4

201

5

201

5

201

6

Market Value (in billions) % of Index


0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015 2016

Assets ($bn) - H1 Assets ($bn) - H2

US public bankruptcies: 2010-2016

Market opportunity Bankruptcies sharply higher in first half of 2016

21

Aggregate of total pre-filing assets of all publicly-traded companies filing for Chapter 11 (excluding assets of financial companies). Through to 30 June 2016.

Source: BankruptcyData.com as at 30 June 2016.


NGA Flagship Fund* returns compared to public

company bankruptcy assets**

Performance of NGA Flagship Fund* following a

down year

Market opportunity NGA has historically posted very strong returns following a down year

22

*NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to April 2016. From 1 April 2016 onwards, performance is provided for Schroder GAIA II NGA Turnaround C Acc USD. Altman-

Kuehne Index of Defaulted Public Bonds. Bank of America Merrill Lynch High Yield Index (J0A0). Performance from May 1990 to August 1996 is provided for New Generation Limited Partnership, a substantially identical

fund. Performance is shown net of fees. **Public Company assets Filed for Bankruptcy in the US excluding financial companies. ^Performance provided to 30 September 2016. Source: NGA, Schroders,

www.bankruptcydata.com as at 30 September 2016.

Down year Down year

return

Following

year

Following two

years

1990 -18.0% 37.3% 63.1%

1994 -5.2% 19.2% 44.8%

2002 -6.8% 50.4% 72.5%

2008 -29.4% 84.3% 109.3%

2011 -9.7% 13.4% 46.7%

2015 -18.3% 3.2%^

Par amount ($m) Annual return Annual return

-150

-50

50

150

250

350

450

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

NGA Flagship Fund* Annual Return Public Company assets filed for bankruptcy

0


Cycle comparison

Market opportunity Current cycle is likely to be longer and move from energy focused to diversified; many bonds already pricing in default risk

Key characteristics 1990-1991 2000-2002 2008-2009 Expected current cycle

Approx. Duration 18 Months 36 months 12 months 36 to 48 months or more

Dominant Industries None Telecom, Tech, Media Many, esp. Financial

Initially Energy, spreading to

many sectors

Causes High yield growth (Drexel) led

to excess leverage in certain

companies, recession, first

Iraq war

Tech telecom bubble led to

irrational markets, also frauds

System wide over-leverage

plus subprime mortgage

Initially lower energy / natural

resources prices, then

inability of overleveraged

companies to refinance

HY Market Size ($bn)* 146.2 283.0 727.3 1,418.0

HY Net Leverage*

(Net Debt/LTM EBITDA) Not available 4.1x 3.2x 7.7x

Outcomes

Balance sheet restructurings

(good companies, bad

balance sheets)

Many smaller tech & telecom

companies had no real

business and disappeared.

Largest telecoms able to

shrink & restructure

Many financial companies

disappear; fear drives debt of

healthy companies down to

excessively low levels

Energy & natural resources

companies restructure

balance sheets to match

assets & cash flow; other

companies restructure

balance sheets (good

companies, bad balance

sheets)

23

Source: NGA as at 30 April 2016. *Source: Bank of America Merrill Lynch Global Research as at 30 April 2016.


Conclusion The case for adding distressed securities to a liquid alternatives portfolio

Distressed is an inefficient niche that often moves independently of other asset classes

NGA has proven 26+ year track record of strong returns and demonstrated liquidity

Conditions in the credit markets bode well for maintaining recent strong performance:

– Looming debt maturities present long and short opportunities

– Many distressed bonds already oversold as market anticipates future defaults

– Demand side of market showing signs of improvement

– Rising interest rates would increase opportunities

– Commodity volatility currently presenting long and short opportunities

– Commodity weakness bleeding into other sectors

These favorable conditions are likely to continue for at least several years

24


Appendix


NGA Flagship Fund* vs. Schroder GAIA II NGA Turnaround Main similarities and differences

*Based on New Generation Turnaround Fund Limited. **E early bird share class is available for the first $50m invested

Source: NGA and Schroders as at 30 September 2016.

