emerging market equity portfolio june...
TRANSCRIPT
International Investment Management
Since 1993
International Investment Management
Since 1993
International Investment Management
Since 1993
International Investment Management
Since 1993
Emerging Market Equity Portfolio June 2016
Table of Contents
Sloane Robinson
- Overview
- Outperforming the Benchmark
- Investment Process
- Risk Management
The Emerging Market Investment Opportunity
- Outlook
- Stock examples
SR Global Fund (Class N) Emerging Market Equity portfolio
Appendix
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2
3-8
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11-20
21-32
33-41
42-48
Overview
Sloane Robinson was founded in London in 1993 by Hugh Sloane and George Robinson, both of whom remain active
portfolio managers.
Organised as an investment partnership. Internal capital represents a significant investment across the funds.
Employ a market directional, equity long/short approach, with a typical net long bias.
Specialise in international equity markets, with particular expertise in emerging markets.
38 staff, of which 15 are dedicated investment professionals. Their average tenure at Sloane Robinson is 10 years.
Their average years of industry experience is 21 years.
The key pillars of our investment philosophy are:
Fundamental stock analysis within the framework of a clearly defined investment process
Macro analysis can identify attractive investment opportunities and potential risks
Concentrated portfolios improve investment discipline and enhance returns
A benchmark-agnostic approach complements an absolute return framework
Judicious use of derivative and FX overlays to manage risk
Source: Sloane Robinson. As at 3rd May 2016.
1
Outperforming the Benchmark
The Emerging Market portfolio has returned an annualised 4.5% since inception (January 2013) versus -5.0% for the
MSCI Emerging Market Free index over the same period1. This outperformance stems from a number of factors:
Identification of powerful investment opportunities and a willingness to allocate substantial capital to them.
India in 2014 and Chinese A-shares in 2014-15 have been important sources of profit.
Our rigorous macro analysis has enabled us to avoid many of the trouble spots. The fund has (until recently)
generally steered clear of Russia, Turkey, South Africa, Brazil and commodities.
Strong stock selection, governed by our investment process. Our stock picks (longs and shorts) in 2015
returned 8.3% (2013: 18.1%, 2014: 5.7%) 2.
Market timing. The fund has varied its overall risk exposure effectively, such that it has been positioned
defensively during corrections but equally has participated in market bounces. It has captured 72% of the
upside of the MSCI Emerging Markets index whilst experiencing only 37% of the downside3.
Source: Sloane Robinson LLP and Bloomberg. 1Portfolio performance is as at 31st May 2016 including a May estimated NAV. SR Global Fund (Class N) Emerging Market
Equity portfolio. Inception date 2nd January 2013. 2Based upon Sloane Robinson attribution analysis. 3Up/down capture as at 29th April 2016.
Performance stated is for the series 1 share class and assumes shares held since inception net of all fees with dividends reinvested. Investors should be aware that
indications of past performance will not necessarily be repeated. The value of shares and the partnership interests in the SR Global Fund (Class N) Emerging Market Equity
portfolio and the income derived there from may go down as well as up and this may be as a result of currency fluctuations.
2
Investment Process – Evaluating Macroeconomic Factors
In-house and third party macro economic research influences portfolio construction and exposures through identifying:
Investment themes
Country or industry specific trends
Macro opportunities / risks
Monetary Factors • Current Account
• Trade Balance
• Exchange Rate
• Reserves
• FDI
Structural Factors • Demographics
• Urbanisation
• Geographic Location
• Resource Dependency
Political Factors • Government Policy
• Privatisation
• Land/Industry Reform
• Foreign Investment
Incentives
• Rule of Law
Cyclical Factors • Outlook for Monetary
Policy
• Investment Cycle
Position
• Demand Dynamics
• Inflation
• Interest rates
Country Analysis
Opportunity
Portfolio Exposure
and Composition Risk
3
Investment Process – Fundamental Security Analysis
Compounders Dynamic Change Deep Value
Opportunities arise when
consensus is missing an important
development in the operating
environment, e.g.
• Industry change through
deregulation, changes in
demand / supply dynamics
• Spinning off of a non-core asset
• Product or process innovation• Increased focus on shareholder
value
• Arrival of new management
• Macroeconomic change
Offer exceptional value
Typically appear cheap versus
their continued ability to generate
cash flow
The fundamentals of the company
have stopped deteriorating
Most commonly found after a
crisis
A company may migrate between these three categories over time
Positive affirmation of an
improvement in fundamentals is
the signal to invest
Experience is key in identifying
the change ahead of consensus
Defensible margin and / or market
share
Sustainable competitive
advantages due to high barriers to
entry – a clear moat
Generally great businesses with
excellent management
Ongoing growth / reinvestment
opportunities
A margin of safety in valuation
is key
4
Investment Process: Example of a Compounder – Tencent
• Competitive moat stems from scale, having built the most successful social network (762m WeChat users) with
high levels of customer engagement (an average of 40 minutes per day).
• Closed loop ecosystem encompasses messaging, wallet (Tenpay has 300m users), online-to-offline, video,
music-sharing, gaming and e-commerce.
• Monetisation comes from (a) value-added services, such as gaming (53% revenues) and social network payments
(25% revenues) and (b) advertising (15% revenues).
• Revenues grew 43% YoY in the first quarter of 2016 and operating margin remained steady at 42%. Some
concern about macro-induced slowdown in brand/display ads but this is only 7% revenues. Meanwhile,
value-added service revenues beating expectations.
• Trades on 32x 2016 earnings but already a 4.3% FCF yield. PE multiple drops to 24x on 2017 numbers, FCF yield
up to 5.2%. We value using a DCF with 12.4% WACC.
Source: Credit Suisse HOLT™ and Sloane Robinson, May 2016
0
5
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25
30
35
40
45
%
Tencent CFROITencent CFROI
5
Investment Process: Example of a Dynamic Change – Tata Motors
Dec 13: we bought the stock around INR 365. The company experienced positive dynamic change as its new
Range Rover product range proved immensely popular in China, driving up earnings expectations as margins
surged.
Jul 14: with the stock at INR 500 we judged valuation less attractive and exited our position.
Sep 15: after the price dropped to INR 300 we considered rebuilding a long position but concluded that the stock
no longer qualified as a positive Dynamic Change candidate as the Range Rover/Land Rover product refresh was
largely complete.
Nov 15: upon further investigation we concluded that the stock was now susceptible to adverse dynamic change.
Whilst volumes were still growing strongly we judged margins would come under pressure due to (i) adverse
geographic mix shift as China demand slowed and (ii) adverse product mix shift as low-margin Jaguar increasingly
drove future volume growth. As a result, we shorted the stock around INR 408.
Feb 16: short closed at an average of INR ~330 .
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Fwd EPS Price
6
Source: Datastream, IBES, May 2016. The value of investments can go down as well as up and this
may be as a result of currency fluctuations.
Price and 12M Forward EPS INR INR
Additional Drivers of Return
Shorts
Individual equity short exposure tends to range from 0-10% NAV. We look for ‘anti-Compounders’ or stocks
experiencing negative dynamic change.
Derivative Overlays
The underlying equity portfolio may be supplemented with additional overlays, which may be motivated either from a
hedging or an investment objective.
Non-FX
Typically driven by a shorter term tactical view on the market where time to implement is of the essence
May take the form of forwards, options or futures contracts
Predominantly on individual companies and markets
FX
FX risk is not automatically hedged, but we may choose to currency hedge underlying long positions on a tactical
or structural basis.
Occasionally FX may be the chosen vehicle to implement a negative view on a country’s macro prospects.
Degree of usage depends on the prevailing market environment.
7
1. Sourcing an Idea
Company meetings
Top-down thematic research
Quantitative screens
Sell-side research
2. Evaluating the opportunity
- Quantitative factors
Examples include DCF modelling, sum of the parts analysis and CFROI
modelling via HOLT*
- Qualitative factors
Examples include interaction with corporate management and analysis of
industry dynamics
3. Presentation and debate within the investment team
4. Portfolio Manager decision – independent, based upon fit with risk/return objective
5. Ongoing appraisal and dialogue between the analyst and portfolio manager regarding the progression of the
6. investment thesis against price target. This influences position sizing and the ultimate sell decision.
