fairtree flexible income plus fund · 2020. 6. 4. · stefi 1.00 mean annual std deviation sharpe...

Fairtree Flexible Income Plus Fund

Update

Louis Antelme

May 28 2020

Agenda

Business unit

Targets and Objectives

Portfolio Risk

Credit Markets

Performance

Conclusion

BCI Income Plus Fund R 8 200 million

CISCA Fund 2 R 515 million


Fairtree Flexible Income R 3 265 million



Unit AUMUnit manages in excess of R13.3 billion





Proton (FI Hedge) R 234 million

Quasar R 70 million

Other “Exotic” Funds R 118 million

Agenda

Business unit


Portfolio Risk

Credit Markets

Performance

Conclusion

• Target STeFi +3.00% after fees.

• All credit instruments Floating Rate Notes (FRN’s).

• FX risk hedged using futures – Euribor / Libor+ translates to Jibar+

• Interest rate risk (MD) limited to 2 years.

• Current spread to 3m Jibar around 3.75%

• Low correlation to other asset classes.

Fairtree Flexible Income Plus Fund (R3.26bn)

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Fairtree Flexible Income Plus FundAsset Allocation 30 April 2020

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LOCAL ZAR 76.92% OFFSHORE 23.08%Cash 0.78% EUR 14.23%

Margin Accounts 1.53% Cash 1.02%

Floating Rate Notes Floating Rate Notes

0-1 year 10.84% 1-3 year 2.37%

1-3 year 32.54% 3-7 year 3.03%

3-7 year 29.27%

Fairtree Global IP 7.80%

USD 8.85%

Cash 0.31%

Fixed Rate Notes Floating Rate Notes

0-1 year 1.76% 1-3 year 0.99%

1-3 year 0.20% 3-7 year 7.55%

Fairtree Flexible Income Plus FundLargest 10 Instruments, Reference entities and Sectors 30 April 2020.

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Agenda

Business unit


Portfolio Risk

Credit Markets

Performance

Conclusion

• Default risk – reality – well diversified (157 instruments).

• FX – no risk – all hedged.

• No Interest Rate risk (MD) limited to 2 years – currently none.

• Liquidity – manageable – WAT 2.86 years, quarterly coupons.

• Spread Duration 2.67 years ≈ 8.5 months current spread.

Fairtree Flexible Income PlusRisks

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Agenda

Business unit


Portfolio Risk

Credit Markets

Performance

Conclusion

Spreads – were they too tight?Itraxx Xover Index – 75 European Sub Investment Grade names.

11 Source : Bloomberg 24 May 2015 – 22 May 2020

Spreads – were they too tight?Itraxx Xover Index – 75 European Sub Investment Grade names.

12 Source : Bloomberg 1 January 2003 – 22 May 2020

Global Credit EventsGlobal Credit Event under CDS

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Source : Markit 2005 – 2020

Spreads - its all relativeGerman 10 year bonds

14 Source : Bloomberg 1 January 1989- 22 May 2020

Spreads – its all relativeUS 10 year bond yields

15 Source : Bloomberg 1 January 1961– 22 May 2020

Spreads – its all relativeUS 10 year bond yields

16 Source : Bloomberg 1 January 1961– 6 May 2020

Credit – How bad has it been?5 Worst days since 1 January 2005

17 Source : Bloomberg 1 January 2005– 30 April 2020

Since 1 Jan 2005 Since 1 Jan 2005 Since 20 Sep 2006 Since 20 Sep 2006 Since 1 Jan 2005 Since 12 May 2014

ITRAXX XOVER ITRAXX MAIN ITRAXX XOVER TR ITRAXX MAIN TR ALBI TR EURO COCO TR

18 03 2020 96 09 03 2020 26 12 03 2020 -4.41% 09 03 2020 -1.16% 10 12 2015 -7.04% 16 03 2020 -7.75%

12 03 2020 94 15 09 2008 25 24 06 2016 -3.60% 12 03 2020 -1.11% 16 03 2020 -4.84% 18 03 2020 -6.86%