NGA Flagship Fund* Schroder GAIA II NGA Turnaround

Investment manager George Putnam, New Generation Advisors

Investment strategy Liquid distressed, North American focused

Portfolio liquidity Liquid portfolio focussed on public debt and equity

Leverage/gross exposure Limited leverage; Max gross exposure 100/40 Limited leverage; Max gross exposure 85/40

Long exposure (single securities) Mainly physical securities

Short exposure (single securities) Mainly physical securities

Asset classes Predominantly bonds and equity, but also opportunistic use of

bank debt, trade claims and private securities

Bonds and equity; bank debt, trade claims and private securities

are not permitted

Concentration Issuer Size (at cost) <4% Adheres to the UCITS 5/10/40 rule

Sector limits Net Market Value By Sector <15%

Liquidity buffer None Min. 30% highly liquid securities

Fees 1.00%/20% performance fee

E shares 1.00%/15%** performance fee

C shares 1.25%/20% performance fee

A shares 2.00%/20% performance fee

Dealing frequency Monthly (20 days notice) Two weekly (every other Wednesday) (five days notice)

Minimum investment $100,000 E and C shares $500,000

A shares $25,000

Offering status Limited capacity Open to investment

26


Schroder GAIA II NGA Turnaround Summary of key features

Key Features

Investment focus Distressed securities

Launch date 2 March 2016

Capacity USD 1bn

Dealing frequency Two weekly (every other Wednesday)

Deal cut off 13.00 Luxembourg time five business days preceding a dealing day

Settlement Three business days following a dealing day

NAV publication Daily on T + 1

Base currency USD

Available share classes* A Acc USD and EUR Hedged

C Acc USD and EUR Hedged, C Dis GBP Hedged

E Acc USD and EUR Hedged, E Dis GBP Hedged

Fund registration Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, The

Netherlands, UK

Share Classes A C E*

Minimum initial subscription/ Minimum holding

$25,000 $500,000 $500,000

Initial charge Up to 3% Up to 1% Up to 1%

Investment management fee 2.00% 1.25% 1.00%

Performance fee 20% of the outperformance over BBA Libor USD 3 Month Act 360 subject to a

High Water Mark

15% of the outperformance over BBA Libor USD 3

Month Act 360 subject to a High Water Mark

*E early bird share class is available for the first $50m invested.

Schroders as at 30 September 2016.

27


2.71%

-1.88%

3.54%

-3.55%

1.70%

-1.97%

3.24%

-3.49%-5%

-3%

-1%

1%

3%

Up Months Down Months

NGA Altman MLHY S&P 500NGA Altman MLHY S&P 500

NGA

Altman

MLHYS&P 500

0%

3%

6%

9%

12%

7% 9% 11% 13% 15% 17% 19%

NGA* Altman* MLHY* S&P

500^

Absolute returns

YTD 2016 3.2% 45.1% 15.2% 7.8%

2015 -18.3% -39.5% -4.6% 1.4%

5 years annualised 5.1% 0.2% 8.2% 16.4%



Since inception annualised (May 1990) 10.9% 5.2% 8.7% 9.7%

Risk adjusted returns

Sharpe ratio 0.7 0.1 0.7 0.4

Standard deviation 11.3% 17.1% 8.2% 14.5%

Correlation 1.0 0.7 0.7 0.5

Performance highlights versus relevant indices Risk vs. return

History of outperformance NGA Flagship Fund* has a long history of strong absolute and risk adjusted returns

*NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to April 2016. From 1 April 2016 onwards, performance is provided for Schroder GAIA II NGA Turnaround C Acc USD. Altman-

Kuehne Index of Defaulted Public Bonds. Bank of America Merrill Lynch High Yield Index (J0A0). Performance from May 1990 to August 1996 is provided for New Generation Limited Partnership, a substantially identical

fund. Performance is shown net of fees and calculated NAV to NAV. ^Includes reinvested dividends, as at September 2016. Source: NGA, Schroders, Bloomberg as at 30 September 2016.