*Credit Suisse HOLT™ is a cash flow return on invested capital (CFROI) based valuation tool we utilise in our fundamental research
8
Life Cycle of a Typical Investment
Risk Management
Sloane Robinson is risk conscious and seeks to avoid permanent impairment of capital.
The Risk Committee focuses upon investment, liquidity, counterparty and operational risk. Its members are:
David Gale, Chief Executive Officer (Committee Chair)
Ed Butchart, Chief Investment Officer
John Cutler, Head of Legal & Compliance
Jason Reeve, Head of Trading
A number of formal meetings occur in which risk issues are discussed:
Daily
Investment team meeting during which relevant risks and opportunities are assessed.
Weekly
Risk Management Committee meeting.
Monthly
Detailed review by CIO and CEO of each portfolio with the relevant portfolio manager/s.
Analyst reviews which focus upon successes, failures and coordination of future research agenda.
9
Emerging Market Investment Opportunity
10
Emerging Markets Outlook
The fundamental drivers of relative underperformance since 2011 are beginning to abate. This appears to be an opportune time to be scaling back into emerging markets.
1) The US dollar is no longer cheap. Ongoing Fed rate hikes may provide some support but the dollar rally looksmature.
2) Emerging market macro has adjusted. External balances have been strengthened by domestic demandslowdowns and weaker exchange rates. Speculative capital inflows have reversed.
3) Commodity markets are adjusting. Of particular importance, balance has been restored in the oil markets.
4) Valuations have improved. Aggregate price to book value has dropped from 2.2x to 1.4x. More importantly, weare finding more Compounder investment candidates that offer an adequate margin of safety.
5) Reform cycle turning up in emerging and frontier markets. Modi a key force for change in India. Dilmaousted in Brazil. Macri transforms Argentine prospects. Saudi launches Vision 2030. China-Pakistan EconomicCorridor a game-changer in Pakistan.
6) Powerful investment themes. In a world of low growth, emerging markets offer some compelling long termopportunities, particularly in consumer service companies.
Timing the bottom is tricky, and a pull back may be due after a strong run in the first quarter, but we think the foundations are being laid for better relative performance from emerging markets in the years ahead.
11
Emerging Markets Outlook
An easing of the headwinds of the last five years offers the opportunity to revisit the longer-term case for allocating
capital to emerging markets.
The countries included in the MSCI Emerging Markets index already account for 37% of the GDP that is represented
by countries included in the MSCI AC World Index (which includes emerging and developed markets) and 81% of the
population.
However, the emerging market share of the total MSCI AC World market cap is just 10%. This rises to 12% if one
includes Chinese A-shares.
Over the long run, emerging market US dollar GDP growth should outstrip that of developed markets.
Source: Sloane Robinson. IMF and Oxford Economics data for MSCI EM and ACWI indexes.
May 2016.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
%
EM Share of World TotalsEmerging Market Share of World Totals
12
Why the US Dollar Matters
Source: Sloane Robinson. IMF country data aggregated using MSCI country weights. May 2016.
A strong dollar creates a FX headwind to equity returns, pressures commodity prices and often forces emerging
market policy tightening as speculative capital exits.
Emerging market US$ GDP growth has slumped from 22% in 2010 to -5% in 2015 (the second worst reading
since the inception of the MSCI Emerging Markets index).
Emerging market US$ GDP is a decent proxy for the US$ sales of quoted emerging market corporates. Profit
margins tend to be pro-cyclical and the multiple of US$ profits that investors are willing to pay is also pro-cyclical.
As a result, there is a close correlation between equity returns and US$ GDP growth in the emerging markets.
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EM $ GDP Growth YoY Change in Average Value of MSCI EM (RHS)
Emerging Market US Dollar GDP Growth and Emerging
Market Equity Returns
13
The Dollar is No Longer Cheap
Over the long run, the broad trade weighted dollar tends to be anchored to the ratio of foreign to US consumer prices.
The dollar was demonstrably undervalued in 2011, particularly versus emerging market currencies.
The dollar is no longer undervalued versus PPP, suggesting that the dollar rally is mature.
Relative interest rate prospects still support the dollar: we are constructive on US growth and see the Fed continuing to tighten
gradually. And the late 1990s show that a dollar overshoot is possible.
Nevertheless, emerging market currencies are looking better value now that external balances have improved and significant
speculative flight has already occurred.
Source: Datastream. May 2016.
Trade-Weighted US Dollar-vs-Relative Consumer Prices
2015 2010 2005 2000 1995 1990 1985 1980 1975
Nominal Effective Exchange Rate Relative CPI
14
Emerging Market Macro Balances Improving
An important part of the US dollar bull thesis has been the initially overvalued level of many emerging market currencies, judged by
real exchange rates (as terms of trade in resource producing countries have reversed) and external balances.
Domestic demand slowdowns and weaker currencies have improved the aggregate current account position. Large deficits (i.e.
Brazil and Turkey) are now narrowing, whilst surpluses have increased (i.e. China and South Korea).
Meanwhile, much speculative capital has been flushed out.
Source: Sloane Robinson and Datastream. May 2016
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EM Current Account Balance
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Non-FDI Capital FlowNon-FDI Capital Flow
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Emerging Market Current Account Balance
Capex Has Been Cut: Improved Returns Should Follow
The period leading up to 2011 saw an investment boom in emerging markets - encompassing the materials and energy sectors,
heavy industry and infrastructure in China, power generation in India but also capacity growth in consumer-facing industries.
The law of diminishing returns usually apply. In other words, capacity growth erodes margins and asset turns and thus depresses
returns on capital. Trailing ROE for the MSCI Emerging Markets index has dropped from 15% in 2011 to 10% today.
The response has been for many corporates to cut back on their capex. Albeit with a delay, this should sow the seeds of an upturn in
margins and returns on capital.
Source: BofA Merrill Lynch Global Research, IMF, Bloomberg. April 2016.
Capex and Margins
16
Oil Market Re-Balancing
Oil matters for the overall emerging market outlook because there is a direct impact on the energy sector (8% market cap of the
MSCI Emerging Markets Index) and oil-producing countries. However, oil prices also seem correlated with broader emerging market
sentiment and capital flows.
The oil market has gone from nearly running out of storage capacity to being in deficit much quicker than most expected. This has
been driven both by sustained strong demand and sharply declining production. Supply disruptions (for example in Nigeria) are likely
to prove transient but the market is likely to remain in deficit in the second half of 2016, arguing for a WTI forecast of $50.
With strong production growth from Saudi Arabia and Iran, plus continued funding for US shale players (US$ 45bn of equity/bond
issuance YTD) a sustained rally from here looks unlikely. Downside risks also would appear to be contained due to a likely supply
response with higher prices. This has encouraged some reduction in the discount rates we use to value companies in oil producing
countries. We own X5 in Russia, BUPA Arabia in Saudi Arabia and Emaar in Dubai.
Source: Datastream. May 2016.
MSCI Emerging Markets and the Oil Price
MSCI EM US$ Price Index
Crude Oil WTI Near month FOB US$/bbl. (R.H.S)
17
Compounder Opportunities Emerge
One of the frustrations of recent years has been the high proportion of great businesses that we have analysed where we have been
unable to find sufficient margin of safety to warrant an investment.
Aggregate emerging market valuations appeared in recent years to become more compelling, but this largely reflected the de-rating
of fundamentally unattractive companies and not an enhancement to the investment opportunity set.
There are signs that this is starting to change. Redemptions from the asset class forced the selling of even good companies, whilst
investors’ attention has lately shifted to beaten up cyclical sectors.
This has created some exciting investment opportunities for us and the proportion of the portfolio accounted for by Compounders is
now at record highs.
Source: Sloane Robinson. As at 29th April 2016.
