investment meeting: summary of views - msmiam.com · bond performance update still hard to make...
TRANSCRIPT
Macro Overview
While US-China concerns seem to have faded (at least as far as equity investors are concerned), they are not forgotten. Most likely, the acceptance that this issue will take time to play out has driven investors to focus on other issues.
Central Bankers’ decisions continue to fail to surprise. This is either a testimony to their increasing transparency or a recognition that “data-driven” rate decisions are a fact of life. Chairman Powell’s gave us the 25 basis point increase yesterday (the eighth this cycle) with small variations in the Fed statement. While removing “accommodative”, he minimized the significance of the omission and reiterated the case for gradual rate hikes. Draghi’s comments the prior week indicate that their June game plan is still THE plan.
While Trump’s America First trade policy remains an issue, the real focus in the coming weeks will be the start of the 3rd Quarter Earnings season and the subsequent US mid-term elections on the 6th of November. Markets should be supported by positive earnings surprises. However, October nervousness may be heightened by the political drama heading into a potential shift of power in the US House of Representatives (probable) and the implications that carries for US policy direction.
Our base scenario (continued global growth above 3.5%, data-driven rate increases and an eventual softening of trade tensions) and we favor a shift some of our exposure out of the US towards EM markets and commodity related sectors.
Investment Meeting: Summary of Views27th September 2018
Current Market ConditionsEquities: Global equity sentiment is nervous but retains the upward
bias of the past few weeks.
US markets are again trading at new multi-year highs across most
metrics while valuations seem more attractive for European and
Emerging Market equities. Relative valuations between the US and
EM markets remain near cycle highs and supportive of our call to
increase our exposure to EM.
USD Fixed Income: as risk appetite rose, US Treasuries pushed toward the 3.05 – 3.10% top of the range for the 10 year note. The Fed gave us 25 bps and Fed Fund futures imply 78% probability of an additional 25 basis points on Dec. 19. Our view is unchanged - we would look to increase our exposure at higher spread and 10 year rates above 3.10%.
EUR Fixed Income: no change. Government 5 & 10 yr. rates are largely unchanged (+3-4 bps) over the past two weeks. Still not attractive for USD ref investors.
Emerging Market Fixed Income: the tapering of USD strength and restrained China trade reaction has brought USD EM spreads down 30-40 bps; EUR EM spreads are marginally lower but less attractive overall. We remain selective buyers as yields go above the 6.00% yield levels on USD EM debt.
Top Ideas and Fund HoldingsUpdates on our current holdings / target funds enclosed.
1
Equity Performance Update
Themes remain unchanged with US markets cementing their lead in USD
terms this year!
The past two weeks have seen a revival of risk-on with the MSCI Latin
America (+4,5%) and Nikkei 225 (+4,8%) leading the way higher. We are
using this rally to cut our position in Japan on valuation grounds but holding
to our exposure to Latin America (beneficiary of stable to higher growth,
weak currencies). Emerging market equities continue to be the big laggards
but we believe that this may soon be changing and are positioning
accordingly.
2
Equity Indices (USD Aug'18 26-Sep-18
MSCI WORLD 1.0% 4.1%
MSCI ACWI 0.6% 2.4%
S&P 500 3.0% 8.7%
NASDAQ COMP. 5.7% 15.7%
RUSSELL 2000 4.2% 10.2%
STXE 600 $ Pr -2.9% -3.2%
MSCI Japan USD 0.2% 0.4%
MSCI AC ASIA x JAPAN -1.2% -8.1%
EM Latin America USD -8.8% -10.4%
EM Europe -7.6% -11.0%
Bond Performance Update
Still hard to make money in bonds in 2018!
The returns continue to be uninspiring at best with the broad Barclays
Aggregate Bond index showing a -2,0% USD return.
The numbers speak for themselves but the tide may be getting ready to turn
as we approach the 3.10% yield level on US 10 year Treasuries. The laggards
have come back a touch over the past two weeks with EM debt and EUR
High Yield recovering 1.3 to 1.5% in USD terms. This now brings the Pan-EUR
HY index into positive territory year to date but still lagging the +2,4% gains
USD Corporate High Yield indices. We are approaching buy levels…
3
Bl.-Barc. Bond Aug'18 26-Sep-18
Global Aggregate 0.1% -2.0%
U.S. Corp 0.5% -2.4%
US Corp High Yield 0.7% 2.4%
Pan-Euro Agg Corp 0.1% -1.1%
Pan-Euro HY Unh Eur -0.1% 0.3%
EM USD Aggregate -1.3% -2.5%
EM Pan-Euro Agg. Unh. -1.0% -1.3%
EM Local CY Aggregate -2.9% -6.4%
Local Currency Returns
Alternative Asset Performance Update
Energy (+16,7%) continues to be the commodity (& Alternative Asset)
outperformer in 2018!
