omam gear 120209 (citywire france)
DESCRIPTION
TRANSCRIPT
Old Mutual Global Equity Absolute Return Fund
For professional clients only. Not for distribution to retail clients.
Citywire Wealth Manager Retreat, 9-10 February 2012
Fund performance
-10
-5
0
5
10
15
3m 6m 1y 2y
(%)
Old Mutual Global Equity Absolute ReturnFundHFRX Equity Market Neutral Index
Source: OMAM / Morningstar, bid to bid, net income reinvested, in euro. Periods to 31/12/2011.
Old Mutual Global Equity Absolute Return Fund
• The fund aims to deliver absolute
returns that have a low correlation
with equity and bond markets, through
a market neutral portfolio of global
equity stocks
Objective
Global, diversified
equity portfolio
Targeting absolute
returns over rolling
12 month periods
Return
volatility target
of 6%
Low correlation to
global stock markets
Market neutrality –
pure alpha
Liquid, transparent
UCITS III fund with
daily dealing
3 | Old Mutual Global Equity Absolute Return Fund
Investment process - overview
Research
• Rigorous implementation of clear, intuitive
investment insights
• Historical strategy analysis spanning
multiple economic cycles
Forecasts
• Diversified alpha sources
• Optimal capital allocation across alpha
strategies based on expected payoffs
• In-built risk control and downside risk
mitigation
Portfolio
• Large opportunity set - 3,500 global stocks
• Efficient, constrained, risk controlled
portfolio construction
• Transparent performance attribution to
alpha sources
Final
portfolio
Portfolio
construction
Capital allocation
to strategies
Stock selection
strategies
4 | Old Mutual Global Equity Absolute Return Fund
Investment process – details
| Old Mutual Global Equity Absolute Return Fund 5
Portfolio
construction
Risk management • Downside risk control
• Risk budget
Final
portfolio
Return diversification • Multiple strategies
• Broad opportunity set
Structured process • Rigorous
• Dispassionate
Portfolio controls • Sector/industry
• Liquidity management
Market impact • Trading costs
• Turnover
Sto
ck s
ele
ction s
trate
gie
s
Dynamic valuation • Attractive valuations
• Balance sheet quality
Market dynamics • Strong medium & short-term trends
• Industries with macro support
Sustainable growth • Strong growth characteristics
• Expectations likely to be fulfilled
Analyst sentiment • Analyst upgrades
• Market under-reaction
Company management • Good investment decisions
• Efficient use of capital
Capital allocation
to strategies
in response to
investor sentiment,
risk environment and
macroeconomics
Dynamic valuation – cyclicality of value returns Example: North America
Source: OMAM.
| Old Mutual Global Equity Absolute Return Fund 6
Jul-81 Aug-83 Aug-85 Aug-87 Sep-89 Sep-91 Sep-93 Oct-95 Oct-97 Oct-99 Nov-01 Nov-03 Nov-05 Dec-07 Dec-09 Dec-11
Cum
ula
tive
retu
rns
OMAM Valuation factor
Book to Price
OMAM Quality factor
100
101
Capital allocation: sentiment/uncertainty spectrum
• A market proxy to assess the macro
environment in real time
• Identify current positioning on
sentiment/uncertainty spectrum
• Analyse expectations of the five
strategies, given the current position
• Tilt strategy weightings accordingly Optimistic
Confident
Pessimistic
Uncertain
Risk Environment
Market
Sentiment
Proprietary analysis to assess the market environment
7 | Old Mutual Global Equity Absolute Return Fund
0 5 10 15 20 25 30 35 40 45 50 55
Sustainable Growth
Capital allocation over time
8 | Old Mutual Global Equity Absolute Return Fund
Source: OMAM. Data from January 1994 to 13 January 2012
Capital allocation to strategies
• Strategies are employed to
differing degrees, depending
on the environment
• Market Dynamics and
Dynamic Valuation tend to
have higher allocations
Portfolio allocations by strategy
Current positions