Emerging Market Equity Portfolio Share of Compounders, Dynamic Change and Deep Value
Investments
18
0%
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ong E
xposure
(%
NA
V),
by
Investm
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Cate
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Compounders Dynamic Change Deep Value
China – A Shift to Consumer Services
China’s immense housing replacement cycle, which kicked off in the late 1990s, is rolling over. Cities have been re-shaped and the
housing stock upgraded. This is bad news for sectors that expanded capacity to meet those elevated levels of replacement demand.
To combat the adverse impact on growth, at a time when export growth is also weak, policymakers have permitted a significant
expansion of credit to shady quasi-local government infrastructure entities. We fear much of this credit will turn bad whilst the boost to
growth is likely to be modest at best.
Households funded their housing purchases not through debt but by redirecting spending away from other consumer items.
Consumption, as measured in the national accounts, declined as a % of GDP, but total household spending did not.
We are starting to see a redirection of household spending back towards other areas of consumption, notably services. Examples
include tourism, private healthcare, insurance and leisure activities (such as cinema attendance). And whilst appetite for foreign luxury
brands has waned there is a clear upgrading from low end unbranded products to affordable Chinese brands.
Source:. Emerging Advisors Group. April 2016.
Household Income and Spending in China
19
India – Stands Out in a Low Growth, Disinflationary World
In a world of deflation fears, India is different. It has until recently been wrestling with an inflation problem and long-term bonds still
yield 7.5%.
In a low growth world, India is an exception. Underinvested, with significant catch-up productivity potential and obvious opportunities
for consumer companies as the middle class expands.
The quality of policymaking has significantly improved under Prime Minister Modi and RBI governor Rajan and the signs are that a
growing proportion of the electorate favours reform.
In the long term, stockmarket capitalisations tend to be anchored by US dollar GDP. We consider the bullish long-term dollar GDP
projections for India to be highly plausible.
Stock selection is critical. Some high quality consumer franchises are expensive whilst some lowly valued stocks threaten to be
value traps. 20% of the Emerging Market Equity portfolio is invested in Indian companies that we consider offer growth at a
reasonable price.
Source:. Datastream. Projections from Oxford Economics. May 2016.
MSCI India Market Capitalisation and US$ GDP
20
Stock Examples
21
Some Compelling Investment Themes
Our portfolio reflects a number of exciting investment themes with excellent long-term potential, identified by a combination of our
macro analysis and bottom-up research.
Indian private sector financials (Axis Bank, Yes Bank and HDFC): a recovering economy and a market share shift from public to
private banks should drive strong and sustained growth.
China healthcare (Jiangsu Hengrui Medicine and Sinopharm): we have identified potential winners from a growing regulatory and
consumer focus on quality and efficacy.
Insurance (AIA and BUPA): limited safety nets and creaking public health systems create a need to save for old age/healthcare.
Best in class franchises should benefit.
Consumer (Tencent, PVR, InterGlobe Aviation, Xtep, Inner Mongolia Yili Industrial, Kweichow Moutai and Jubilant FoodWorks):
winners from consumers trading up to affordable quality as well as from a pent-up demand for services, particularly in China and
India.
IT services (Globant and EOH): attractive business franchises with plenty of growth potential, capitalising on the shift to
digitalisation and outsourcing to technology specialists.
22
Source:. Sloane Robinson. As at 25th May 2016.
Source: Morgan Stanley. May 2016
Loans Market Share
Indian Financials: Axis Bank and Yes Bank (Dynamic Change)
Macro Dynamic Change: The Indian economy is gradually recovering, initially led by public sector capex and FDI but now
broadening out to urban/rural consumption (helped by rate cuts, pending civil servant wage hikes and predictions of a better
monsoon season).
Sector Dynamic Change: State banks are 75% of total credit outstanding but are hamstrung by inefficiency, asset quality problems
(17% impaired loan ratio) and inadequate capital (likely to need US$ 40bn in fresh equity). This creates a fantastic opportunity for
private banks to take market share. Fourth quarter FY2015 system-wide bank credit grew ~10% YoY, but Axis loans grew 20% and
Yes Bank is 30%.
Axis: US$ 18.3bn market cap. 3.5% share of total bank credit. Historically a corporate lender (still 45% loans plus 15% to SMEs) but
focused on growing retail exposure (now 40% loans, of which two-thirds are mortgages). Trades currently on 2.1x FY 2017 P/BV,
with a 17% ROE (i.e. FY 2017 PE of 13x) but sustainable ROE should be 100-200bp higher.
Has been affected by broader sector asset quality concerns but has responded by placing INR 230bn of corporate loans (largely
issued before FY 2012) on a watch list and are preparing for 60% to turn into NPLs over the next two years. This is 6% of total loans
and implies two years of 150bp credit cost charge. Unprecedented transparency.
Yes: US$ 6.4bn market cap. 1.1% share of bank credit. Founded 2004. 65% loans to large corporates (mainly working capital
loans), only 1% retail. Only 0.8% gross NPA ratio, 50-70bp credit costs. 2.2x FY 2017 P/BV, with a 19% ROE (i.e. FY 2017 PE of
12.5x) which should be sustainable.
23
Mortgages as a Percentage of Nominal GDP
Indian Financials: HDFC (Compounder)
Source: European Mortgage Federation, HOFINET, HDFC. November 2015.
% GDP
US$ 29.5bn market cap. Superbly managed franchise focused on credit quality, cost efficiencies and customer service.
22% stake in HDFC Bank. Loans are growing ~25% YoY. 50% are retail, and 50% corporate/SME. Gross NPL ratio of just 0.9%. Net
interest margin steady above 4%. 1.9% ROA, 19% ROE. 19x FY 2017 PE not too high a price to pay for sustained 20% p.a. growth
potential.
Core mortgage business ~50% of fair value. Recent slowdown should prove transient. Low mortgage penetration creates scope for
multi-year 15% p.a. growth. 70% mortgages and 30% developer loans. 3% net interest margin. 2.6% ROA and 20% ROE. Total write
offs since business inception <4bp of cumulative disbursements.
50% stake in HDFC Standard Life. Individual new premiums growing ~15% p.a. Private players winning share from hitherto
dominant state insurer LIC. To be separately listed.
Stripping out the market/estimated value of subsidiaries we calculate that the core mortgage business is valued at an attractive
12.6x FY 2017 earnings.
24
China Healthcare: Jiangsu Hengriu Medicine (Compounder)
US$ 13.4bn market cap. The most innovative Chinese pharmaceutical company with strong first to market generic capabilities but
also a growing capability in innovative drugs. 20 Class I (innovative) and 57 Class III (first-to-market) drugs in the pipeline.
Chinese pharma market should see strong volume growth (rising incomes, ageing and expanding health insurance) combined with
pricing pressure in provincial tenders. Makes for low-teens annual growth in market size as healthcare spending rises from 5.6% of
GDP to 6.5-7% of GDP by 2020.
Number one in Chinese oncology (34% sales) and number two in surgical anaesthetics (27% sales). Typically winning market share
from higher priced MNCs, having demonstrated comparable efficacy.
10% revenues from overseas (but a target of 20% by 2020). Six drugs sold in US, five ANDA (Abbreviated New Drug Application)
approvals pending and aim to sell innovative drugs in US by 2020.
We look for sales to compound 23% p.a. 2015-20, driven by expansion of international portfolio and continued rapid growth in surgical
anaesthetics, oncology, infusion solutions and contrast media. Margins have upside potential, reflecting scale economies and much
higher profitability for innovative products.
Trades on 26x 2017 estimated earnings, but with strong and sustainable earnings growth potential and a 3% 2017 free cashflow
yield.2014 Healthcare Expenditure as a % of GDP versus GDP per capita
Source: OECD Database, Goldman Sachs Global Investment Research. GDP per capita (in US$)
Healthcare
expenditure
as %
of
GD
P
25
China Healthcare: Sinopharm (Dynamic Change)
US$ 13bn market cap, Fosun International own 28% and China National Pharmaceutical 29%. Focused on pharmaceutical
distribution (number one player, with an 18% market share).
The top five pharma distributors have a 37% market share. High entry barriers (working capital and extensive supply network) argue
for a consolidated industry. As a comparator, the top five in the US have 90%+ market share.
