The Investor Universe. How to find your target investor; and what does he want? April 2011

Transcription

1 The Investor Universe How to find your target investor; and what does he want? April 2011

2 I. Types of investors II. Overview of international investors Conclusion 2

3 The transaction type drives the kind of investor targeted during a fundraising Characteristics of an ideal investor change over the life of a company as it grows and evolves Consideration of different types of investors, and their respective characteristics, helps in determining appropriate sources of funding for a company, at each stage in its life Investors can often be categorized, based on their policies and appetite for risk: active vs. passive investors equity vs. debt investment short vs. long-term investment minor vs. major investment public vs. private investment sector and country specialism Targeting the right investor groups is key in helping to deliver success in fundraising; as is targeting those groups with the right message 3

4 The appetite of investors varies, which delineates which investors to approach for each type of transaction Equity investment Public (e.g. IPO) Private (e.g. private placement) Pension funds Hedge funds Asset management companies Mutual funds Broker / dealer companies Emerging market specialists Insurance companies Commercial banks Global investment funds Sovereign funds Private equity funds Venture capital Business angels Strategic investors Hedge funds Emerging market specialist Investors expectations/ areas of interest Growth potential Long-term capital appreciation perspective/yield potential Strong and experienced management Right timing, evaluation of an industry s characteristics and position in the cycle Positive equity story High anticipated return on investment 4

5 Emerging market investors Investor universe International investors Global players private equity funds traditional funds Emerging market specialists Hedge funds Sovereign funds Rationale for investing Emerging markets provide international investors with the potential for new investment opportunities Long-term historical returns above the average returns on stocks of developed capital markets Diversification potential Pension funds Commercial banks Mutual funds Local investors Private equity funds Insurance companies Rationale for investing Strong knowledge of the local market Government regulations: local investors have to hold a proportion of funds in domestic stocks Returns on the stocks of the domestic issuers traditionally exceed returns of international stocks Asset-liability management: matching FX exposures 5

6 I. Types of investors II. Overview of international and domestic investors Conclusion 6

7 Money flows again into Emerging Markets Strong outperformance of Emerging Markets Source: MSCI Barra MSCI Index YTD 1 Yr 3 Yr 5 Yr 10 Yr EUROPE 9.4% 11.2% -7.4% -0.9% 2.7% G7 INDEX 5.2% 9.7% -3.4% -0.6% 1.2% NORTH AMERICA 6.1% 11.3% -1.0% 1.0% 1.3% THE WORLD INDEX 5.5% 10.0% -3.5% -0.2% 1.8% BRIC 4.4% 10.0% -2.3% 8.6% 16.7% EM (EMERGING MARKETS) 3.8% 16.8% 0.5% 7.3% 14.1% EFM (EMERGING + FRONTIER MARKETS) 3.5% 16.4% -0.3% 6.7% FM (FRONTIER MARKETS) -5.0% 2.9% -18.8% -5.6% Emerging market funds US$706 billion invested in emerging market ETFs (as of 1 st April 2011). This is only 3.9% below all-time peak capitalization. Lingering problems in the Euro-zone and (potential) downgrades of several developed countries ratings should mechanically trigger more investments into EM funds. Returns of EM indices beat any developed market on a long-term view Frontier Markets are lagging (investors prefer to invest first in EM markets) Conclusion: Targeting international investors is crucial Main drawback: they can run away as quickly as they came so we would advise to diversify your shareholder base (different types of funds, in several countries) 7

8 International investors: what are they looking for? Global players Improve returns by allocating a portion of their funds to higher return emerging/frontier markets Benchmark against conservative indices, unlikely to deviate from the mainstream CIS region has traditionally been treated as one by investor. It is therefore important to differentiate Kazakhstan from Russia, Ukraine and Georgia Composition of Worldwide Investment Fund Assets, end 2010* Balanced- Mixed 17% Other / Unclassified 6% Equity 37% Emerging market specialists Strong knowledge of country and market with regional focus Often willing to invest privately first, based on strong knowledge of country Key investors Money Market 16% Bond 24% Worldwide Investment Fund Assets (trillions of EUR)* Hedge funds Sovereign funds Typically looking for liquidity, and prime stock investors during IPO Sovereign funds often considered to be diversifying away from original source of fund s wealth, such as natural resources Security of supply and strategic interests may be drivers much more than pure investment returns Q2010 *Source: European Fund and Asset Management Association 8

9 International investors: latest trends Global players ++ Strong demand for Emerging markets / Commodities pushed Global AM firms to launch new EM/FM funds Emerging market specialists +++ The number of funds is growing and small funds are generally collecting fresh money Hedge funds + Better liquidity in local markets brings more hedge funds (though not a major driver yet) Sovereign funds = / + Have been historical investors in Emerging Markets but are often lagging (many investment constraints) *Source: European Fund and Asset Management Association 9

