emperor asset management investment seminar
DESCRIPTION
This presentation will take you through Emperor Asset Management's investment philosophy and track record. It also touches on wealth management with a short explanation of how to calculate your wealth index.TRANSCRIPT
Robert Falcon ScottFund overview
27 May 2014Coastlands Umhlanga
Page 2
Background
• Intellectual capital• FSB License• 30 years Investment Experience
Vega Capital acquired by Tom De Lange in 2004
Joined forces
Joined forces with GT247 in 2010
• Management Expertise• IT & Admin Support• World class platforms
• Extensive marketing arm• JSE Listing (Purple Capital)Rebranded
Rebranded to Emperor Asset Management in 2011
• AUM R360 MillionExpansion
Partnered with IJG Securities in 2011
• Premier brokerage house in Namibia
Page 3
Our philosophy is that the right investment solution is a marriage of science, skill and discipline, coupled with a deep and trusting client understanding. Our quantitative strategy creates long term sustainable wealth, underpinned by a high degree of effective risk management.
Robert Falcon Scott Fund
Investment Philosophy
Proprietary quantitative decision making framework
Real time access to portfolio holdings
Segregated client portfolios
Tailored gearing to meet individual risk return requirements
Stock exclusion capacity to meet specific investor preferences (e.g. Sharia compliance)
Operationally scaled to meet retail and institutional demands
Robust track record of market leading returns
Benchmark - FTSE / JSE Top 40
Page 4
Best & worst performers at 31 December 2013
Client Performance
Smaller clients by NAV
Larger clients by NAV
25 036Current NAV
20.20%Return 1 year
111%Gearing
Worst performance
24 556Current NAV
40.80%Return 1year
152%Gearing
Best performance
5 554 573Current NAV
22.60%Return 1 year
104%Gearing
Worst performance
6 157 661Current NAV
35.80%Return 1year
158%Gearing
Best performance
Page 5
Fund overview – December 2013
Robert Falcon Scott
Inception 1 October 2004
Number of investors 1539
Benchmark FTSE / JSE Top 40
Average gearing 1.12 times – Since inception (1.48 times last 3 years)
Portfolio turnover Historic = 0.7 times per annum
Redemptions 95% = T + 1 (5% = month end) up to R10M
Management fee 1.2%
Performance fee 20% above the benchmark
Administrator First World Trader trading as GT247.COM
Auditor Group - BDO South Africa Inc. | Fund - PWC
Manager Tom de Lange
FSB license categorisation Category 2 (Category 2A pending) FSB license number - 22588
Fund size R360 million
Page 6
The Wealth IndexCompass to Wealth
Page 7
The Wealth Index
Source: “The Millionaire Next Door”
Loser, spenderWI < 0.5
SecurityWI = 1.0
LifestyleWI = 1.5
Financial Independence(but a race against time)
WI = 2.0
Financial Freedom(Capital preservation, but with
risks)WI = 3.0
True Wealth(Capital growth, emotional
freedom, no risks)WI= 4.0
Implications at retirement
Page 8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
20 25 30 35 40 45 50 55 60 65
Wealth
Comfort
Security
Different Priorities, different outcomes
Age
SecurityWealth
Comfort
3.5%Cons
5.5%Balanced
7.5%Growth
Real Return &Fund Type
Wealt
h
Index
Rule of thumbAdd 0.5 every 8
years
Page 9
20 25 30 35 40 45 50 55 60 650.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Initial years & mid life crisis
Typical Outcome
Age
Wealt
h Index
Security
Lifestyle
Wealth
Typical
Page 10
20 25 30 35 40 45 50 55 60 650.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Wealthy 23%
Comfortable 17%
Anxious 60%
Security
Lifestyle
Wealth
60% will face a retirement below the bread line…
Our wealth building research for salaried workers
Age
Wealt
h Index
Page 11
Tom: before and after the Gigabucks decision…
Age
Wealt
h Index
20 25 30 35 40 45 50 55 60 650.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50Wealthy 23%
Comfortable 17%
Anxious 60%
Tom
Security
Lifestyle
Wealth
Page 12
Our Strategy
Page 13
Strategy overview
Investment Strategy
Algorithm-based quantitative strategy
Long-Short Equity
140 most liquid JSE shares utilising CFD’s with maximum 2 times leverage limits
determined by the client’s risk profile.