The Dynamic Change opportunity comes from (i) 70% of the 13,000 distributors in China likely to be eliminated by 2020 due to their
failure to meet new Good Selling Practice rules, (ii) growing emphasis in tenders on distributor coverage and efficiency, and (iii)
clamp down on ‘shadow distributors’ who pay kickbacks and evade VAT.
So whilst overall market grows 13% p.a. the top ten players should see ~20% p.a. growth as they boost their market share.
Low margin (~6.5% distribution margin and 4% overall EBIT margin) but low (~0.5%) capex/sales. We see working capital dropping
from last year’s 14% of sales as company becomes increasingly proactive in managing receivable days.
Trades on 15x 2017 estimated earnings for a ~20% EPS growth CAGR over the next five years. Free cashflow yield is currently 8%.
Source: Citi Research and China Ministry of Commerce. December 2015.
26
Pharmaceutical Distribution Industry Structure
(Revenue Based)
Indian Consumer: InterGlobe Aviation (Compounder)
US$ 5.5bn market cap. A rare airline with Compounder characteristics: i.e. India’s Southwest Airlines or Ryanair equivalent.
Huge growth opportunity: (i) it takes sixteen hours by train from Delhi to Mumbai, two hours by plane, (ii) domestic air passenger
volumes are growing ~20% p.a., (iii) a country of 1.3bn people have just 280 aircraft serving the domestic aviation market, (iv) as the
only consistently profitable airline, they have been the sole carrier to grow capacity since 2008, taking domestic market share to
37%.
Best in class business model: (a) buy a single plane type (A320) in bulk for a discount, (b) lease rather than own, and for only six
years (keeps maintenance cost down), (c) maximise time in air, (d) no frills, (e) only serve 36 airports (out of 56 that could take
A320) to maximise scale economies.
RASK-CASK (Revenue minus Cost excluding fuel per Available Seat Kilometre) spread of US$ 0.034 is twice that of local rivals’
average and comparable to global best in class players despite high Indian landing fees.
Now have 111 aircraft. Target 136 by the end of FY2017 as capacity jumps 34%. 5 year capacity growth of 18% p.a. Overall industry
set to grow domestic fleet ~16% p.a. but we believe demand growth is strong enough to absorb this without pressuring Indigo’s 84%
load factor.
Trading on 13.5x estimated earnings for FY 2017, when it should generate free cashflow of ~US$ 500m. Has negative working
capital, is funded by its suppliers and offers a 4% dividend yield. Not your typical airline!
27
IT Services: Globant & EOH (Compounders)
Two little known but fast-growing niche IT players with Compounder potential.
Globant: US$ 1.3bn market cap, WPP own 20%. 65% workforce in Argentina but becoming more diversified and recently acquired
an Indian business.
Develop bespoke cutting edge software solutions, with a focus on ‘digital transformation’ - the fastest-growing (~20% p.a.)
component of the global IT services market. Globant built LinkedIn’s mobile app on Android, Southwest Airlines’ website, a big data
analytics platform for BBVA and the intelligent ‘Magic Band’ for Disney (their number one client, ~10% of sales).
Management guides for at least 20% revenue growth but has been delivering mid-to-high 20s. Argentine peso devaluation drove
EBITDA margin up to 23%, which should normalise around 20% with scope for steady improvement on scale economies.
Trading on 26x 2017 earnings. We have been trimming exposure after a recent strong run, but think the medium term prospects
remain compelling.
EOH: US$ 1.2bn market cap. South African (SA) IT services company (SA is 87% of revenues, but aim to take Middle East/Africa up
to 50% in medium term). Focused on outsourcing (33% sales), systems integration (26%) and industrial technologies such as smart
meters and surveillance systems (13% sales).
Revenues up fivefold and earnings up threefold in last five years. Under-developed SA IT services market seen growing low double
digit p.a., with EOH growing its market share from current ~6%, both organically and via M&A.
Model is for individual business heads to identify well-run but subscale rivals in SA’s fragmented IT sector that they can buy for
single digit PE multiples to enhance existing service offerings.
Trading on 15x 2017 earnings. 14% EBITDA margin. We see earnings compounding at a 25% pace over the next five years.
28
EM Insurance: AIA (Compounder)
US$ 69.6bn market cap. Strength lies in distribution (309k agents), product (focused on protection), brand (46m customers) and
financial strength (US$ 5bn excess capital, doubles if Hong Kong moves to ‘Solvency II’) – not to mention excellent management
since separating from AIG.
Operating in a region with a large (4bn) and growing population, rising urbanisation/middle class (464m households by 2017 with
disposable income > US$10k), low social welfare spending (one-sixth of G7 levels) and a US$ 51trn mortality protection gap. 50% of
global insurance growth is coming from Asia.
Number one player in Hong Kong (accounts for 32% embedded value), Singapore (13%) and Thailand (17%).
A rarity in having 100% ownership of a Chinese business (18% of EV) with licences in five coastal provinces. Seeing very strong
growth in this business. China is now second biggest contributor to value of new business. Mainlanders also contribute 30% of Hong
Kong business (policies being cheaper than in China, and protection cover offers treatment in Hong Kong).
Recent enforcement of US$ 5,000 limit on mainlanders using UnionPay for overseas insurance products has immaterial effect: 80%
regular policy payments fall below this limit.
Generating a US$ 4bn free surplus a year from the back book, which is more than sufficient to finance high IRR, shorten payback of
new business, pay progressive dividends and maintain a fortress-like balance sheet.
Low sensitivity to stockmarket gyrations and interest rate changes due to focus on ‘protection’ type products.
Overall value of new business should grow 18% in 2016. Embedded value growth a more moderate 14% (reflects large size of back
book). Trades on 1.5x 2016 forecasted embedded value, implying a reasonable 9x multiple of 2016 estimated new business value.
29
Emerging Market Insurance: BUPA Arabia (Compounder)
US$ 3.0bn market cap. One of only two listed entities within the BUPA group, operating in one of its most promising markets.
Saudi Arabia has a young population (over half the population is below the age of 25) but a high incidence of obesity (32% adults)
and diabetes (20% of those aged over 20 have type II).
US$ 25k per capita GDP, but only two hospital beds per 1,000 people (5.5 in developed markets) and nine doctors per 10,000 (27 in
developed markets). Free healthcare for public sector workers and dependents but public hospitals struggling to cope.
Law requires that 14.7m expats plus local private sector workers must have health insurance to pay for private medical care. Total
insured population still only 11m so more room for growth here.
Hints that Vision 2030 reform agenda extends health insurance to ~13m public sector workers. Saudi Aramco leading the way.
Top three health insurers have 81% market share. BUPA is number one (45%), clear leader on price and quality and easily the best
managed. 30%+ ROE, entirely generated from underwriting with limited appetite for investment risk. These are Compounder
characteristics.
Trades on 14x 2017 earnings. 18% YoY premium growth in the first quarter of 2016.
Source: International Diabetes Federation, 2015 data
0
5
10
15
20
25
Saud
i Ara
bia
UAE
Egyp
t
Mex
ico
Om
an
Turk
ey
Jord
an US
Braz
il
Chin
a
Indi
a
Russ
ia
Mor
occo
Spai
n
S.Af
rica
Isra
el
Cana
da
Ger
man
y
Japa
n
Net
herla
nds
Fran
ce
Italy
Aust
ralia UK
Swed
en
% o
f 20-
79 Y
ear O
lds
Prevalence of DiabetesPrevalence of Diabetes
30
Chinese Consumer: Xtep (Dynamic Change)
31
Source: Xtep
US$ 1.1bn market cap. Chinese sportswear brand: 64% sales from footwear, 34% from apparel.
Sports participation and spending on sportswear seeing secular growth. One million Chinese will run a marathon this year.
Government targeting a 60% rise in the number of sports facilities by 2025 and wants 500m citizens regularly exercising.
Industry has learned from over-expansion in 2010-13 which created excess inventory. Should see low double digit industry growth
Nike/Adidas have 28% market share of the Chinese sportswear market, but for products with an ASP of RMB 850-1,450. Only really
affordable for Tier 1 cities. Xtep more focused on Tier 3-4 cities with ASP of RMB 250-400.
