chris murphy citywire presentation may 2014 - final...-11.60-15 -5 5 15 consumer services...

AVIVA INVESTORS

Chris Murphy

May 2014

UK EQUITY INCOME FUND

This document is for investment professionals only. It is not to be viewed by or used with retail clients.

income- investing

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“I” IS FOR INCOME Aviva Investors UK Equity Income Fund

BUT WHAT DOES INCOME INVESTING MEAN TO ME?PERSONAL VIEW

Income:

- Above average yield.

- And the distribution has to grow.

There’s more to it than this:

- Net income re-invested for total return.

- Style and discipline is about lower risk returns.

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And these have important consequences for stock selection

Aviva Investors UK Equity Income Fund

AND THE INDEX IS WRONGPERSONAL VIEW

- Investment is about beating cash and inflation

- The risk/structure of the market is the wrong starting point

- So think about investment in absolute terms

- Alpha, Beta.....Sigma are all Greek to me

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These have implications for portfolio construction


Markets and investors

– Markets are not efficient– Fear and greed drives

investor behaviour– Investors are systematically

biased– Investors over-value growth

Companies

– All companies have a life cycle

– Returns fade to weighted average cost of capital (WACC)

– If it’s too good be true it is!– Boring is good– You need barriers to entry

INVESTMENT BELIEFSCONSISTENCY

Conviction of views

Investing

– Keep it simple – own what you can understand

– Don’t fall in love with a stock– Valuation is fundamental

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IDEA GENERATIONHOW DO WE THINK ABOUT COMPANIES?

Cash flow is the driver of returns

Cash flow recovery: – Bombed out stocks– Out of favour for macro or

company specific reasons– Strategic value – Path to recovery

Screen for :– EV/sales– Price / book– Poor performance

Examples:– Rio Tinto– Tesco– BP

Cash compounders:– Good to high returns– Often perceived as boring– Stable cash flows – High barriers to entry– Companies re-invest or return

money to investors

Screen for :– Yield– Free cash flow yield– Price/earnings– EV/EBITDA

Examples:– Sage – Imperial Tobacco– Stagecoach

Future cash flow: – Companies have good

investment opportunities– Clarity on future returns– Extreme caution on valuation

Screen for :– Growth rate– Consistency of growth

Examples:– BBA Aviation– Majestic Wine– Cineworld

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PORTFOLIO CONSTRUCTIONBUILDING A FUND

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Idea generation:– Screen for ideas – Broad spread of valuation

metrics– Not a quant process

Valuation analysis:– Look at historic returns– Industry/competitor

analysis– Common sense

Portfolio construction:– Stock driven– Diversified ideas– Max stock weight 5%

A disciplined and consistent approach


THEMES AND POSITIONING

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9

STOCKSAviva Investors UK Equity Income Fund

APPENDICES

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AVIVA INVESTORS UK EQUITY INCOME FUNDFUND OVERVIEW

Heading Aviva Investors UK Equity Income Fund

Fund manager Chris Murphy

Fund manager inception 17/04/2009

Launch date 28/04/1989

Fund size1 £976.2m

No. of stocks 40 - 75

Peer group IMA UK Equity Income

Individual stock weights Max. 5%

Individual sector weights N/A

Fund ratings

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Past performance is not a guide to the future.Source: Aviva Investors. ¹ Assets Under Management as at 30 April 2014.

7.12

5.64

2.58

2.58

1.45

0.53

0.07

-1.41

-2.34

-4.62

-11.60

-15 -5 5 15

Consumer Services

Telecommunications

Utilities

Industrials

Technology

[Unassigned]*

Basic Materials

Consumer Goods

Health Care

Financials

Oil & Gas

1.93

2.07

2.12

2.25

2.38

2.43

2.46

2.55

2.59

2.99

0 1 2 3 4

Resolution

Melrose Industries

Reed Elsevier

Compass

BT Group

Centrica

Intermediate Capital Group

Rio Tinto

Sage Group

BBA Aviation

Active sector bets (%) Top ten active stock bets (%)

AVIVA INVESTORS UK EQUITY INCOME FUNDPORTFOLIO POSITIONING AS AT 30 APRIL 2014

12Source : Factset as at 30 April 2014. * “Unassigned” includes stocks that have note yet been assigned to a FTSE sector.


69.0

25.9

2.2 3.0

82.2

14.8

3.0 0.00

102030405060708090

Large Cap Mid Cap Small Cap AIM & non-FTSE

%

Fund (%) Index (%)