0 5 10 15 20 25 30 35 40 45 50 55
Market Dynamics
0 5 10 15 20 25 30 35 40 45 50 55
Dynamic Valuation
0 5 10 15 20 25 30 35 40 45 50 55
Analyst Sentiment
0 5 10 15 20 25 30 35 40 45 50 55
Company Management
Strategy attribution
Source: OMAM. Data to 31/12/2011
9 | Old Mutual Global Equity Absolute Return Fund
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
December 3 months 12 months
Dynamic Valuation V Dynamic Valuation Q
Market Dynamics Sustainable Growth
Analyst Sentiment Company Management
Strong performance with low correlation to equity and bond markets
1m 3m 6m 1y 2y MSCI World Index JP Morgan Global
Bond Index
Old Mutual Global Equity Absolute Return Fund 0.3% -0.9% 5.2% 12.6% 12.9% -0.1 -0.2
Morningstar GIF sector average* -2.8% -2.1% -9.0% -7.9% -5.6% - -
Source: OMAM/Morningstar, bid to bid, net income reinvested, US dollar terms. Periods to 31/12/2011. *Morningstar GIF sector average: GIF OS Alternative – Market Neutral - Equity
Correlation data since launch 01/07/09 to 31/12/2011.
Dynamic investment approach delivering strong performance
% return Correlation vs.
10 | Old Mutual Global Equity Absolute Return Fund
• Fund ranked #1 in sector during 2011
Five key reasons to invest
Typically lower volatility versus long-only equity funds
Flexible, dynamic investment process
Diversified, global equity portfolio
Market neutral fund
A highly diversified global equity absolute return fund
Aims to beat cash in all-market conditions
11 | Old Mutual Global Equity Absolute Return Fund
Investment details
Launch date: July 2009
Minimum investment: €, $, £ 100,000
Annual management charge: €, $, £ 0.75%
Performance fee: 20% of outperformance above a hurdle rate
(central bank base rate – semi annually)
High water mark: Yes
Dealing frequency: Daily
Dealing cut off time/
valuation point:
12 noon
Share classes: US dollars/euro/sterling
(euro/sterling share classes are hedged against the US dollar base currency)
Structure: Ireland-domiciled UCITS III fund
12 | Old Mutual Global Equity Absolute Return Fund
Appendix
Optimise risk and return profile
Regional allocations
• 33% North America (30-35% constrained)
• 33% Pan Europe (30-35% constrained)
• 17% Asia ex Japan (15-20% constrained)
• 17% Japan (15-20% constrained)
Investment parameters
• Gross leverage reset to 200% each time we trade
• Net leverage reset to 0% at each trading day
Constraints
• net countries constrained at +/- 1%
• net regions constrained at +/- 0.3%
• net sectors constrained at +/- 10%
• net industries constrained at +/- 10%
• stocks constrained at +/- 1.5%
14 | Old Mutual Global Equity Absolute Return Fund
Return Risk Sharpe Sortino
Dynamic Valuation 15.3 11.8 1.3 2.8
Book to Price 10.1 19.1 0.5 0.9
(Return and Risk indicate annualised numbers)
Strategy example: dynamic valuation
Source: OMAM, MSCI
• Returns to simple value strategies, such as book to price, are cyclical
• Dynamic valuation mitigates downside risk by incorporating cycles in risk appetite
Cu
mu
lative
re
turn
s
0
5
10
15
Dec95 Sep98 May01 Feb04 Nov06 Aug09
Factor performance 31 Jan 1994 – 29 Apr 2011
15 | Old Mutual Global Equity Absolute Return Fund
Return Risk Sharpe Sortino
Dynamic Valuation 9.9 12.8 0.8 1.3
Price Momentum 0.2 19.1 0.0 0.0
(Return and Risk indicate annualised numbers)
Strategy example: market dynamics
Source: OMAM, MSCI
• Returns to simple momentum strategies tend to be volatile and suffer sharp
downturns
• Market dynamics delivers stable returns by capturing changes in the macro
environment
Cu
mu
lative
re
turn
s
Factor performance 31 Jan 1994 – 29 Apr 2011
Dec95 Sep98 May01 Feb04 Nov06 Aug09
0
1
2
3
4
5
6
16 | Old Mutual Global Equity Absolute Return Fund
Stock example: Sulzer
• Sulzer is a Swiss firm manufacturing
pumping solutions and industrial equipment.