Building a strong brand name for running. Running shoes 30-40% footwear sales. Most common local shoe brand among first 1,000
finishers at Beijing marathon. Rivals Anta and Li Ning are more focused on basketball.
Margins on an improving trend due to (i) rising e-commerce (8% sales) (ii) increased focus on footwear, (iii) increased focus on
higher margin functional products.
Working capital is also on an improving trend due to new inventory control system.
Net cash is 25% of market cap. We project a 2016 free cashflow yield of 10% of market cap.
and a 5.5% 2016 dividend yield.
Indian Consumer: PVR (Compounder)
US$ 600m market cap. with strong growth prospects.
India has six cinema screens per million people vs 21 in China and 123 in the US. Only 20% screens are modern multiplex – the
uneconomical single screens that dominate the industry are closing down. PVR is the number one player in the consolidated
multiplex segment (34% market share).
PVR has 515 screens, with 60-70 new additions due per year plus mid-single digit ticket price inflation and scope to boost food &
beverage spend and advertising. Creates the potential for ~20%+ organic revenue growth CAGR. Also eyeing M&A.
EBITDA margin should be bolstered over time by mix effects and operating leverage. Goods and service tax reform likely to be a net
positive.
Film slate is an external risk but Bollywood output (half of revenues) has improved after a tricky couple of years.
Trades on 26x FY 2017 estimated earnings, 10x EV/EBITDA. Already a 5% FCF yield for FY 2017, which is set to grow strongly.
Source: PVR. April 2016.
0
20
40
60
80
100
120
140
Scre
en
s p
er
mill
ion
pe
op
le
Cinema PenetrationCinema Penetration
32
Emerging Market Equity Portfolio
33
Historic Performance
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Portfolio Index
2013 1.5% -0.7% 1.6% 1.5% 1.4% -5.1% 1.7% 0.0% 4.0% 3.3% 1.6% -0.2% 10.8% -2.3%
2014 -5.7% 3.9% 0.3% -2.4% 2.7% 1.6% 0.6% 0.7% -3.6% 4.0% 0.7% 1.2% 3.7% -1.8%
2015 2.0% 3.0% -2.2% 7.5% 2.2% -3.0% -0.4% -6.1% -0.7% 5.8% -2.6% -1.3% 3.3% -14.6%
2016 -2.8% -4.1% 4.6% 1.6% -1.01 -2.0%1 2.4%
Source: Sloane Robinson LLP and Bloomberg. As at 31st May 2016. *Compound annualised return. Inception 2nd January 2013. 1Internal estimate. Performance stated is for the
series 1 share class and assumes shares held since inception net of all fees with dividends reinvested. Investors should be aware that indications of past performance will not
necessarily be repeated. The value of shares and the partnership interests in the SR Global Fund (Class N) Emerging Market Equity portfolio and the income derived there from
may go down as well as up and this may be as a result of currency fluctuations.
Historic Emerging Market Strategy Returns
Note: Performance stated relates to the series 1 share class of the SR Global Fund (Class G) Emerging Market portfolio and assumes shares held since inception net of all fees with dividends reinvested . The portfolio
was managed from its inception in March 1996 through to the end of 2012 by Richard Chenevix-Trench. At the end of 2012 this portfolio was re-mandated to Global Opportunities, a mandate Richard continues to manage
today.
SR Global Fund Inc. Inception 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CAGR
Emerging Market portfolio Mar-96 37.2% 110.8% -4.5% 78.9% -16.0% 20.5% 4.7% 57.3% 24.7% 31.3% 26.6% 33.8% -32.2% 50.0% 2.9% -17.3% -0.8% 19.3%
MSCI EMF 0.6% -11.6% -25.3% 66.4% -30.6% -2.4% -6.0% 56.3% 26.0% 34.5% 32.6% 39.8% -53.2% 79.0% 19.2% -18.2% 18.6% 7.4%
YTD
34
-2.0
-10.2
3.3 4.5
2.4
-17.3
-4.6 -5.0
-20
-10
0
10
YTD 1 Year 3 Year* Since Inception*2.1.13
%
Emerging Market Equity Portfolio MSCI Emerging Market Index
Upside and Downside Capture – Inception to 29th April 2016
Average monthly performance during up markets
Average monthly performance during down markets
Source: Sloane Robinson LLP and Bloomberg. As at 29th April 2016. Inception 2nd January 2013. Performance stated is for the series 1 share class and assumes shares held since
inception net of all fees with dividends reinvested. Investors should be aware that indications of past performance will not necessarily be repeated. The value of shares and the
partnership interests in the SR Global Fund (Class N) Emerging Market Equity portfolio and the income derived there from may go down as well as up and this may be as a result of
currency fluctuations. The upside/downside capture ratio reflects the percent of the index return that the Emerging Market Equity portfolio has independently generated.
Upside Capture Ratio = 72%
Downside Capture Ratio = 37%
35
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Emerging Market Equity MSCI Emerging Marketindex
-4.0%
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
Emerging Market EquityMSCI Emerging Market
index
Country Exposure
Source: Sloane Robinson LLP. As at 25th May 2016. ¹Predominantly exposure to companies quoted
outside of emerging markets whose main drivers or business lie in the region.
36
% Of Total Portfolio Equity
Long
Equity
Short
Equity
Index
Net
Exposure
Gross
Exposure
Hong Kong / China 30.6 -4.2 -14.3 12.1 49.0
India 19.7 19.7 19.7
Pakistan 5.6 5.6 5.6
South Korea 1.5 1.5 1.5
Taiwan 3.1 3.1 3.1
Total Emerging Asia 60.5 -4.2 -14.3 42.0 78.9
Argentina 5.3 5.3 5.3
Brazil 2.0 2.0 2.0
Peru 0.6 0.6 0.6
Total Latin America 7.9 0.0 0.0 7.9 7.9
Russia 3.2 3.2 3.2
Saudi Arabia 3.2 3.2 3.2
South Africa 4.1 4.1 4.1
United Arab Emirates 2.2 -5.1 -2.8 7.3
Total EEMEA 12.7 0.0 -5.1 7.6 17.7
Other1
1.9 1.9 1.9
Total Other 1.9 0.0 0.0 1.9 1.9
Total 82.9 -4.2 -19.4 59.4 106.4
Net Sector Exposure
Source: Sloane Robinson LLP. As at 25th May 2016.
37
Consumer Discretionary 11.1 Industrials 3.5
Auto -2.1 Transportation 3.5
Auto Components 3.3 0.0
Hotels, Restaurants & Leisure 1.3 Information Technology 15.2
Movies & Entertainment 4.0 Electronic Equipment 1.0
Textiles, Apparel & Luxury Goods 4.6 Internet Software & Services 4.2
0.0 IT Services 2.4
Consumer Staple 7.9 Semiconductor & DRAM 3.1
Beverages 3.0 Software & Services 3.0
Food & Staples Retailing 3.2 Technology Hardware & Equipment 1.5
Food Products 3.7 0.0
Personal Products -2.0 Materials 5.7
0.0 Construction Materials 3.5
Financials 19.8 Metals & Mining 2.2
Banks 11.0 0.0
Insurance 8.8 Real Estate 2.2
0.0
Health Care 9.2 Utility 4.2
Health Care Equipment & Services 4.0 Gas Utilities 2.0
Pharmaceuticals 5.2 Utilities 2.2
Balance Sheet and Position Sizes
Net Inv - % 59.4
Longs - % 82.9
> 4% 20.7
2% to 4% 45.1
< 2% 17.1
Shorts - % -4.2
Index Overlay -19.4
No. of Long Positions 33
No. of Short Positions 2
Average Market Cap Exposure
(US$ billions) %
<1bn 10.2
1-5bn 24.7
5-10bn 18.5
10-25bn 21.2
25bn+ 25.4
Average Weighted Market Cap US$ 30bn
Top 10 Positions
Source: Sloane Robinson LLP. As at 25th May 2016.
