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Ignis Absolute Return Government Bond Fund Diversified returns from global government bonds and currencies
This presentation is intended for professional clients and investment professionals
only and should not be relied upon by retail investors.
Ignis capabilities**
Ignis
Fixed Income €65.3bn
Equities €12.9bn
Real Estate €3.6bn
Advisors (FoF/Alts) €2.2bn
Solutions (LDI/ALM) €39.2bn^
Key facts
Founded in 1899
Part of the Phoenix Group
AuM: €84.2bn*
140 investment professionals
Pragmatic: outcome-focused and innovative
Talent driven: creative and passionate people who look at
the world differently
Building on our heritage: evolving to address client needs
in a changing world
Aligned with clients: we are co-investors
1 *Source: Ignis at 31/12/2012 (including €11.4bn of stock-lending collateral). **AuM by business unit/investment capability (31/12/2012). ^Ignis Solutions is responsible for €39.2bn of liabilities under management.
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Ignis Absolute Return Government Bond Fund
Stable, experienced team
Flexible, innovative approach
Proprietary technology and investment tools
Led by Ignis CIO Chris Fellingham
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Ignis Absolute Return Government Bond Fund
Ignis Fixed Income: a broad range of capabilities
*Source: Ignis at 31/12/2012.
37%
28%
3%
29%
3%
Direct funds under management - €65.3bn*
Rates Credit
Stock Lending Liquidity
Other
0
2
4
6
8
10
12
14G10 10 year sovereign yields
Germany
Japan
UK
US
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Ignis Absolute Return Government Bond Fund
Bonds have done well, but limited potential for long-only strategies
Source: Datastream at 29/03/2013.
Performance:
Gains have been strong and yields are
close to historic lows (with some
divergence)
Outlook:
Correction (when it comes) will lead to
capital losses
3
We believe:
It is vital to separate alpha and beta
Management of downside is critical
Investors’ requirements for liquidity must be matched with the instruments invested in
Ignis absolute return philosophy
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Ignis Absolute Return Government Bond Fund
Designed to deliver:
Performance in all market conditions
Low volatility: 4-6% standard deviation*
Low correlation with other asset classes
Alpha not beta
Investing in:
Highest quality and most liquid debt instruments (long and short exposure)
Foreign currency - max 25% of total risk budget (G10 only)
Ignis Absolute Return Government Bond Fund An innovative fund:
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Ignis Absolute Return Government Bond Fund
*The fund’s target volatility is a standard deviation level of 4-6%, it is managed with the aim of delivering stable returns regardless of market moves.
Broad universe; highly liquid instruments
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Ignis Absolute Return Government Bond Fund
Instruments traded
G10 sovereign bonds
Bond futures
Interest rate swaps
OTC options (on rates and currencies)
Swaptions
Currency forwards (currency restricted to 25% of risk)
Inflation swaps and options
Derivatives management at Ignis
Derivatives excellence programme
€127bn* notional derivatives traded in 2012
Independent counterparty risk committee
Positions collateralised daily for cash or government
bonds
*Source: Ignis at 31/12/2012.
Delivering performance in challenging markets
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Ignis Absolute Return Government Bond Fund
-5%
0%
5%
10%
15%
Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13 Apr 13
Performance* Ignis Absolute Ret Gov Bond EUR I2 class (10.8%)
EONIA (1.0%)
Lipper Global Absolute Return EUR Low (2.0%)
*Source: Lipper, NAV to NAV, gross income reinvested since launch on 31/03/2011 to 28/03/2013. EONIA is the rate that large banks use to borrow from, and lend to, one another on the overnight market. The performance data does not take account of the commissions and costs incurred on the issue and redemption of shares (including the initial charge). Performance comparisons are inappropriate due to the diverse nature of the objectives of the funds populating this sector, including differing benchmarks, risk characteristics and timeframes for delivering performance. The Euro I2 Hdgd share class is closed to new investors. The Euro I Hdgd share class was launched on 02/01/2013 and has a limited past performance. **Source: Ignis, ex post volatility daily over one month since inception to 28/03/2013 based on Euro I2 Hdgd share class. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
0%
5%
10%
15%
Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13 Apr 13
Volatility** Ex Ante volatility
Ex Post volatility
0
5
10
15
20
25
30
-1.6% -1.4% -1.2% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%
Freq
uen
cy
Histogram showing distribution of weekly returns*
Normal distribution at 5%volatility
37 67
8
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Ignis Absolute Return Government Bond Fund
Positive skew of returns Performance (since launch): 10.78%**
Average weekly return: 0.10%*
Information ratio: 1.43