Higher return with less risk since the Fund’s inception

Average Return

Average monthly returns vs. indices

NGA/S&P=84% NGA/S&P=54%

Standard Deviation

28

In up months, we capture 84% of the S&P’s upside vs. 54% during down months


Integrated portfolio and position level risk management Principal risk control tools are diversification and liquidity, overlaid with strict portfolio guidelines


Diversification

and liquidity

monitoring

Institutional

platform and

processes

Focus on securities with an active trading market

Monitor positions for events that reduce liquidity

Diversified by issuer, sector and level in the capital structure

Little to no leverage and limited use of derivatives (<5% of

NAV, no more than purchase price at risk)

Registered with the SEC since inception

Portfolio valuations independently verified by third-party

administrator

Dedicated Risk Officer monitors risk guidelines on a daily basis

and has independent trading authority

Position/portfolio size limits

Security level

4% in any long position

2% for bond short

1% for equity short

7% in any security (in practice rarely

approach this limit)

Portfolio level

85% gross long/40% short

30% “highly liquid” securities

15% sector net long

29


60 core positions

25 – 35 each of long and short

Typical number of

positions

Long: 1 – 3%

Short: 0.5 – 2% Average position sizes

Average holding period

18 – 36 months

Holding

periods

Schroder GAIA II NGA Turnaround Portfolio summary


Typical gross and

net exposure

Gross long: 60 – 85%

Gross short: 10 – 40%

Gross: 80 – 120%

Net: 30 – 60%

Position limits

Long bond/equity 4% at cost

Bond short 2% at cost

Equity short 1% at cost

Derivatives 15% at market

7% in any security at market

Global

exposure

Focused mainly on North

America

30


Issuer Sector Country %NAV

MGIC Investment Banks & Other US 3.2%

Intelsat Luxembourg Telecommunication Services LU 2.7%

Codere Finance 2 Luxembourg Consumer Services LU 2.3%

Momentive Performance Materials US 2.1%

Fairpoint Communications Telecommunication Services US 2.1%

Affinion Group Holdings Media US 2.0%

Washington Mutual Banks & Other US 1.9%

Hexion Materials US 1.9%

Algeco Scotsman Global Finance Capital Goods UK 1.5%

Cumulus Media Media US 1.5%

Goodman Networks Telecommunication Services US 1.5%

Cengage Learning Consumer Services US 1.4%

Texas Competitive Electric Holdings Utilities US 1.4%

Overseas Shipholding Energy US 1.4%

Linn Energy Energy US 1.3%

SandRidge Energy Energy US 1.3%

Caesars Entertainment Consumer Services US 1.3%

M/I Homes Consumer Durables & Apparel US 1.3%

Ally Financial Diversified Financials US 1.3%

Cliffs Natural Resources Materials US 1.3%

Top 20 long positions Top 10 short positions

Schroder GAIA II NGA Turnaround Current portfolio positioning


Sector Country %NAV

Consumer Services US -1.1%

Energy US -1.0%

Telecommunication Services US -0.9%

Energy US -0.9%

Retailing US -0.9%

Materials AU -0.7%

Materials CA -0.7%

Energy US -0.6%

Energy BM -0.6%

Materials CA -0.5%

31


13,9%

11,9%

3,8%

-0,5%

-1,3%

-5% 0% 5% 10% 15%

Schroder GAIA IINGA Turnaround*

Long Bond

Long Stock

Short Bond

Short Stock

Company Position Sector Country Performance

Contribution

Chesapeake Energy Long/Short Energy US 1.3%

Chaparral Energy Long Energy US 1.1%

Linn Energy Long Energy US 0.9%

Hexion Long Materials US 0.8%

Algeco Scotsman Global Finance Long Consumer Services US 0.7%

YTD performance attribution by security type

Top five contributors

Schroder GAIA II NGA Turnaround Since inception attribution*

32

*Performance is provided for Schroder GAIA II NGA Turnaround C Acc USD and is provided net of fees. All attribution data is provided net of fees. ** Sector attribution of less than 0.5% has been excluded. The combined

value of the attribution for excluded sectors (Utilities, Consumer Staples, Healthcare, Tech and Operating Expenses) comes to 0.00%. * Fund inception date : 2 March 2016. Source: NGA as at 30 September 2016.

