2013.09 liontrust macro presentation

Professional Investors and Advisers only

Macro Equity Income Fund

Jan VH Luthman and Stephen Bailey

Forecast Yield 2013-2014: 4.16%

2 2

Why we seek to interpret macro themes:

Powerful and unprecedented

More scope for outperformance than stock-specific analysis

– Stock-specific: very few ‘asymmetries of information’ - investment decisions may be made only on the basis of information already in the public domain. Little scope to outperform

– Macro-themes: considerable asymmetries of awareness and interpretation, ample scope to outperform

Themes by their nature are inherently less volatile than stock-specific analysis

3 3

Some of the larger themes:

QE/sterling

Global readjustment of currencies and wages

Asset managers

Global health

Prudence & the rise of challenger banks

4

1. Quantitative Easing/Sterling

5 5

4.5

4.7

4.9

5.1

5.3

5.5

5.7

5.9

6.1

Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13

GBP vs MYR

Sterling vs EM currencies

Source: Bloomberg, Liontrust Investment Partners LLP. Data from 01.01.2009 to 30.08.2013.

Sterling vs Malaysian ringgit

6 6

1,500

1,700

1,900

2,100

2,300


GBP vs KRW



Sterling vs South Korean won

7 7

1.7

1.8

1.9

2.0

2.1

2.2

2.3

2.4

2.5


GBP vs SGD



Sterling vs Singapore dollar

8 8

Quantitative easing

Sterling vs US dollar

1.35

1.40

1.45

1.50

1.55

1.60

1.65

1.70

1.75


USD vs GBP


9

2. Global Readjustment of Currencies and Wages

This theme has matured

10 10

Global Readjustment of Currencies and Wages

We live in a globalising, competitive world

Over the long term, unit costs of production will trend towards approximate, risk-adjusted parity

This trend will follow different paths in different parts of the world

11 11


High-cost economies

– Prefer lower currencies, not wages

Low-cost economies

– Prefer higher wages, not currency appreciation

12 12


Theme has matured

Principal driver – rapid rise in Chinese minimum wages – is fading

Margins eroding as more competitors move in to Chinese market

Equity valuations driven to over-optimistic levels

Entire US-listed exposure sold

13

3. Asset Managers

Theme summary & update

14 14

Asset Managers - much as expected

More positive perceptions of economic outlook

Improving corporate earnings

Rising equity valuations

Investor confidence returning

Rising bond yields

Declining bond prices

Switch from bonds to higher-fee equities

Rising inflows, rising fees & fee rates

15 15

Asset Managers - much as expected

Strong cash flows

Boosting balance sheet strength

Improving dividend outlook

Possible special dividends/buybacks

Preferred to Banks for exposure to recovery

Less political risk

Clarity of financial statements

16 16 Source: Bloomberg, Liontrust Investment Partners LLP. Data from 31.12.2012 – 17.07.2013

Banks & Financials relative to the FTSE All-Share

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13

Banks FTSE All-Share index Specialist financials

17

4. Global Health Theme summary & update

18 18

Pharmaceuticals – tobacco analogy

Tobacco 2004

– Mature markets

– Low growth

– No pricing power

– Political interference

– Litigation risk

Pharmaceuticals 2012-13

– Mature markets

– Low growth

– No pricing power

– Political interference

– Litigation risk

19 19

Pharmaceuticals – tobacco analogy

Tobacco re-orientated to new geographic markets

Pharmaceuticals re-orientating to new geographic markets

and

Reducing risk and improving productivity of R&D

Transformation of investor rating of pharmaceuticals could be even more powerful than that of tobacco

20 20

Pharmaceuticals


0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

Jul 09 Nov 09 Mar 10 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12 Nov 12 Mar 13 Jul 13

FTSE-All Share index relative to the S&P 500 Pharmaceuticals, Biotchnology & Lifesciences index

Re-rating of pharmaceuticals is underway in the US

21 21

Pharmaceuticals

Source: Financial Express, Liontrust Investment Partners LLP as at 30.08.2013.