Realised tracking error: 3.34%
Source: Ignis, information since inception 31/03/2011 to 28/03/2013, based on EUR I2 Hdgd share class and net of fees.*Source: Lipper, based on weekly data from 01/04/2011 to 29/03/2013. **Source: Lipper, NAV to NAV, gross income reinvested since inception to 28/03/2013 based on EUR I2 Hdgd share class. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.4% -0.6% -1.0% -0.8% -1.2% -1.4% -1.6%
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Ignis Absolute Return Government Bond Fund
Lowly correlated returns
Source: Morningstar Direct, correlation of daily returns in local currency based on EUR I2 Hdgd share class since fund launch on 31/03/2011 to 28/03/2013. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
Since launch the fund has exhibited low correlation with other asset classes, and a negative correlation with equities:
Ignis Absolute Return Govt Bond Fund
MSCI World Citigroup WGBI Barclays Capital
Global Agg Corporate
ETFS Physical Gold
Ignis Absolute Ret Govt Bond Fund
100%
MSCI World -31% 100%
Citigroup WGBI
23% -52% 100%
Barclays Capital Global Agg Corporate
-7% 9% 31% 100%
ETFS Physical Gold -8% 10% 6% 39% 100%
Correlation, %
100
80
60
40
20
0
-20
-40
-60
-80
-100
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
-1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5%
Weekly returns of Ignis Absolute Return Government Bond Fund versus Citigroup G7 Government Bond Index
Source: Ignis, Lipper; ARGBF data based on EUR I2 Hdgd share class net, Citigroup G7 data shown in local currency; all information based on weekly data from 01/04/2011 to 29/03/2013. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
Strong performance in all market conditions
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Ignis Absolute Return Government Bond Fund
43% 22%
14% 21%
Citigroup G7 GBI weekly returns
ARGBF weekly returns
10
Manages €24.4bn*
Specialises in government bonds
and currencies
Multi-specialist structure provides
combination of perspectives
Team includes chief economist
Stuart Thomson
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Ignis Absolute Return Government Bond Fund
Ignis rates team: complementary skill set
*Source: Ignis at 31/12/2012 (Figures in brackets are number of years of investment experience)
Head of Rates
Quant Team Macro
Economics Portfolio
Management Liquidity, Repo and
Collateral Management
Russ Oxley (15)
Adam Purzitsky (8) Josh Heming (14)
Stuart Thomson (28)
Paul Shanta (4) Ross Crawford (12)
Jin Wong (6) Aaron Rock (7)
Brian Jack (12) Colin Goymer (20)
CIO
Chris Fellingham (27)
Product Specialists
Helen Farrow (26) Joanna Howley (15)
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Ignis Absolute Return Government Bond Fund
Ignis rates team: complementary skill set
Idea generation Opportunity set
Macroeconomic strategy
Quantitative research
Market timing
Russ Oxley
Stuart Thomson
Paul Shanta
Jin Wong Aaron Rock
Ross Crawford
Josh Heming
Adam Purzitsky
Inflation
Nominal
FX
Volatility Russ Oxley
Paul Shanta
Ross Crawford
Adam Purzitsky
Aaron Rock
Jin Wong
Stuart Thomson
Investment process
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Ignis Absolute Return Government Bond Fund
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Identify key macro-
economic themes
Analysis of forward curves in clearcurve to
find optimal expression of
view
Express each key view through
multiple positions to
increase diversification
and reduce idiosyncratic risk
Allocate risk to key themes
depending on short term conviction
Monitor intraday P&L and
dynamically hedge as needed
Portfolio 5 key themes
expressed through 15-20 different
positions
Our proprietary ClearCurve system:
Breaks average yields into individual one
year forward rates:
- magnifies opportunities unseen by most
- ensures optimal portfolio positioning
Shows profit/loss the position would have
made historically:
- helps size positions according to clients’
risk budget
Translates desired forward rate exposure
into tradable investments
The benefits of ClearCurve
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Ignis Absolute Return Government Bond Fund
14 Source: Ignis, ClearCurve; all data for illustrative purposes only
-1.0
-0.5
0.0
0.5
1.0
1y0y 1y2y 1y4y 1y6y 1y8y 1y10y 1y12y 1y14y 1y16y 1y18y 1y20y 1y22y 1y24y 1y26y 1y28y
%
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
1Y0Y 1Y2Y 1Y4Y 1Y6Y 1Y8Y 1Y10Y 1Y12Y 1Y14Y 1Y16Y 1Y18Y 1Y20Y 1Y22Y 1Y24Y 1Y26Y 1Y28Y
%
Forward - 04/01/2012
Forward - 30/04/2012
15
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Ignis Absolute Return Government Bond Fund
ClearCurve: a key proprietary tool Deconstructing the forward rate curve
Dominated by changes in domestic structural supply and demand/regulation
Global competition for capital/global macro Expectation
of base rates
Source: ClearCurve, all data for illustrative purposes only
German forward rate curve
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Ignis Absolute Return Government Bond Fund
Implementing views using ClearCurve German Forward Curve
Potential positions
Carry:
Long 1y4y fwd
- Long 5yr bund, short 4yr bund
Directional:
Long 1y9y fwd
- Long 10yr bund, short 9y bund