Year to date, the HFRI Absolute return index is the only broad benchmark
showing positive returns (+0,8%) as CTAs and Global hedge indices continue
to lag and the Bloomberg Commodity TR is at -2,6%.
Over the past two weeks, both Industrial Metals (+3,8%) and Energy (+4,0%)
continue to move higher. We retain overweight exposure to the energy
sector and have been adding to our copper mining position.
4
Alternative Assets Aug'18 25-Sep-18
HFR Macro/CTA 2.4% -1.8%
HFR Global Hedge 0.5% -1.1%
HFR Absolute Return 0.4% 0.8%
BBG Commodity TR -1.8% -2.6%
BBG Agriculture TR -6.0% -10.8%
BBG Energy TR 3.8% 16.1%
BBG Industrial Metals TR -4.3% -12.4%
Gold vs USD -2.1% -8.4%
Source: Bloomberg
Currency Performance Update
We’re seeing what we believe to be a temporary bounce in USD after the
mid-August shift in trend.
The improving tone in the US-Mexico and US-Canada trade negotiations has
been sufficient to shake out the one-sided bets in favour of the USD since
February.
Consistent with the risk-on bid for markets, EM currencies continued to be
well bid and gained about 1.3% of their losses leaving them down 4.5% year
to date. While the USD was slightly higher versus the JPY and Gold, it was
largely unchanged against the other pairs we chart.5
Aug'18 Last 3 Mos. YTD
DXY 0.6% 1.2% 2.6%
USDMXN 2.4% -4.5% -3.9%
USDBRL 7.9% 8.9% 22.1%
USDCAD 0.2% 0.6% 4.0%
USDEUR 0.9% 0.6% 2.5%
USDCHF -2.1% -1.6% -0.3%
USDGBP 1.3% 1.1% 4.2%
USDRUB 8.3% 5.4% 16.9%
USDJPY -0.7% 3.8% -1.5%
USDAUD 3.4% 4.7% 8.6%
USDCNH 0.9% 7.3% 5.1%
USDINR 3.6% 7.7% 11.2%
XAUUSD -2.1% -8.3% -7.9%
Source: Bloomberg
USD Returns vs FX
Returns As of: 27-Sep-18
The Week’s Macro Indicators : CB Watch
The Fed delivered an additional +50 bps in a well-telegraphed manner subject to economic growth coming through as expected.
• U-3 Unemployment rate: July data at 3.9% from 4.0% in June and average hourly earnings stable at 2.7% YoY. US Labor Force Participation rate also stable at 62.9% is still near multi-decade lows.
• US Capacity Utilization: July steady near 78.1% - still not above the 80-82% levels which would lead to increased inflation fears.
• PCE (Personal Consumption Expenditure) Deflator: up a touch at 1.98% vs July’s 1.90% - almost at the Fed's 2% target level.
• Bloomberg Financial Conditions Index: improving financing environment – rising again.
No major changes in Europe either. ECB remains committed to
holding a steady course on rates until mid-2019.
• EZ Financing Conditions holding steady – no change
• Euro Zone Unemployment rate continues to grind lower: June at 8.3% vs prior Qtr. 8.4%
• EZ Capacity Utilization: last print for June 30 (84.3%) approaching levels indicative of capacity constraints. Current estimates are for a 3Q18 print of 84.10%.
• EZ All-item Inflation: August back down to 2.0% target vs July 2.1% in line with steady forecast of 2.0 %..
6
The Week’s Macro Indicators : Key Indicators
The data flow out of the US is improving and now Europe is falling short.
• US data surprising even more on the downside since the end of month and the CESIUSD is now almost positive at -0,3 vs -19.2 .
• European data (CESIEUR) reversed direction and is now -25,2 vs -5.0 at mid-month.
• Japan (CESIJPY) back at -3,0 vs -1.6 two weeks ago.
• G-10 data is a bit higher at +13,40 vs +3.9 on the 12th Sept. on the back of improving data flow out of the US.
7
Fixed Income: US & EUR Overview
US Treasuries: 3mo, 2yrs and 10yrs (%) EUR Govies: 2s, 5s and 10s (%)
EM Debt: USD & EUR Aggregate Spreads (bps)USD: Global IG and Global High Yield Corp. Spreads (bps)
USD short rates (3mo and 2yrs) continue to grind higher while 10s are flat. Looking at 3mo vs 10 year rates, we are not near “recession warning levels”. Europe is a snooze even as macro data improves. Credit spreads improving on Global High Yield USD and EM debt.
8
S&P 500 3Q18 Earnings : Optimism Remains
Thomson Reuters/IBES earnings estimates for the 3Q18 incorporate the new Global Industry Classification Standard (GICS) which go into effect for the S&P 500 at the close of business Sept. 28th.