Company Weight Country Sector
Tencent 4.3% China Internet Software & Services
Axis Bank 4.3% India Banks
AIA Group 4.1% Hong Kong Insurance
PVR 4.0% India Movies & Entertainment
Sinopharm 4.0% China Health Care Equipment & Services
Inner Mongolia Yili 3.7% China Food Products
HDFC 3.7% India Banks
InterGlobe Aviation 3.5% India Transportation
Jiangsu Hengrui Medicine 3.3% China Pharmaceuticals
X5 Retail 3.2% Russia Food & Staples Retailing
Concentration 38.0%
38
* an incentive fee will only be payable at the end of a rolling two year performance
period if both outperformance versus the index and the high water mark (net of all
fees) has been achieved.
Summary of Key Features
Inception 2nd January 2013
Co-managed by Ed Butchart and CJ Morrell
Terms:
Monthly dealing
One month’s notification on redemptions
1% management fee
15% performance fee, based upon absolute return versus high water mark
Hurdle: MSCI Emerging Markets index*
Service Providers:
Prime Broker: Morgan Stanley
Administrator: Morgan Stanley Fund Services (MSFS)
Auditor: PwC
Source: Sloane Robinson LLP. As at 29th April 2016.
39
Biographies Ed Butchart, CFA
Chief Investment Officer and Portfolio Manager
Educated at St. John’s College and Nuffield College, Oxford. Doctorate in Economics/Economic History.
Junior Research Fellow, Merton College, Oxford 1994-97.
Merrill Lynch 1997-2004. Emerging European specialist 1997-2000, Global Emerging Markets
Strategist 2000-04. Co-head of Latin American and Emerging European economics team.
Moore Capital 2004-2008. Portfolio Manager, Emerging Market Equities. Part of a 3-man team
investing across emerging markets.
Gemstrat Advisory 2008-11. Established an independent research company, focused on economic
and strategic research on emerging markets. 40-50 clients across the fund management industry.
Sloane Robinson 2011-present. Initially as Head of Investment Strategy and Risk, responsible for
macroeconomic research and oversaw the firm’s investment risk process. Appointed Deputy CIO
January 2012. Appointed CIO September 2012.
40
Biographies Christopher “CJ” Morrell
Managing Executive and Portfolio Manager
Educated at Westminster school in 1984, Japanese Missionary Language Institute 1985-1987.
James Capel Tokyo 1987-1991. European equity sales to Japanese Institutions.
Smith New Court Japan 1991-1995. Director Head of International Equity Sales.
Merrill Lynch Tokyo 1995-1996. Director Head of International Equity Sales.
Merrill Lynch New York 1996-2000. Director European equity sales.
Merrill Lynch Toronto 2000-2002. Managing Director, Head of Canadian Equity Sales. Part of a 3
man team that managed Merrill Lynch’s acquisition of Midland Walwyn securities.
Merrill Lynch London 2002-2006. Managing Director, Head of Asian and Emerging Market Equity
Sales.
JP Morgan Asset Management 2006-2010. Managing Director, Emerging Market equity team,
Manager of the JP Morgan Emerging Alpha Plus fund, Manager of the JP Morgan Emerging Ultra fund,
member of the 5 man management committee.
Sloane Robinson 2010-present. Currently manager of the Frontier portfolio and co-manager of the
Emerging Market Equity portfolio.
41
Appendix
42
Kelly Dormer-Phillips
David Hayward
Daniel Lee
Ashleigh McDowell
Kate Ralph
Lindsey Smith
Michelle Stuchfield
Organisational Chart
Investment Team
Ed Butchart
CIO
Trading Legal & Compliance I.T.
Richard Atherton
Charles Cartledge
Richard Chenevix-Trench
Balthazar Florentin-Lee
Marcin Gieniusz
Alex Kydd
Peter Oldham
Krunal Savani
Nathalie Becherel
Laura Li Claire Carroll
Claude Rolland
Sarah Wild
SRIS Board*
Investor Relations
Robert Pino
James Quinn
Operations
Tiffany O’Gwynn
Tracy Sweeney
Organisation chart of Sloane Robinson LLP (SR LLP), Sloane Robinson Investment Services (SRIS) and Sloane Robinson (US) Inc.. The above reflects operational
responsibilities but not necessarily reporting lines. As at 3rd May 2016.*The Board of Sloane Robinson Investment Services Limited comprises Ed Butchart, Richard
Chenevix-Trench, David Gale, George Robinson and Hugh Sloane.
Administration
Marc Menem
Clare Phillips
George Robinson
Christine Rowley
Hugh Sloane
Simon Williams
Nathan Wong
David Gale
CEO
Kerry Barlow
Operations
Manager
Angela Ledbury
Head of Operations &
CFO
John Cutler
Head of Legal &
Compliance
Jason Reeve
Head of Trading
Christopher Morrell
Managing Executive
43
Performance History
Source: Sloane Robinson and Bloomberg as at 29th April 2016. 1Sub-portfolio within the SR Global Fund range.2Sub-portfolio of SR Phoenicia. 3Please note that the Phoenicia
portfolio has been managed by Richard Atherton since the end of March 2012. *Compound Annualised Return. Performance data refers to Series 1 shares throughout and
assumes shares held since inception net of all fees with dividends re-invested. The prices of shares and the income from them can go down as well as up and this may be as a
result of currency fluctuations. Investors may not get back the amounts they have invested. Indications of past performance will not necessarily be repeated. Performance stated
for inception years is for the period since launch.
International Portfolio1
Phoenicia Portfolio2
Emerging Market Equity Portfolio1
Japan Portfolio1
Global Opportunities Portfolio1 Frontier Portfolio1
-4.6
-9.6
4.6 4.76.6
11.6
2.2
-11.3
-4.6
0.0
2.95.4
-20
-10
0
10
20
YTD 1 Year 2 Year* 3 Year* Since March2012*
Since Inception *15.8.01
%
Phoenicia Portfolio MSCI AC World ex-US index
2.9
-1.6
9.4 9.8 8.5
0.1
-16.2
-1.9 -2.5 -3.2
-20
-10
0
10
20
YTD 1 Year 3 Year* 5 Year* Since Inception*4.1.11
%
Frontier Portfolio MSCI Frontier index
-1.0
-7.3
4.2 5.06.4
-17.6
-4.2 -4.0
-20
-10
0
10
YTD 1 Year 3 Year* Since Inception*2.1.13
%
Emerging Market Equity Portfolio MSCI Emerging Market Index
-18.2
-22.3
-3.1
9.4
1.93.6
-2.2
-6.1
2.54.9
-0.3
4.2
-30
-20
-10
0
10
20
YTD 1 Year 3 Year* 5 Year* 10 Year* Since Inception*1st October 03
%
Japan Portfolio MSCI Japan index
-6.3
-13.8
6.2
1.93.3
11.7
2.2
-11.3
0.0 -0.1
1.75.0
-20
-10
0
10
20
YTD 1 Year 3 Year* 5 Year* 10 Year* Since Inception*24.1.94
%
International Portfolio MSCI AC World ex US index
-5.6
-15.8
1.8
4.6
1.9
-5.1
5.68.0
-20
-10
0
10
YTD 1 Year 3 Year* Since Inception*2.1.13
%
Global Opportunities Portfolio MSCI AC World index
3
44
Investment Team
Team Member Regional Bias Years at SR Years Experience
Richard Atherton* International
Ed Butchart* Emerging
Charles Cartledge Emerging Markets
Richard Chenevix-Trench* Emerging Markets/International
Balthazar Florentin-Lee International
Marcin Gieniusz Frontier
Alex Kydd* Japan
Marc Menem Quantitative Analyst
CJ Morrell* Frontier/Emerging Markets
Clare Phillips Emerging Markets
George Robinson* Emerging Markets
Christine Rowley Emerging Markets
Hugh Sloane* International
Simon Williams Asia inc Japan
Nathan Wong Europe
Source: Sloane Robinson. As at 3rd May 2016. * These individuals are portfolio managers as well as potential idea generators.
