sabre dynamic equity ucits fund...edge (~30% of performance attribution) ‘information advantage’...

Sabre Dynamic Equity UCITS Fund

PRIVATE AND CONFIDENTIAL ‐ ADDRESSEE ONLY

PRESENTATION May 2018

© Sabre Fund Management 2018 – Confidential Information

Sabre Fund Management: Key Team Members

2

Melissa HillMelissa is a Principal and

Sabre’s Chief Executive Officer. She chairs the firm’s board and management committee. She is also a member of the Investment Committee which supervises the ongoing development of Sabre’s

funds.

Melissa has been leading Sabre’s business since 2002, having

originally been appointed to the Board in March 2000, as

Marketing Director. She has extensive experience of hedge

fund management and, as such, is responsible for devising and implementing the company’s

strategic business plan.

Melissa entered the investment industry in 1996 on joining Sabre.

She was instrumental in the launch of Sabre’s first

quantitative strategy in 1997, being actively involved in the

implementation and global asset raising.

Dan JelicicDan is a Principal of Sabre and is the architect of Sabre’s dynamic style investment methodology.

He leads the ongoing development of Sabre’s Style

strategies and drives the investment process utilised in

both Sabre’s Style Arbitrage and Dynamic Equity Funds.

Dan joined Sabre in April of 2002 to run the Sabre Style Arbitrage

Fund – a strategy devised by him as a progression of his previous experience of running money at

ABN AMRO Asset Management in London.

Dan has developed a range of quantitative fundamental and technical models to forecast

equity styles. Prior to Sabre, Dan has many years investment

experience in portfolio management, quantitative

research/model development, and risk management.

.

Stephen ReesStephen is a Senior Portfolio

Manager and Head of Investment Risk joining Sabre in

2009 to share in the portfolio management of Sabre’s funds, undertake quantitative research and development pertinent to

Sabre's Investment process. He has been instrumental in

developing the directional elements of the long/short 'Sabre

Dynamic Equity Fund’.Stephen was appointed as a

Director in March 2018.

Prior to joining Sabre, Stephen was Head of Investment Process

Research at Schroders, a role which involved integrating quant

techniques into the firm's investment processes and

managing L/S portfolios. He was also Head of quant investing at

both Rothschild and Baring Asset Management. In 1991 he

developed and managed one of the first UK equity funds to be run

using active quant techniques at BZW (now Blackrock/BGI).

.

7 Investment professionals 6 Operational Professionals

Dan Jelicic & Stephen Rees both have 20+ years experience running Systematic Equity Funds


Sabre Fund Management

3

Boutique Hedge Fund Manager

Specialists in generating alpha from Style Factors

Award winning market neutral fund (Sabre Style Arbitrage) launched in 2002

Market neutral process Enhanced by directional components in 2013 with the launch of the Sabre Dynamic Equity Fund

Proven track record – targeting the highest quality risk adjusted returns

Established management and investment team


Overview Of The Sabre Dynamic Equity Strategy

4

A systematic equity long/short fund with a market neutral core

Market neutral alpha generating process enhanced with a variable net market bias

“Market Neutral +”

Targeting returns in the region of 12%-15% p.a. with < 10% annualised volatility and low beta (-0.3 to +0.3 target range)

Predominantly invested in large or upper mid cap European equities. Modest US market exposure too, to enhance Sharpe ratio

Low correlation with equity markets and long/short hedge fund indices (<0.3 long term target)


Sabre Dynamic Equity Returns Since Inception

5

Sabre Style ArbitrageFeb 2013 – Mar 2018

9.1%

5.5%

1.62

2.68

Sabre Dynamic Equity Feb 2013 – Mar 2018

11.4%7.1%1.65

2.84

Sabre Style Arbitrage: (Sabre’s original market neutral

process)

Sabre Dynamic Equity(UCITS):

(Market neutral process enhanced)HFRI, Equity HedgeFeb 2013 – Mar 2018

6.3%

5.3%

1.18

1.68

HFRI Equity Hedge Index:(Benchmark hedge fund index)

Stoxx 600Feb 2013 – Mar 2018

8.1%

11.4%

0.71

1.08

Stoxx 600:(Benchmark European equity index)

Compound Annual Return :

Annualised Volatility:

Annualised Sharpe Ratio:

Annualised Sortino Ratio

The above returns are net of fees charged to investors.Dynamic Equity returns from February to May 2013 were recorded in the legal entity Sabre Enhanced Fund Limited. Dynamic Equity returns from June 2013 to Oct 2014 were recorded in the legal entity Sabre Dynamic Equity Fund Limited (Cayman)Dynamic Equity returns from Nov 2014 were recorded in the legal entity Sabre Dynamic Equity UCITS Fund

© Sabre Fund Management 2018 – Confidential Information 6

• Only around 1/2 our return attributable to broadly

researched ‘conventional’ Style factors.