Forecasts for the 3Q18 season show continued solid earnings growth of 21,6% (+18,7% ex-Energy). Main drivers are Energy (+97%), Financials (+41,6%), Materials (+30,9%) and the new Info. Tech. (+20,2%). YoY growth numbers will begin to fade as we enter 2019.
Revenue growth is expected to notch a still high growth of 7.6% (6.4% ex-Energy) vs +3,0% GDP growth estimates for the US economy. The growth is expected to come are Energy (+19,0%), the new Communications Svcs. (+12,0%), Real Estate (+11,9%) and Materials (+10,1%).
We continue to look to build positions in the Materials, Energy and Health Care sectors on a selective basis.
9
S&P 500 : Earnings Growth by Sector (YoY)
S&P 500 : Revenue Growth by Sector (YoY)
STOXX 600 3Q18 Earnings : Optimism Remains
As is usually the case, Earnings Season in Europe sees fewer constituents reporting (176 our of 600).
The TR/IBES consensus estimates call for a sharp pick up both in revenues (+7,4% 3Q vs +3,2% 2Q) and earnings (+14,2% 3Q vs 9.7% 2Q). Not surprisingly, Energy (+48,3%) and Financials (+20,3%).
Similarities with the US end there as earnings expectations are more varied and three sectors are expected to see a drop in earnings (Telecom Svcs. (-12,0%), Health Care (-5,0%) and Utilities (-0,9%)). On the positive side, analysts do not expect earnings growth to fade as they do for US companies.
Our bias in Europe favors Energy and , Health Care while also looking at companies that pay sustainable high dividends.
10
STOXX 600: Earnings & Revenue Growth (YoY) Forecasts
STOXX 600 : Euro Zone Earnings Growth by Sector (YoY)
Global Equity: Overview
Equity Market Valuation vs 7yr Hi-Lo
11
As of: 26-Sep-18
Index Last Price
Dividend
Yield (%)
Trailing 12
Mo EPS*
Est.
Earnings**
EPS Growth
Est Est P/E
Current
Pr/Book Low Hi
P/B % From
Hi
Current
Pr/Sales Low Hi
P/S % From
Hi
SP500 2,915.56 1.85 138.31 161.27 16.6% 18.08 3.52 1.83 3.52 0.0% 2.27 1.03 2.28 0%
Dow Jones Industrials 26,492.21 2.15 1409.25 1562.55 10.9% 16.95 4.19 2.29 4.19 0.1% 2.13 1.05 2.26 6%
Nasdaq 8,007.47 0.99 172.03 334.06 94.2% 23.97 4.79 2.33 5.06 5.3% 2.95 1.43 2.95 0%
Stoxx 600 Europe 383.65 3.59 22.14 25.94 17.2% 14.79 1.88 1.26 2.10 10.4% 1.26 0.73 1.32 5%
Nikkei 24,033.79 1.85 1385.91 1422.54 2.6% 16.90 1.91 1.06 1.94 1.6% 1.15 0.46 1.17 1%
MSCI Asia X-Japan 653.17 2.72 52.89 51.75 -2.2% 12.62 1.52 1.17 2.12 28.2% 1.26 0.85 1.56 19%
MSCI Emerging 1,041.78 2.89 82.84 86.98 5.0% 11.98 1.58 1.24 2.12 25.6% 1.20 0.89 1.50 20%
MSCI Emerging Europe 309.13 5.20 44.82 42.91 -4.3% 7.20 0.97 0.69 1.46 33.4% 0.90 0.73 1.52 41%
MSCI Emerging Asia 535.38 2.59 42.15 43.44 3.0% 12.32 1.59 1.23 2.22 28.4% 1.16 0.79 1.45 20%
MSCI Emerging LatAm 2,509.73 3.24 155.04 189.76 22.4% 13.23 1.87 1.32 2.34 19.9% 1.34 0.96 1.86 28%
MSCI India 1,303.12 1.59 58.11 67.12 15.5% 19.42 3.05 2.23 3.55 14.1% 2.18 1.19 2.29 5%
MSCI China 79.27 2.42 6.28 6.51 3.8% 12.17 1.65 1.10 2.56 35.6% 1.36 0.86 2.04 33%
Source: Bloomberg
The shifting risk appetite is taking US and Japanese valuations to new highs pretty much across the board even as trade US-China trade tensions increase. S&P500
PE is now above 18.0x; Price/Book and Price/Sales ratios are at new cycle highs. The Nikkei 225 is now approaching cycle highs on both Price/Book (1.91x vs
1.94x high) and Price/Sales (1.15x vs 1.17 high). European markets continue to look more attractive with some upside to valuations across all metrics. Emerging
markets remain the best value on these metrics across the board.