Top five detractors

Company Position Sector Country Performance

Contribution

US Silica Holdings Short Energy US -0.5%

Tanker Investments Long Energy BM -0.4%

Petrobras Short Energy NL -0.4%

Tervita Long Commercial & Prof. Services CA -0.3%

First Quantum Minerals Short Materials CA -0.3%

YTD performance attribution by GICS sector**

5,1%

4,9%

1,3%

1,2%

0,8%

0,6%

0% 1% 2% 3% 4% 5% 6%

Energy

Cons. Disc.

Financials

Materials

Industrials

Telecoms


Long Short

Geographic exposure Sector exposure Exposure analysis

Schroder GAIA II NGA Turnaround Snapshot of current exposure


Gross Long Equity 32.1%

Gross Long Debt 41.8%

Fund Gross Long 73.9%

Gross Short Equity -7.4%

Gross Short Debt -4.4%

Fund Gross Short -11.8%

Total Gross Exposure 85.7%

Total Net Exposure 62.1%

33

-25% -5% 15% 35% 55% 75%

North America

Europe

United Kingdom

Asia

South America

South Africa

Australia

-10% -5% 0% 5% 10% 15% 20%

Energy

Banks & Other Financials

Telecommunication Services

Media

Materials

Consumer Services

Capital Goods

Consumer Durables & Apparel

Transportation

Utilities

Insurance

Diversified Financials

Real Estate

Software & Services

Semiconductors & Equipment

Commercial & Professional Services

Automobiles & Components

Pharma., Biotech & Life Sciences

Retailing

Health Care Equipment & Services


Historical performance monthly net returns NGA Flagship Fund*

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2016 -5.1% -3.6% 1.1% 3.1% 3.4% -1.0% 1.7% 3.8% 0.2% 3.2%

2015 -1.8% 2.3% -0.6% 0.7% -0.4% -1.8% -0.7% -5.6% -4.0% -0.4% -2.8% -4.6% -18.3%