• ~50% attributable to Sabre idiosyncratic factors.

Key Differentiators from our Peers in Factor Investing

Proprietary FactorsProprietary Factors

• Unique factors to tradecompany announcements of

earnings, revenues & corporate guidance.

• From data captured and quantified by Sabre over 15 years giving us a significant edge (~30% of performance

attribution)

• Unique factors to tradecompany announcements of

earnings, revenues & corporate guidance.

• From data captured and quantified by Sabre over 15 years giving us a significant edge (~30% of performance

attribution)

‘Information Advantage’‘Information Advantage’

• Innovative integration of statistical arbitrage trading

models with factor investing.

• Extra low correlation source of alpha & Risk

Management benefits in managing drawdowns in factor reversal/inflection

periods.

• Innovative integration of statistical arbitrage trading

models with factor investing.

• Extra low correlation source of alpha & Risk

Management benefits in managing drawdowns in factor reversal/inflection

periods.

Statistical ArbitrageStatistical Arbitrage

+=

• Incorporation of risk controlled net-market

exposure, effectively treating the equity market and beta

as additional sources of factor premia.

• Incorporation of risk controlled net-market

exposure, effectively treating the equity market and beta

as additional sources of factor premia.

Market Neutral +Market Neutral +

• Dynamic allocation to factors based on factor-trend

identification

• Dynamic Net Variable Bias

• Higher frequency tradingfrom proprietary factors

• Capacity constrained high alpha

• Dynamic allocation to factors based on factor-trend

identification

• Dynamic Net Variable Bias

• Higher frequency tradingfrom proprietary factors

• Capacity constrained high alpha

Dynamic ProcessDynamic Process

• Primarily European Process

• Most factor funds are US or Global in nature

• Primarily European Process

• Most factor funds are US or Global in nature

EuropeanEuropean


Sabre Dynamic Equity : The Process

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Over 40 long/short Style Factor indices

Fundamental & behavioural factors

Proprietary factors

Dynamic Style factor allocation

Market neutral multi factor portfolio

Over 40 long/short Style Factor indices

Fundamental & behavioural factors

Proprietary factors

Dynamic Style factor allocation

Market neutral multi factor portfolio

Variable net market exposure by gearing of long book relative to the short

Treats ‘the market’ as an additional factor to capture long-term equity risk premium

Also magnifies long-book alpha which is higher than short

Net exposure determined by riskiness of the market, measured by factors such as long book volatility, VIX, gold price & sentiment/macro risk indices

Potential for net short position in extreme risk environment

Variable net market exposure by gearing of long book relative to the short

Treats ‘the market’ as an additional factor to capture long-term equity risk premium

Also magnifies long-book alpha which is higher than short

Net exposure determined by riskiness of the market, measured by factors such as long book volatility, VIX, gold price & sentiment/macro risk indices

Potential for net short position in extreme risk environment

Low volatility (low beta) stocks tend to outperform high beta ones, when risk adjusted.

Proprietary formulation of beta factors

Long book tilted towards low beta, short book towards high beta

Requires additional net directionality in the portfolio but without increasing net beta.

Dynamic Allocation

Low volatility (low beta) stocks tend to outperform high beta ones, when risk adjusted.

Proprietary formulation of beta factors

Long book tilted towards low beta, short book towards high beta

Requires additional net directionality in the portfolio but without increasing net beta.

Dynamic Allocation

Stock Selection Variable BiasBeta Arbitrage

Sabre’s award winning market neutral

processenhanced by

directional and beta tilting.

Market Neutral Core Directional Elements


Performance Attribution from the three principal return drivers

8

% average contribution to total returns

Return Decomposition by Calendar Year

Source: Sabre Fund Management Limited

Actual performance attribution of Sabre Dynamic Equity (Cayman) fund from Feb

2013 to Oct 2014. Actual performance attribution of Sabre Dynamic Equity

(UCITS) fund from Nov 2014.

Pro forma attribution for variable bias and beta arbitrage from 2002 to Jan 2013.

Stock selection attribution extracted from Sabre Style Arbitrage Fund Limited,.