* - diluted eps from continuing ops. includes one time, extraordinary gains/losses
** -Bloomberg consensus EPS GAAP estimates excluding one time, extraordinary gains/losses
We look at market levels on three key metrics (current Price to next 12 months estimated Earnings (Est P/E), current Price to Book Value (P/B) and current Price toSales. While these measures alone do
not necessarily account for markets' potential to continue to move higher, they do provide a good sense of the relative value of different global equity markets.
Price/Book 7 Yr Price/Sales 7yr
12
Top Ideas
13
Global Equity: Top Ideas
14
Name Sector CCY
Market Cap
(bln) Entry Date
Initial Entry
Level Last Close
% Return
From
Purch.
Top Anal.
Target price % Upside Exit Date Exit Price
Realized
Gain/Loss %RESOLUTE MINING LTD Materials AUD 0.97 26-Apr-17 1.16 1.29 10.78% 1.60 24.51% 16-Feb-18 1.14 -1.93%
UNITED STATES STEEL CORP Materials USD 5.14 26-Jun-17 21.86 29.03 32.80% 58.00 99.79% 14-Mar-18 39.78 81.98%
PEARSON PLC Consumer Discretionary GBp 7.16 30-Nov-16 794.00 916.80 15.47% 845.00 -7.83% 15-Jun-18 879.00 10.71%
ELI LILLY & CO Health Care USD 110.98 14-Nov-16 77.70 103.33 32.99% 95.25 -7.82% 07-Aug-18 102.38 31.76%
Positions Exited 2018
MSM Focus Ideas
Theme Strategy Name Sector CCY
Market Cap
(bln) Entry Date
Average
Entry Level Last Close
% Return
From
Purch.
Top Anal.
Target price % Upside
Defensive Value KONINKLIJKE AHOLD DELHAIZE NConsumer Staples EUR 24.39 26-Jan-17 19.96 19.53 -2.14% 22.40 14.68%
Defensive Value MONDELEZ INTERNATIONAL INC-AConsumer Staples USD 63.41 29-Nov-17 42.94 43.24 0.70% 46.25 6.96%
Defensive Yield NESTLE SA-REG Consumer Staples CHF 247.49 13-Oct-14 67.80 80.64 18.94% 86.00 6.65%
Defensive Value VODAFONE GROUP PLC Telecommunication Services GBp 44.60 6-Feb-14 204.45 167.40 -18.12% 232.20 38.71%
Basing commodity Growth&Yield ANTOFAGASTA PLC Materials GBp 8.50 31-Aug-18 817.00 854.00 4.53% 954.00 11.71%
Basing commodity Value FREEPORT-MCMORAN INC Materials USD 20.29 22-Jun-18 16.48 14.00 -15.05% 21.80 55.71%
Energy recovery Growth&Yield CONOCOPHILLIPS Energy USD 89.81 21-Mar-17 45.65 77.28 69.29% 80.45 4.10%
Energy recovery Growth&Yield KINDER MORGAN INC Energy USD 38.86 13-Dec-16 21.50 17.61 -18.09% 21.00 19.25%
Energy recovery Value ROYAL DUTCH SHELL PLC-A SHS Energy GBp 220.04 22-Sep-16 1,872.00 2,642.00 41.13% 2,955.00 11.85%
Energy recovery Value SCHLUMBERGER LTD Energy USD 84.27 1-Oct-14 101.50 60.88 -40.02% 85.50 40.44%
Finance value Value CAPITAL ONE FINANCIAL CORP Financials USD 46.02 13-Jun-17 80.67 96.19 19.24% 112.90 17.37%
Finance value Yield SWISS RE AG Financials CHF 30.77 24-Apr-17 86.95 90.66 4.27% 104.70 15.49%
Healthcare spend Growth FRESENIUS MEDICAL CARE AG & Health Care EUR 27.44 31-Jan-17 75.33 89.26 18.49% 94.40 5.76%
Healthcare spend Yield GLAXOSMITHKLINE PLC Health Care GBp 76.32 5-Oct-17 1,516.00 1,531.60 1.03% 1,712.00 11.78%
Healthcare spend Value ROCHE HOLDING AG-GENUSSCHEINHealth Care CHF 204.28 28-Jan-14 200.00 236.25 18.13% 227.25 -3.81%
Healthcare spend Value SHIRE PLC Health Care GBp 41.82 27-Mar-17 4,676.00 4,613.50 -1.34% 4,602.00 -0.25%
Tech Transformation Value FACEBOOK INC-A Information Technology USD 482.02 15-Feb-18 159.39 166.95 4.74% 215.20 28.90%
Tech Transformation Growth FANUC CORP Industrials JPY 4363.41 15-Feb-18 27,000.00 21,385.00 -20.80% 26,500.00 23.92%
Tech Transformation Value SIEMENS AG-REG Industrials EUR 94.38 22-Dec-17 117.55 111.04 -5.54% 131.20 18.16%
Consumer Recovery Value BOOKING HOLDINGS INC Consumer Discretionary USD 93.40 21-Nov-17 1,761.00 1,967.51 11.73% 2,332.00 18.53%
US Consumer spend Growth STARBUCKS CORP Consumer Discretionary USD 77.26 29-Nov-17 57.25 57.27 0.03% 62.50 9.13%
US Consumer spend Growth VISA INC-CLASS A SHARES Information Technology USD 303.65 29-Feb-16 73.50 149.27 103.09% 161.00 7.86%
Last update target prices:25-Sep-18
Pricing Date: 27-Sep-18
Pricing Date: 12-Sep-18
Account Name: MSM Top
Account No.:
Fund Description Ticker Last Price NAV Date CurrencyFund
ObjectiveAsset Class
YTD
Return1Yr Return
Sharpe
Ratio
Maximum
Drawdown
1Yr
Comments
The Doric Fund is a long/short Asian equity hedge fund
focusing on greater China ,India,South East Asia and Korea.