AVIVA INVESTORS UK EQUITY INCOME FUNDPORTFOLIO CHARACTERISTICS

Market cap breakdown

Style analysis

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Portfolio analytics Fund

Turnover (L12m) 3 15.01%

Turnover (5 year average p.a.) 3 22.34%

Portfolio Beta4 0.87

Tracking Error4 3.43

Portfolio Volatility4 11.25

Index Volatility4 12.44

Portfolio characteristics Fund FTSE® All

Share Index

Number of stocks 54 625

Portfolio Yield1 3.70% 3.36%

Historic Yield2 3.50% --

Past performance is not a guide to future performance. All portfolio and risk data over the month of April 2014 unless stated. Source : Factset / APT / Style Research / Aviva Investors performance1 Current portfolio yield and not distributed as per Factset. as at 30 April 2014. 2 The historic yield reflects distributions declared over the past year as a percentage of the I share class price, as at 31 March 2014. This does not include initial charges and investors may be subject to further tax on their distributions. ³ Turnover data as at 31 March 2014. 4 Data is based on 36 months of historical returns (3 yr ex-post risk) unless otherwise stated, as at 31 March 2014.Where the investment objective of a fund is to prioritise the generation of income over capital growth, or in circumstances where they have equal priority, all or part of the ACD’s fee may be charged against capital instead of against income. It is also possible to charge other costs against capital instead of against income. This may limit capital growth.

-2.3

0.9 0.8

-0.2

-1.7

0.8

-0.9

-0.1 -0.2

-1.2

1.5

-0.4-1.0

-2.2 -2.4

-1.0

0.2

1.0

-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.0

AVIVA INVESTORS UK EQUITY INCOME FUNDDELIVERING A CONSISTENT ABOVE MARKET YIELD

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Average portfolio yield over the past 5 years = 117% of FTSE® All Share Index

Past performance is not a guide to future performanceSource: Factset / FTSE® as at 30 April 2014, yields shown are the gross yields.For the historic yield please refer to the most recent fund factsheet on the Aviva Investors website www.avivainvestors.co.uk


2.5

3

3.5

4

4.5

5

5.5

6

6.5

Dec

-08

Feb-

09

Apr

-09

Jun-

09

Aug

-09

Oct

-09

Dec

-09

Feb-

10

Apr

-10

Jun-

10

Aug

-10

Oct

-10

Dec

-10

Feb-

11

Apr

-11

Jun-

11

Aug

-11

Oct

-11

Dec

-11

Feb-

12

Apr

-12

Jun-

12

Aug

-12

Oct

-12

Dec

-12

Feb-

13

Apr

-13

Jun-

13

Aug

-13

Oct

-13

Dec

-13

Feb-

14

%

Aviva Investors UK Equity Income Fund FTSE® All Share Index

FUND PERFORMANCE

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Past performance is not a guide to future performanceFund launched 28 April 2009.Source: Aviva Investors/Lipper Hindsight as at 30 April 2014. Performance is net of fees, retail share class A, income reinvested, mid prices as of midday. Chris Murphy has managed the Aviva Investors UK Equity Income Fund since 17 April 2009.

Aviva Investors UK Equity Income Fund SCA Inc 1m % 3m % 6m % 1yr % YTD

2yr % p.a.

3yr % p.a.

5yr % p.a.

S. I. % p.a.

Fund Return (Net) 0.67 2.86 0.78 12.17 0.11 16.84 11.53 15.74 12.25

FTSE® All Share Index 2.16 4.72 2.65 10.52 1.51 14.12 8.46 14.65 10.47

IMA UK Equity Income Sector 1.00 4.15 3.37 13.52 1.74 16.59 10.26 14.56 10.02

Percentile Rank 66 77 91 56 78 49 40 33 11

Aviva Investors UK Equity Income Fund SCA Inc 2009 % 2010 % 2011 % 2012 % 2013 %

UK Equity Income fund 21.1 12.5 -0.3 15.5 25.9

FTSE® All Share Index 30.1 14.5 -3.5 12.3 20.8

IMA UK Equity Income Sector 23.5 13.8 -3.1 13.2 24.7

Percentile Ranking 55 65 33 36 43


AVIVA INVESTORS UK EQUITY TEAM

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THE UK EQUITY TEAMAN EXPERIENCED AND DIVERSE TEAM

Source: Aviva Investors, as at 30 April 2014.

£7.7bn of active UK equity funds under management as at 31 December 2013

David LisHead of EquitiesIndustry experience : 41yrs

Nicola Abrahams Team PA

Charlotte MeyrickAnalystIndustry experience : 2yrs

James BalfourAnalystIndustry experience : 2yrs

Katherine WadeSenior AnalystIndustry experience : 20yrs

Viv RowlandProduct SpecialistIndustry experience : 9yrs

Ed KevisAnalystIndustry Experience: 5yrs

Chris MurphyHead of UK Retail fundsIndustry experience : 26yrs

Trevor GreenHead of UK Institutional fundsIndustry experience : 24yrs

Mark DenhamFund Manager – Pan European Equities Industry experience : 21yrs

VacancyDeputy Fund ManagerEuropean & UK Equities

BIOGRAPHIES

Chris MurphyFund Manager

Chris joined Aviva Investors as a UK Equity fund manager in June 2006

Main Responsibilities Fund manager for the Aviva Investors UK Equity Income and Aviva Investors UK Equity Fund.

Experience and Qualifications Chris joined the investment industry in 1988.He previously worked as a fund manager at FramlingtonInvestment Management, managing first income and then growth portfolios, concentrating on retail funds. Prior to this, he was a UK equity analyst at James Capel and a graduate UK equity analyst at Lehman Bros.Chris holds a BSc (Hons) in Physics from University College, Cardiff and holds the IIMR (Institute of Investment Management Research) qualification.

