presentación kames capital
TRANSCRIPT
Kames Capital
Investment Roundtable 2016
24 August 2016
Today’s presenters
2
Steve Kenny
Director of Wholesale Business
Stephen Jones
Chief Investment Officer
Nick Edwardson
Product Specialist, Multi-Asset Investing
Adrian Hull
Senior Investment Specialist, Fixed Income
Stephen Adams
Head of Equities
Steve Kenny
3
► Market backdrop
► Our investment capabilities
► European Sales Team
► Where we are registered
► Building our business in Continental Europe – the story so far
► Where we compete
► Support
Agenda
4
► Low/negative yields on cash
► BREXIT
► Expensive markets
► Rise of nationalism
► Uncertain regulatory environment
► Changing demand trends
Market backdrop
5
Our asset classes
As at 31 July 2016. *As at 30 June 2016. Excludes €2.5 billion in cash
6
Team Client funds* Products and services
Fixed
income 29 €31.2bn
• Investment grade
• High yield
• Strategic bond
• Core plus
• Absolute return
• Ethical
Equities 28 €18.1bn• UK all companies
• UK smaller companies
• Global equity income
• Unconstrained
• Absolute return
• Ethical
• Global sustainable
Property 19 €2.9bn • Direct (pooled and segregated)
• Indirect (discretionary and advisory)
• Specialist funds e.g. healthcare
Multi-asset 13 €5.6bn• Diversified Income
• Diversified Growth
• Asset Allocation Service
What Kames can deliver
7
Fixed income Equities
• Government bonds
- UK and International
• Strategic bond funds
• Pension and LDI specialists
• Corporate bonds
• Investment grade
• High yield
• UK & Global equity income
• European equity
• UK small cap
• Asia Pacific
• UK opportunities
• UK index plus
• Global equity
• UK & Global unconstrained
Property Multi-asset
• UK mainstream property with
active value tilt (PAIF)
• Healthcare
• Advisory service
• Fund of funds global
property
• Active value UK property
• Real return investment
• Diversified Growth
• Diversified Income
• Asset Allocator Fund
• Bespoke asset allocation
and guidance solutions
• Asset Allocation overlays
Absolute return Ethical & Sustainable investing
• Cash, through to cash plus 8%
• Absolute Return Bond
• UK & Global equity market neutral
• UK dark green screened
equity
• Sterling dark green
screened bonds
• Dark green balanced multi
asset
• Global sustainable
8
Steve Kenny
Director of Wholesale
Business
Mark Savage
Head of UK Regional
Sales
Wholesale management team
Sam Carter
Head of Global
Financial Institutions
Richie Dixon
Head of Continental
European Wholesale
9
Nadia BucciBusiness Development Manager
Edouard GiraudBusiness Development Consultant
Richard McGrailBusiness Development Manager
John ParkinBusiness Development Manager
Barnaby WoodsBusiness Development Manager
Steve Kenny
Director of Wholesale
Business
Trish Noon
Administrator,
European Team
Richie Dixon
Head of European Team
European sales team
Jeroen van WilgenburgBusiness Development Manager
Martin WeissBusiness Development Manager
Elena DelfinoBusiness Development Manager
Mark Ferguson Business Development Manager
10
Where we are registered
LBPAM
LBPAM
Building our business in Continental Europe
11
2007 • Launch of Dublin-domiciled fund range
2008 • Registered in Switzerland and the Netherlands
2010 • Registered in Luxembourg
2011 • Launch of Kames Absolute Return Bond Fund
2012 • Kames named European Fixed Income Manager of the Year
• Registered in Germany and Austria
2013 • Registered in Spain and Belgium
2014 • Launch of two new equity market neutral funds
• Kames named European Asset Manager of the Year
2015 • Launch of two new absolute return bond funds
• Registered in Italy and Sweden
2016 • Retail registration in Italy
• Launched two new multi-asset funds, a global sustainable fund and added
a global fund to equity market neutral range
• Registration in progress in Portugal
LBPAM
LBPAM
Overall market – €3,877bn, Bonds €866bn, Equities €1,276bn
Where we compete
Source: Lipper FundFile, as at end of 2014. ETFs are excluded from these numbers.
