NEI Global Total Return Bond Fund Managed by Amundi Asset Management

Transcription

1 NEI Global Total Return Bond Fund Managed by Amundi Asset Management Tapping value wherever it exists. A broad fixed income and currency universe. Full cycle product.

2 CANADIAN FIXED INCOME ALLOCATIONS Canadian investors are over-exposed to Canadian fixed income Canada s Share of the Global Bond Market Canadian Investors Allocation to Canadian Bonds 2.7% 74% Source: Barclays, as of June 30, 2014 Source: CIFSC/Investor Economics, as of March 31,

3 HISTORICAL CANADIAN BOND YIELDS AND RETURNS Strong Canadian bond returns were largely fueled by declining yields, now near their all-time lows Historical bond yields and bond returns in Canada 12% 10% 8% 6% 4% 2% 0% % 500% 400% 300% 200% 100% 0% FTSE TMX Canada Universe Cumulative Return (Right Axis) Government of Canada 10-Year Bond Yield (Left Axis) Source: Bloomberg and FTSE TMX Global Debt Capital Markets, monthly data from July 31, 1989 to June 30,

4 CURRENT STATE OF THE CANADIAN MARKET Canadian fixed income is low yielding and poorly diversified Canadian rates and yields are near all-time lows Canadian fixed income is highly concentrated in government, housing, and financial services Government of Canada Yield Curve Canadian Bond Market by Sector Sector (% of total) Government 69.94% Sub-sector (% of sector) Federal 53.13% Provincial 44.25% Municipal 2.63% Source: FTSE TMX Canada Universe, as of June 30, Sector (% of total) Corporate 30.06% Sub-sector (% of sector) Financial 47.24% Energy 13.77% Infrastructure 13.81% Communication 10.08% Industrial 7.15% Real Estate 4.62% Securitization 3.33% Source: Bloomberg, as of June 30,

5 WHAT S AHEAD Increasing demand for fixed income but low Canadian returns Rising rates will impact returns Demographics will lead to a greater need for income Interest rate changes and corresponding profit/loss of FTSE TMX Canada Universe Bond Rate Change +0.25% +0.50% +1.00% +2.00% Profit/Loss -1.84% -3.62% -7.01% % Source: Bloomberg Portfolio Scenario Analysis tool, June Population % 24.7% 10% Government of Canada 10Yr Bond Yield 8% 11.5% 14.4% 5% 0% Source: HRSDC calculations based on Statistics Canada Source: Bloomberg, monthly data from July 31, 1989 to June 30,

6 WHY GO GLOBAL? The Benefits More selection Reduced risk through diversification Higher yields and returns Currency management can reduce volatility and be a source of returns Global Fixed Income Returns Global Fixed Income Returns Country Yield on 10-Year Government Bond Australia 3.55% Italy 2.85% UK 2.67% Spain 2.66% US 2.53% Canada 2.24% France 1.70% Germany 1.25% Japan 0.57% Source: Bloomberg, June 30, 2014 Source: Barclays and FTSE TMX Global Debt Capital Markets, annual returns from 2004 to

7 AMUNDI ASSET MANAGEMENT Firm Overview Leading institutional asset manager Formed by combining the asset management expertise of two major banking groups: 80% Crédit Agricole and 20% Société Générale Managing over U.S. $1 trillion The Team Laurent Crosnier Chief Investment Officer Pascal Dubreuil Senior Portfolio Manager Culture of transparency and risk management Amundi invests in all asset classes and major currencies Leader in building innovative investment solutions Amundi has won numerous investment awards and is considered a global market leader in Global Fixed Income Romain Mercier Portfolio Manager Comprehensive Resources: 20 Strategists / Economists 24 Credit Analysts 17 Quantitative Researchers 14 SRI Analysts 7