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AVIVA INVESTORS

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INTRODUCING AVIVA INVESTORS

Owned by Aviva plc, the largest general insurer in the UK1:

– listed on the London and New York stock exchanges

– 318 years in business

– 31.4 million customers around the world

– paid £27.5 billion in claims and benefits to customers in 2013

– rated A+ “strong” by Standard and Poor’s and A “excellent” by A.M. Best2.

Aviva Investors operates around the world:

– £241 billion assets under management across a range of investment strategies

– More than 360 investment professionals based in 15 countries

– A top 10 asset manager, by UK assets under management3

– Working with the UN since 2008 to promote sustainable business behaviour.

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Financial stability and a wealth of experience and resources

1Based on Datamonitor analysis of market share based on 2012 gross written premiums.2Insurer financial strength rating (IFSR).3Based on 31/12/2012 AUM; IMA Annual Survey, August 2013Data as at 31 December 2013. Source: Aviva Investors and Aviva plc


A GLOBAL INVESTMENT SPECIALIST

21Source: Aviva Investors as at 31 December 2013

Global scale, local knowledge

Investment strategiesthat balance risk and reward, drawing from expertise across global markets.Broad rangeof clients including large corporations, institutional investors and wealth managers.More than 950employeesBased in 19 locationsAcross 15 countries

NORTH AMERICA Boston MassachusettsChicago IllinoisLouisville KentuckyNew York New YorkToronto Canada

ASIA PACIFICMelbourne, Sydney AustraliaSingaporeTaipei Taiwan

EUROPEDublin IrelandFrankfurt GermanyLondon United KingdomLuxembourgParis FranceStockholm SwedenUtrecht NetherlandsWarsaw PolandZurich Switzerland

MIDDLE EASTDubai (DIFC) UAE


EXPERTISE TO BUILD EFFECTIVE SOLUTIONS

22Source: Aviva Investors as at 31 December 2013

Expertise across the asset classes

Total AUM of £241bnOur investment strategies include:

– Long-only and absolute return global fixed income strategies

– Multi-asset investments to address our clients’ diverse needs

– Bespoke investment and risk management solutions

– Direct and indirect global real estate

– Global, regional and style equity strategies

– Long-established pension LDI capabilities

Helping you to achieve your investment goals

Fixed Income 60%

Equity 18%

Real Estate 10%

Investment Solutions 8%

Other 4%

Our strategy is to offer investment propositions which deliver outcome with low volatility. We focus on what we do best, and on capabilities and propositions that build on our heritage in managing long-term savings.

Our Multi-asset team manage over £68 billion which include some assets that they have allocated to other investment desks across Aviva Investors.



23You need to be a UK resident over the age of 18 with a permanent UK address. One entry only per household.

To enter the competition, you need answer FOUR questions correctly and complete your details by 11.59pm on 11th June 2014*.

Visit: www.avivainvestors.co.uk/discretionary/5years_competition orscan the QR code with your smart phone on the right hand side. *Terms and conditions apply.

IMPORTANT INFORMATIONThis document is approved for use within the UK only. Past performance is not a guide to the future.

Except where stated as otherwise, the source of all information is Aviva Investors as at 30 April 2014. Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature.

Throughout the document Aviva Investors refers to Aviva Investors Global Services Limited, the Investment Manager. The Investment Manager manages the fund on a daily basis making and implementing all portfolio decisions.

Investment into the fund is provided by Aviva Investors UK Fund Services Limited. Aviva Investors UK Equity Income Fund: Where the investment objective of a fund is to prioritise the generation of income over capital growth, or in circumstances where they have equal priority, all or part of the ACD’s fee may be charged against capital instead of against income. It is also possible to charge other costs against capital instead of against income. This may limit capital growth. The value of aninvestment in the fund and any income from it may go down as well as up and the investor may not get back the original amount invested.

“FTSE®” is a trade mark jointly owned by the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE® International Limited (“FTSE ®”) under Licence. FTSE® does not sponsor, endorse or promote this product and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. All copyright in the index values and constituent list vests in FTSE®.

For further information please read the latest Key Investor Information Document and Supplementary Information Document. The Prospectus and the annual and interim reports are also available on request. Copies can be obtained from Aviva Investors UK Fund Services Limited, No. 1 Poultry, London EC2R 8EJ or by contacting our Relationship Management Team on 0800 0154773* or email them on fund&[email protected].

*Telephone calls may be recorded for training and monitoring purposes. Calls are free from a BT landline. Call charges may vary from mobiles and other networks. Issued by Aviva Investors UK Fund Services Limited. Registered in England No. 1973412. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119310. Registered address: No. 1 Poultry, London EC2R 8EJ. An Aviva company. www.avivainvestors.co.uk

CI06832 05/2014

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chris murphy citywire presentation may 2014 - final...-11.60-15 -5 5 15 consumer services...

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