But has barely begun in the UK

-100%

0%

100%

200%

300%

400%

500%

600%

May

-92

Apr

-93

Mar

-94

Feb-

95

Jan-

96

Dec

-96

Nov

-97

Oct

-98

Sep-

99

Aug

-00

Jul-0

1

Jun-

02

May

-03

Apr

-04

Mar

-05

Feb-

06

Jan-

07

Dec

-07

Nov

-08

Oct

-09

Sep-

10

Aug

-11

Jul-1

2

Jun-

13

FTSE 350 Index Tobacco TR in GB FTSE 350 Index Pharmaceuticals & Biotechnology TR in GB FTSE All Share TR in GB

22 22

Pharmaceuticals

Driven initially by yield-hungry investors

Sector has risen strongly FH 2013

Shift from fixed interest

— yield premium

— high quality earnings

— strong balance sheets

Growth prospects not yet priced in

23

5. Prudence & The Rise of Challenger Banks

24 24

Prudence and the Rise of Challenger Banks

UK cannot afford another bank bailout

Regulatory system must prevent the possibility

Prudence is non-negotiable

Banks will not be allowed to expand lending via lower capital adequacy

Instead, the Government will encourage new ‘challenger’ banks

25 25


Prudently funded

Politically favoured

Government preference for low-risk 'community' banks

No bail-out baggage

Rights Issue to repair balance sheets unlikely

Expanding lending; can access FFL scheme at lowest rate of 25bps pa.

Possible significant advantage in re-mortgage market

26 26


Mortgage Guarantee Scheme

– Government determined to expand ‘challenger’ banking sector

– Mortgage Guarantee Scheme could be an enabler

– Not just FTBs & Home Movers

– May also apply to re-mortgages

– Re-mortgaging must be with new lender

27 27


Mortgage Guarantee Scheme

– May enable challengers to poach incumbents’ mortgage loans

– Applies to new loans, not existing loans

– Applies to repayment mortgages – not interest-only

– Challengers poach (safer) repayment mortgage loans

– Incumbents left with growing proportion of (riskier) interest-only loans

28 28


Mortgage Guarantee Scheme – who may benefit:

– Challenger banks

– Mortgage comparison websites

– Some retailers, as lower mortgage rates boost disposable income

– Prudent borrowers (repayment only; low multiples)

– Some house builders

29 29

Theme exposure

Moneysupermarket.com: conduit to challenger banks

Close Brothers: private bank

Paragon: buy-to-let mortgage provider, applying for a banking licence

J. Sainsbury: increasing consumer spending; full ownership of Sainsbury’s Bank

Telford Homes: London-based developer with apartments in areas of urban regeneration.

30 30

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Oct

-03

Apr

-04

Oct

-04

Apr

-05

Oct

-05

Apr

-06

Oct

-06

Apr

-07

Oct

-07

Apr

-08

Oct

-08

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Liontrust Macro Equity Income

Target yield 2013/2014 4.16% Historic yield* 3.16%

Liontrust Macro Equity Income Fund

FTSE All-Share index

IMA UK Equity Income sector

Source: Financial Express accumulation units , data as at 31.08.2013, total return, bid-to-bid retail class. Launch date 31.10.2003. *Income Units

166.5%

126.4%

119.2%

Past performance is not a guide to future performance. Investment in the Fund carries the risk of potential total loss of capital. Investment in the Fund involves a foreign currency and may be subject to fluctuations in value due to movements in exchange rates. A portion of the Fund’s expenses are charged to capital. This has the effect of increasing the distribution and constraining the Fund’s capital performance.

31 31

Strictly private and confidential information

Liontrust Macro Equity Income Fund

Important notice: This presentation is the property of Liontrust Fund Partners LLP (“LFP”) authorised and regulated by the Financial Conduct Authority, and is strictly confidential. It contains information intended only for the person to whom it is addressed or presented, and is intended for evaluation purposes only, with no licence to use the content or materials within. In receiving this presentation, the recipient acknowledges and agrees that: i) in the event the recipient does not wish to pursue this matter, this presentation will be returned as soon as possible; ii) the recipient will not copy, fax, reproduce, divulge or distribute this confidential presentation, in whole or in part, without the express written consent of LFP; iii) all of the information herein will be treated as confidential material with no less care than that afforded to the addressee’s own confidential material of the most sensitive nature; iv) information herein may constitute material non-public information, disclosure of which may be prohibited by law, and the legal responsibility for its use is borne solely by the recipient. This presentation in no way constitutes an offer to sell, nor a solicitation to purchase securities in any company or investment product.

The value of units in a unit trust and the income generated from them can fall as well as rise and are not guaranteed; investors may not get back the amount originally subscribed. Past performance is not a guide to future performance. The issue of units may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Equity investment should always be considered as long term. A portion of the Fund’s expenses are charged to capital. This has the effect of increasing the distribution and constraining the Fund’s capital performance. Investment in the Fund carries the risk of potential total loss of capital. Investment in the Fund involves a foreign currency and may be subject to fluctuations in value due to movements in exchange rates.

The Prospectus or Key Investor Information Documents (KIIDs) for Liontrust’s unit trusts are available direct from Liontrust or from our website, www.liontrust.co.uk.

Date post:	19-Jan-2015
Category:	Economy & Finance
Upload:	citywirewebsite
View:	463 times
Download:	3 times

2013.09 liontrust macro presentation

Economy & Finance