12
Bonds
(€bn)
Equities
(€bn)
Mixed
(€bn)
Other
(€bn)
Money
market (€bn)
Fund of
funds (€bn)
Total
(€bn)
Total X-Border 866.29 1,275.97 553.87 280.48 418.72 481.80 3,877.15
Austria 34.77 11.09 6.74 7.12 1.75 12.93 74.41
France 75.62 155.47 41.46 39.09 272.67 89.02 673.34
Germany 128.73 146.32 121.41 124.36 21.48 78.56 620.86
Italy 176.97 66.38 111.67 13.82 29.69 49.66 448.19
Netherlands 18.68 31.14 3.32 1.30 0.08 18.60 73.11
Spain 70.66 20.48 25.96 36.28 15.73 30.77 199.88
Sweden 42.54 122.35 37.95 9.95 16.63 45.99 275.42
Switzerland 128.73 145.03 41.06 14.91 28.57 36.00 394.29
UK 189.59 577.71 164.30 33.65 32.12 120.27 1,117.65
Net sales history of traditional long-term funds (€m)
13
Source: Broadridge FundFile. Chart includes tracker funds but excludes money market funds, ETFs and fund of funds.
BondEquity Mixed assets Other
Industry at a glance
14
Source: Broadridge FundFile. May 2016.
BondEquity
Mixed assets Other
Cumulative net sales, last six months
March 2016 April 2016 May 2016
1 Bond Global Curr Asset Allocation Alt Derivatives
2 Asset Allocation Alt Bond Global Corp Bond Global Corp
3 Bond Eur CIG TM Other Bond Global Curr
177 Equities UK Equities Japan Equities N. America
178 Bond Flexible Equities Europe Equities Europe
179 Equities Europe Equities Eur ex UK Bond USD CHY
Best and worst sectors – net sales
Our distribution network
15
Marketing and PR activity
16
Adrian Cammidge
Head of Investment
Communications
Roisin Hynes
Communications
Manager
Joanna Mirea
Head of Channel
Management
Andrew Taylor
Marketing
Communications
Manager
Stephen Jones
17
Global backdrop
As at August 2016
18
► Low growth, not no growth
► Some signs of increasing momentum
– Global PMI data
– EM dark spots brighten
► Escape velocity
► Inflation not a near-term issue
► Aggressive monetary policy support continues
2015 2016 2017
USA 2.40% 1.90% 2.00%
Europe 1.70% 1.50% 1.30%
Japan 0.60% 0.60% 1.00%
Global 3.10% 3.10% 3.00%
► 52% to 48% (with 72.2% turnout) do not believe that the UK should be part of the European
Union
► Forty plus years of UK economic, domestic and foreign policy “turned on its head”
► GBP currency the “whipping boy” of the markets
► GBP currency the “saviour” of the markets
► Commercial (London) real estate at the epicentre of the storm
► Initial volatile reaction short lived
► Aggressive recovery based on lower bond yields and central bank action impressive
► “Brexit means Brexit” – but when …??
Brexit Referendum : 23rd June 2016
19
► Brexit a UK only economic shock. Period of no UK growth likely
► Europe staggers on
– Germany, Spain
– France, Italy
► USA – companies and economy ignore the politicians
– US to grow at 2.5% annualised in H2
► China quietly devaluing and attempting rebalance
► Japan … no worse than we are accustomed to
► Emerging economies OK
► Central banks go all in on quantitative easing AND private sector asset purchases
Economic Outlook : H2 2016 into 2017
20
► Government bonds expensive
► Long end of curves threatened by fiscal policy pivot
► Credit markets manageable, and extra yield attractive
► Equity no more volatile than long government bonds
► Equity income attractive
► Geopolitics an ever present headwind – “Events, dear boy, events”
– EU migration issues
– Near and Middle East conflicts
– South China sea
– US election
– Run into French presidential elections
– Italian constitutional vote
– Brexit tensions and disquiet
Market Outlook : H2 2016 into 2017
21
Adrian Hull
22
Brexit effects – a local or global event?
Source: HSBC
23
Outcome for EM markets very different from UK property...
LondonUK
cyclical
UK
exporters
Periphery
and
Eastern
Europe
UK non-
cyclical
Europe
(ex UK)
Asia
US
2.63
3.00
1.75
4.25
0.25
1.791.94
0.62 0.60
-0.80
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
80s cycle average Feb 94 - Feb 95 Jun 99 - May 00 Jun 04 - Jun 06 Dec 15 - Jun 16
Yie
ld c
ha
nge
%
Fed funds and 10-year bond yield changes in different rate-hiking cycles
Fed funds target rate 10-year US Treasury
US rate cycle – so far, this time, it is different...
Source: federalreserve.gov; Federal funds effective rate and market yield on U.S. Treasury securities at 10-year constant maturity, quoted on investment basis
Is QE effect on the rates cycle “low forever”?
