H2 o multireturns presentation citywire wealth manager

H2O MultiReturns Fund A dynamic global macro approach

Citywire Wealth Manager 17-18 October Marc Maudhuit

2.

Contents

1 2 3 H2O MultiReturns Fund

Objective and positioning

Investment process

H2O’s long-term track-record

H2O Moderato

H2O asset Management

History and Overview

People

4 Appendix

H2O Asset Management History & Overview

People

H2O Asset Management: History & Overview

• Specialized in global fixed income and global macro strategy management

• Key members of the team together since the early 1990s (managed £28 billion in

global macro strategies in 2007)

20 years’ experience in global fixed income & 14 in global macro management

• Boutique structure backed by one of Europe’s largest asset managers (NGAM)

Founded in 2010, with headquarters in London

£2.6 bn. / €3.0 bn. in assets under management as at 30 August 2013

84% in eight institutional mandates , 16% in eight mutual funds

Source: H2O AM Source : H2O AM

H2O AM – People

H2O MultiReturns Fund Objective & Positioning

Investment Process

H2O MultiReturns Fund – Objective & Positioning

* Average historic 1-month LIBOR rate since 2010. Source: global-rates.com as at 2 October 2013

Retu

rn

Money Market Funds

Fixed Income Funds

Equity Funds

> 15% 5% 10% 1%

Volatility range

H2O MultiReturns Fund

Investment Horizon

1 year 3 years 5 years

0.5%*

4-5%

Deliver higher performance than a bond fund with similar volatility over the same

investment horizon

Outperform 1-month LIBOR by 4% p.a. (after fees) over 3 years

Volatility target of between 5% and 10% p.a. over 3 years

Investment Process – top-down allocation

Specific

Relative Value

(arbitrages)

Directional

G4 Duration USD Beta

Country & sector arbitrages

Region & yield curve arbitrages

Inter-bloc & Intra-bloc arbitrages

Trading

Sector arbitrages

Credit Duration

Long-term > 1 year

Medium term 6 mths – 1 yr

Medium to short term

< 1 week

Allocation

Investment Process – Making decisions

ECONOMICS

Source: H2O AM 9.

CIO VincentChailley

Gonzague

Legoff

TECHNICALS

FLOWS

Julio

Obeso

ECONOMICS

VALUATIONS

SPECIFIC

Jeremy

Touboul

Loic

Cadiou

Jean-Baptiste

Roux

CEOBruno

Crastes

Juliette

Pianko

CASH Timothée Consigny

QUANT

• Covering all market-driving factors

• Making clear-cut decisions

Portfolio Monitoring Panel

In-house front office tool enabling:

• real-time monitoring of positions, volatility & constraints

• real-time attribution of performance

P-BMD 1-3 3-7 7-15 15+ Total Ex-Cdt Carry R-D Total

Currency EUR 2 10 46 84 141 50 -3 -3NAV CHF 31 2 34Bench. EONIA PLN 24 0 24 24 -67 -29 -96

GBP -48 68 20 20 154 47 201USD -14 -69 20 113 49 -1 36 14 50CAD 100 26 126

P P-T AUD 58 58EUR Bloc -12.3% 61.1% JPY 51 51

EUR -16.3% 64.4% KRWSEK 0.9% Total -12 -59 42 265 235 94 360 61 421NOK 4.8% 1.9%CHF -7.8% -6.7% €-sov. 1-3 3-7 7-15 15+ Total %PLN 5.0% 1.7% GR 1 26 63 91 9.6%CZK -0.2% Bonds 0.56% < 1.5% IT EURUSD EURGBP EUR USD EUR USDHUF -0.1% Currencies 0.55% < 1.5% ES 2 25 20 47 4.8% δ -2.6 0.4GBP 2.1% -0.9% Credit 0.70% < 1.5% PT 1 28 30 4.1% τ 27.8 -7.7