The Fund seeks to generate positive returns on The Doric
Fund is a long/short Asian equity hedge fund focusing on
greater China both longs and shorts investment. The
approach relies on benefiting from structural changes in the
development of Asian domestic economies, deep
duediligence, systematic risk management and portfolio
construction.
DORASPS KY 501.90 31/07/2018 USD Long Short Alternative -9.61 -2.86 -0.19 -11.43
Positives: performance - top or second decile fund over the past 1 & 3 years and
since inception; 3Yr Sharpe ratio 1.1 and 5yr 1.4 vs peers 0.37 and 0.63. Bottom-up
fundamentally driven with a clearly defined portfolio construction. Proven risk
management track record and transparent. Negatives: monthly liquidity subject to
60 day notice period for redemptions. Recommendation: Buy
Enam India Growth Fund is an open-end feeder fund
incorporated in the Cayman Islands. The Fund aims to
preserve and achieve long-term capital appreciation through
a concentrated, actively managed long-only portfolio. The
Fund invests in a master fund investing in equity instruments
of listed Indian companies and does not use hedging in its
investment strategy.
ENAMIND KY 336.06 31/08/2018 USD Long Biased Alternative -15.67 -3.97 -0.25 -17.50
High conviction bottom-up manager focusing on India. Aims to deliver consistent
alpha over the India Nifty 500 index. Manager has a solid longer term record
investing in the region. Positives: Sharpe ratio 1.74 over past year, 0.71 since
inception vs 0.24 index. Industry exposure as of Jan 31'18: Financials (25%), Media
(10%), Logistics (7%), Cons. Durables (7%) and Cement (7%). Recommendation: Buy
AXA IM Fixed Income Investment Strategies - U.S. Short
Duration High Yield Fund is an open-end fund incorporated in
Luxembourg. The Fund's objective is to AXA IM Fixed Income
Investment Strategies - U.S. Short Duration High Yield Fund
realize a high level of current income through investing in
high-yield fixed income corporate debt securities, primarily in
U.S.-domiciled companies.
AXUSHLF LX 152.92 11/09/2018 USD High Yield Bond Fixed Income 1.66 1.82 0.17 -1.06
Positives: performance - top decile fund over the last 1, 3 & 5yr periods; 1Yr Sharpe
ratio 1.53 vs peers 0.74. Negatives: retail class fee structure relatively high for FI
funds; relatively high duration (8.7) implies more risk should interest rates increase
in next 3 -6 months, more volatile than peers (5.6% vs 3.8%). Recommendation: Buy
Legg Mason Western Asset Macro Opportunities Bond Fund
is an open-end investment fund incorporated in Ireland. The
Fund's objective is to maximise Legg Mason Western Asset
Macro Opportunities Bond Fund is an open-end total return.
The Fund invests in debt securities, convertible bonds,
preferred shares and warrants listed on regulated markets
globally, including emergingmarkets.
WAMOAAU ID 119.23 11/09/2018 USDEmerging
Markets BondFixed Income -9.38 -8.64 -1.73 -10.26
Positives: performance - top decile fund over the last 1, 3 & 5yr periods; 1Yr Sharpe
ratio 1.36 vs peers 0.45. Negatives: retail class fee structure (TER 1.76%) relatively
high for FI funds; relatively high duration (11.1) implies more risk should interest
rates increase in next 3 -6 months but volaility similar to peers (4.8% vs 4.5%).
Recommendation: Buy
PIMCO GIS Income Fund is an open-end fund incorporated in
Ireland. The objective of the Fund is to seek high current
income, consistent with prudent investment PIMCO GIS
Income Fund is an open-end fund incorporated in Ireland.