Relative value:
Long 1y14y and 1y19y
short 1y16y and 1y17y
- Long 15yr, 16yr and 20yr bund, short
14yr, 18yr and 19yr bund
Source: ClearCurve, all data for illustrative purposes only
0
1
2
3
4
51 year forward versus average yields
Average 20y DBR yield October 2011: 3.09%
Carry opportunity
Directional opportunity
Relative value opportunity
17
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Ignis Absolute Return Government Bond Fund
ClearCurve: insight from forward rates
Source: Ignis, ClearCurve; all data for illustrative purposes only
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
0y 5y 10y 15y 20y 25y
Nominal spot rates (US)
Change (%, RHS) 20/09/2011 30/09/2011
Operation Twist in September 2011 caused long-dated spot rates to fall slightly while short-dated rates rose…
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
0y 5y 10y 15y 20y 25y
Nominal forward rates (US)
Change (%, RHS) 20/09/2011 30/09/2011
…our forward analysis enabled us to anticipate which rates would fall most, allowing us to implement positions precisely to capture value
Seven uncorrelated sources of alpha in our universe
Allows macro themes to be implemented in multiple ways
Reduces idiosyncratic risk
Result: efficient portfolio with better risk adjusted returns
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Ignis Absolute Return Government Bond Fund
Diversification by design: the Arc of Alpha
< 2 years
2-15 years
> 15 years
FX
Asset Swaps
Inflation
Volatility strategies
22.6
-17.0
5.6
-22
-18
-14
-10
-6
-2
2
6
10
14
18
22
26
19
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Ignis Absolute Return Government Bond Fund
Using diversification to control risk
Ex-a
nte
tra
ckin
g er
ror
%
Source: UBS Delta, data at 28/03/2013. The fund takes risks by implementing different strategies. If each strategy was well correlated, the total risk of the fund would be a sum of the parts. In fact, the strategies are lowly correlated. This creates a diversification benefit, reducing the fund’s total volatility.
Risk taken by independent risk buckets
Ex-a
nte
tra
ckin
g er
ror
%
3.2 1.9 2.0 3.0 3.0 2.4
5.9
-22
-18
-14
-10
-6
-2
2
6
10
14
18
22
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Risk mitigated by diversification
Portfolio risk is controlled and managed through:
Front, Barclays POINT, and ClearCurve
Fund manager parameters and oversight:
- Target volatility range: 4-6% standard deviation
- Average monthly VaR of 3.1%* since inception
Ex post volatility historically lower than ex ante due to dynamic hedging
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Ignis Absolute Return Government Bond Fund
Risk management at core of process
*VaR at 99% confidence level, source Ignis at 28/03/2013. **Source: Ignis at 28/03/2013. Ex post volatility daily over one month since launch based on EUR I2 Hdgd share class. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13
Volatility**
Ex ante volatility
Ex post volatility
Performance driven by a range of strategies
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Ignis Absolute Return Government Bond Fund
Source: Ignis, internal trading systems, indicative only, base currency, data since launch on 31/03/2011 to 28/02/2013. The fund generates performance by implementing different strategies. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
71
451
5
165
93
58
325
0
50
100
150
200
250
300
350
400
450
500
Rates < 2y Rates 2-15y Rates 15y+ Asset Swap Global Inflation FX: Active Volatility
Bp
s
Contribution by strategy: cumulative since launch
Theme: China in growth recession
Short US 5y inflation
Long US ultra-long forwards
Theme: political and regulatory change Short yen vs USD and GBP
Short inflation in UK
Long UK gilts versus swaps
Theme: US and UK growth to accelerate
Short US and UK front-dated forwards
Short volatility in long-dated rates
Long volatility in short-dated rates
Theme: Crisis, Response, Anticipation, Improvement, Complacency
Short euro vs GBP Short French 5y5y inflation Long German short-dated real yields
Positioning at end March 2013
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Ignis Absolute Return Government Bond Fund
Volatility
strategies
List header three List header four List header one List header two
ClearCurve – developed by Ignis in 2005
Unique in extracting forward rates from government bonds
Provides a more accurate view of the path of interest rates
High level of experience in both long and short investing
Chief economist part of team
Risk management embedded within process
Team have dedicated quant specialists
What sets us apart?
April 13
Alpha not beta Diversified skill set Innovative approach
Designed to deliver performance in all market conditions
Non-directional (although core views taken)
Lowly correlated to credit, gilts, gold and equities
Manager not constrained by any particular biases
Ignis Absolute Return Government Bond Fund
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^This is the rate that large banks use to borrow from, and lend to, one another on the overnight market. In Europe this is EONIA (Euro Over Night Index Average). *Performance fee is net of fees, over compounded cash rates and subject to a high water mark.