8 AMUNDI TEAM ORGANIZATION Multi-asset coverage under one roof breeds strong convictions The team, located in London, collaborates with investment experts from Amundi s global, developed and emerging sovereign, corporate credit and currency teams Laurent Crosnier CIO - Amundi London Branch & CEO/CIO - Amundi (UK) Ltd Cedric Morisseau Head of Global Bonds, Absolute Return and Currency GFI & Asian Fixed Income Global Fixed Income Absolute Return & Currency Amundi UK Limited Amundi Smith Breeden Singapore & Kuala Lumpur London London London Durham, USA P. Jauer CIO P. Chow L. Aderdor R. Lim H.J. Koh T. Neo N. Nazlan K. Kamaruddin Global Bonds C. Morisseau C. Morris+ R. Stefani A. Beaudu Global Aggregate P. Dubreuil+ R. Mercier Global Corporate G. Pesques P. Dubreuil+ S. Fawn EMD S. Strigo T. Delabre M. Vydrine Absolute Return F. Castaldi Y. Casa A. Burgues Currency J. Kwok R. Puri Insurance Solutions M. Styles C. Morris+ P.Hayden Global Fixed (Q1-2014) C. Chappuis + Junior PM t.b.a. Product Specialists J. Keller M. Lake A. Bender L. Ben Lazrak (t) Singapore UK Limited J. Tay J. Shea Architects in Bold (t) Trainee +Member of more than one team Singapore Team reports directly to L. Crosnier Source: Amundi 8

9 TAKING YOUR FIXED INCOME GLOBAL How to Successfully Manage Global Fixed Income Broad Universe Investing in government bonds, currencies, credit & emerging market debt Physical instruments & derivatives Flexible Style Unbiased Approach Conviction Investment Horizon Dynamic risk allocation within and across asset classes Targeting consistent excess return by being long and short across a wide range of risk exposures Team-based approach to detect pertinent global macro themes and build strong strategic views Combining long-term macro views with tactical management Portfolio balance & Target tracking error of 4.5% Benchmark + 3% p.a. Experienced & complementarity Identification of long term & short term market drivers 9

10 THE BROADEST BENCHMARK An Even Wider Investment Universe The most global benchmark universe: Barclays Global Aggregate Hedged Global Investment Grade 68% Sovereign, 16% Credit, 16% Covered & ABS +14,000 Issues & 2,500 Issuers +70 Countries NEI Global Total Return Bond Fund: Use of the broadest benchmark available Investment in currency High Yield bonds (min 75% IG), Debt of non-oecd issuers (min 50% OECD) 10

11 A DISCIPLINED INVESTMENT PROCESS Generating Strong Strategic Views 11

12 A DISCIPLINED INVESTMENT PROCESS Combining Strategic Views with Tactical Management Three angles of investment in normally low-correlated asset classes 12

13 A DISCIPLINED INVESTMENT PROCESS Tapping value wherever it exists Flexible and Dynamic Asset Allocation Source : Amundi, as of June 30, 2014 *Amundi Funds Bond Global Aggregate / Portfolio inception date: October

14 A FULL CYCLE PRODUCT 1st Quartile performance over 5 years * Calendar Year Net Performance Net Portfolio Annualized Net Relative Annualized Net Information Ratio Net Sharpe Rolling 1 year +4.81% -0.34% Since Inception % +5.86% Source: Amundi, as of June 30, 2014 *Mercer **Amundi Funds Bond Global Aggregate (IU-C) / Portfolio inception date: October Net of management fees 14

15 A FULL CYCLE PRODUCT Sources of Excess Return are Dynamic Over Time Amundi Funds Bond Global Aggregate - Performance Attribution OECD Bonds Global bond exposure Country allocation Yield curve segment allocation Bond selection Credit Credit exposure Market/Industry Corporate bonds selection Emerging market exposure Currency allocation Trading TER Total net out-performance Ex-post tracking error Information ratio Absolute Portfolio Performance Amundi Funds Bond Global Aggregate - Performance attribution graph expressed as an absolute percentage of the contribution gross performance. Allocation given for indicative purposes only, may change without prior notice. Source : Amundi. Data as at end December

16 MARKET CORRELATION Low Correlation with Benchmark and Other Funds 3-Year Correlation Matrix (1) (2) (3) (4) (5) (6) (1) Amundi Fds Bd Global Aggregate IU-C (2) FTSE TMX Canada Universe Bond (3) Barclays Global Aggregate TR Hdg USD (4) S&P/TSX Composite TR (5) S&P 500 TR (IA Extended) (6) MSCI World NR USD Source: Amundi, Bloomberg, FTSE TMX, and Barclays. 16

17 NEI GLOBAL TOTAL RETURN BOND FUND NEI Global Total Return Bond Fund Key Characteristics Managed according to Amundi Global Aggregate Strategy Unconstrained approach versus benchmark Average duration between 1 and 8 years Global bond investment grade according to CIFSC Maximum allocation to below BBB- rated securities: 25% 17