06 10 2014 90 18 03 2020 20 09 03 2020 -3.53% 07 05 2010 -1.00% 24 08 2016 -3.78% 12 03 2020 -5.38%

09 03 2020 87 12 03 2020 20 16 03 2020 -3.11% 24 06 2016 -0.98% 23 03 2020 -3.49% 17 03 2020 -4.97%

16 03 2020 83 01 11 2011 19 18 03 2020 -3.11% 16 09 2008 -0.92% 12 03 2020 -3.25% 24 06 2016 -4.65%

SA – just another risky creditRepublic of South Africa 5 year CDS vs Itraxx Crossover CDS Index

18 Source : Bloomberg 31 December 2019 -22 May 2020

SA – just another risky creditRepublic of South Africa 2026 bond spread to 3m Jibar vs Itraxx Crossover Index

19 Source : Bloomberg 31 December 2019 -25 May 2020

How has credit performed?Since March 2007

Source : Bloomberg March 2007 – 30 April 202020

Agenda

Business unit


Portfolio Risk

Credit Markets

Performance

Conclusion

Inception January 2007

Income Plus Mandates : 13 Years of Relative Performance (9.30% pa)

Source : Morningstar, Bloomberg Jan 2007 – 30 April 202022

Fairtree IP TOP40TR ALBI STeFI

327.39 301.31 267.56 256.36

Income Plus Mandates : 13 Years of Relative PerformanceCalendar year since 1 January 2007

Source : Morningstar, Bloomberg 1 January 2007 – 30 April 202023

Year Income Plus ALBITR TOP40TR STeFi

2007 15.14% 4.25% 18.97% 9.40%

2008 7.30% 16.97% -23.58% 11.70%

2009 8.86% -0.99% 31.73% 9.13%

2010 9.64% 15.01% 17.22% 6.93%

2011 8.29% 8.78% 2.20% 5.71%

2012 9.48% 15.99% 26.12% 5.55%

2013 9.76% 0.64% 22.77% 5.18%

2014 8.09% 10.15% 9.17% 5.90%

2015 10.32% -3.93% 7.52% 6.46%

2016 8.99% 15.45% -1.60% 7.36%

2017 10.43% 10.26% 23.07% 7.52%

2018 9.95% 7.69% -8.31% 7.29%

2019 10.24% 12.41% 10.32% 7.29%

2020 -1.91% -5.14% -7.33% 2.22%

Income Plus Mandates : 13 Years of Correlation

Inception 1 January 2007


INCOME

PLUSTOP40TR ALBITR STeFi

INCOME PLUS 1.00 0.20 -0.06 0.01

TOP40TR 0.09 1.00 0.11 -0.15

ALBITR 1.00 0.02

STeFi 1.00

Mean

Annual

STD

Deviation

Sharpe

Ratio

INCOME PLUS 9.30% 1.97% 1.00

TOP40TR 8.62% 16.60% 0.01

ALBITR 7.66% 7.81% 0.04

STeFi 7.32% 0.49%

Fairtree Flexible Income Plus Fund

Calendar year since 1 January 2015


Year

Fairtree

Flexible Income

Plus

ALBITR TOP40TR STeFi

2015 9.90% -3.93% 7.52% 6.46%

2016 11.73% 15.45% -1.60% 7.36%

2017 10.00% 10.26% 23.07% 7.52%

2018 10.36% 7.69% -8.31% 7.29%

2019 9.51% 12.41% 10.32% 7.29%

2020 -0.29% -5.14% -7.33% 2.22%

Performance in perspectiveMTD and YTD to 26 May

Source : Bloomberg, internal 26 May 2019 – 26 May 202026

26 May 2020 FAIRTREE

FLEXIBLE TOP40 TR ALBI TR STEFI

ITRAXX

XOVER TR

FT

Global

Month to Date 0.73% 0.97% 6.95% 0.42% 2.27% 0.37%

Year to Date 0.43% -6.43% 1.45% 2.65% -8.67% -12.36%

Year on Year 5.65% 0.05% 5.60% 7.08% -5.55%

AttributionBroad based widening of spreads

Source : Bloomberg, internal 31 December 2019 – 25 May 202027

InstrumentAverage

Weight

YTD

Performance

YTD

Contribution

Current Implied

Spread (As marked)