2014 2.0% 1.4% 0.2% 0.1% 0.9% 1.0% -1.7% 1.0% -1.4% -2.2% 0.0% -0.4% 0.8%

2013 2.5% 1.3% 6.6% 0.3% 2.9% -0.8% 3.7% -0.3% 1.0% 2.7% 2.9% 3.5% 29.5%

2012 4.8% 3.8% 2.3% -0.6% -3.0% 0.9% -0.8% 0.8% 2.9% 1.6% -1.5% 2.1% 13.7%

2011 1.9% 0.4% -0.6% 1.6% -0.4% -1.5% -1.4% -6.7% -5.8% 5.6% -2.0% -0.8% -9.8%

2010 1.2% 2.5% 4.6% 1.8% -3.3% -2.3% 3.0% -2.6% 2.6% 3.1% 0.3% 4.1% 15.5%

2009 1.7% -7.2% 5.4% 11.9% 14.8% 3.0% 10.3% 7.6% 10.6% -0.1% 3.8% 6.0% 90.2%

2008 -2.4% 0.1% -2.0% 2.9% 2.3% -0.9% -2.3% 1.0% -8.7% -11.2% -9.2% -1.1% -28.3%

2007 1.4% 1.7% 1.8% 0.5% -0.7% 1.3% 0.0% 0.6% 0.1% 2.9% -2.3% -0.9% 6.5%

2006 4.4% -0.2% 6.4% 1.0% 0.4% -0.1% -2.2% 1.6% -0.9% 3.0% 2.5% 1.3% 18.1%

2005 -2.1% 3.2% -1.3% -2.0% -0.8% 1.1% 1.7% 1.5% 0.7% -2.8% 2.6% 1.8% 3.3%

2004 3.2% 0.6% -1.1% -0.7% -0.6% 2.8% -1.4% -0.3% 1.3% 1.0% 4.5% 4.6% 14.7%

2003 -0.2% -0.6% 3.7% 9.1% 8.0% 4.6% 1.5% 3.8% 3.3% 5.7% 1.4% 1.6% 50.4%

2002 0.5% -0.8% 0.7% -1.9% -0.5% -3.6% -2.4% -0.2% 0.2% -0.3% 1.9% -0.6% -6.8%

2001 2.3% 2.6% 0.9% -1.1% 5.0% 2.4% 0.7% 1.4% -0.5% 2.2% 0.9% 0.5% 18.7%

2000 -0.1% 0.3% 0.4% -1.8% -0.3% -0.6% 1.9% -0.2% 1.8% -1.7% -0.8% 3.2% 2.2%

1999 -0.4% 0.4% 8.8% 14.1% 3.2% 1.1% -1.0% -0.5% -2.2% -0.2% 1.2% -0.8% 24.9%

1998 -1.1% 6.6% 2.6% 0.6% 3.7% 1.1% 1.6% -8.8% 0.1% 0.1% 6.9% -0.8% 12.5%

1997 3.0% -0.8% -2.8% -1.3% 4.9% 1.2% 2.1% 1.4% 2.0% -1.7% -3.0% -1.8% 2.9%

1996 1.7% 0.2% 2.6% 1.5% 3.8% 0.4% 0.6% 2.9% 0.9% 0.4% 2.6% -1.6% 16.8%

1995 -0.3% 2.4% 1.3% 3.0% 2.2% 5.4% 2.5% 1.4% 0.1% -2.3% 2.4% 0.0% 19.2%

1994 2.7% 1.0% -2.8% -0.5% -1.3% -2.5% 0.7% 2.5% -0.7% -0.4% -2.7% -1.0% -5.2%

1993 8.0% 2.5% 5.8% 1.9% 3.1% 4.8% -1.8% 1.3% 0.1% 3.5% -1.0% 1.9% 33.5%

1992 3.9% 7.0% 1.6% -1.4% -0.2% -2.1% 0.5% 0.6% 3.6% -1.8% 2.3% 3.6% 18.8%

1991 4.2% 3.3% 11.9% 7.6% 0.9% 0.4% 5.2% -2.2% 3.7% -0.7% -3.1% 1.7% 37.3%

1990 -0.2% -1.5% -0.8% -0.5% -3.5% -7.4% -3.3% -2.2% -18.0%

*NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to March 2016. From 1 April 2016 performance data is provided for Schroder GAIA II NGA Turnaround C Acc USD. Performance

from May 1990 to August 1996 is provided for New Generation Limited Partnership, a substantially identical fund. Performance is shown net of fees on a NAV to NAV basis. Source: NGA, Schroders as at 30 September

2016.

34


Historical performance attribution NGA Flagship Fund*

NGA Flagship Fund is New Generation Turnaround Fund Limited, from September 1996 to March 2016. From 1 April 2016 performance data is provided for Schroder GAIA II NGA Turnaround C Acc USD. Performance

from May 1990 to August 1996 is provided for New Generation Limited Partnership, a substantially identical fund. Performance is shown net of fees on a NAV to NAV basis. ** Annualised figures calculated using annual

returns as shown above. Source: NGA, as at 30 September 2016.

