en thomas palmblad
TRANSCRIPT
BANK DEGROOFPresentation for VIVIUM Assurances
Bruxelles Kinepolis 14th October 2010
Mr. Thomas-Karl Palmblad
14th October 2010
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1. Introduction of Bank Degroof
2. Introduction to Degroof’s Global Investment approach for VIVIUM
3. Introduction of Bank Degroof’s Behavioral Value strategy
4. Q & A
Agenda
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Independent merchant Bank, founded in 1871, owned by its management
24.1 bn EUR in assets under management
Asset management produces 80% of income
Headcount 1000
Offices in Belgium (HQ), Luxembourg, Switzerland, France, Spain and Bahamas
Bank Degroof
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1. Senior management owns a majority stake
in the bank. This gives them, in a long-term
approach, a vital interest in the bank's
performance and reputation
Management & staff include (1)
controlling stake held by Guimard Finance
and the Philippson, Siaens, Schockert,
Haegelsteen and Fontaine families, (2)
active partners and
(3) other members of management and staff
2. Financial partners include Compagnie du
Bois Sauvage, Parmafin (Theo Maes
family), Luc Waucquez family, Levimmo
and others. Own shares represent 1.19 %
ManagementManagement
and staffand staff
63.85%
FinancialFinancial
partners and otherspartners and others
36.15%
MANAGEMENT AND STAFF HAVE A STAKE IN THE GROUP’S SUCCESS
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Private clients Institutional clients Public and private companies and their shareholders
BANK DEGROOF’S REPUTATION IS BUILT ON THE EXPERTISE MADE AVAILABLE TO ITS CLIENTS
Corporate Finance• M&A expertise, recognized by various
rankings
• Dominant position in the issue of fairness opinions
• One of the main financial advisers to the Belgian state and regional governments for privatisations and other major financial operations
• Active role in private and public placements for private companies and companies listed on Euronext Brussels
Credits & Structuring
• Structured and tailor-made credits
Private wealth management
• Protect and grow
• Full support at all stages of wealth creation
• EUR 21.0 billion in assets under management
Legal and patrimonial structuring• Specialists in legal, fiscal and inheritance
structuring
Credits & Structuring
• Credit facilities as part of overall asset management relationships
• Bank Degroof Brussel’s Institutional Portfolio Management department, Degroof Fund Managament Company and Degroof Gestion Institutionnelle (DGI) are the Degroof group's competence centres for institutional asset management
• Management of EUR 15.9 billion in UCIs
• Management of EUR 2.9 billion of institutional portfolios
Financial markets• Long-established financial market player• Advice and sales to institutional clients in equities,
bonds, undertakings for collective investment, listed derivatives and treasury management
• A leading liquidity provider on Euronext Brussels
UCI administration
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OUR REPUTATION AND PROFESSIONAL APPROACH ENABLE US TO ATTRACT AND RETAIN HIGHLY COMPETENT PROFESSIONALS
• Our culture is that of top grade professionals, working together in a climate of mutual trust and respect to produce optimal, lasting solutions for our clients
• This culture provides a stability stimulating creative innovation
• We favour a long-term approach, with close attention to financial fundamentals
• For example, the average length of service of senior staff is 11.2 years
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• a clear and contrarian investment philosophy,
• inspired by academic research and, that is translated
• into disciplined investment processes by Teams
• through a "fundamental-quantitative” approach
• and with tight risk control
Bank Degroof = excellent performance thanks to
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VIVIUM, the switch to Degroof Active Management Styles
VIVIUM Managed Funds 4 Compartments
Stability Fund
Balanced Fund
Dynamic Fund
Aggressive Fund
Degroof Active Funds Selection of 4 Management Styles
Global Low
Global Medium
Global High
Equities Europe Behavioral Value
Active Risk Level
Low
High
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VIVIUM, the switch to Degroof Active Managed Investment Processes
Equity Level
Low: 20%
High: 100%
VIVIUM Managed Funds 4 Compartments
Stability Fund
Balanced Fund
Dynamic Fund
Aggressive Fund
12 months return as at 30th September 2010
Return 1 Year : + 6.61%
Return 1 Year : + 8.51%
Return 1 Year : + 9.89%
Return 1 Year : + 5.31%