18 PERFORMANCE Diversified to Maximize Upside and Minimize Downside Upside and Downside Capture Upside Capture Ratio Downside Capture Ratio NEI Global Total Return Bond Fund Performance Attribution Since Inception 8% NEI Global Total Return Bond Fund A 82.2% -21.4% 6% Barclays Global Aggregate CAD Hedged Source: NEI Investments and Barclays, to % 100% 4% 6.1% 7.3% 2% 0% * NEI Global Total Return Bond Fund, As of June 30 th 2014, Since inception (Sept 2013) Benchmark Performance Portfolio Performance 18

19 CREDIT EXPOSURE Overweight High-Beta Credit Overweight credit High beta vs. low beta European vs. US & EM Credit Financials vs. Industrials Sub-debt from IG issuers vs. pure high yield Assets by Credit Rating 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 12.7% 8.1% 14.9% 45.4% 9.6% 0.0% 0.0% 0.0% 0.0% 1.5% AAA AA A BBB BB B CCC CC C NR * NEI Global Total Return Bond Fund, As of June 30 th

20 DURATION EXPOSURE / YIELD CURVE Shorter duration vs. benchmark: 2.17 year vs year Curve strategy Flattening US 5-30 as the curve is still steep for this point in the cycle. Assets by Maturity 30% 25% 20% 15% 10% 5% 0% 10.5% 16.6% 25.1% 12.7% 17.2% 5.8% 4.5% 0-1 yr 1-3 yr 3-5 yr 5-7 yr 7-10 yr yr 20+ yr Portfolio Benchmark * NEI Global Total Return Bond Fund, As of June 30 th 2014 Duration Strategically underweight in duration on the US, UK and Japanese curves. Tactically short EUR 5Y. Portfolio Characteristics * NEI Global Total Return Bond Fund, as of June 30 th 2014 **Yield to maturity of the bonds and derivatives plus cash rate for currency. 20

21 CREDIT EXPOSURE Underweight treasuries versus the benchmark Overweight on credit vs. government bonds Yield ratios remain attractive Overweight on European financials and peripheral credit European spread remains attractive in light of a supportive monetary policy environment Overweight European peripheral RMBS Better rating & compelling yield pick-up 50% Assets by Sector 40% 30% 25.4% 22.4% 20% 10% 0% 11.1% 0.7% 2.0% 0.3% 2.1% 1.7% 0.5% 0.4% 3.7% 4.3% 1.1% 6.3% 5.8% 2.9% ABS Portfolio Benchmark Agencies Auto Banks & Bldg Soc. Capital Goods Chemicals Collat. debt Cons. Cycl. Cons. Non-cycl. EM Sovereign Ext. EM Local Energy Insurers Teleco. & Tech. Treasuries Utilities * NEI Global Total Return Bond Fund, As of June 30 th

22 COUNTRY EXPOSURE Country allocation - Sovereign and Corporate Short US vs. Europe due to differential of growth and monetary policy. Short JGBs due to valuation and inflation expectation. Assets by Country Allocation as % of NAV 40% 35% 30% 25% 20% 15% 10% 5% 0% 18.7% 11.4% 9.8% 8.2% 8.0% 7.1% 5.8% 3.6% 3.4% 3.2% 2.2% 1.6% 1.4% 1.4% 1.0% Italy Portugal France Germany US UK Spain Netherlands Belgium Ireland Brasil Switzerland Mexico South Africa Turkey Portfolio Benchmark * NEI Global Total Return Bond Fund, As of June 30 th 2014 GOVIES CREDIT SECURITIZED TOTAL ITALY PORTUGAL FRANCE GERMANY USA UNITED KINGDOM SPAIN NETHERLANDS BELGIUM IRELAND BRAZIL MEXICO SOUTH AFRICA Others

23 CURRENCY EXPOSURE Overweight USD bloc vs. EUR & JPY Directional positions Long USD bloc vs. JPY & EUR blocs, growth leadership and exit of QE Long EM bloc (MXN,HUF,BRL) vs. Commodity bloc (NZD & CAD) Relative positions Short EUR/GBP Short EUR/NOK Long GBP/CHF Long USD/CAD Directional positions (P-B) 30% 20% 10% 0% -10% -20% 15% 5% -5% USD Bloc USD-EMG Bloc EUR-EMG Bloc Relative positions (P-B) EUR Bloc JPY Bloc Commodity Bloc -15% USD GBP MXN NOK HUF BRL CAD CHF JPY NZD EUR * NEI Global Total Return Bond Fund, As of June 30 th