13
5
8
20
6
5
8
5
6
3
23
13
23
0
9
10
23
19
27
33
11
5
18
8
29
12
31
25
37
9
12
21 Average
45
Investment Team Biographies
Richard Atherton (Portfolio Manager & Research Analyst) joined Sloane Robinson in 2003 as a research analyst and is manager of the Phoenicia portfolio. He began his career
as an articled clerk at Freshfields before working in UK corporate finance at Barclays de Zoete Wedd in London between 1993 and 1995. Prior to joining Sloane Robinson Richard
worked for Robert Fleming (latterly JP Morgan) in London on the equity sales desk. Richard graduated from Cambridge University in 1989 with a degree in History before passing the
Law Society’s final examination in 1991.
Ed Butchart, CFA (CIO and Portfolio Manager) joined Sloane Robinson in March 2011 and alongside being CIO is co-manager of the Emerging Market Equity strategy. He began
his career in 1997 at Merrill Lynch as an economist and strategist specialising in emerging Europe, before being appointed the firm’s Global Emerging Markets Equity Strategist in
2000. He was also co-manager of the firm’s Latin American and emerging European economics research group. In 2004 he joined Moore Capital, where he was an equity portfolio
manager focused on emerging markets. In 2009 he established his own independent research business, Gemstrat Advisory. Ed obtained a first class degree in History and
Economics at St. John’s College, Oxford, followed by an M.Phil. and doctorate in economic history at Nuffield College, Oxford. He held a Junior Research Fellowship at Merton
College, Oxford before embarking on his city career. He is a holder of the Chartered Financial Analyst designation.
Charles Cartledge, CFA (Research Analyst) joined Sloane Robinson in 2008 as a research analyst. He began his career in 1989 at UBS in London as an equity research analyst.
He subsequently worked with Barclays de Zoete Wedd in Hong Kong (as an analyst) and New York (in institutional equity sales). In 2000 Charles returned to Hong Kong with Morgan
Stanley and moved to Singapore in 2006, in institutional equity sales. Charles graduated from Cambridge University in 1989 with a degree in Geography and is a holder of the
Chartered Financial Analyst designation.
Richard Chenevix-Trench (Portfolio Manager) joined Sloane Robinson in 1995 and is the manager of the Global Opportunities portfolio (formed from the merger of the Emerging
Market and Asian portfolios he previously managed). Richard began his career at Warburg Securities as a research analyst for the Asia region. In 1986 he joined Baring Asset
Management in Hong Kong as director of their Asia Pacific division with responsibility for Asian equities. In 1991 he moved to London to establish the Emerging Markets investment
division. Richard graduated from Imperial College, London, with a degree in Biochemistry.
Balthazar Florentin-Lee (Research Analyst) joined Credit Suisse First Boston in 2003, and spent two years in the corporate finance division, with time spent in the utilities team and
a team advising corporate clients on HOLT (their proprietary CFROI based analytics tool). He then moved into the equity research division advising and training external clients in the
use of HOLT. In 2010 he joined Sloane Robinson as the resident HOLT expert and has worked in the investment team as a research analyst since 2012. Balthazar graduated from
the London School of Economics, with a degree in Economics.
Marcin Gieniusz, CFA (Research Analyst) joined Sloane Robinson in October 2011 as an analyst with a focus on frontier and emerging markets. Previously, he gained work
experience at JP Morgan Investment Banking in London, Siemens Consulting in Munich and the Department of Economics of the Polish Embassy in Berlin. Marcin obtained a first
class degree in International Management at the University of Bath, followed by an MPhil in Economics at the University of Cambridge.
Alex Kydd, CFA (Portfolio Manager & Research Analyst) joined Sloane Robinson in 2008 and is co-manager of the Japan strategy. He started his career at Arthur Andersen in
1994, where he qualified as a chartered accountant. In 1998 he joined Orbis Investment Advisory Ltd, the London office of the Bermuda-based global hedge fund Orbis, as an equity
investment analyst. In 2005 he joined Threadneedle Investments as a Japan equity portfolio manager. Alex graduated from Cambridge University with a double first in Economics. He
is a holder of the Chartered Financial Analyst designation.
46
Investment Team Biographies
Marc Menem (Quantitative Analyst) joined Sloane Robinson in March 2011. He started his career in 2004 with the Systematic Quantitative Strategies trading desk at BNP Paribas.
He joined the Equities Quantitative Research team at JP Morgan in 2008 with responsibility for emerging markets, publishing research and building bespoke solutions for a wide
range of investors. Marc joined Gemstrat Advisory in 2010 as a Quantitative Analyst. Marc obtained an engineering degree from Ecole Polytechnique in France in 2004.
Christopher Morrell (Portfolio Manager & Managing Executive) joined Sloane Robinson in March 2010 and is the manager of the frontier and co-manager of the emerging
markets strategy. In 2012 Christopher was appointed as a managing executive within the investment team. Having joined the industry in 1987 he spent the first nine years in Tokyo
initially at James Capel and subsequently at Merrill Lynch. For the next six years he was based in North America undertaking international equity sales before returning to London in
2002 as global head of emerging market equity sales. In 2006 he moved to JP Morgan Asset Management with responsibility for the management of a number of emerging market
products.
Clare Phillips (Research Analyst) joined Sloane Robinson in July 2013 as a research analyst with a focus on the Asia Pacific region. She started her career in 2002 at the insurer
Friends Provident and in 2004 moved to Nevsky Capital as an emerging market financials equity analyst, becoming a partner in 2010. In 2012 she moved to Baillie Gifford as an
Asian Portfolio Manager. Clare graduated from Oxford University with a Master of Physics.
George Robinson (Portfolio Manager) co-founded Sloane Robinson in August 1993 and is responsible for managing an Asia Pacific mandate. In 1979, George joined the Swire
Group in Hong Kong, where he was seconded to Cathay Pacific Airways. He worked in various positions in Hong Kong, London, the Philippines and Korea. In 1985 he joined WI Carr
and established an office in Seoul conducting research on the Korean economy and companies listed on the Korean Stock Exchange. In 1988 he moved with WI Carr to Bangkok
where he set up a similar operation conducting research on companies listed on the Thai Stock Exchange. In 1991 he moved to Hong Kong as director of research, supervising
research on listed companies in Hong Kong and China. George graduated from Oxford University with a degree in Engineering Science.
Christine Rowley, CFA (Research Analyst) joined Sloane Robinson in 2003 as a research analyst with a focus on the Asian markets. She has been an analyst and portfolio
manager concentrating on the Asian and Emerging markets since 1991. Prior to joining Sloane Robinson she contributed to stock selection in the Asian and Indian sub-continent
markets for GT Management, and subsequently at Invesco where she managed their largest emerging markets mutual fund. Christine graduated from Duke University with a degree
in Economics and from the London School of Economics with an MSC in Economics. She is also a holder of the Chartered Financial Analyst designation.
Hugh Sloane (Portfolio Manager) co-founded Sloane Robinson in August 1993 and has been a manager of the International and Japan portfolios since the inception of the firm.
Hugh began his investment career at GT Management in 1979, where he remained for 14 years. Initially he worked in Hong Kong as an economist analysing the business cycle in
North and South East Asia. In 1986 he moved to Japan as investment director of GT Japan and Chairman of its Asian Investment Committee. In 1991 he moved to London as
investment director of GT and Chairman of its European Investment Committee. He left GT Management in 1993 to establish Sloane Robinson Investment Management Limited, the
predecessor to the Investment Manager. Hugh holds a degree in Economics and Politics from Bristol University and an MPhil in Economics from Oxford University.
Simon Williams (Research Analyst) joined Sloane Robinson in May 2016 as a research analyst. He started his career in 2003 at KPMG where he worked in audit and transaction
services whilst successfully studying for the ACA qualification. In 2007 he joined Nevsky Capital as a research analyst and from 2011 was the senior Asian equity analyst and in 2014
was made a partner. Simon graduated from Cambridge University with a MA in Mathematics.
Nathan Wong, CFA (Research Analyst) joined Sloane Robinson in 2007, as an analyst with a pan-European remit. Nathan started his career in 2000 at Deloitte in banking and
financial services. In 2004, he joined Merrill Lynch as an equity analyst covering European speciality / other finance companies. Nathan graduated from Imperial College, London,
with a First class degree in Mathematics, is a Chartered Accountant and a holder of the Chartered Financial Analyst designation.