Momentum shares increase portfolio returns during mid/late bull markets
Momentum / Growth ranking
1
50%
Blue chips add portfolio stability and lower risk levels,
increase consistency of returns
Blue Chips
Strategy weighting
3
20%
Value shares lower overall risk levels and outperform during
bear markets or early bull markets
Dividend & Earningsyield ranking
2
30%
20% of funds used as margin leaving 80% of the funds held in cash generating a 4.26% yield
Cash Underpin4
Page 14
Portfolio JSE
Total Return 30.7% 13.4%
Upside Capture 108% 100%
Downside Capture
63% 100%
Outperformance 7/10 years
Equities only (no gearing), management fees included, no market timing
Momentum strategy (Simulated results)
Page 15
Portfolio JSE
Total Return 24.9% 13.2%
Upside Capture 88% 100%
Downside Capture
52% 100%
Outperformance 7/10 years
Earnings yield and dividend yield, no gearing, no market timing
Value Strategy (Simulated)
Page 16
Portfolio JSE
Total Return 24.3% 13.4%
Upside Capture 92% 100%
Downside Capture
60% 100%
Outperformance 7/10 years
Equities only (no gearing), management fees included, no market timing
Blue Chips strategy (Simulated results)
Page 17
Portfolio JSE
Total Return 29.0% 13.4%
Upside Capture 103% 100%
Downside Capture
62% 100%
Outperformance 8/10 years
Combined strategy, no gearing, no market timing
RFS Fund Strategy (Simulated)
Page 18
Resultant upside & downside capture vs. benchmark (Dec 2013)
Investment Strategy
Our investment strategy has resulted in higher upside and lower downside capture, since inception as shown alongside
Emperor Strategy(No Gearing)
Strategy: Inclusion of 50% momentum shares
UpsideCapture
101% Stock selection: Liquid Small Cap shares
Market timing: Gearing increased when market indicates strength
1
2
3
119%Last 12 m 78%
Emperor Strategy (146% Gearing)
Upside Downside
128%Last 18 m 78%
145%Last 2 yrs 76%
148%Last 3 yrs 87%
142%Last 4 yrs 83%
118%Last 5 yrs 70%
118%Since inception 90%
Strategy: Inclusion of 30% value shares Inclusion of 20% blue chip shares
Market Timing: Gearing decreased when market indicates weakness
Universe selection : Top 140 shares
Position Weights : Equalised
1
2
3
4
DownsideCapture
51%
Page 19
Portfolio JSE
Total Return 45.7% 13.2%
Upside Capture 152% 100%
Downside Capture
87% 100%
Outperformance 10/10 Years
CFDs (160% variable gearing), with partial market timing
The RFS Fund Strategy (Simulated Results)
Page 20
For the 3 year period ending 31 December 2013
Actual RFS Fund performance vs. simulated results
RFS
Actual returns Emperor Strategy
Simulated
Annualised Returns
1 Year 30.1% 24.1%
2 Years 40.5% 37.1%
3 Years 28.8% 26.8%
Upside Capture
1 Year 119% 82%
2 Years 145% 122%
3 Years 148% 116%
Downside Capture
1 Year 78% 28%
2 Years 76% 36%
3 Years 87% 37%
Average Gearing 150% 150%
We have outperformed the simulated portfolio in all 3 years
Gearing for simulated portfolio normalised to RFS geAaring, all costs & income included
Page 21
5 Years after the Global Financial Crisis…
Current Market Assessment
Declining peak sentiment
Page 22
Downside ProtectionBubble Indicator
Market TimingCFD Put Options
Page 23
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
2,000
20,000
A leading market turbulence indicator : Forecasted 5/6 major retracements
Downside Protection: Market TimingB
ub
ble
FTS
E/J
SB
Top
40
Page 24
ValuationQuarter 13 14 15 16 17 18 19 20 21 22 23 Avg90% 100% 100% 97% 87% 80% 75% 70% 65% 61% 57% 52% 77%80% 100% 100% 100% 91% 84% 79% 74% 69% 65% 60% 56% 80%70% 100% 100% 100% 95% 88% 83% 78% 73% 69% 64% 60% 83%60% 100% 100% 100% 98% 91% 86% 81% 77% 72% 68% 63% 85%50% 100% 100% 100% 100% 93% 88% 83% 78% 74% 69% 65% 86%40% 100% 100% 100% 95% 88% 83% 78% 74% 69% 65% 60% 83%35% 100% 100% 98% 88% 81% 76% 71% 66% 62% 57% 53% 77%30% 100% 100% 86% 76% 70% 64% 59% 55% 50% 46% 42% 68%25% 100% 89% 74% 64% 57% 51% 47% 42% 38% 33% 29% 57%20% 98% 78% 63% 53% 46% 41% 36% 31% 27% 23% 18% 47%10% 89% 69% 54% 44% 37% 31% 27% 22% 18% 13% 9% 37%Avg 99% 94% 88% 81% 74% 69% 64% 59% 55% 50% 46% 70.9%