10 Domestic investors Total investment portfolios of domestic institutional investors (US$bn) Brief Overview Over the last three years, the local pension funds have increased their assets under management by ca 50% At YE2010, pensions funds assets totaled US$15.1bn, representing ca 51.7% of assets managed in Kazakhstan Other key fund managers are the commercial banks with 36.2% of local funds under management, and investment funds with 6.8% Commercial Banks Investment Funds Pension Funds Insurance Companies Source: Agency of the RK on Supervision and Regulation of Financial Market and Financial organizations (AFN) 10

11 Institutional investors in Kazakhstan As of 1 January 2011 total institutional assets under management US$29.2bn Institutional investors Total assets under management Portfolio structure Pension funds and others US$15.1bn 34.0% - domestic corporate securities (25.5% bonds, 8.5% shares) 45.0% - local government securities 8.4% - corporate securities of foreign issuers Second tier banks and others US$10.6bn 19.1% - domestic corporate securities (16.1% bonds, 3.0% shares) 71.8% - local government securities 4.6% - corporate securities of foreign issuers Mutual funds and others US$1.8bn 57.3% - venture capital 4.5% - domestic corporate securities (1.8% bonds, 2.7% shares) Insurance companies and others US$1.6bn 30.6% -deposits in commercial banks 35.4% - domestic corporate securities (32.9% bonds, 2.5% shares) Private equity funds and others US$0.2bn 3.2% -venture capital 12.4% domestic corporate securities (11.1% bonds, 1.3% shares) Source: AFN Note: USD/KZT FX rate

12 Investment portfolio breakdown of major domestic institutional investor Breakdown by types of investors and assets classes Domestic equity investors 100% 90% 80% 21% 9% 45% 23% Insurance Investment Companies Funds 2% 3% 70% 60% 50% 40% 71% 88% 94% 71% Commercial Banks 19% 30% 52% 20% 10% 0% 8% 3% 3% 3% 3% 6% Pension Funds 76% Pension Funds Commercial Banks Insurance Companies Investment Funds Total KZ issuers shares KZ issuers bonds Other Pension funds account for three quarters of all domestic institutional equity investment They tend to keep their investments over a long period of time, which limits a stock s liquidity Source: AFN 12

13 Conclusion Characteristics of an ideal investor change over the life of a company as it evolves and grows Consideration of different types of investors and their respective characteristics helps in determining appropriate sources of funding for a company at each stage in its life International investors have an appetite for long-term investments in emerging markets, such as Kazakhstan, due to the higher growth that these markets offer. Kazakhstan s resilience during the recent crisis is a further attraction Most international investors with interest in Kazakhstan are located: in London - which remains the best choice for a listing, at least for small and mid-sized Kazakh companies There is also a decent number of investors interested in Kazakh companies (the US, Stockholm, Moscow, Hong-Kong) Domestically, despite the obligation of domestic pension funds to invest 30% of their assets in government bonds, the interest for domestic corporate stocks has been resuming since 2010 Targeting the right investor groups is key in helping to deliver a success for fundraising, as is targeting those groups with the right message 13

14 sclaimer Speaker profile Jean-Christophe Lermusiaux Managing Director Head of Research Jean-Christophe joined Visor Capital in November 2008 from Exane BNP Paribas, where he was in charge of the IT Services & Software sector. Jean-Christophe joined Visor Capital having over 11 years of experience as a sell-side analyst, in Paris and in London. He and his team achieved top international rankings (#1 Extel individually, #2 Extel as a team, #1 Starmine for the quality of recommendations). Over the last two years in Exane BNP Paribas, his team ranked #1 out of 25 in the bank s trading ideas portfolio (Long/Short Equity, absolute performance). Jean-Christophe holds an engineering degree from the Ecole Centrale d Electronique and an MBA from ESSEC Business School.

15 This presentation was prepared exclusively for benefit of participants of the IPO Master Class in order to indicate, on a preliminary basis, the feasibility of a possible transaction or transactions and does not carry any right of publication or disclosure to any other party. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Visor Capital. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of Visor Capital. Visor Capital has not assumed any responsibility for the independent verification of any of the information set forth in this presentation, including the valuation material made available to the recipient in connection with any further investigation of the possible transactions. Visor Capital does not make any express or implied representation or warranty as to the accuracy or completeness of the information contained in, or for any omissions from, this presentation. In addition, Visor Capital expressly disclaims any and all liability which may be based on such information, errors therein or omissions there from.