for personal use onlyforecast 2016 eps growth 8.4% 4.1% 10.7% 11.3% low in absolute terms cheaper...
TRANSCRIPT
Investment update
February 2016
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Disclaimer
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This presentation has been prepared by Walsh & Company Investments Limited as responsible entity (Responsible Entity) of the Emerging
Markets Masters Fund (Fund). The information in this presentation is of a general nature and does not purport to be complete, nor does it
contain all information which would be required in a product disclosure statement (PDS) prepared in accordance with the requirements of the
Corporations Act.
An investment in units of the Fund is subject to various risks, many of which are beyond the control of the Responsible Entity and Walsh &
Company Asset Management Pty Limited (Investment Manager).
This presentation contains statements, opinions, projections, forecasts and other material (forward looking statements), based on various
assumptions. Those assumptions may or may not prove to be correct. None of the Responsible Entity, the Investment Manager, their
respective officers, employees, agents, advisers nor any other person named in this presentation makes any representation as to the accuracy
or likelihood of fulfilment of the forward looking statements or any of the assumptions upon which they are based.
This presentation may contain general advice. Any general advice provided has been prepared without taking into account your objectives,
financial situation or needs. Before acting on the advice, you should consider the appropriateness of the advice with regard to your objectives,
financial situation and needs. Where the presentation relates to the purchase of a particular product, you should obtain a copy of the relevant
product disclosure statement or offer document before making any decisions in relation to the product.
Any opinions expressed reflect the Fund’s position at the date of this presentation and are subject to change. The information is taken from
sources which are believed to be accurate, but the Responsible Entity accepts no liability of any kind to any person who relies on the
information contained in this presentation. Unless expressly stated, none of the information should be taken to be a recommendation. You are
acting independently at your own risk.
To the extent permitted by law, the Responsible Entity, the Investment Manager or their respective officers, employees, agents and advisers
give no warranty, representation or guarantee as to the accuracy or completeness or reliability of the information contained in this presentation.
Further, none of the Responsible Entity, the Investment Manager or their respective officers, employees, agents and advisers accept, except to
the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or in connection with, the information
contained in this presentation. Any recipient of this presentation should independently satisfy themselves as to the accuracy of all information
contained herein.
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Emerging markets update
– Chinese uncertainty weighing on markets – GDP growth, FX policy,
stock market volatility
– Oil price and commodity volatility
• Commodity exporters (Russia, Brazil, South Africa) have been hit hard
– New Year has been marked by extreme stock market volatility
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China update
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– FX regime
– Market practices
– Market performance
– Long term outlook
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China Managers in EMF portfolio
4
80
100
120
140
160
180
Dec 14 Mar 15 Jun 15 Sep 15 Dec 15
APS JPM Cephei NCC CSI 300 Index
+13%
+11%
+38%
+36%
Source: Walsh & Co AM. Data to 31 December 2015. Performance figures in AUD.
Not simply investing in the index
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EM economies have grown faster than DM
GDP
Growth
(%yoy)
5
Source: IMF World Economic Outlook 2015
-4
-2
0
2
4
6
8
10
2001 2004 2007 2010 2013 2016 2019
Developed Markets Emerging Markets For
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Fund performance1 – peer comparison
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At 31 December 2015 – ranked by 1 year performance
Source: Walsh & Co AM, MSCI, Bloomberg
Notes: 1. Returns based on share price returns inclusive of dividends reinvested
2. Inception date was 2 October 2012
Peers AUM ($ mill) 6 M 1 Y 2 Y 3 Y Since
Inception2
Emerging Markets Masters Fund 157 -6.0% 3.9% 18.9% 28.8% 33.9%
Somerset Emerging Markets Dividend Gr 1706 -8.1% 1.1% 14.2% 32.7% n/a
CFS Wholesale Global Emerging Market 1,285 -12.7% 0.3% 12.2% 30.9% 35.0%
MFS Emerging Markets Equity Trust 281 -7.6% -1.1% -0.2% 10.1% 14.3%
Schroder Global Emerging Markets 190 -9.6% -1.4% 3.5% 17.9% 23.5%
CFS FC Inv-CFS Glb Emg Mkts Leaders 115 -10.8% -3.0% 1.6% 17.8% 22.7%
Aberdeen Emerging Opportunities 1,133 -10.9% -3.4% 4.1% 11.9% 17.3%
Mercer Emerging Markets Shares Fund 525 -12.3% -4.3% 0.1% 14.5% 19.0%
Russell Emerging Markets Fund Class A 167 -12.3% -5.6% 2.1% 17.1% 22.4%
GMO Emerging Markets Trust 205 -12.7% -6.1% -3.8% 5.4% 9.8%
Arrowstreet Emerging Markets 562 -13.6% -6.2% 1.3% 12.8% 18.1%
Dimensional Emerging Markets Trust 351 -13.6% -6.8% -2.6% 10.4% 15.3%
MSCI Emerging Markets Index -12.6% -4.7% 1.9% 15.4% 20.2% For
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Fund performance – drivers
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At 31 December 2015
- Country allocation, manager selection and sector allocation
contributed to strong performance
- Country Allocation
- Positive
- Overweight to China A, India. Underweight to Brazil, South
Africa
- Negative
- Underweight to Korea and Taiwan
- Manager selection
- 14/17 managers outperformed their respective benchmarks.
