are we priced for perfection? tm richard jenkins and bill kanko black creek investment management...
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ARE WE PRICED FOR PERFECTION? TM Richard Jenkins and Bill Kanko Black Creek Investment Management UNIQUE INSIGHTS. PROPRIETARY IDEAS Slide 2 ARE WE PRICED FOR PERFECTION? Lehman Brothers crisis 2008 Eurozone crisis 2011 Tapering crisis 2013??? We have seen similar things before... Slide 3 10-YEAR RETURNS PATTERN OF NORMALIZATION Returns average out over time go where they have been lower and valuations are more attractive Source: Paltrak Cumulative Return from Aug 2003 to Aug 2013 147.5% 118.0% 72.6% 51.6% 20.7% Slide 4 5-YEAR RETURNS Source: Paltrak Cumulative Return from Aug 2008 to Aug 2013 41.4% 11.0% 9.1% 6.7% 5.7% Slide 5 GLOBAL MARKET OUTPERFORMANCE LED BY U.S. Source: Paltrak Cumulative Return from Aug 2011 to Aug 2013 51.1% 38.8% 29.2% 5.6% 5.3% Slide 6 BLACK CREEK INTERNATIONAL EQUITY: SIGNIFICANT OUTPERFORMANCE SINCE INCEPTION OF THE FUND Source: Paltrak Cumulative Return from Sep 2008 to Aug 2013 28.7% 80.5% 19.9% 24.8% Slide 7 BLACK GLOBAL LEADERS FUND: OUTPERFORMANCE SINCE MANAGED BY BLACK CREEK Source: Paltrak Cumulative Return from Jun 2006 to Aug 2013 28.3% 40.4% 18.2% 33.7% Slide 8 BLACK CREEK GLOBAL BALANCED: OUTPERFORMANCE SINCE INCEPTION OF THE FUND Source: Paltrak Cumulative Return from Jan 2007 to Aug 2013 29.1% 8.4% 17.4% Slide 9 GLOBAL STOCK MARKET VALUATIONS Real estate Bonds Cash Equities Commodities hard, soft Art, collectibles, etc. Slide 10 GLOBAL STOCK MARKET VALUATIONS Average P/E Source: Thomson Datastream and I/B/E/S Global equities long-term average p/e (14x) Slide 11 OUR MARKET VIEWS Flight to quality (defensive assets) similar to 1998-99 Dont confuse yield with value There is a premium on safety European crisis There is light at the end of the tunnel U.S. has turned the cornerreally! China now the hard work begins! Africa/South America If China catches a cold? Deleveraging = slower consumption-led growth we still believe this Low interest rates are creating overcapacity everywhere Slide 12 RELATIVE P/E VALUATION: GLOBAL STAPLES VS. BROAD MARKET +1 standard deviation -1 standard deviation Source: Morgan Stanley Slide 13 CURRENCY ACCORDING TO THE BIG MAC INDEX Source: The Economist, July 2013 Slide 14 CURRENCY SHOULD BE A TAILWIND USD: 18% Mexico: 58% Euro: 11% Sterling: 11% China: 54% Korea: 39% Russia: 18%* CAD overvalued to:What is expensive? Denmark: -28% Sweden: -25% Australia: -20% Switzerland: -27% Source: OECD statistics directorate, August 30, 2013 Slide 15 WHY BLACK CREEK? WHY NOW? Focus Experience Results Flexible size Global investing should see tailwinds Cohesive, team-focused strategy The need to think long term has never been greater Slide 16 OUR GOALS FOR OUR CLIENTS Positive returns Competitive returns beat competitors, indexes and ETFs Beat fixed income So far, so good. Slide 17 YTD1YR3YR 5YR Since inception* Black Creek Global Leaders Fund Class A20.2%35.3%12.9%7.8%3.5% MSCI World (C$)19.0%26.4%13.5%4.6%3.8% Black Creek International Equity Fund Class A18.4%41.8%15.2%12.5%12.7% MSCI EAFE (C$)15.2%27.3%9.3%1.9%5.0% Black Creek Global Balanced Fund Class A11.5%27.9%11.0%7.9%4.0% Global Balanced Index** % 11.4% % 15.4%8.5%8.0%2.2% Source: RBC Dexia, August 31, 2013 ** 60% MSCI World Index CAD/40% JPM GBI C$ ** Black Creek Investment Management took over management of Global Leaders on June 15, 2006; inception date is February 2005. BLACK CREEK PERFORMANCE Formerly known as Castlerock Global Leaders Fund, Castlerock International Equity Fund and Castlerock Global Balanced Fund *February 2005 *September 