• Dynamic valuation turned positive in 2010
as earnings expectations were not fully
incorporated into its price.
• Market Dynamics was positive as
manufacturing benefited from the global
economic recovery.
• Sustainable Growth improved as the stock’s
historic growth characteristics looked
sustainable into the future.
• Analyst Sentiment was broadly positive
over the period as market under-reacted to
analyst forecasts
• Company Management was positive but
moving towards neutral due to recent
acquisitions.
• Overall, there was wide support for opening
a long position in April 2010, and after
profiting from a strong rally, this position
has been closed as we believe the
company is now fairly priced.
Source: OMAM
17 | Old Mutual Global Equity Absolute Return Fund
OMAM (UK) Quantitative Strategies team: where we fit
Statistical Arbitrage
• Global Statistical Arbitrage
Quantitative Strategies
• Global, regional and single country equity long-only
• Global and regional equity market neutral
• Regional equity 130/30
• Ian Heslop
• Amadeo Alentorn
• Mike Servent
Managed Futures
• Managed futures absolute return
Portfolio construction
Modelling and systems
Research
Key product(s) Key product(s) Key product(s)
Principals
Systematic Investments
Paul Simpson, Head of Systematic Investments
18 | Old Mutual Global Equity Absolute Return Fund
Biographies
Dr Amadeo Alentorn Head of Quantitative Research / Fund Manager
Amadeo Alentorn joined OMAM in 2005 as an intern,
while studying a PhD in Computational Finance at the
University of Essex, before becoming a full-time
quantitative analyst in 2006. During his PhD he
developed a new option pricing model using extreme
value theory and collaborated with the Bank of England
in several research projects, developing models for
systemic risk of banking networks and liquidity of
payment systems. Prior to this he worked as a software
developer in the IT industry and in the manufacturing
industry. Amadeo holds a BEng in Robotics from the
University of Plymouth and an MSc in Computer
Science from the University of Essex. He is a CFA
charterholder.
Mike Servent Head of Quantitative Modelling Systems / Fund
Manager
Mike Servent joined OMAM in November 2004 from
Barra International where he was a Senior Consultant
specialising in the implementation of multi asset-class
risk systems. Prior to this he spent five years with COR
Risk Solutions, which developed the optimisation,
backtesting and modelling software currently used by
the Quantitative Strategies Team at OMAM. At COR he
worked as Commercial Development Manager as well
as undertaking research projects with various clients.
Mike has an MA in Physics from Oxford University.
Lawrence Clark Quantitative Developer
Lawrence Clark joined OMAM in November 2006,
having spent the previous year as a postgraduate
physicist at Oxford University conducting research into
carbon nanomaterials for quantum information
processing. Lawrence has an MPhys from Oxford
University, specialising in financial market complexity
and computer programming.
Dr Yuangao Liu Quantitative Analyst
Yuangao Liu joined OMAM in November 2007 from
Jacobs UK, where he was a structural engineer
specialising in building computer models to solve a
variety of engineering problems. Previously he was a
project research assistant at Tsinghua University,
Beijing. Yuangao has a PhD in Structural Engineering
from Imperial College, London and a BEng in Civil
Engineering from Tsinghua University, Beijing. He is a
FRM charterholder.
Dr Ian Heslop Head of Quantitative Strategies / Fund Manager
Ian Heslop joined the Quantitative Strategies team in
2004 from OMAM’s Global Equities team, where he was
a fund manager specialising in the global technology
and biotechnology sectors. He joined the Old Mutual
group from Barclays Global Investors, where he was a
UK quantitative fund manager. Ian has a BA in
Chemistry from Oxford University and completed a PhD
in Medicinal Chemistry at Edinburgh University.