The objective management. The Fund will utilize a global
multi-sector strategy that is founded on the principle of
diversification across a broad range of globalfixed-income
securities.
PIMCMEI ID 10.64 11/09/2018 USDForeign
Aggregate
Bond
Fixed Income -1.70 -1.03 -1.36 -1.88
Positives: performance - top decile fund over the last 1, 3 & 5yr periods; 1Yr Sharpe
ratio 1.17 vs peers 0.23; ; rmoderate duration (4.55) and volaility significantly below
peers (1.6% vs 12.9%). Negatives: retail class fee structure (1.45%) relatively high for
FI funds. . Recommendation: Buy
N/A
Investment Recommendation: SummaryMSM Investment Idea
Page 1 of 4
Pricing Date: 12-Sep-18
Account Name: MSM Top
Account No.:
Fund Description Ticker Last Price NAV Date CurrencyFund
ObjectiveAsset Class
YTD
Return1Yr Return
Sharpe
Ratio
Maximum
Drawdown
1Yr
Comments
N/A
Investment Recommendation: SummaryMSM Investment Idea
PIMCO GIS Global High Yield Bond Fund is an open-end fund
incorporated in Ireland. The Fund seeks maximum total
return consistent with prudent investment PIMCO GIS Global
High Yield Bond Fund is an open-end fund incorporated in
management. The Fund invests at least two-thirds of its
assets in a diversified portfolio of high yield fixed-income
securities that are denominated in majorworld currencies.
PGHYBMI ID 10.66 11/09/2018 USD High Yield Bond Fixed Income 0.68 1.16 -0.14 -2.42
Positives: attractive YTM 5.97%; moderate duration (4.2) and volaility in line with
peers (3.0% vs 2.9%). Negatives: performance - 2nd quartile fund over the last 1, 3 &
5yr periods; 1Yr Sharpe ratio 0.76 vs peers 1.03; retail class fee structure (1.45%)
relatively high for FI funds. Recent spread widening has impacted performance but
manager has a solid record. Recommendation: Watchlist
Ashmore SICAV - Emerging Markets Short Duration Fund is an
open-end fund incorporated in Luxembourg. The Fund will
mainly seek to access the returns available from short term
emerging market transferable securities which are debt in
nature and other instruments issued by sovereigns, quasi-
sovereigns and corporates denominated exclusively in USD
and hard currency.
AEMSRIU LX 105.72 11/09/2018 USDEmerging
Markets BondFixed Income -2.91 -0.23 -0.46 -4.31
Positive: excellent manager EM FI.Results in top deciles over 1 & 3yr periods, short
duration preferable in rising rate environment, 1Yr Sharpe ratio (3.70) superior., low
relative 1Yr volatility (3.06% vs 5.73%). Negatives: exposure to higher risk EM
markets (Venezuela, Ecuador). Recommendation: buy
IVA Global Sicav is an open-end fund incorporated in
Luxembourg. The Fund's objective is to seek long-term
capital growth with high risk. The Fund invests in a range of
securities and asset classes from markets throughout the
world.
IVAGLAU LX 174.20 11/09/2018 USDGlobal
AllocationMixed Allocation -1.28 1.43 0.04 -5.22
Global multi-asset manager with a proven track record. Positives: Sharpe ratio 1.14
vs 0.38 peers; has outperformed peers over 1, 3 & 5yr periods as well as in 5 of the 8
years since inception; full transparency. Current allocation (87% Equity, 3% FI, 9%
Gold, 2% Cash) approx. Regional allocation: NorAm (45%), Europe (27%), APAC
(25%), LatAm (2%), Other (1%).
The iShares Core MSCI Europe ETF is an exchange-traded
fund incorporated in the USA. The ETF seeks to track the
investment results of an index composed of European region
developed market large, mid and small capitalization
equities.
IEUR US 47.34 11/09/2018 USDEuropean
RegionEquity -3.23 -0.63 -0.12 -11.49
ETF tracking performance of MSCI Europe multi-cap index. More attractive
valuations and should benefit from a growing global economy. Positives: tracks
index closely and low-cost structure (0.10% Expense ratio).
Franklin Templeton Investment Funds - Templeton Asian
Smaller Companies Fund is a SICAV incorporated in
Luxembourg. The Fund's objective is long-term capital
appreciation. The Fund invests primarily in small-cap
companies incorporated or whose principal business activity
is in the Asian region (except Japan).