2008 *January 2007 As at August 31, 2013: Slide 18 ITS NOT ABOUT COUNTRY ALLOCATION BUT OUR BEST 25 BUSINESS IDEAS Flexible all-cap go-anywhere mandates Avoid areas of high valuation risk; the converse is also true Fewer companies to follow = depth of research/competitive analysis = conviction in our choices High deviation from index results in outperformance Disciplined BUY/SELL process replace our least favourite idea with our newest idea Slide 19 BUSINESSES YOU DO NOT FIND AT HOME Wienerberger Wuxi Pharmatech Carnival Corp. GPO Televisa Galp Energia Randstad Holding Publicis Groupe Accor Heidelberg Cement Christian Dior Bricks and ceilings Pharmaceutical supply Cruise line Media and television Oil & gas Staffing services provider Communications Hotel operator Cement & building materials Luxury consumer items Slide 20 SUMMARY While bonds and real estate are priced for perfection, equities are fairly valued the equity market is the place to be Black Creek is different, by focusing we deliver in the long term A world of opportunities exists. STOP reacting to the headlines, have a focused strategy to take advantage of them Buy the best opportunities you can find, anywhere! Stay flexible but disciplined Thank you for your support. We really mean it, we know it is hard out there for all equity investors Slide 21 All charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results. CI Investments, the CI Investments design are registered trademarks of CI Investments Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Thank you FOR ADVISOR USE ONLY Slide 22 WHY INVEST GLOBALLY? Equities are outperforming fixed income The Canadian dollar is overvalued by 10% - 30% We seek companies that are GLOBAL leaders (we consider Canada as well) Slide 23 WHAT WE DELIVER Our diversified global portfolios provide exposure to: 25 global market share leading companies Lower than average long-term valuations A proprietary view of the future of each company Focus, focus, focus Portfolios that do not track indexes we are trying to BEAT the index Slide 24 AREAS TO AVOID GIVEN PERFORMANCE OVER THE PAST 10 TO 15 YEARS Real estate and banks in commodity-centric countries Safe multinationals in safe industries Consumer companies in emerging markets Bonds and bond proxies in safe countries Dividend and income first stories rather than those supported by a business case and valuations Watch return of capital deception Slide 25 OUR PRODUCTS Black Creek Global Leaders Fund Black Creek Global Leader Corporate Class (focused equity) Black Creek International Equity Fund Black Creek International Corporate Class (EAFE) Black Creek Global Balanced Fund Black Creek Global Balanced Corporate Class (dividend and income) Slide 26 DIVIDENDS AND INCOME Black Creek Global Balanced Fund provides a mix of the two Fixed-income portfolio offers yield over 5% Equity portfolio near 3% yield BUT we buy the businesses first, and receive dividends later Slide 27 BLACK CREEKS COMPETITIVE ADVANTAGES Structure: owned by the investment managers Integrity: invest our own money in funds Experience: award-winning managers (global, balanced, international, European) More than 50 years of combined experience Have managed over $23 billion in assets Have seen booms and busts all over the world Conviction: 25 globally leading companies each a proprietary idea Small fund size: allows for flexibility Slide 28 THE CASE FOR EQUITIES Equity markets peaked in 2000 not normal returns Earnings yield attractive relative to bond yields Free cash flow yields are even higher Dividend yields higher than bonds (very rare) Investor sentiment is terrible globally (buy low, sell higher)