Gain on longs Net interest and dividend income Gain on shorts Net performance

2016 8.3% 1.0% -6.1% 3.2%

2015 -26.4% 2.1% 6.0% -18.3%

2014 -3.7% 1.1% 3.4% 0.8%

2013 32.0% 2.2% -4.7% 29.5%

2012 15.2% 4.7% -6.2% 13.7%

2011 -15.1% 1.0% 4.3% -9.8%

2010 21.2% 1.9% -7.6% 15.5%

2009 102.9% 2.5% -15.2% 90.2%

2008 -50.9% 1.9% 20.7% -28.3%

2007 -7.7% 2.8% 11.4% 6.5%

2006 16.5% 3.4% -1.8% 18.1%

2005 1.4% 1.0% 0.9% 3.3%

2004 14.4% 1.4% -1.1% 14.7%

2003 57.8% 4.2% -11.6% 50.4%

2002 -14.0% 4.2% 3.0% -6.8%

2001 6.3% 3.1% 9.3% 18.7%

2000 -4.2% 4.2% 2.2% 2.2%

1999 3.2% 4.7% 17.0% 24.9%

1998 -2.5% 5.1% 9.9% 12.5%

1997 1.3% 1.1% 0.5% 2.9%

1996 10.2% 4.3% 2.3% 16.8%

1995 11.8% 5.3% 2.1% 19.2%

1994 -16.4% 3.9% 7.3% -5.2%

1993 32.8% 1.9% -1.2% 33.5%

1992 16.6% 3.4% -1.2% 18.8%

1991 33.5% 2.7% 1.1% 37.3%

1990 -24.8% 5.5% 1.3% -18.0%

Annualised SI** 4.7% 3.0% 1.4% 10.9%

35


Founded New Generation Advisors in 1990 and New

Generation Research, Inc. (publishing affiliate of New

Generation Advisors) in 1986

Prior to founding New Generation, practiced law with

Dechert LLP in Philadelphia, PA

Also serves as a trustee of the Putnam Group of

Mutual Funds

BA, MBA and JD from Harvard University

Joined New Generation in 2005

Prior to joining New Generation, spent two years in

corporate finance at JP Morgan and two years at NMG,

an international strategy consulting firm

BA degree from Yale University

MBA from University of Virginia

George Putnam Portfolio Team Leader

Baily Dent Portfolio Team, Analyst

Investment team Biographies


36



Prior to joining New Generation, spent two years working

for a technology start-up and three years at bankruptcy

advisory firm Zolfo Cooper

BA from Dartmouth College

BE from Thayer School of Engineering (Dartmouth)

MBA from University of Virginia

Joined New Generation in early 2009 after 3 years of

high yield and distressed buy side experience as analyst

and portfolio manager at Banc of America Securities

13 years of sell side high yield and distressed research

experience at Banc of America Securities and

Donaldson, Lufkin & Jenrette

Headed Banc of America’s high yield research group for

four years

BA degree from Wesleyan University

MBA degree from The Wharton School (University of

Pennsylvania

Daan Goedkoop Portfolio Team, Analyst

Michael Weiner Portfolio Team, Analyst, Chief Risk Officer

Investment Team Biographies


37


Joined New Generation in 2016.

Prior to joining New Generation, spent eleven years at

distressed debt hedge fund, Strategic Value Partners;

three years at bankruptcy advisor, E&Y Capital Advisors;

and four years within the merchant banking group of BNP

Paribas.

BA degree from Cornell University, MBA from Columbia

University.


Prior to joining New Generation, spent nine years in the

high yield sales and trading group at Goldman Sachs in

New York City, and one year at J.P. Morgan

BA from University of Virginia

Steve Kovacs, Analyst Portfolio Team, Analyst

Mark Koontz Portfolio Team, Head Trader


38



Joined New Generation in 2011.

Previously served 2 years with Teach for America.

BA in Mathematics and Economics from University of

Virginia.

Colin Page

Portfolio Team, Trading Assistant, Analyst



39


For professional advisers only. This material is not suitable for retail clients. This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder GAIA II (the

“Company”). Nothing in this presentation should be construed as advice and is therefore not a recommendation to buy or sell shares.

The Company qualifies as a Société d’Investissement à Caiptal Variable (“SICAV”) and as an alternative investment fund within the meaning of article 1(39) of the 2013 Law.