TEMASAU LX 46.17 11/09/2018 USDAsian Pacific
Region ex
Japan
Equity -7.94 -1.81 0.01 -12.85
Regional play on small to mid-cap plays in Asia. More attractive valuations and
should benefit from a growing global economy. Manager has a solid longer term
record investing in the region. Positives: Sharpe ratio 1.98 vs 1.79 index and 1.45
peers; strong risk management in difficult markets (2011 correction saw the fund
down 15.6% vs -26.6% index, -17.2% peers). Current allocation (97% Equity, 3%
Cash) approx. Regional allocation: India (25%), South Korea (19%), China (16%),
Taiwan (16%), RORegion (30%).
Page 2 of 4
Pricing Date: 12-Sep-18
Account Name: MSM Top
Account No.:
Fund Description Ticker Last Price NAV Date CurrencyFund
ObjectiveAsset Class
YTD
Return1Yr Return
Sharpe
Ratio
Maximum
Drawdown
1Yr
Comments
N/A
Investment Recommendation: SummaryMSM Investment Idea
iShares Latin America 40 ETF is an exchange-traded fund
incorporated in the USA. The Fund tracks the performance of
the S&P Latin America 40 Index. The Fund uses a
Representative Sampling strategy to try to track the Index.
The Index includes highly liquid securities from major
economic sectors in Latin America. It weights the holdings
based on market capitalization.
ILF US 29.33 11/09/2018 USDLatin American
RegionEquity -12.67 -15.51 -0.64 -26.03
ETF tracking performance of S&P Latin America 40 index. More attractive valuations
and should benefit from a growing global economy/stable to higher demand for
commodities/improving political environment. Positives: tracks index closely and
low-cost structure (0.10% Expense ratio), full transparency. Regional allocation:
Brazil (59%), Mexico (23%), Chile (12%), Peru (4%), Colombia (2%).
Recommendation: Buy
SPARX Japan Fund PLC is a UCITS certified open-end
investment company incorporated in Ireland. The objective is
long-term capital appreciation. The Fund will invest primarily
in equity securities of Japanese companies listed or traded on
Recognised Exchanges.
SPAFDID ID 26553.00 11/09/2018 JPY Japan Equity 3.78 19.04 1.46 -12.37
Institutional share class of Japanese long-only equity manager with a solid longer
term record investing (top-decile since new manager in 2011). Bottom up investor
focused on small & mid-cap companies. Positives: Sharpe ratio 2.17 vs 1.46 peers,
experienced team with fundamental focus, full transparency into holdings.
SPDR S&P Regional Banking ETF is an exchange-traded fund
incorporated in the USA. The Fund's objective is to replicate
as closely as possible the performance of the S&P Regional
Banks Select Industry Index, an equal-weighted index.
KRE US 62.23 11/09/2018 USD Financial Equity 6.48 19.88 1.52 -9.12Current allocation (100% Equity,0% Cash) approx. Pure play on US regional banks
which should benefit from increasing Net Interest Income as rates go higher in a
strong economy. Pure tracker with low-cost fee (0.35%)
The Global X Copper Miners ETF is an exchange-traded fund
incorporated in the USA. The seeks to provide investment
results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive
Global Copper Miners Index ("Underlying Index").
COPX US 20.38 11/09/2018 USD Materials Equity -25.48 -21.25 -0.75 -30.96
Current allocation (100% Equity,0% Cash) approx. Pure play on copper supply
dynamics and synchronized global growth driving copper prices/volumes higher over
the coming 12-18 months. Globally diversified with regional allocation as follows:
Canada (32%), Australia (14%), China (9%), UK (6%), Switz. (6%) India (6%) Chile (5%),
ROW (23%). Pure tracker with relatively low-cost fee (0.65%). Recommendation:
Buy on weakness
VanEck Vectors Gold Miners ETF is an exchange-traded fund
incorporated in the USA. The ETF tracks the performance of
the NYSE Arca Gold Miners Index. The ETF invests in
materials stocks of all cap sizes across the globe. Its largest
allo- cation is in North American companies, principally those
domiciled in Canada. The ETF weights the holdings using a
market capitalization methodology.
GDX US 17.99 11/09/2018 USD Materials Equity -22.59 -26.50 -1.54 -28.58
Current allocation (100% Equity,0% Cash) approx. Pure play on gold price recovery
over the coming 1-3 years. Globally diversified with regional allocation as follows:
Canada (50%), Australia (16%), US (15%), ROW (20%). Pure tracker with low-cost fee
(0.52%). Recommendation: buy on weakness.
Page 3 of 4
Pricing Date: 12-Sep-18
Account Name: MSM Top
Account No.:
Fund Description Ticker Last Price NAV Date CurrencyFund
ObjectiveAsset Class
YTD
Return1Yr Return
Sharpe
Ratio
Maximum
Drawdown
1Yr
Comments
N/A
Investment Recommendation: SummaryMSM Investment Idea
iShares MSCI Global Select Metals & Mining Producers ETF is
an exchange-traded fund incorporated in the USA. The ETF
seeks investment results that correspond generally to the
price and yield performance, before fees and expenses, of
the MSCI ACWI Select Metals & Mining Producers Ex Gold &
Silver Investable Market Index.