24 LONG-TERM STRATEGIC POSITIONS NEI Global Total Return Bond Fund Global Bond View Credit View Currency View Emerging markets View Interest rates to rise, impacting mostly the 5-year bonds Positive on Credit, still compelling Yield ratios USD, GBP outperform EUR; Overvalued commodity currencies Selective on Emerging Markets Positive on short term Local Debt Rationale Pick-up activity in the US negative for global bond markets Effective ECB firewall for periphery reducing safeheaven appeal for bonds Japan fully committed to reflating its economy Europe lagging but not decoupling Rationale Corporate yields still attractive vs. bond yields Healthy balance sheets Attractive valuation of European credit vs. US, Asian and UK credit Bank Deleveraging vs. releveraging cycle and M&A within the industrial sector Rationale US growth leadership and exit from QE positive. US-EUR yield differentials rising; USD Still undervalued USD safe heaven currency Overvalued commodity currencies EM FX rally can continue selectively (carry) Rationale EM growth story showing signs of improvement USD-denominated assets to rebound but continued pressure from rising US yields Short-end of local curves offers decent carry and more limited interest rate risk Positions Short duration Long Europe - Short US Short 5-year vs. long 30- year bonds Positions Long Credit Overweight Financials Overweight European credit Positions Long USD & GBP vs. EUR Long MXN, HUF, BRL, vs. CAD, NZD Positions Long local debt of Mexico (2018), Brazil ( ), South Africa (2018) 24

25 INCORPORATING GLOBAL BONDS Adding global bonds could increase returns while maintaining overall risk levels The Impact of Global Bonds on a Canadian Bond Portfolio A Portfolio With and Without Global Bonds Efficient Frontier For illustration purposes only. Analysis is based on historical return and correlation sourced from Amunid and FTSE TMX Global Debt Capital. Canadian Bonds is represented by FTSE TMX Canada Universe and Global Bonds is represented by Amundi Fds Bd Global Aggregate IU-C hedged into CAD for the period of September 31, 2007 (the fund s inception date) to June 30,

26 SUMMARY Concluding Take-Aways The need to go global: - Canadian investors are over-exposed to Canadian fixed income - Canadian fixed income is low yielding and poorly diversified - Strong Canadian bond returns were largely fueled by declining yields The NEI Global Total Return Bond Fund is managed according to the successful Amundi Global Aggregate - Track record of exceptional performance - 1st quartile performance over 5 years Low correlation to the benchmark and to equities Unconstrained approach versus benchmark Overweight credit versus government bonds Average duration between 1 and 8 years Global bond investment grade Adding global bonds could increase returns without adding risk 26

27 Questions For more information on NEI Investments and our investment solutions, contact or visit NEIinvestments.com The information and opinions in this report were prepared by NEI Investments for internal and professional Advisor use only. NEI Investments endeavors to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, NEI Investments makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein. Mutual funds are sold by prospectus only through registered dealers. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Northwest Funds, Ethical Funds and NEI Investments are registered marks and trademarks owned by Northwest & Ethical Investments L.P. 27