24
Markets and Fed consistently expect higher rates
25
Source: HSBC
Fed hikes overestimated for last seven years
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
%
Spot Fed funds futures
Fed funds futures expectations and spot
FOMC projections, September 2015
Longer
run
Investment grade spreads: attractive, globally
26
Source: Bloomberg. As at 30 June 2016
Added benefits of cross-market relative value ideas
10%
20%
30%
40%
50%
60%
70%
80%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Corporate bond spreads as % of total yield
USD EUR GBP 10y average USD 10y average EUR 10y average GBP
Lower yields drives duration higher
Source: Bloomberg Global Developed Sovereign Bond index as at 31 July 2016
0.3
0.8
1.3
1.8
2.3
6.0
6.5
7.0
7.5
8.0
8.5
2010 2010 2011 2012 2013 2014 2015 2016
%ye
ars
World government bond index characteristics
Duration (LHS) Yield (RHS)
Increasing volatility for bond markets
27
Global search for yield continues
Source: Bloomberg as at 31 July 2016
-1
0
1
2
3
4
5
6
7
8
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Yie
ld (
%)
Market cap ($bn)
Fixed income market by yield and size
Negative yielding assets a dead-weight on core rates
28
60
100
140
180
220
260
2010 2012 2014 2016
Sp
rea
d (
ba
sis
po
ints
)
US investment grade corporates
European investment grade corporates
Cross asset class comparison
Source: Bloomberg as at 31 July 2016
Government bonds Investment grade credit High yield
-1
1
2
3
4
2010 2012 2014 2016
Yie
ld (
%)
10-year US Treasury
10-year German bund
3
5
7
9
11
2010 2012 2014 2016
Yie
ld (
%)
US high yield European high yield
Relative value for positive yielding $ assets compelling
29
► “Brexit”
– So far Brexit looks like a local not a global event so far
– Response to Brexit may be global; more QE and “lower for longer”
► Policy action
– US Federal Reserve only CB with rate hike potential over next year
– Less “road to run” for monetary policy – but still dominant factor
– Politics may trump QE with increasing demand for fiscal loosening
► Structural demand
– Structural demand of fixed income globally undiminished
– Corporate bonds (and US) key components for positive yield portfolio
Key points summary
30
Stephen Adams
31
► A ‘phoney war’ period ahead of negotiations
► But early indications from companies are encouraging
► Real data is stronger than initial surveys
Brexit and the economy
Source IHA, Markit, ONS:
32
-60
-40
-20
0
20
40
60
80
Aug 14 Dec 14 Apr 15 Aug 15 Dec 15 Apr 16 Aug 16
Citi Economic Surprise Index - United Kingdom
Source: Factset as at 17 August 2016
► Implications for policy, interest rates and £
are clearer than the growth outlook
► UK equity market + 9% since the vote; +18%
from the result day low
– c.67% of market revenues is derived
overseas
– 2017 All-Share EPS estimate up 4.7% since
the vote
– FTSE 100 outperforming
► (Even) lower for (even) longer
– Attractions of sustainable yield and growth
– Challenges for financials
► Opportunities in domestic and infrastructure
companies
Brexit and the market
Source: Factset as at 17 August 2016
33
80
85
90
95
100
105
110
Aug 15 Oct 15 Dec 15 Feb 16 Apr 16 Jun 16 Aug 16
FTSE 100 - Price Index FTSE 250 - Price Index
Global equities: Emerging Markets versus Developed Markets
Source: Factset as at 17 August 2016
34
0.6
0.7
0.7
0.8
0.8
0.9
0.9
1.0
1.0
1.1
Aug 06 Aug 08 Aug 10 Aug 12 Aug 14 Aug 16
MSCI Emerging markets EPS estimates relative to MSCI World
-5
5
15
25
35
45
Aug 06 Feb 08 Aug 09 Feb 11 Aug 12 Feb 14 Aug 15
Money supply growth (M1 YoY %)
United States China Euro Zone
UK equities
► Core
► Small Cap
► Ethical
► UK Equity Income
► Absolute Return
Broad equity capability
35
International equities
► Global Equity Income
► Global Sustainable (launched 21 April
2016)
► Global Equity Market Neutral (launched
21 June 2016)
Nick Edwardson
36
Investment environment
37
0
2
4
6
8
10
1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
Yie
ld (
%)
10-year US Treasuries versus Fed Funds rate (including implied forward rates)
10yr US Treasuries Fed Funds Rate
Implied Forward Rate March USD Median Dots
0
50
100
150
200
250
300
350
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
World earnings per share (US$)
-4%
-2%
0%
2%
4%
6%
8%
10%
1980 1985 1990 1995 2000 2005 2010 2015
Real GDP Growth
Advanced economies Emerging economies
0
5,000
10,000
15,000
20,000
25,000
30,000
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
$ b
illio
n
Yield
Amount of developed market bonds yielding x% or more
US 30 year
2.3%
Multi Asset current portfolio themes
As at 31 July 2016
► Active asset allocation enhances returns
and lowers risk through selecting lowly
correlated sources of return
► Scarcity of truly defensive assets with
valuation appeal
► Anticipating the next concern – US
elections, revisiting China or an “unknown
unknown”?