19 | Old Mutual Global Equity Absolute Return Fund
Biographies (Consultants)
Dr Mark Salmon Professor of Finance
University of Warwick
Mark Salmon’s current research interests lie in financial
econometrics, behavioural finance and aspects of
international macroeconomics. He is Professor of
Finance at the University of Warwick and is Director of
the university’s Financial Econometrics Research Centre
and Finance Research Institute, as well as External
Professor at the European University Institute in
Florence. He currently also acts as a consultant to the
Bank of England and is a Research Fellow of the Centre
for Economic Policy Research associated with the
International Macro Programme. He has served as a
consultant to a number of city institutions and was a
member of a task force set up by the European
Commission to consider exchange rate policy for the
euro. Mark has a BA from Essex University and an MSc
from the London School of Economics. He has
published widely in academic journals, including
Econometrica, The Annals of Statistics, Journal of
Econometrics, the Economic Journal, the Journal of
Economic Dynamics and Control, Journal of Empirical
Finance and the International Economic Review.
Dr Stephen Satchell Reader in Financial Econometrics/Fellow of Trinity
College
University of Cambridge
Stephen Satchell focuses on both empirical and
theoretical aspects of econometrics, finance, risk
measurement and utility theory. His very strong
econometric techniques knowledge has proved
invaluable for OMAM’s quantitative strategies team.
Steve is a reader in financial econometrics at
Cambridge, a Fellow of Trinity College, Cambridge, and
a visiting fellow at Birkbeck College, University of
London. He holds two PhDs (Cambridge and London),
an MSc (Sydney) and an MA (Cambridge). He has
refereed widely in academic journals and has affiliations
with professional bodies in finance. He has published
widely in varied areas of finance, including equity return
and risk models, style rotation, asset allocation, trading
rules, volatility, option prices, exchange rates, and
property markets.
Dr Peter Pope Professor of Accounting
Cass Business School, City University
Peter Pope has researched and published extensively in
the areas of capital markets, financial reporting and
international equity valuation. Prior to his current role in
OMAM’s Academic Advisory Board, he was Head of the
V-Lab research program in the quantitative strategies
team from 2006 to 2010. Before joining Cass in 2011,
Peter Pope previously held academic positions at
Lancaster University Management School, Strathclyde
Business School and Liverpool University. He has also
been visiting professor at the Stern School, New York
University, and the University of California at Berkeley.
He is a qualified accountant and was a member of the
U.K. Accounting Standards Board Academic Panel.
20 | Old Mutual Global Equity Absolute Return Fund
Biographies (Consultants)
Dr Christopher Malloy Assistant Professor of Business Administration
Harvard Business School, Finance Unit
Christopher Malloy’s main interests lie in the behavioural
aspects of empirical finance. His research concentrates
on asset pricing, investments and portfolio choice and
he helps to continue to advance our equity strategies.
Chris is Assistant Professor of Business Administration
in the Finance Unit of Harvard Business School. Prior to
this he was Assistant Professor of Finance at the
London Business School, having previously been a
Research and Teaching Assistant at the University of
Chicago's Graduate School of Business and a Research
Assistant at the Washington DC Board of Governors of
the Federal Reserve System. He has a BA in
Economics from Yale University and a PhD in Finance
and an MBA from the University of Chicago. He has
published in the Journal of Finance.
Dr Ian March Professor of Finance
Cass Business School, City University
Ian Marsh’s areas of expertise include exchange rate
modelling and forecasting, credit risk modelling and
applied financial econometrics. He spent four years as
a banker and economist prior to completing his PhD and
has spent time as a researcher at the International
Monetary Fund and the Bank of England’s Financial
Stability area, as well as acting as a consultant to a
range of financial institutions. Ian has a BA from
Sheffield University, an MSc from Birkbeck College,
University of London and a PhD from Strathclyde
University, all in economics. He has published in many
journals including the Journal of Finance, Journal of
Monetary Economics, Review of Economics & Statistics,
Journal of International Money and Finance &
Explorations in Economic History.