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VIVIUM, the switch to Degroof Active Managed Investment Processes
Equity Level
Low: 20%
High: 100%
VIVIUM Managed Funds 4 Compartments
Stability Fund
Balanced Fund
Dynamic Fund
Aggressive Fund
Tracking Error 1.92% Vol. 5.29% Tracking Error 2.92% Vol. 9.8%
Tracking Error 6.28% Vol. 15.5%
Tracking Error 5% Vol. 19.7%
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• 3 RISK PROFILES
ASSET ALLOCASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
GLOBAL LOW
GLOBAL MEDIUM
GLOBAL HIGH
EQUITY RATIO
20%
48%
75%
0% 20% 40% 60% 80% 100%
DEGROOFGLOBAL ISIS
LOW
DEGROOFGLOBAL ISIS
MEDIUM
DEGROOFGLOBAL ISIS
HIGH
ASSETS UNDER MANAGEMENT (mio €)
347
580
1,918
-
500
1,000
1,500
2,000
2,500
ISIS LOW ISIS MEDIUM ISIS HIGH
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• MEDIUM = Flagship Management of Banque Degroof, 1.92 billion euros
reflects the allocation strategy of medium risk
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
OPTIMIZE THE RETURN
1. Allocation between
assets classes
2. Diversification within every asset class
• OBJECTIVE
80% OF THE RETURN
20% OF THE RETURN
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BONDS
EQUITIES
SHORT TERMALTERNATIVE
CONVERTIBLE BONDS
REAL ESTATE
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
Govies / AgenciesSecuritizedCorporatesInflation linked
Large capsSmall capsPrivate Equity
CurrenciesDeposits
Commercial papers
OfficesCommercialResidential
Flex CollarHedge Funds
Timber
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1. ALLOCATION : MEDIUM (July 2010)
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
LowLow
HighHigh
EQUITIES BONDS CONV BDS ALTERN. CASH REAL PROP. TOTAL
EURO 14.8 24.8 0.3 11.0 0.0 2.9 53.9Belgium 0.7 0.9 0.3 0.9 2.8Germany & Austria 4.1 5.5 0.0 0.2 9.8France 4.4 11.3 1.1 16.9Netherlands 1.5 0.5 0.5 2.5Italy 1.5 0.5 0.0 2.1Spain 1.7 1.0 2.7Others (Port,Irel,Finl,Gr) 0.9 5.0 0.1 6.1
EMEA ex-Euro 5.4 0.9 0.3 0.0 0.1 6.6Great Britain 3.1 0.3 0.0 0.1 3.5Switzerland 1.0 0.0 1.0Others (Swed, Norw, Denm, Isr) 1.2 0.9 0.0 2.1
NORTH AMERICA 14.5 0.0 0.3 4.4 0.3 0.5 20.0
United States 13.0 0.0 0.3 4.4 0.2 0.5 18.4Canada 1.6 0.0 1.6
JAPAN 2.2 0.1 2.3
ASIA ex-Japan 2.0 0.3 2.3 0.1 4.6Australia & NZ 1.3 0.1 0.0 0.0 1.4Hong Kong 0.5 0.1 1.2 0.1 1.8Singapore 0.2 0.1 1.1 0.0 1.4
EMERGING MARKETS 10.7 1.9 12.6
TOTAL 49.5 25.7 3.2 15.4 2.6 3.6 100.0
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2. BENCHMARK
LowLow
HighHigh
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
ISIS MEDIUM
58%
21%
8%
38%
10%
48%
16%
4%
28%
2%
38%
11%
0%
18%
0%6%3%0%0%
10%
20%
30%
40%
50%
60%
Equitie
s
Conv B
onds
Altern
ative
Real e
state
Bonds
Cash
Max
Bench
Min
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3. ALLOCATION TOOLS (ASSETS CLASSES)
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
INVESTMENT COMMITTEE
MACRO-ECONOMY
-Growth: Europe, USA, Japan, Emerging countries
-Inflation :
-Short term interest-Long term interest-Exchange rates-Equity markets valorisations
Leading indicatorsConsummer confidenceLabour marketNew ordersInventoriesProfitabilityReal estate activityCreditsCPI, PPI
Monetary aggegatesCommodities pricesWorld trade volumeLabor cost
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BONDS ALLOCATION
- Duration/Positioning Real interest rate Yield curve
- Govies-Inflation linked: Expected inflation
- Credit: Corporate - govies: Rating/risk
- Sectors
- Countries
3. ALLOCATION TOOLS (ASSETS CLASSES)
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
INVESTMENT COMMITTEE FIXED INCOME COMMITTEE
QUANTITATIVE TOOLS
- Allocation Equity-Bonds: Risk premium
- Allocation Blue-Small: Relative P/E
FINANCIAL RATIOS
- Price/Earnings
- Earnings revision
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4. STRATEGY
A. GLOBAL ALLOCATION
Slightly overweighted in equity
Underweighted in real estate
Lower bonds duration
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
0
10
20
30
40
50
Equity
Conv Bonds
Alternative
Real estateBonds
Cash
(%)
Isis Medium Benchmark
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Underweighted in Japan
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
4. STRATEGY
B. EQUITY ALLOCATION
0
5
10
15
20
25
Euro
Europe ex-euro
North America
Asia & Emg mktsJapan
(%)
Isis Medium Benchmark
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ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
4. STRATEGY
C. BOND ALLOCATION
Overweighted in corporate & securitized bonds
01020304050607080
AAA AA A BBB NR
(%)
ISIS Medium Benchmark