► Rotation into previously disliked parts of
the credit market, EM already performing,
Bank Credit attractively valued
► Brexit uncertainty impacting Sterling and
Euro assets leading to flight to defensives
and quality, not just a short-term issue
► Dependable income and growth are as
pertinent investment strategies as ever,
yield a powerful growth strategy in itself
► Investor concern shifting from EM to DM,
particularly Europe, creating opportunity
for better EM performance
► Selective alternative exposure delivers
diversification and attractive risk/return;
partly via illiquidity premia
38
Active asset allocation in changing markets
As at 30 June 2016. * The ranges shown are for the physical exposure. Any derivative positions such as currency forwards or covered call options are not included in the above figures or reflected in
the chart. Historic asset allocation shown for the Kames Diversified Growth Fund.
39
Asset allocation limits*
Min Max
Bonds 0% 100%
Equities 0% 100%
Cash & other 0% 100%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16
Bonds Equities Listed Alternatives Cash & other
► Benchmark unconstrained
► Freedom to allocate assets to
achieve objective
► Flexible & pro-active
► Infrastructure, aircraft leasing and
renewable energy
► Income-generating assets in a tradeable
listed corporate structure
► High initial yield, potential for income and
capital growth
► Portfolio diversification, low correlation
with equities and bonds
Listed Alternatives/Specialist income
As at 15 Aug 2016. Specialist investments show London listed investment companies which invest in infrastructure, aircraft leasing or renewables. Assumes that an equal amount is initially invested in
each stock at the end of the week following Initial Public Offering.
40
Total return indices
60
80
100
120
140
160
180
200
220
240
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Specialist Investments FTSE All-share
► Global Real Estate stocks have
outperformed Global equity markets over
the last 10 years
► Longer term correlation with general equity
between 0.6-0.8
► Strong growth over the last 20 years. US
and European FFMC increasing from EUR
71bn to EUR 651bn today
► Global REIT valuations at 1,1X underlying
value (NAV) while 4.0% div. yield leaves
substantial spread vs. real rates
Listed Real Estate
As at 31 July 2016
41
0
50
100
150
200
250
Jul 05 Jan 07 Jul 08 Jan 10 Jul 11 Jan 13 Jul 14 Jan 16
GPR 250 Index (Property Shares World TR)
MSCI (General Equity World TR)
This document is not intended for retail distribution and is directed only at investment professionals/qualified investors. It should not be distributed to,
or relied upon by, private investors. All data in this presentation is sourced to Kames Capital unless otherwise stated.
The views expressed in this document represent our understanding of the current and historical positions of the market. They should not be
interpreted as a recommendation or advice. Past performance is not a guide to future performance. The value of investments and the income from
them may go down as well as up and is not guaranteed.
Kames Capital Investment Company (Ireland) Plc operates two different methods of hedging share classes. Full details of these can be found in the
prospectus.
This document is accurate at the time of writing but can be subject to change without notification.
Kames Capital Investment Company (Ireland) plc, is an umbrella type open-ended investment company with variable capital registered in the
Republic of Ireland (Company Number 442106), registered office at 25-28 North Wall Quay, International Financial Services Centre, Dublin 1. Board
of Directors: Andrew Bell (UK), Mike Kirby (Ireland) and Bronwyn Wright (Ireland). Kames Capital Investment Company (Ireland) plc is regulated by
the Central Bank of Ireland.
Kames Capital plc is the Investment Manager and Marketing Agent for Kames Capital Investment Company (Ireland) plc.
Kames Capital is an Aegon Asset Management company and includes Kames Capital plc (Company Number SC113505) and Kames Capital
Management Limited (Company Number SC212159). Both are registered in Scotland and have their registered office at Kames House, 3 Lochside
Crescent, Edinburgh, EH12 9SA. Kames Capital plc is authorised and regulated by the Financial Conduct Authority (FCA reference no: 144267).
Kames Capital plc provides segregated and retail funds and is the Authorised Corporate Director of Kames Capital ICVC, an Open Ended
Investment Company. Kames Capital Management Limited is an appointed representative of Scottish Equitable plc (Company Number SC144517),
an Aegon company, whose registered office is 1 Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (PRA/FCA reference no: 165548).
Important information
42
FPID: 2016/23970