Fairtree Global 6.97% -12.31% -0.86% 510 bps

Sasol 3.46% -8.61% -0.30% 573 bps

AGL03 5.88% -6.64% -0.39% 380 bps

Landbank 1.30% -30.00% -0.39% 1400-4600bps

Multi Asset Income Fund rankings1 Year Performance : FT FIPF 5.33%, BCI IPF 4.33%

Source : Morningstar 30 April 202028

Agenda

Business unit


Portfolio Risk

Credit Markets

Performance

Conclusion

Stable Alpha generation over an extended period

Volatility is to be expected in all risk markets from time to time

Current volatility has not changed the investment thesis or process.

Thank you

Collective Investment Schemes are generally medium to long-term investments. Please

note that past performance is no guarantee of future performance and that the value of

participatory interests may go down as well as up. Collective investments are traded at

ruling prices and can engage in scrip lending and borrowing. A Collective Investment

Scheme may be closed to new investors in order for it to be managed more efficiently in

accordance with its mandate. The Manager does not provide any guarantee with respect

to the capital or the return of the portfolio. Excessive withdrawals from the portfolio may

place the portfolio under liquidity pressure and in such circumstances, a process of ring-

fencing of withdrawal instructions and managed pay-outs over time may be followed.

Commission and incentives may be paid, and if so, are included in the overall costs.

Investors should note that the value of an investment is dependent on numerous factors

which may include, but not limited to, share price fluctuations, interest and exchange

rates and other economic factors. Performance is further affected by uncertainties such

as changes in government policy, taxation and other legal or regulatory developments.

The performance of the portfolio is dependent on the making of correct assessments of

the price movements of individual securities and other investments. Financial markets

have historically exhibited high levels of volatility and negative movements that have

affected the price of all assets within a specific class. The portfolio’s investments will

thus be subject to market risk. Through financial gearing via the long/short process, the

portfolio may be leveraged. This will mean enhanced positive gains but conversely can

mean magnified losses. No taxation has been deducted in the computation of returns.

The taxation treatment of returns is the investor’s responsibility.

All returns are disclosed net of performance fees.

Fairtree Asset Management (Pty) Ltd is registered as a financial services provider with the

Financial Services Board of South Africa, with registration number 2004/033269/07 and

FSP number 25917.

A schedule of fees, charges and maximum commissions, as well as a detailed description

on how performance fees are calculated and applied, is available on request from the

manager of each fund (“the Manager”), being either Sanne Management Company (RF)

(Pty) Ltd, MET Collective Investments (RF) (Pty) Ltd, Nautilus Managed Account Platform

(RF) (Pty) Ltd, Prescient Management Company (RF) (Pty) Ltd or Boutique Collective

Investments (RF) (Pty) Ltd, all being registered and approved managers of Collective

Investment Schemes. The name of the fund shall reflect the name of the approved

manager of the fund. Additional information, including key investor information

documents, minimum disclosure documents as well as other information relating to the

portfolio is available, free of charge, on request from the Manager.

The Manager retains full legal responsibility for any co-named portfolio and is responsible

for the appointment of a trustee in accordance with the provisions of the Collective

Investment Schemes Control Act, 45 of 2002

We believe the information displayed is accurate and reliable, but no warranty of accuracy

or reliability is given and no responsibility arising in any way for errors and omissions

(including by way of negligence) is accepted by Fairtree Asset Management (Pty) Ltd.

This information is not intended to provide advice to, or take into account individual

investors’ objectives or circumstances. This material should not be construed to represent

a solicitation to invest in the portfolio and is disclosed for reporting purposes only.

Disclaimer

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fairtree flexible income plus fund · 2020. 6. 4. · stefi 1.00 mean annual std deviation sharpe...

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