Source: Sabre Fund Management Limited

Variable Bias: History of Net Exposure

Net Bias varies dynamically with changing risk landscape Modest Bias averaging just 22% since inception Long Bias can be beneficial, even in falling markets due to very strong long book alpha Pro-forma shows bias would have gone net short in very volatile past periods (e.g. 2008,2011)


Style Factors for Stock Selection

+

Size:Sensitivity of stock returns to company market cap

+

Helps manage Style Inflection Points

‘Conventional’ factors

Value, Quality & GrowthFundamental Styles measuring key p/l account and balance sheet metrics

Earnings Momentum:Measuring Consensus Analyst Revisions to forecast earnings

Momentum:Measuring the ‘Herd Effect’ in Investor behaviour

Macro Economic:Sensitivity of stock prices to macro parameters

40+ Factors across 9 different Styles40+ Factors across 9 different Styles

Helps manage Style Inflection Points

Technical factors capturing tendency of groups of stocks to ‘revert to mean’

Different frequencies & groups (e.g. Sectors, correlated pairs)

Generally uncorrelated source of alpha to most style factors

Important in dynamic style allocation to help prevent over emphasis on trending styles

Sabre ‘Reversal’ factors Sabre ‘Information Advantage’ factors

Focus on Earnings, Revenues & Company Guidance

Announcements captured over many years for every stock in our universe to build rich, proprietary , time stamped database

Enabled Sabre to build proprietary models to quantify and react to company announcements in optimal way

Gives significant advantage over peers

Most significant source of Performance Attribution over 12 years

Size:How markets are rewarding Market Cap exposure

Suite of proprietary ‘Statistical Arbitrage’ type factors


Why Dynamic Style Allocation?

To be clear: We are not predicting Style regimes – or the economic cycle

Style regimes tend to display ‘persistence’ :- lasting long enough to ‘trend follow’

Sabre’s process detects factor trends and tilts the portfolio accordingly

Style factor returns vary through time for a variety of reasons

E.g., investor behavioural biases, the risk landscape and the economic cycle

11

Schematic of typical Style regimes through an economic Cycle Sabre’s dynamic factor trend following process


Volume, liquidity & size constraints

Maximum position size of 3% NAV

Risk Target: 9%-10%

Gross Leverage : 200% to 500%

Beta adjusted Net : -30% to +30%

Approximately 300 to 400 stocks per side

Limited exposure to each factor country & sector

Risk Management

Quantitative: Risk management

Quantitative: Risk management

Qualitative:Risk Management

Qualitative:Risk Management

Checking of daily and intraday data updates and model outputs

Flexibility to tailor trade sizes to account for intra-day news, borrowing costs, etc. within model tracking error constraints

Checking for ‘event risk’ i.e. extreme stock specific issues not covered by models

Weekly Risk meetings with Head of Risk & CEO

Net Leverage : -30% to +60%

Rare discretionary leverage reduction by consensus of risk panelBespoke Risk attribution and

forecasting model

Extraordinary meetings of Risk Panel (Head of Risk, CEO & portfolio managers) to discuss perceived macro risks


Sabre Dynamic Equity Layers of Added Value

13

Statistical Arbitrage Trading

Dynamic factor Allocation

Style Factor Premia, Long/ Short Indices

Information Advantage

Factors

Dynamic Variable Net Bias

Dynamic multi layered process

Gre

ater

Alp

ha,

Gre

ater

Skill

,

G

reat

er A

dded

Val

ue

Beta Arbitrage


ADDITIONAL INFORMATION – FUND / COMPANY

14


Fund Terms

Share Class ISIN Management Fee

PerformanceFee

Hurdle Rate

Minimum Investment

Share Class

Closure

B - Founders Class LU1366216296 0.90% 20% × €100,00028th

February 2017

C – Ordinary Class LU1366216452 1.65% 20% × €100 ×


Sabre Dynamic Equity UCITS Returns Since Inception

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2014 0.18 1.96 2.14

2015 2.34 1.12 1.67 -1.24 3.29 2.12 4.32 -0.96 -0.80 2.59 2.42 2.53 21.10

2016 -3.14 -3.70 -0.23 -1.72 3.99 -2.75 2.73 -0.44 2.21 -0.26 -2.16 0.67 -5.00*

2017 2.79 0.62 1.42 1.48 -0.36 -0.24 0.85 2.02 0.29 2.08 1.76 0.33 13.80

2018 1.46 -0.23 -0.51 0.91 1.63

Year 2013 2014 2015 2016 2017 2018

18.35 12.08 19.72 -0.83 13.74 (e)1.91

Sabre Dynamic Equity (offshore) Returns Since Inception

The above returns are net of fees charged to investors.

The above returns are net of fees charged to investors.

Sabre Dynamic Equity (UCITS) and Sabre Dynamic Equity (Offshore) are run pari-passu and have identical gross trading p/l’sNet performance differences between the two funds can occur due to different fee structures, liquidity terms, NAV pricing datesand other operational considerations. Over time, we would expect similar cumulative performances from the two funds.

* The majority of the net performance differential between the two funds during 2016 was due to costs involved in porting the UCITS fund from its original platform to the Advenis Investment Management platform.