Dr Mikhail Chernov Associate Professor of Finance
London Business School
Mikhail Chernov’s research focuses on empirical asset
pricing problems and applications of econometric
methods to finance. His main areas of interest are
options, volatility, fixed income and credit and he makes
a strong contribution to our growing expertise in non-
equity asset classes. Mike is an Associate Professor of
Finance at the London Business School. Formerly he
was an Associate Professor of Finance at Columbia
Business School in New York. He holds BS and MS
degrees from Moscow State University and a PhD in
Finance from Pennsylvania State University. He has
published in the Journal of Finance, the Journal of
Econometrics and the Journal of Financial Economics.
21 | Old Mutual Global Equity Absolute Return Fund
How to contact us
Old Mutual Asset Managers (UK) Limited
2 Lambeth Hill
London
EC4P 4WR
Telephone: +44 (0) 20 7332 7500
Online: www.omam.co.uk
Email: [email protected]
22 | Old Mutual Global Equity Absolute Return Fund
Important information
This information is being communicated only to persons who have professional experience in matters relating to investments falling within Article 19(1) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2001, as amended (the Order) and to persons to whom it may otherwise be lawful to
communicate it to (all such persons being referred to as relevant persons). Other persons should not rely or act upon this document or any of its contents. The
recipient should not use the information in this document in any way which would constitute 'market abuse'.
This document does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or
subscribe for, any securities nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. No
representation or warranty, express or implied, is or will be made by OMAM, its advisors or any other person as to the accuracy, completeness or fairness of the
information or opinions contained in this document and any reliance you place on them will be at your sole risk.
The Company: Old Mutual Dublin Funds plc, 1 North Wall Quay, Dublin 1, Ireland. The Company is an Irish law umbrella UCITS authorised by the Central Bank
of Ireland. The fund cited above is authorised for distribution in the UK, Italy, Spain, France, Sweden and Switzerland.
Representative in Switzerland is First Independent Fund Services Ltd., Klausstrasse 33, 8008 Zurich, Switzerland. Paying agent in Switzerland is NPB New
Private Bank Ltd, Limmatquai 1, P.O. Box, 8022 Zurich, Switzerland. French centralising agent is Société Générale, Tour Granite 75886 Paris cedex 18
(Contact: M. Hugues de VERGNES – Tel : 33 1 42 14 25 88). Please read the simplified prospectus of the Company before investing. The prospectus and
simplified prospectus, articles of association and annual and semi-annual reports of the Company may be obtained free of charge from the Swiss
Representative or the French centralising agent. Old Mutual Global Equity Absolute Return Fund is a subfund of Old Mutual Dublin Funds (the “Company”). The
Company has been registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) under no. 894 of its registries,
pursuant to Spanish laws and regulations. We recommend that you seek advice from your financial adviser before making an investment decision. A complete
list of Spanish distributors is available at the CNMV website. Before investing in the Shares, please read the Prospectus which is available on www.omam.co.uk
and at the local distributors appointed in Italy. Past performance is not a guide to future performance. Performances are net of taxes.
The performance data shown do not take account of the commission and costs incurred on the issue and redemption of shares.
Issued by Old Mutual Asset Managers (OMAM), the trading name of Old Mutual Asset Managers (UK) Limited and Old Mutual Fund Managers Limited. Old
Mutual Asset Managers (UK) Limited, 2 Lambeth Hill, London EC4P 4WR, England. Registered in England No. 2949554. Authorised and regulated in the UK by
the Financial Services Authority. Telephone calls may be recorded for security purposes and to improve our customer service. 01/12/H2841
For professional clients only, and not to be distributed to or relied upon by retail clients. Past performance is not a guide to future performance.
23 | Old Mutual Global Equity Absolute Return Fund