USD Bloc 11.8% -20.2% Directional 1.38% 47% IE γ -0.9 0.0USD 1.9% -22.7% Relative 0.72% 24% BE ϖ -6.0 5.1MXN 9.9% 3.6% Specific 0.87% 29% Total 5 80 84 168 18.5% % -2.6% 10.6%HKD -1.0% Agg. Duration 36.5ZAR -2.0% -0.5% Zone 10.8

Commo Bloc 0.0% -13.9% Yield curve 29.4 MD 1-3 3-7 7-15 15+ Total USD Other SWMD Carry %CAD -10.1% Sovereign risk 51.8 ABS/MBS 2 6 0 9 0 11 20 31 17.9% < 20% AUD -0.1% -3.7% US Dollar 38.0 AA 0 0 0 0 1.1%NZD 0.1% -0.1% Inter-Bloc 33.5 A 0 4 0 5 0 44 1.7%

JPY Bloc 1.6% -25.3% Intra-Bloc 50.3 BBB 4 0 4 30 1.0%JPY -26.1% Periph. Ccies 3.1 HY 2 8 10 68 2.5%KRW 1.6% 0.8% Credit expo. 33.4 EM Hard 0 9 16 26 50 508 508 8.3%

EM Ccies 1.0% 0.0% Group alloc. 15.6 EM LocalBRL 0.8% Credit picking 11.5 Total 4 31 17 26 78 508 11 669 167 32.4%MYR -0.1% EM arbitrage 45.7CLP -0.1% Trading 5.0 EMD MD 1-3 3-7 7-15 15+ Total MD SWMDRUB -0.2% Diversification 168 Argentina 0 7 7 65 Money market 37.8%IDR -0.1% Venezuela 13 26 39 399 Balancesheet 62.2% Off-bal. 46.8%INR 1.0% -0.3% Colombia ABS 17.9% Futures 36.4%

Korea Gvt Bonds 28.0% Repos 4.2%Liquidity 4.29 < 8 Thaïland Credit Bonds 6.3% Reverse rGovernment bonds 1.36 Russia EM Bonds 8.3% SwapsCorporate bonds 0.51 Ukraine Equities 1.7% Options 6.2%Emerging mkts bonds 1.07 Turkey Leverage 1.09Asset Backed Sec. 1.35 South AfricaAsset liquidity 2.81 MoroccoMarket liquidity 1.47 Others 2 3 43Quotation liquidity 0 9 16 26 508

EquitiesOptions

Total

SvgnCorpoEMDCcy

TrésoABS

Futures

44

1.97% <2.3%

5Total 50

T-B H2O PatrimoineMod. Dur. -206

Agg. Yield 6.99%46.0EUR

Equities

71

0

100

36

Max

< 42%

< 30% 68

150

30

EUR9

Agg. Rating

BondsCcy

VaR

Liquidity 4.29

MenuCalculate

€

$

SEKNOK

MXN

AUD

PLN

MYRRUB

GBP

ZAR

HUF

Com

¥

EM

CAD

NZD

CHF

BRLCLP

KRW

-20% -10% 0% 10% 20%

Bonds

P

Carry

Credit

Balance-Sheet

Currencies

Options

Team

Adagio

ModeratoPat.

Direc.

Relative

Source : H2O AM

2012 2013 ITD Directional Exposure to G4 govies 53 -43 136

Relative Value (Arbitrage) G4 Bond market allocation 58 14 151 G4 yield curve allocation 28 31 122

Specific Country allocation 1113 316 613 Total Govies 1252 319 1022

Directional USD vs: EUR, JPY, CAD 25 94 37

Relative Value (Arbitrage) Inter-bloc currency allocations -61 15 57 Intra-bloc currency allocations 92 101 132

Specific Emerging currency allocations 1 43 14 Total Currencies 57 254 240

Directional Exposure to credit markets 312 -9 235

Relative Value (Arbitrage)

Credit market allocation 54 40 165 Corporate bond market picking 120 -1 88

Specific Emerging bond market picking 79 -49 -144 Total Credit 565 -19 344

Directional Equity market exposure 126 34 170

Relative Value (Arbitrage) Global equity market allocation 9 -124 -156 Long-short sector -90 -122 -339

Specific Long/short equities -42 162 -65 Total equities 3 -50 -390

Trading 79 180 424 Total gross out-performance 1955 984 1639

Fixed & performance fees -235 -165 -489 Total net out-performance 1720 519 1150

Performance Attribution*

11.