Contact details

17

email: [email protected]

46-48 Grosvenor Gardens

London

SW1W 0EB

Tel: +44 (0)20 7592 7870

Fax: +44 (0)20 7592 7880

www.sabrefund.com


AWARDS RECEIVED BY SABRE FUNDS

18


Disclaimer

19

This presentation has been prepared by Sabre Fund Management Limited (the “Investment Manager”), which is authorised and regulated by the UK Financial Conduct Authority (“FCA”), firm registration number 114233. This document is intended for Professional Clients and eligible Counterparties only. Sabre are not permitted to deal directly with Retail Clients. The content is confidential, is intended only for the person to whom it has been provided and under no circumstance may a copy be shown, copied, transmitted, or otherwise given to any person other than the authorized recipient without the prior written consent of the Investment Manager). Notwithstanding anything to the contrary herein, each recipient to this presentation (and each employee, representative, or recipient) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of: the Sabre Dynamic Equity Fund (the “Fund”) and (ii) any of their transactions, and all materials of any kind (including opinions or other tax analyses) relating to such tax treatment and tax structure. The distribution of the information contained herein in certain jurisdictions may be restricted, and, accordingly, it is the responsibility of any prospective investor to satisfy itself as to compliance with relevant laws and regulations.

The information contained herein is preliminary, is provided for discussion purposes only, is only a summary of key information, is not complete, and does not contain certain material information about the Fund, including important conflicts disclosures and risk factors associated with an investment in the Fund, and is subject to change without notice. Unless otherwise indicated, the information contained herein is believed to be accurate as of the date on the front cover. No representation or warranty is made as to its continued accuracy after such date.This document is not intended to be, nor should it be construed or used as an offer to sell, or a solicitation of any offer to buy, interests or shares in the Fund. No offer or solicitation may be made prior to the delivery of a definitive private placement memorandum (the "Memorandum") which will contain additional information about the Fund, including disclosures relating to risk factors and conflicts of interest. Performance data represents past performance. Current performance may be higher or lower than the performance data presented. The information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it and may not be considered to be a personal recommendation. In the event of any discrepancies between the information contained herein and the Memorandum, the Memorandum will prevail. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. You should make an independent investigation of the investment described herein, including consulting your tax, legal, accounting or other advisors about the matters discussed herein.

An investment in the Fund may not be suitable for all investors. An investment in the Fund will be suitable only for certain financially sophisticated investors who meet certain eligibility requirements, have no need for immediate liquidity in their investment, and can bear the risk of an investment in the Fund for an extended period of time. Investing in financial markets involves a substantial degree of risk. There can be no assurance that the investment objectives described herein will be achieved. Investment losses may occur, and investors could lose some or all of their investment. No guarantee or representation is made that the Fund’s investment program, including, without limitation, the investment objectives, diversification strategies, or risk monitoring goals, will be successful, and investment results may vary substantially over time. Investment losses may occur from time to time. Nothing herein is intended to imply that the Fund's investment methodologies may be considered "conservative", "safe", "risk free" or "risk averse". Economic, market and other conditions could also cause the Fund to alter the investment objectives, guidelines, and restrictions. Certain information contained in this document constitutes "forward-looking statements," which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements.

The Investment Manager believes that the information contained in this material to be reliable but does not warrant its accuracy or completeness. The estimates, investment strategies, and views expressed in this document are based upon past or current market conditions and/or data and information provided by unaffiliated third parties (which has not been independently verified) and is subject to change without notice. Target returns presented herein are solely for the purpose of providing insight into the Fund’s' investment objectives, detailing the Fund’s anticipated risk and reward characteristics in order to facilitate comparisons with other investments and for establishing a benchmark for future evaluation of the Fund’s performance. Such target returns presented are not a prediction, projection or guarantee of future Funds performance. The target is based upon assumptions regarding future events and situations that may prove not to be accurate or not materialize. Accordingly, the Fund’s target return should not be used as a primary basis for an investor's decision to invest in the Fund.

Equity funds may decline in value due to both real and perceived general market, economic and industry conditions. Investment in securities of smaller and mid-capitalization companies tend to be more volatile and less liquid than securities of larger companies. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks. Entering into short sales includes the potential for loss of more money than the actual cost of the investment, and the risk that the third party to the short sale may fail to honor its contract terms, causing a loss to the portfolio.

Full details of the Fund are contained in the prospectus that is available on request from Sabre Fund Management Limited. Sabre Dynamic Equity Fund is an unregulated collective investment scheme for the purposes of the Financial Services and Markets Act 2000 and may only be promoted in the UK to persons falling within the FCA qualifying categories set out in the FCA’s Conduct of Business Rules or in the Financial Services and Markets Act 2000; Promotion of Collective Investment Schemes (Exemptions) Order 2001 (SI 2001/1060).

sabre dynamic equity ucits fund...edge (~30% of performance attribution) ‘information advantage’...

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