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Based on long term views
5. ASSET ALLOCATION: CONCLUSIONS
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
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ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
1. NON EQUITY CLASSES 2. EQUITY CLASSES
- BONDS- FLEXIBLE COLLAR- CONVERTIBLE BONDS- HEDGE FUNDS- REAL ESTATE- COMMODITIES- OTHERS: TIMBER
- STYLES:INDEXEDVALUEGROWTH…
- PRIVATE EQUITY
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MEDIUM
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
1. NON EQUITY CLASSES
Cash
2%
Flex collar14%
Timber1%Cash
2%
Real properties4%
Bonds25%
Conv bonds3%
Equity51%
Hedge funds1%
Non equity49%
Bonds 16.5% Govies,
3.1% Inflation linked
2.4% Corporates
3.7% Securitized
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ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
2. EQUITY CLASSES
MEDIUM
third party12%
value6%
Non equity49%
Index31%
Equity51%
private equity1%
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ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
Based on convictions, on medium term views
DIVERSIFICATION: CONCLUSIONS
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RISK CONTROL
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
MEDIUM
RiskControl
1
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Positive years: 2003 - 2007
80
90
100
110
120
130
140
150
2003 2004 2005 2006 2007
Global bonds Isis Medium
ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION
PESSIMISTIC SCENARIOOPTIMISTIC SCENARIOPositive years: 1993 - 2000
70
90
110
130
150
170
190
210
230
250
1993 1994 1995 1996 1997 1998 1999 2000
Global bonds Isis Medium
Negative years: 2000 - 2003
40
50
60
70
80
90
100
110
2000 2001 2002 2003
Global bonds Isis Medium
+25.5%
+36.5%
-10.1%
UPSIDE HIGHER THAN DOWNSIDE
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Introduction to Bank Degroof’s Behavioral Value strategy
Source: “Capturing the Value Premium in the UK; 1955-2001” Dimson, Nagel & Quigley, LSE, January 2003
Cumulative value of British shares between 1955 and 2001
Unfortunately …
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Introduction to Bank Degroof’s Behavioral Value strategy2. Quality of forecasting is a disaster
Behavioral Value deals with these flaws through
A. Strong buying and selling discipline
Obtained through a quantitative approach and improved bybehavioral criteria such as earnings revision momentum
B. Behavioral Value eliminates the analysts’ bias oflong term optimism
By introducing mean reverting in the valuation model/business plan
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The Wheel of Fortune – where Degroof is
Behavioral Value
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Risk PremiumDJ Stoxx 50 Earnings Yield Gap - Growth sensitivity
-0.25%
0.75%
1.75%
2.75%
3.75%
4.75%
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%
13.75%
14.75%
J an-99 J an-00 J an-01 J an-02 J an-03 J an-04 J an-05 J an-06 J an-07 J an-08 J an-09 J an-10-0.25%
0.75%
1.75%
2.75%
3.75%
4.75%
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%
13.75%
14.75%
Risk P remium Normative RP -25% -15% -5%
5% 15% Stdev Stdev -35%
Normative RP = 2.90% ; Last = 10.14% ; 30/08/2010 = 10.60%
Last update : 02/09/2010
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Degroof Equities Europe Behavioral Value Gips
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Market snapshot
Source: Bloomberg 8th October 2010
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Start End Return US Equity Market
Q4 1948 Q4 1949 -15%
Q2 1953 Q2 1954 -12%
Q3 1957 Q2 1958 -19%
Q2 1960 Q1 1961 -11%
Q4 1969 Q4 1970 -30%
Q4 1973 Q1 1975 -46%
Q1 1980 Q3 1980 -7%
Q3 1981 Q4 1982 -24%
Q3 1990 Q1 1991 -16%
Q1 2001 Q4 2001 -46%
Q1 2008 (?) Q1 2009 (?) -43%
Mean -23%
Median -17%
Source: Lehman Brothers, Global Strategy Outlook, 7 December 2007
OutlookComparison to previous crises
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Source: Global Financial Data
Bottom reached at
8 July 1932 171%
31 March 1938 29%
28 April 1942 54%
19 May 1947 19%
13 June 1949 42%
22 October 1957 31%
26 June 1962 33%
7 October 1966 33%
26 May 1970 44%
3 October 1974 38%
12 August 1982 58%
4 December 1987 21%
11 October 1990 29%
9 October 2002
9 March 2009
34%
Oct 8, 2010 +68%
Average 45%
Median 33%
Performance US equities 12 months after bear market bottom
OutlookEquities
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Contact details
Thomas Palmblad,
Institutional & Corporate Desk
Rue de l’Industrie 44
1040 Bruxelles
E-mail: [email protected]
Phone: +32 2 287 93 27
www.degroof.be