* H2O Moderato fund Source: H2O AM

Govies

Currencies

Credit

Equities

Trading

Correlation: at the heart of global macro management

12. Source: Bloomberg & H2O AM

• Global managers are highly sensitive to correlations

• Correlations can boost, but also reduce their risk-adjusted return

• Correlation changes can be used at a manager’s advantage

• In 2003, and again in 2013, correlation changes provided a great source of performance

Calm seas – July 2001 Lehman Bros. – October 2008

EMU debt crisis – June 2012

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The Correlation Risk Trap

Source: Bloomberg 13.

Correlations : the unwinding has just started

Correlation-only (constant volatility)

Heat Map

Positions

Bond allocation

Medium-term & indirect investors (3-year rolling correlation)

15.

H2O’s Long-Term Track Record H2O Moderato

16.

Positioning of H2O Moderato, a comparable fund (albeit less dynamic) for H2O MultiReturns Fund

Source: H2O AM

Retu

rn

Money Market Funds

Fixed Income Funds

Equity Funds

> 15% 5% 10% 1%

Volatility range

H2O MultiReturns Fund

Investment Horizon

1 year 3 years 5 years

0.5%*

4-5%

4%

H2O Moderato

Low Risk Fixed Income Funds

2-3%

17.

Performance of H2O Moderato Strategy(31/07/01 – 30/08/13)

Source: H2O AM & Bloomberg

Annualised gross performance : +5.5% Annualised gross excess return : +3.7% Average ex-post volatility (based on daily NAVs): 5.3%

Original inception date 31/07/2001 – at Amundi. The Strategy was ‘unmanaged’ from 31/03/2010 – 22/08/2010, before being re-launched as H2O Moderato on 23/08/2010

Strategy gross performance

Conclusion

18.

H2O MultiReturns Fund: A dynamic global macro approach for all market conditions

Outperform 1-month LIBOR by 4% p.a. (after fees) with

volatility between 5-10% p.a. over an investment horizon of 3 years

Use a volatility budgeting process to build efficient portfolios

Appendices

H2O MultiReturns Fund – Terms & Constraints

20.

Fund details

Launch date TBC – October 2013

Accounting currency GBP

Investment horizon 3 years

Net performance objective* 4% p.a. in excess of 1-month GBP LIBOR

Annual ex-post volatility 5-10%

* Based on the I/A share class over the investment horizon, after fees and expenses

Share class reference information

Share class Ongoing charges Max. initial charge* Redemption charge Min. initial investment*

I/A 0.80% 1.00% None £5,000,000

I/D 0.80% 1.00% None £5,000,000

N/A 1.00% 1.00% None £50,000

N/D 1.00% 1.00% None £50,000

I = Institutional share class N = No trail share class A = Accumulation share class D = Distribution share class * Initial charge and minimum initial investment waived when investing via a platform

About Natixis Global Asset Management

• Global, affiliate-based organisation

• Each affiliate manages their clients’ assets independently

• £516 billion in assets under management1

15th largest asset manager in the world2

• Diversified product line and client base

• Over 3,000 employees worldwide with local representation in key markets

21. Source: H2O AM

1 As at 30 June 2013 2 Source: Cerulli Quantitative Update : Global Markets 2013 – NGAM is ranked 15th in the world based on assets under management as at 31

December 2012.