- Steadview Capital and Chinese funds were largest contributors
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Portfolio
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Glo
bal/
Reg
ion
al
Co
un
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Fund
31-Dec-14
Weight (%)
31-Dec-15
Weight (%) BMO LGM Frontier Markets Fund 8.1% 13.3%
Somerset Emerging Markets Dividend Growth Fund 8.7% 11.6%
Lazard Emerging Markets Fund 8.8% 9.7%
Polunin Discovery Frontier Markets Fund 6.8% 6.8%
Arisaig Africa Consumer Fund 5.8% 5.4%
Arisaig Latin America Consumer Fund 4.5% 4.1%
Schroder International Emerging Europe Fund 2.1% 2.6%
Steadview Capital Fund 10.2% 12.9%
APS China A-Share Fund 9.3% 7.4%
NCC China A-Share Fund - 5.5%
Cephei QFII China Absolute Return Fund - 5.5%
Aberdeen India Opportunities Fund 3.9% 4.1%
GBM Crecimiento Fund 3.9% 3.8%
JPMorgan China Pioneer A-Share Fund 13.4% 3.5%
East Capital Russian Fund 0.9% 1.5%
Aberdeen Thailand Equity Fund 2.0% -
Fama Brazil Challenger Fund 2.2% -
BTG Pactual Absoluto Fund* 3.8% -
Total Invested 94.4% 97.5%
Cash 5.6% 2.5%
Total 100.0% 100.0%
A diversified portfolio of leading managers
Source: Walsh & Co AM. At 31 December 2015. Notes: 1. Some figure may not reconcile due to rounding
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Frontier 22% China 22%
Brazil 2%
Other 19%
Russia 4% India 20%
Mexico 6%
South Africa 2%
Cash 3%
EMF portfolio – Country weights
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Country Active Weights2
-26%
-5%
-4%
-3%
0%
1%
3%
12%
22%
Other
South Africa
China
Brazil
Russia
Mexico
Cash
India
Frontier
Source: Walsh & Co AM
Notes: 1. Some figures may not reconcile due to rounding. 2, Active weights are relative to MSCI Emerging Markets Index
Country allocation1
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Portfolio – Sector allocation
Consumer Staples, 23%
Financials, 21%
IT, 13%
Consumer Disc, 11%
Industrials, 10%
Materials, 6%
Health Care, 5%
Telecom Services, 4%
Energy, 3% Utilities, 2%
Cash, 2.5%
Country allocation1 Sector Active weights2
Source: Walsh & Co AM
Notes: 1. Some figures may not reconcile due to rounding. 2. Active weights are relative to MSCI Emerging Markets Index
-7%
-7%
-4%
-3%
-2%
0%
1%
2%
2%
3%
15%
IT
Financials
Energy
Telecom Services
Utilities
Materials
Consumer Disc
Health Care
Industrials
Cash
Consumer Staples
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Valuations are compelling
Developed
Markets Australia
Emerging
Markets
Frontier
Markets
Forward P/E 16.8x 16.1x 13.2x 10.2x
Price/Book 2.1x 1.9x 1.4x 1.4x
Dividend
Yield 2.6% 4.9% 2.9% 4.0%
Forecast 2016
EPS Growth 8.4% 4.1% 10.7% 11.3%
Low in absolute terms
Cheaper than developed markets
Supported by solid earnings potential
11 11
Source: MSCI, Bloomberg, FactSet, BMO LGM. Data at 31/12/2015
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Emerging Market valuations
MSCI Emerging Markets Index- Price to Book Ratio
Source: Bloomberg, MSCI to 31 January 2016.
1.0x
1.5x
2.0x
2.5x
3.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Current Average +/- 1 Standard Deviation
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0.5x
0.6x
0.7x
0.8x
0.9x
1.0x
1.1x
1.2x
1.3x
1.4x
1.5x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Current
discount
37%
Long-term average – 11% discount
Emerging Market valuations
MSCI Emerging Markets – Price to Book Ratio relative to MSCI World
Source: Bloomberg, MSCI, data to 31 January 2016.
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Frontier Markets
20% of EMF is invested in Frontier Markets
Unique exposure – no other retail fund in Australia provides this
access
Uncorrelated markets
Inefficient, providing great opportunities for active management
Security FM EM World
MSCI Frontier Markets 1
MSCI Emerging Markets 0.37 1
MSCI World 0.37 0.83 1
Source: Bloomberg, MSCI data (Correlation calculated based on Index weekly gross returns from May 2002 to Jan 2016).
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Australian investment landscape shifting
Tailwind becomes headwind – changing dynamics between Australia
and Emerging Markets
Industrialisation and urbanisation
Consumer led growth
Australian market dynamics
circa 60% of ASX in Financials and Materials
Historically low cash rates
Increasing opportunity for Australian investors to invest abroad in Emerging
Markets to harness growth
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Emerging Markets Masters Fund
#1 performing emerging markets equity fund available to Australian retail
investors in 2015 and 20141
Truly active approach - 2/3 portfolio stocks not represented in the MSCI
Emerging Markets Index
Access to leading specialist active managers in region – tap into on the
ground expertise
Ability to express specific investment themes – macro overlay
Strong, stable performance across market cycles
Commitment to active capital management
Exceptional access – global network, but local managers is key
Highly experienced, majority independent advisory board and compliance
committee
Leading platform for investors to access Emerging Markets
1 Source – Morningstar Direct
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