Fund manager Russ Oxley (lead manager), Stuart Thomson, Adam Purzitsky and Paul Shanta (co managers)
Launch date 31 March 2011
Sector Lipper Absolute Return Euro Low
Structure UCITS IV SICAV
Domiciled Luxembourg
Benchmark EONIA^
Liquidity Daily dealing
Minimum investment EUR A Class: €1,000 EUR I Class: €1,000,000
Annual management fee EUR A Class: 1% EUR I Class: 0.5%
Performance fee* Fund manager is entitled to 10% of performance generated above EONIA^ with a high water mark
Registered for sale: Luxembourg, UK, Spain, Germany, Austria, France, Italy, Sweden, Switzerland, Finland, Belgium and the Netherlands
Fund profile
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Ignis Absolute Return Government Bond Fund
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Ignis Absolute Return Government Bond Fund
Contact us
Roger de Passe
Regional Director - Benelux
Mob: +32 (0) 470 99 16 68 Email: roger.depasse@ignisasset.com
Philip Goldsmith
Managing Director Europe
Mob: +41 (0)79 753 35 74 / +44 (0)7836 243 999
Email: philip.goldsmith@ignisasset.com
Telephone calls may be monitored and/or recorded for the purpose of security, internal training, accurate account operation, internal customer monitoring and to improve the quality of service.
Your main contact Your regional support
Dee Clarkin European Sales Support Manager Tel: +44 (0)20 3003 3127 Email: dee.clarkin@ignisasset.com
Christina Kniep Sales Support Executive Tel: +44 (0)20 3003 3124 Email: christina.kniep@ignisasset.com
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Ignis Absolute Return Government Bond Fund
Disclosure
This information is intended for professional clients and investment professionals only and should not be relied upon by retail investors.
The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice.
Distribution of this document and the offering of shares in certain jurisdictions may be restricted by law and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. This document does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such offer or solicitation.
Further detailed information regarding the Fund, its Prospectus, its Key Investor Information Document (KIID), its latest annual reports and any subsequent half-yearly reports (including information on how to switch, buy and sell units of the Fund and other unit classes available), is available free of charge from Ignis Investment Services Ltd. You can also obtain these documents through our website www.ignisasset.com/international.
Past performance is not a guide to future performance.
The fund takes long and short positions based on the fund manager’s views of the market direction. This means the fund’s performance is unlikely to track the performance of broader bond and equity markets. While this creates the opportunity for the fund to deliver positive returns in falling markets, it also means that the fund could deliver negative returns in rising markets. The value of investments and any income from them can fall as well as rise and is not guaranteed. Exchange rate movements may cause the value of investments to fluctuate. Please note the Euro I2 share class is closed to new investors.
The fund is a sub fund of Ignis Global Funds SICAV, an investment company organised under the laws of the Grand Duchy of Luxembourg as a Self Managed SICAV. The investment company has its registered office at Vertigo-Polaris, 2-4 Eugene Ruppert, L-2453 Luxembourg, and is authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg.
The sub fund is currently registered for public distribution in the following countries: Luxembourg, UK, Spain, Germany, Austria, France, Netherlands, Belgium, Sweden, Switzerland, Finland and Italy. Copies of all relevant scheme documentation can be obtained free of charge from the locally appointed paying agents. Austrian Paying Agent: Unicredit Bank Austria, 8398 Global Securities Sales & Services, P.O. Box 35, A-1011 Vienna; Belgium Paying Agent: Fastnet Belgium SA, B-1000 Brussels, Avenue de Port 86C, b320; French Paying Agent: Société Générale SA, 29 Boulevard Haussmann, F-75009 Paris; German Information Agent: Société Générale SA, Neue MainzerStraße 46-50, D-60311 Frankfurt / Main; Italian Paying Agent: RBC Dexia, via Vittor Pisano 26, 20124 Milan; Luxembourg Paying Agent: Société Générale, 11 Avenue Emile Reuter, L-2420 Luxembourg; Netherlands Paying Agent: ING Bank NV, Van Heenvlietlaan 220, Location Code BV.06.01, NL-1083 CN Amsterdam; Spanish Paying Agent: RBC Dexia Investor Services España SA, calle Fernando El Santo no20, Madrid 28010; Swedish Paying Agent: SEB Merchant Banking, Sergels Torg 2, SE-106 40 Stockholm; Swiss Paying Agent: NPB Neue Privat Bank AG, Limmatquai 1, P.O. Box, CH-8022 Zurich.
This document has been issued by Ignis Investment Services on behalf of Ignis Global Funds SICAV. Ignis Investment Services is registered in Scotland Number SC101825. Registered Office: 50 Bothwell Street, Glasgow G2 6HR. Authorised and regulated by the Financial Conduct Authority.