Year 13 14 15 16 17 18 19 20 21 22 23 Avg90% 100% 100% 100% 100% 100% 100% 89% 73% 69% 66% 63% 87%80% 100% 100% 100% 100% 100% 100% 95% 79% 75% 72% 69% 90%70% 100% 100% 100% 100% 100% 100% 100% 85% 81% 78% 75% 93%60% 100% 100% 100% 100% 100% 100% 100% 91% 87% 84% 81% 95%50% 100% 100% 100% 100% 100% 100% 100% 97% 92% 89% 87% 97%40% 100% 100% 100% 100% 100% 100% 100% 92% 88% 85% 82% 95%35% 100% 100% 100% 100% 100% 100% 87% 71% 67% 64% 61% 86%30% 100% 100% 100% 100% 100% 90% 53% 37% 33% 30% 27% 70%25% 99% 96% 93% 90% 86% 71% 34% 18% 14% 11% 8% 56%20% 95% 92% 89% 86% 82% 68% 30% 14% 10% 7% 4% 53%10% 99% 96% 93% 90% 86% 71% 34% 18% 14% 11% 8% 56%Avg 99% 99% 98% 97% 96% 91% 75% 61% 57% 54% 52% 79.9%
Sen
tim
en
tS
en
tim
en
t
Probability of Positive Return (March 2014)
Downside Protection: Risk Matrix
Valuation = 19.7 Market Sentiment = 62% Confidence (Qtr) = 77% Confidence (Yr) = 91%
Adjusted Confidence (+Bubble Indicator) = 66% Adjusted (Yr) = 71%
Page 25
Up to 8x protection
Downside Protection: CFD Put Options on Alsi40
Dec-0
7
Jan-
08
Jan-
08
Feb-
08
Feb-
08
Feb-
08
Mar
-08
Mar
-08
Mar
-08
Apr-0
8
Apr-0
8
Apr-0
8
May
-08
May
-08
Jun-
08
Jun-
08
Jun-
08
Jul-0
8
Jul-0
8
Jul-0
8
Aug-0
8
Aug-0
8
Aug-0
8
Sep-
08
Sep-
08
Oct-0
8
Oct-0
8
Oct-0
8
Nov-0
8
Nov-0
8
Nov-0
8
Dec-0
8
Dec-0
8
Dec-0
80
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
18,000
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
DEC08P JSE
Page 26
Our Track Record
Page 27
Annualized Returns – Our Track Record
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
30.1% 30.1%
39.0%40.5%
28.8% 29.4% 28.5%
24.2%
19.2%19.2%
25.1%
20.7%
13.1% 13.5%
16.4% 15.7%
Source: Bloomberg *EAM return net of fees - The returns achieved to date are after the deduction of performance and management fees** Capital return calculation - This represents the returns without the re-investment of dividends *** Total return calculation - The total return assumes all dividends and distributions are re-invested resulting in higher return numbers
Page 28
At December 2013Fund Performance
Jun-0
4
Dec-
04
Jun-0
5
Dec-
05
Jun-0
6
Dec-
06
Jun-0
7
Dec-
07
Jun-0
8
Dec-
08
Jun-0
9
Dec-
09
Jun-1
0
Dec-
10
Jun-1
1
Dec-
11
Jun-1
2
Dec-
12
Jun-1
3
Dec-
13
0%
100%
200%
300%
400%
500%
600% Alpha: 0.74%Beta: 0.94%
284.8
14.74%
13.32%
14.77%
14.83%
17.06%
10.52%
11.89%
0.32% 2.55% Food And HealthResourcesConsumerTmtIndustrialServicesFinancialPut OptionsPlatinum
Share % Weight % Move 6m
Coronation Fund Managers
9.58% 27.40%
Top Five Holdings
EOH Holdings 7.07% 51.90%
7.00% 50.10%Naspers
6.31% 9.40%
Aspen Pharmacare Ltd 6.01% 18.30%
Remgro
645.1%
Page 29
Our simple offering to our investors
25.9%return per annum
1
24.2% <95%risk relative to JSE(downside capture)
90%
2
10/10years with positive
returns
9/10
3
10/10years outperformance
of the benchmark
8/10
4
Page 30
What we can do for You...
20 25 30 35 40 45 50 55 60 650.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00Wealthy 23%
Comfortable 17%
Anxious 60%
Security
Lifestyle
Wealth
Emperor
Age
Wealth Index
Page 31
CIO performance to 31 December 2013
Fund Manager’s Performance
Total Invested in RFS portfolios = R7,709,388 (98%* of total NAV)
Tom de Lange
Andromeda Portfolio - Inception 01/02/09
Current NAV
Return 1 year
Return per annum
Cumulative return
R5,655,361
65.9%
54.8%
757%
Performance
Alpha pm
Beta
Upside capture
Downside capture
Average Gearing
1.69%
1.54
201%
145%
221%
Ratios
* Remaining 2% in Purple Capital shares
Block BThe Offices of Hyde ParkStrouthos Place (off 2nd Rd)Hyde Park, 2196
e [email protected] +27 (0)87 940 6121w www.emperor.co.za
Thank you
Emperor Asset management is a division of First World Trader, an authorised financial services provider, FSP 22588