PICK US 29.74 11/09/2018 USD Materials Equity -12.85 -6.37 -0.21 -20.92
Regional play on small to mid-cap plays in Asia. More attractive valuations and
should benefit from a growing global economy. Manager has a solid longer term
record investing in the region. Positives: Sharpe ratio 1.98 vs 1.79 index and 1.45
peers; strong risk management in difficult markets (2011 correction saw the fund
down 15.6% vs -26.6% index, -17.2% peers). Current allocation (97% Equity, 3%
Cash) approx. Regional allocation: India (25%), South Korea (19%), China (16%),
Taiwan (16%), RORegion (30%).
Wellington Management Funds Ireland PLC - Wellington
Global Health Care Equity Fund is an open-end fund
incorporated in Ireland. The objective is long-term capital
appreciation. The Fund invests in equity securities of health
care companies worldwide.
WGHCEPB ID 35.93 11/09/2018 USDHealth Care
SectorEquity 13.25 12.08 0.78 -10.09
Global equity play in an attractive sector. Positives: proven asset manager w
attractive long-term record, top quartile performance over a 1, 3 & 5yr periods, 1Yr
Sharpe ratio (1.55) exceeds peers (1.05), 1Yr Volatility (15.05% below peers (17.55%);
Negatives: absolute volatility relatively high for investment with a 3 to 6 month time
frame.
Robo Global Robotics & Automation Index ETF is an exchange-
traded fund incorpor- ated in the USA. The ETF seeks to track
the performance of the ROBO Global Robotics and
Automation Index. The ETF weights the holdings using a
multi factor methodology that primarily holds US based
information technology and industrial companies.
ROBO US 40.94 11/09/2018 USD Thematic Equity -0.92 7.73 0.57 -13.99
Globally diversified play on AI, Robotics and application of Automation in
manufacturing. Current allocation (100% Equity,0% Cash) approx. Longer term (3-5
year) play on the development of applied technologies both at the consumer and
manufacturing level. Current allocation: US (42%), Japan (26%), Europe (17%) ROW
(15%). Pure tracker with moderate fee (0.95%).
iShares Global Energy ETF is an exchange-traded fund
incorporated in the USA. The Fund's objective is to seek
investment results that correspond to the performance of
the S&P Global Energy Index.
IXC US 36.44 11/09/2018 USD Energy Equity 3.88 16.01 0.85 -13.16
Globally diversified play on stable to higher energy prices over the coming 12 - 18
months. Current allocation (99.7% Equity,0.3% Cash) approx. Should benefit from
global economic growth leading to stable to higher energy prices. Pure tracker with
low-cost fee (0.47%). Recommendation: Hold
WisdomTree India Earnings Fund is an exchange-traded fund
incorporated in the USA. The Fund seeks investment results
that correspond to the price and yield performance of the
WisdomTree India Earnings Index.
EPI US 25.97 11/09/2018 USD India Equity -6.19 -1.78 0.03 -15.54
Regional play on small to mid-cap plays in Asia. More attractive valuations and
should benefit from a growing global economy. Manager has a solid longer term
record investing in the region. Positives: Sharpe ratio 1.98 vs 1.79 index and 1.45
peers; strong risk management in difficult markets (2011 correction saw the fund
down 15.6% vs -26.6% index, -17.2% peers). Current allocation (97% Equity, 3%
Cash) approx. Regional allocation: India (25%), South Korea (19%), China (16%),
Taiwan (16%), RORegion (30%).
Source: Bloomberg, MSM Inv. Advisors SA
Page 4 of 4
Market Technicals – Key Slides
Potential Market Risks
• US/China trade tensions linger with Trump now accusing China of meddling with the mid term elections
• Kavanaugh hearing with the Senate the outcome of which could result in a potential political turmoil
• Italian yields stabilising but the Italian budget details keenly awaited
• Sell off in treasuries continues and a move above 3.12% in 10’s and 3.25% in 30’s could start putting pressure on equities
• Brexit YOYO continues
US 30yr testing Critical Support
Source: Credit Suisse
US 10yr same story as the 30’s
Source: Credit Suisse
Europe: Bunds Selling off in Tandem with Treasuries
Source: Credit Suisse
S&P 500: Still Behaving
Source: Raymond James
Financials : Excellent Value
Source: Raymond James
Europe: STOXX Value Play
Source: Goldman Sachs
Dollar: Looking Topish
Source: Raymond James
EURUSD: Buying Opportunity
Source: Citi
EURCHF: An Attractive Entry Point
Source: Goldman Sachs
GOLD: Showing Signs of Basing
Source: Raymond James