go global as a viking! · 2013-11-06 · risk diversification by spreading your investments 4...
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Go Global as a Viking!
Thomas Fischer
October, 2013
Thomas Fischer
• MBA
• 38 years in financial services
• Currency trader 1978-2000
• Jyske Bank/JGAM 2000 -2013
• Editor Currency Cross Trader
• Consultant ENR Asset Management
• Golf
• Copenhagen Marathon 05 4:10
• Copenhagen Marathon 07 4:08
Invest globally and you gain on both risk and return
Risk
Return
Efficient front with and without global investments
Lower risk at a given level of return
Higher return at a given level of risk
Risk diversification by spreading your
investments
4
“Why Not Diversify Internationally Rather Than Domestically?” Solnik
(1974)
1. The greater the number of securities, the less the portfolio is likely to lose as the result of one company’s misfortune
2. An internationally diversified portfolio is likely to carry a much smaller risk than a domestic portfolio
1
2
Model Portfolio Theory
• Diversification reduce unsystematic risk
• Best level of diversification – efficient frontier
• Global diversification – currency overlay
• Systematic risk cannot be diversified away.
5
US Efficient Frontier
6
Global Efficient Frontier Active Currency Overlay
7
Global Diversification
• Individual Stocks, Bonds & Currencies (no currency hedging)
• Global Funds (hedging within Fund)
• Regional Funds (hedging within Fund)
• Emerging Market Funds (hedging within Fund)
• Country Funds (hedging within Fund)
8
The size of the FX Market 2013
• 5.3 Trillion US dollars every day!
• US dollar 87% of all trades
• UK (41%) & USA (19%) largest jurisdictions
Purchasing-Power-Parity
• Long term measurement based on inflation
• Fundamentals always right in the long run but….
• Currency rates affected by short term traders
• Currency risk needs to be watched 24-7
10
Factors affecting currency rates
• Macroeconomic factors – GDP/Unemployment/Growth
• Interest rate differential
• Market trends – momentum/relative strength index
• Central banks
11
Analyzing Currencies like stocks
• GDP
• Interest rates
• Employment rate
• FDI
• Sentiment
• Charts
12
EURO
• 11 member states introduced EUR January 1999
• Notes and coins were launched on 1 January 2002
• Today 17 member states
• 33% of all currency trades
• 27% of world foreign exchange reserves
Member States using Euro
• Belgium
• Germany
• Estonia
• Ireland
• Greece
• Spain
• France
• Italy
• Cyprus
• Luxembourg
• Malta
• The Netherlands
• Austria
• Portugal
• Slovenia
• Slovakia
• Finland
Euro Statistics
• GDP: 12,4 trillion USD (17 countries)
• Population: 332 million (17 countries)
• Government debt: 85% of GDP
• Unemployment: 12.1%
• 10 year bond: 1.76%
Eurozone alphabet soup!
ECB alphabet soup - explained!
• EFSF = European Financial Stability Facility created 2010 EUR 440 Billion
• EFSM = European Financial Stabilisation Mechanism created 2010 – EUR 60 billion
• SMP = Securities Markets Programme – ECB purchase in secondary bond markets – discontinued 2012 now OMT
• ESM = European Stability Mechanism created 2012 EUR 500 Billion
• LTRO = Long-Term Refinancing Operations existed since 1999 but Mario Draghi introduced 3 year lending in 2011 EUR 489 Billion in 2012 EUR 529 Billion
• OMT = Outright Monetary Transacions 2012 – ECB purchase secondary sovereign bond markets
The EURO Source: BCA
USD
• GDP 15, 6 trillion
• Population 316 million
• 50 states
• 87% of all currency trades
• 63% of World foreign exchange reserves
USD Statistics
• GDP: 15,720,000,000
• Population: 316 million
• National debt of GDP: 100%
• Unemployment: 7.30%
• 10 year Government bond 2.62%
EUR/USD
• All time high: 1.6038 (07/18/08)
• All time low: 0.8230 (10/26/00)
• Average since introduction: 1.2024
• Current: 1.3450
• Daily turnover: 1.3 trillion
Source: Jyske Markets
ENR offers Global Investments
to US persons
Unique global investments for US investors
• SEC registered Investment Adviser
• ENR invest your money as a non-US person
• A world of opportunities
• Increased diversification and potentially higher returns
Asset allocation and diversification
• Top-down investment decision process
• Time horizon
– Short term; 0-3 months, market sentiments, 10%
– Medium term; 3-12 months, (three indicators), 60%
• Valuation; what asset classes/sectors/regions are over-/under-valued?