47
Sloane Robinson Fund Summary
SR Global Fund SR Phoenicia
International Portfolio Global Opportunities
Portfolio* Japan Portfolio Frontier Portfolio
Emerging Market Equity
Portfolio** Phoenicia Portfolio
Manager Hugh Sloane Richard Chenevix-Trench Hugh Sloane/Alex Kydd Christopher Morrell Edward Butchart/Christopher
Morrell Richard Atherton
Investment Style Discretionary Macro Long/Short Directional
Equity
Long/Short Directional
Equity
Long/Short Directional
Equity Long/Short Directional Equity
Long/Short Directional
Equity
Fund Focus Global (typically ex-US) Global (typically ex-US) Japan Frontier Emerging Markets Global (typically ex-US)
Typical Number of Longs ≤ 50 25-40 ≤ 50 25-40 25-40 ≤ 30
Tactical Derivative Overlays Yes Yes Yes Yes – rarely today Yes No
FX Hedging Yes Yes Yes Yes – rarely today Yes Yes
Dealing Frequency
(redemption notice period) Monthly (1 month) Monthly (1 month) Monthly (1 month) Monthly (3 months) Monthly (1 month) Monthly (1 month)
Fees (management and
performance) 1% + 15% 1% + 15% 1% + 15% 1% + 15% 1% + 15% 1% + 15%
Hurdle (rolling 2 year) No MSCI AC World index No MSCI Frontier index MSCI Emerging Market index No
Inception 24th January 1994 1st March 1996 1st October 2003 4th January 2011 2nd January 2013 15th August 2001
Capacity US$ 1-2bn US$ 750m US$1-2bn US$ 300m US$ 1-2bn US$ 1-2bn
Current Av. Market Cap. US$ 11.4bn US$ 46.4bn US$ 9.4bn US$ 2bn US$ 29.3bn US$ 29.3bn
AUM US$ 545m US$ 385m US$ 95m US$ 26m US$ 80m US$ 105m
Source: Sloane Robinson LLP. As at 29th April 2016. *The Global Opportunities mandate was formed at the end of 2012 from the prior Class G Emerging Market
mandate.**Launched as a continuation of the original emerging market strategy. 1The SR Global Fund (Class H) Japan portfolio has been co-managed by Hugh Sloane and
Alex Kydd since November 2010. Prior to this Hugh was the sole portfolio manager. 2The SR Phoenicia (Class A) Phoenicia portfolio has been managed by Richard Atherton
since April 2012.
48
Sloane Robinson LLP
36 Queen Street
London
EC4R 1BN
Sloane Robinson LLP
36 Queen Street
London
EC4R 1BN
Sloane Robinson LLP
36 Queen Street
London
EC4R 1BN
Sloane Robinson LLP
36 Queen Street
London
EC4R 1BN
International
Investment
Management
Since 1993
T +44 (0) 20 7929 2771
www.sloanerobinson.com
Registered in England No. OC309313
Authorised and Regulated
by the Financial Conduct Authority
International
Investment
Management
Since 1993
T +44 (0) 20 7929 2771
www.sloanerobinson.com
Registered in England No. OC309313
Authorised and Regulated
by the Financial Conduct Authority
International
Investment
Management
Since 1993
T +44 (0) 20 7929 2771
www.sloanerobinson.com
Registered in England No. OC309313
Authorised and Regulated
by the Financial Conduct Authority
International
Investment
Management
Since 1993
T +44 (0) 20 7929 2771
www.sloanerobinson.com
Registered in England No. OC309313
Authorised and Regulated
by the Financial Conduct Authority
The funds managed and services provided by Sloane Robinson LLP (“Sloane Robinson”) are open to institutional and other sophisticated investors, but are not
accessible by the general public. This document does not constitute or form part of any offer, invitation or advice to purchase or subscribe for shares or interests in any
of the funds managed by Sloane Robinson. Any application for such shares or interests must be made solely on the basis of the relevant fund’s information
memorandum, which supersedes all information in this document.
The distribution of this document (and the offering of limited partnership interests and/or shares in funds, or provision of the services of Sloane Robinson) in certain
jurisdictions may be restricted. Persons into whose possession this document comes are required to inform themselves about and to observe any such restrictions. In
the UK, this document is only intended for distribution to eligible counterparties and professional clients as defined under the Financial Conduct Authority rules (“FCA
Rules”). The FCA Rules for the protection of retail clients do not apply in respect of an investment with, or in any of the funds managed by, Sloane
Robinson. Investment with, or in any of the funds managed by, Sloane Robinson is not covered by the Financial Services Compensation Scheme.
In the United States, the units of any funds managed by Sloane Robinson may not be offered, sold or delivered directly or indirectly in the United States or to or for the
account or benefit of any “US Person” except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the United States
Securities Act of 1933, as amended (the “1933 Act”) and any applicable state laws. The funds managed by Sloane Robinson have not been, nor will they be, registered
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document and interests in funds managed by Sloane Robinson have not been approved or disapproved by the United States Securities and Exchange Commission, any
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The units of any funds managed by Sloane Robinson have not been and will not be registered with any securities commission or similar authority in Canada nor are such
registration contemplated. The units may not be offered, sold or delivered directly or indirectly in Canada or to or for the account or benefit of any “Canadian Person”
except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of any Canadian securities legislation. SR Global Fund LP (“SR
Global Fund”) and Sloane Robinson are relying on (a) the non-resident investment fund manager registration exemption pursuant to Section 4 Permitted clients of Part 2
Exemptions from investment fund manager registration of Multilateral Instrument 32-102 Registration Exemptions for Non-Resident Investment Fund Investment
Managers in Ontario and Québec and (b) the international dealer exemption pursuant to Section 8.19 of NI 31-103. To the extent the units of the SR Global Fund are
being offered outside Canada, this is pursuant to the “accredited investor exemption” as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions. To
qualify under this exemption a prospective purchaser of units must be both an accredited investor and a “permitted client” as defined in section 1.1 of NI 31-103. This
document and units in SR Global Fund have not been filed with or approved or disapproved by any securities commission, similar authority in Canada or any other state
or federal regulatory authority, nor has any such regulatory authority passed upon or endorsed the merits of this offering or passed upon the accuracy or completeness
of any offering materials. Any representation to the contrary is unlawful.
This communication does not constitute or form part of any offer or advice to purchase or subscribe for shares or interests in any of the funds managed by Sloane
Robinson or to enter into any service relationship with Sloane Robinson. This document is intended to describe generally certain aspects of Sloane Robinson’s current
investment service and process, investment philosophy, approach to research, risk management, infrastructure and related matters. It does not represent binding
investment rules and may vary from time to time or be changed by Sloane Robinson at its discretion. Sloane Robinson does not guarantee the accuracy or
completeness of the information herein. This document does not express any views as to the suitability of an investment with, or in the funds managed by, Sloane
Robinson or to an individual’s circumstances. There are significant risks associated with such investments and a prospective investor should consider these carefully
and seek independent advice as appropriate. The relevant fund’s information memorandum should be referred to for further information on that fund and for disclosure
of the risks associated with investment into that fund. It remains a person’s responsibility to satisfy themselves as to the applicability of laws and regulations relating to
any investment which they may decide to make, including obtaining any government or other consent which may be required or observing any other formality which is
legally binding on such person. Performance returns may not be reflective of individual investments in the fund(s). The price of shares and the income from them can
go down as well as up and this may be as a result of currency fluctuations. Investors may not get back the amount they have invested. Indications of past performance
will not necessarily be repeated and returns are not guaranteed.
©Sloane Robinson LLP 2016. All rights reserved. The information contained in this document is strictly confidential and is intended only for use of the person to whom
Sloane Robinson has provided it. No part of this document may be divulged to any other person, distributed and/or reproduced without the prior written permission of
Sloane Robinson. Sloane Robinson and its associates (which provide investment management services to the Fund) are entirely independent and no other financial
institution or marketing group has an ownership interest in Sloane Robinson.