Investment Process – top-down allocation in practice

Specific

Relative Value

(arbitrages)

Directional

Inter-bloc & Intra-bloc arbitrages

Curr

enci

es

Trading

Allocation

USD vs: EUR, JPY and CAD

Inter-bloc positions

EUR JPY CAD

Intra-bloc positions

EUR, SEK, PLN, CHF, GBP, NOK

JPY, KRW, SGD

CAD, ZAR, AUD, NZD

Asia Latin America

Eastern Europe

Other

G4 duration


Specific

Relative Value

(arbitrages)

Directional

Region & yield curve

arbitrages

Gov

ies

Trading

Allocation

Region allocation

N. America

Europe ex-EMU

EMU Japan

Yield curve

1-3 years 3-7 years 7-15 years 15-30 years

Canada US Mexico

UK Sweden Poland Hungary

France Italy Portugal Spain etc

Japan


Specific

Relative Value

(arbitrages)

Directional

Sector arbitrages

Cred

it

Trading

Allocation

Corporates Emerging soveriegn vs. corporate

High Grade

Investment Grade

High Yield

ABS / MBS

Sovereign Corporate

Credit duration

Instrument selection

Instrument selection


Specific

Relative Value

(arbitrages)

Directional

Country & Sector

Arbitrages

Equi

ties

Trading

Allocation

Beta

Region allocation

N. America

Europe ex-EMU

EMU Japan

Sector Arbitrages

Financials Tech Indu

History of H2O Moderato

H2O Moderato (I-share)

The absolute performance portfolio whose track record is analysed below is a UCITS III that has been managed by the same fund manager (namely Vincent Chailley) using the same investment process & management tools since its inception on May 28, 2003. The reference index has continuously remained the euro-zone daily money market rate (EONIA) compounded daily. The objective has also systematically consisted in outperforming EONIA by 2% p.a. net of fees over a minimum 3-year investment horizon with a targeted ex-post volatility of 2-4% p.a. at this horizon. The management universe includes government and corporate bonds, currencies, and equities.

The fund has carried several names since its launch. When Vincent left Amundi on March 31, 2010, he stopped managing it for nearly five months (31/03/10 thru. 23/08/10) before resuming it under the name of “H2O Moderato”. During this short period, the performance calculation is based upon the assumption that the fund strictly tracked the Euro money market rate (EONIA) in gross & net terms.

The sources are Bloomberg and the fund prospectuses, exclusively. The gross performance computations are based upon the fixed & performance fees as indicated in the fund prospectuses, and using a formula that best estimates the gross performance.

Since inception, the fixed fee has stood at 0.60% p.a. and the performance fee at 30% above management objective from November 2002 until March 2010. It is 25% since 23/08/2010. There was no High Water Mark until August 2010.

Disclaimer

27.

H2O is authorised and regulated by the Financial Conduct Authority (FCA) and is listed on the UK Financial Services Register under firm reference number 529105. This document (and any attachments thereto) is confidential and for use only by the intended recipient. Access by others is unauthorized. Its content should not be relied upon and no liability or responsibility is accepted by us (H20 AM LLP) or associated companies), without subsequent written confirmation of its contents, signed by an authorized signatory. If you are not the intended recipient, please notify us promptly and delete all copies and note any discloser, copying, distribution or any action taken or omitted to be taken in reliance on the information it contains is prohibited and may be unlawful. This message is provided for information purposes and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments. Company Name & Business Office: H20 AM LLP, 2nd floor, 10 Old Burlington Street, London W1S 3AG. Company Number OC356207.

NGAM UK Sales Contact

28.

Derek Brander Director, UK Wholesale Cannon Bridge House 25 Dowgate Hill London EC4R 2YA Tel: 020 3405 2181 Mobile: 07939 511 816 Email: [email protected] James Walkin UK Wholesale Sales Cannon Bridge House 25 Dowgate Hill London EC4R 2YA Tel: 020 3405 2156 Mobile: 07939 206 538 Email: [email protected]

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Economy & Finance