• Liquidity; free liquidity available for investments in financial assets
• Economic momentum; the business cycle, growth and output gap
– Long term; 1-5 years, structural fundamentals, 30%
Products An overview
• Managed Accounts
(Discretionary Portfolio Management)
• Advisory Account
(non-Discretionary)
• IRA pension plans
• Leveraged investments
• Minimum funds
Risk Profiles Horizon in years
Low Risk Medium Risk High Risk Speculative
+3 +5 +7 +10
AUM
100t USD Managed Account 250t USD Advisory Account
• Client segmentation
ENR Viking Portfolios
• Minimum USD 100,000 • Jyske Bank Denmark your custodian • Monthly Market Outlook from ENR • Global Investments • Management fee inclusive of custodian fees
Viking Low Risk Allocation
Asset class Min. % Max. % Neutral weight%
Fixed income 0 100 75
Equities 0 40 15
Alternatives 0 20 5
Cash 0 100 5
Viking Medium Risk Allocation
Portfolio risk profile: Medium risk
Asset class Min. % Max. % Neutral weight %
Fixed income 0 80 45
Equities 0 80 45
Alternatives 0 40 5
Cash 0 100 5
Viking High Risk Allocation
Portfolio risk profile: High risk
Asset class Min. % Max. % Neutral weight %
Fixed income 0 40 15
Equities 0 100 75
Alternatives 0 60 5
Cash 0 100 5
Performance after ENR fee
LOW RISK MEDIUM RISK HIGH RISK
2009 18.3% 23.2% 27.9%
2010 7.4% 10.3% 8.0%
2011 -1.3% -4.8% -8.6%
2012 8.1% 11.2% 12.4%
year-to-date 4.2% 9.1% 9.1%
Low Risk Portfolio Fixed Income:
USD
5,8% E.ON International Finance
BV 30.4.2018 5,90%
USD ArcelorMittal Var. 05.08.2015 6,65%
USD 3,75% Best Buy Co 15.03.2016 5,17%
USD
6,221% Telefonica Emisiones
03.07.2017 6,91%
USD
6,25% Vale Overseas Ltd
23.01.2017 5,47%
USD 5,55% Alcoa 01.02.2017 4,65%
MXN 8% Mexico 19.12.2013 6,37%
NZD
6,5% European Investment Bank
10.09.2014 4,93%
Subtotal 46,05%
Equities:
USD Apple Inc (US) 4,05%
USD PepsiCo Inc (US) 5,86%
USD Sherwin-Williams 5,28%
USD
WisdomTree Japan Hedged Equity
Fund 4,95%
EUR SAP AG (DE) 4,85%
CHF Nestle SA (CH) 3,28%
CHF Roche Holding Ltd (CH) 6,81%
HKD
China Railway Construction
Corporation (HK) 4,39%
Subtotal 39,47%
Alternatives:
GBP British Land Co PLC (GB) 4,77%
Subtotal 4,77%
Cash:
USD US Dollar 9,71%
Total: 100,00%
Medium Risk Portfolio
Asset Type Model%
Fixed Income:
USD 3,75% Best Buy Co 15.03.2016 4,47%
USD ArcelorMittal Var. 05.08.2015 4,91%
USD 6,221% Telefonica Emisiones 03.07.2017 4,83%
MXN 8% Mexico 19.12.2013 4,21%
NZD 6,5% European Investment Bank 10.09.2014 4,44%
Subtotal 22,86%
Equities:
USD Apple Inc (US) 3,59%
USD PepsiCo Inc (US) 4,83%
USD BorgWarner 6,72%
USD Sherwin-Williams 5,12%
USD WisdomTree Japan Hedged Equity Fund 6,73%
EUR SAP AG (DE) 4,68%
EUR Prysmian (IT) 5,62%
GBP Vodafone Group PLC (GBP) 5,31%
CHF Nestle SA (CH) 6,12%
CHF Roche Holding Ltd (CH) 6,10%
HKD
China Railway Construction Corporation
(HK) 4,26%
SEK Swedbank A (SE) 3,91%
Subtotal 62,99%
Alternatives:
GBP British Land Co PLC (GB) 4,56%
Subtotal 4,56%
Cash:
USD US Dollar 9,59%
Total: 100,00%
High Risk Portfolio Fixed Income:
MXN 8% Mexico 19.12.2013 4,30%
NZD
6,5% European Investment Bank
10.09.2014 5,07%
Subtotal 9,37%
Equities:
USD Apple Inc (US) 3,57%
USD PepsiCo Inc (US) 6,26%
USD Qualcomm Inc (US) 5,09%
USD BorgWarner 6,71%
USD Sherwin-Williams 5,11%
USD
WisdomTree Japan Hedged Equity
Fund 6,63%
EUR SAP AG (DE) 4,73%
EUR Prysmian (IT) 5,67%
GBP Diageo PLC (GB) 5,25%
GBP Vodafone Group PLC (GBP) 5,31%
CHF Roche Holding Ltd (CH) 4,13%
CHF Nestle SA (CH) 4,92%
USD iShares FTSE China 25 Index Fund 4,99%
HKD
China Railway Construction
Corporation (HK) 4,26%
SEK Swedbank A (SE) 3,77%
Subtotal 76,40%
Alternatives:
GBP British Land Co PLC (GB) 4,56%
Subtotal 4,56%
Cash:
USD US Dollar 9,67%
Total: 100,00%
ENR Advisory Extra Accounts
• Minimum investment USD 250,000 • Jyske Bank Denmark your custodian • Self-direction • Monthly Market Outlook from ENR • Advisory Investment cases from ENR • Fee 1% inclusive of custodian fees to Jyske Bank
Strong Danish banks in EU stress test
• New capital requirement of 9% (before 7%)
• Major Danish banks show strong resilience in EU stress tests (European Banking Authority’s test)
• Jyske Bank’s core capital is 13.8% and was never below 12.3% in the stress test
Denmark
• Trade balance surplus
• Low unemployment
• Highly regulated banking industry
• Active democracy (voting participation +85%)
• Least corrupt nation
• Member of EU but not part of the euro
5 easy steps to become a client
1. Complete custodian bank application forms
2. Choose ENR investment product
3. Sign ENR contracts
4. Wire transfer funds
5. Go!
E-mail: [email protected]
Free-call: 1-877-989-8027
Fax: 1-514-989-7060
Website: www.enrasset.com
ENRs contact details
ENR Asset Management Inc.
1 Westmount Square, Suite 1400
Westmount Quebec
Canada
Thomas Contact Details
• 011-45-3880 0011
• 011-45-2526 9239