Subscriptions for shares of the Company can only be made on the basis of its prospectus together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copies of

which can be obtained, free of charge, from Schroder Investment Management (Luxembourg) S.A.

The distribution and promotion of the Company's units is restricted for the purpose of the 2013 Law, to professional investors who are supposed to have sufficient experience to judge themselves the concept of

risk-spreading and the information they need to form their opinion. Accordingly, this material is targeted to institutional; professional; existing investors and newly accepted clients of the Schroder Group where

reasonable steps have been taken to ensure that investment in the Company is suitable. This material should not be relied upon by persons of any other description.

Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get the amount originally invested.

An investment in the company entails risks, which are fully described in the prospectus.

Schroders has expressed its own views and opinions in this presentation and these may change.

Risk Considerations:

The fund will take significant positions on companies involved in mergers, acquisitions, reorganizations and other corporate events, which may not turn out as expected and thus may cause significant losses.

High yield bonds (normally lower rated or unrated) generally carry greater market, credit and liquidity risk. A rise in interest rates generally causes bond prices to fall. Equity prices fluctuate daily, based on many

factors including general, economic, industry or company news. The fund uses derivatives for leverage, which makes it more sensitive to certain market or interest rate movements and may cause above-

average volatility and risk of loss. A derivative may not perform as expected, and may create losses greater than the cost of the derivative. The counterparty to a derivative or other contractual agreement or

synthetic financial product could become unable to honour its commitments to the fund, potentially creating a partial or total loss for the fund. In difficult market conditions, the fund may not be able to sell a

security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares. The fund may engage in physical short sales, which are effected by selling a

security that the Fund does not own. The risk of short sales is that the price of acquiring the security for delivery may be higher than the price at which the security was sold. Short sales run the risk of losing an

amount greater than the initial investment.. A decline in the financial health of an issuer could cause the value of its bonds to fall or become worthless. A failure of a deposit institution or an issuer of a money

market instrument could create losses. The fund can be exposed to different currencies. Changes in foreign exchange rates could create losses. Emerging markets, and especially frontier markets, generally

carry greater political, legal, counterparty and operational risk. Failures at service providers could lead to disruptions of fund operations or losses.

Issued in October 2016 by Schroder Investment Management Limited, 31 Gresham Street, EC2V 7QA, who is authorised and regulated by the Financial Conduct Authority. This presentation may not be

distributed to any unauthorised persons. For your security, communications may be taped or monitored.GIA00129

Important Information

40


This material regarding the Schroder GAIA II NGA Turnaround ("Fund") was prepared by Schroder Investment Management

Ltda ("Schroder"), the Fund Manager, in response to a request from Brazilian clients sent to Schroder and should not be

understood as an analysis of any securities, advertising material, offer to purchase or sell, offer or recommendation of any

financial assets or investment. The purpose of this material is exclusively informative and does not include investment

objectives, financial conditions or the particular and specific needs of any shareholders or other investors. The opinions

stated in this material pertain to Schroder and may change at any time. The opinions are based on the date of their

submission and do not encompass any fact that may have arisen after this date, hence, Schroder is not compelled to

update this material to reflect such provisions after the submission of the same. This material is for exclusive distribution to

professional and institutional investors and should not be used as support material by other individuals. THIS MATERIAL IS

HIGHLY CONFIDENTIAL AND SHOULD NOT BE REPRODUCED OR DISTRIBUTED, ENTIRELY OR PARTIALLY, TO

PERSONS OTHER THAN THE ORIGINAL RECIPIENTS. The Fund and the distribution of the shares of the same are not

registered at the Brazilian Securities Commission "CVM", and therefore do not meet certain requirements and procedures

usually observed in public offerings of securities registered with the CVM, with which investors in Brazilian capital markets

may be familiar. For this reason, the access of the investors to certain information regarding the Fund may be restricted.

SCHRODER DOES NOT GUARANTEE PERFORMANCE.

Important Information

41

schroder gaia ii nga turnaround · 2016 onwards, performance is provided for schroder gaia ii nga...

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