28 DISCLAIMER Issued by Amundi London Branch, which is authorized by the Autorité des Marchés Financiers and subject to limited regulation by the Financial Conduct Authority for the conduct of investment business in the United Kingdom. Details about the extent of regulation by the Financial Conduct Authority are available on request. This report is for information purposes for professional investors only and is not intended as an offer or solicitation with respect to the purchase or sale of securities. Opinions and estimates may be changed without notice. It may not be copied or distributed to any other person and must not be distributed to retail clients in the UK. Investment in the fund should be made on the basis of the current Prospectus which is available from Amundi London Branch, 41 Lothbury, London EC2R 7HF. The past performance of investments is not necessarily a guide to future returns. Investment Views shown are valid as at the date stated and are presented to illustrate the team process. They do not necessarily represent the current or future views of the Amundi team and are not a forecast of actual events. Nor should the be construed as investment advice. Amundi s views are subject to change. This material is provided for information purposes only and does not constitute a recommendation, a solicitation, an offer, an advice or an invitation to purchase or sell any fund, SICAV, sub-fund, ( the Funds ) described herein and should in no case be interpreted as such. This material, which is not a contract, is based on sources that Amundi considers to be reliable. Data, opinions and estimates may be changed without notice. Amundi accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi can in no way be held responsible for any decision or investment made on the basis of information contained in this material. The information contained in this document is disclosed to you on a confidential basis and shall not be copied, reproduced, modified, translated or distributed without the prior written approval of Amundi, to any third person or entity in any country or jurisdiction which would subject Amundi or any of the Funds, to any registration requirements within these jurisdictions or where it might be considered as unlawful. Accordingly, this material is for distribution solely in jurisdictions where permitted and to persons who may receive it without breaching applicable legal or regulatory requirements. Not all funds, or sub-funds will be necessarily be registered or authorized in all jurisdictions or be available to all investors. Investment involves risk. Past performances and simulations based on these, do not guarantee future results, nor are they reliable indicators of futures performances. The value of an investment in the Funds, in any security or financial product may fluctuate according to market conditions and cause the value of an investment to go up or down. As a result, you may lose, as the case may be, the amount originally invested. All investors should seek the advice of their legal and/or tax counsel or their financial advisor prior to any investment decision in order to determine its suitability. It is your responsibility to read the legal documents in force in particular the current French prospectus for each fund, as approved by the AMF, and each investment should be made on the basis of such prospectus, a copy of which can be obtained upon request free of charge at the registered office of the management company. The information contained in this document is deemed accurate as at January Disclaimer for Amundi Funds Amundi Funds is a Luxembourg registered UCITS and is an umbrella company comprising various sub-funds. It is a recognized collective investment scheme under S.264 of the UK Financial Services & Markets Act This material is solely for the attention of institutional, professional, qualified or sophisticated investors and distributors. It is not to be distributed to the general public, private customers or retail investors in any jurisdiction whatsoever nor to US Persons. Moreover, any such investor should be, in the European Union, a Professional investor as defined in Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments ( MIFID ) or as the case may be in each local regulations and, as far as the offering in Switzerland is concerned, a Qualified Investor within the meaning of the provisions of the Swiss Collective Investment Schemes Ordinance of 23 July 2006 (CISA), the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the FINMA s Circular 08/8 on Public Offering within the meaning of the legislation on Collective Investment Schemes of 20 November In no event may this material be distributed in the European Union to non Professional investors as defined in the MIFID or in each local regulation, or in Switzerland to investors who do not comply with the definition of qualified investors as defined in the applicable legislation and regulation. 28

29 DISCLAIMER Amundi Canada Inc., 2000 McGill College Avenue, Suite 1920 Montreal QC H3A 3H3 ( Amundi Canada ), is a corporation incorporated under the laws of Canada and a wholly-owned subsidiary of Amundi, a corporation incorporated under French law. Both are indirectly held jointly by Crédit Agricole (to the level of 75 %) and Société Générale (to the level of 25 %), two banks incorporated under French law which have agreed to combine their asset management activities under the name of Amundi. Asset management services in respect of the above-mentioned client provided for pursuant to the portfolio management agreement entered into between Amundi Canada and such client has been delegated by Amundi Canada to Amundi, pursuant to sub-advisor agreements entered with Amundi. Amundi Canada is registered as portfolio manager in the provinces of Quebec, Nova Scotia, Ontario, Alberta and British Columbia. Amundi Canada is also registered as an exempt market dealer in the same provinces, except in Nova Scotia. The information provided herein is confidential and is addressed exclusively to Canadian institutional investors and to any other exempt category within the meaning of the applicable laws. This information is not meant to be distributed or used by any person or entity in a country or jurisdiction where such distribution or use would be contrary to legal or regulatory requirements, or would obligate Amundi Canada or its affiliates (together, the Crédit Agricole group ) to any registration requirements in such country or jurisdiction. Moreover, unless otherwise specified, the date provided herein is for informational purposes only and it does not constitute an offer to buy, a solicitation to sell, an investment advice regarding a security, an offer or solicitation by Amundi Canada or by any member of the Crédit Agricole group to provide an advice or a financial, legal, fiscal or investment service or to buy or sell financial instruments. Neither Amundi Canada nor any member of the Crédit Agricole group can warrant or declare, implicitly or explicitly, that the information provided herein is exact, complete or current. 29