Delaware Investments Global Real Estate Securities. Citywire Wealth Management Forum. Presented by:

Transcription

1 Delaware Investments Global Real Estate Securities Citywire Wealth Management Forum Presented by: Bob Zenouzi Senior Vice President Senior Portfolio Manager July 1, 2009 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries. Investment management is provided by Delaware Investment Advisers (DIA), a series of Delaware Management Business Trust (DMBT). DMBT is a U.S. registered investment advisor. The information presented is available for institutional non-u.s. investor use only. Not for public distribution nor an offer or solicitation in any jurisdiction where it would be unlawful to do so. It is not intended and should not be construed to be a presentation on information for any U.S. mutual fund

2 Growth of Global REIT Markets 2

3 Global Regional Breakdown (est.) (Market Cap: $590 Billion) (Potential Market Cap: $1 Trillion) Emerging/Other, 10% Singapore, 4% Canada, 2% Hong Kong, 16% Singapore, 3% Canada, 2% U.S., 30% UK, 7% U.S., 37% Hong Kong, 20% Australia, 10% UK, 6% Europe, 11% Japan, 14% Australia, 6% Europe, 10% Japan, 12% Source: UBS and Delaware Investments 3

4 Growth of Global Listed Real Estate Driven by REIT Markets * U.S. REIT experience has been accepted globally * REIT structure and growth will accelerate internationally 4

5 Global Listed Real Estate: * Approximately 7% of Total Real Estate and approximately 4% of Stock Markets * Majority of Real Estate owned by private investors/governments * Securitization varies by Region/Country 5

6 Correlations: US REIT & National Sub-Indices Considerable divergence in returns to national indices Shows scope for diversification by investing globally Diversification of real estate and capital markets provide investors ample opportunity for alpha US Nareit EPRA UK EPRA Japan US Nareit EPRA UK EPRA Japan EPRA Hong Kong EPRA Australia EPRA Singapore EPRA Netherlands EPRA France EPRA Germany EPRA Hong Kong EPRA Australia EPRA Singapore EPRA Netherlands EPRA France EPRA Germany Note: based on monthly total returns from January 2002 to April 2009 for selected indices denominated in USD terms; it is not possible to invest directly in an index; past performance is not indicative of future performance; data from Bloomberg 6

7 Correlations: US REIT & National Sub-Indices Adding global real estate can change portfolio return Investors can benefit from diversification Growth of $1 Scenario 1 (0% real estate) Scenario 2 (10% real estate) Scenario 3 (20% real estate) 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 Scenario 1 Scenario 2 Scenario 3 Global equities 60% 50% 45% Global bonds 30% 30% 25% US T-bills 10% 10% 10% Global real estate 0% 10% 20% 100% 100% 100% Annualized performance (to April) Full period Ann'd volatility Ratio Note: based on monthly total returns from January 2002 to April 2009 for MSCI ACWI, BarCap Global Aggregate, Citi 3- month T-bill, and EPRA/Nareit Global, all denominated in USD terms without transaction costs; it is not possible to invest directly in an index; past performance is not indicative of future performance; data from Bloomberg and Barclays Capital 7

8 Rationale for Global Real Estate * Improve returns within global portfolios Asia - Access to high secular growth markets in China/India/Hong Kong through developers and REITs Europe - Introduction of REIT legislation has facilitated transfer on tax efficient basis of corporate/state owned real estate to transparent listed vehicle US - Deep and transparent liquid market provides stable returns over time. Privatizations of the past decade and distressed assets will have to re-equitize through IPO's. Emerging Markets - Growing economies and growth of middle class will provide opportunities for retail and residential real estate. * Diversification Growth of Asia and other Emerging Markets will provide investors with low correlation between regions/countries Ability to invest with world class management teams in each region * Liquidity Growth will continue in listed sector and provide investors with the ability for more flexible asset allocation 8

9 Philosophy We believe that superior investments in the global real estate market can best be identified through a combination of top-down country investment conditions and a dual (property- and security-level) bottom-up, fundamental approach to research. Further, we believe that constructing a portfolio which represents the best relative values in the marketplace and emphasizes companies with safe, predictable cash flow growth will produce consistent excess returns at moderate risk levels for our clients. Top-down overview Economic and regulatory considerations Dual bottom-up research Property and security level Construct portfolio based on relative values Capacity constrained 9

10 Investment process overview Sell Discipline Seeks to secure profits and minimizing losses Reaches price range Better opportunities Decline in fundamentals 4 3 Portfolio Construction Managing Risk Diversification Risk controls - Sector weights - Individual security weights - Geographical concentration - Typically securities Risk control & attribution analysis Continual monitoring of: Portfolio Characteristics Performance Attribution 1 2 Fundamental research Dual bottom-up research Property level analysis Security analysis Qualitative evaluation Typically securities Valuation screens Initial global real estate universe Typically securities Focus on relative valuation opportunities Relative country attractiveness Intra-country relative valuation and performance Create a focused universe Typically securities 10

11 Investment Process 1 Valuation Screens Global Real Estate Universe $100M minimum market cap Liquidity Data availability Securities Screen for Relative Values P/NAV, Relative Multiples, and Implied cap rates Focus on stocks selling at a discount to own history and compelling relative valuation Securities 11

12 2 Investment Process Fundamental research Attractive Fundamentals securities Data processing Financial models Review/discussion Property analysis Private market cap rates Supply/Demand analysis On-site property assessment Regional considerations Qualitative assessment Assess human capital Corporate governance Interview management Long-term strategic goals Security analysis FFO and AFFO projections Spread investing (DCF) Capital structure Sum of the parts 12

13 Investment Process 3 Portfolio construction Managing Risk Approximately securities Well diversified across sectors and countries/regions Maximum stock weight of 5% or 250 basis points above the FTSE EPRA/NAREIT Global Real Estate Index, whichever is greater Country weight range: from 50% weighting to 150% over country index weight - If country index weight is less than 10%, no weight restrictions Implementation Fund portfolio securities Performance attribution Portfolio construction Upside potential Identify attractive opportunities Establish price range 13

14 Investment Process 4 Sell Discipline Securing profits and minimizing losses Reaches price range Relative pricing versus other opportunities Negative change in fundamentals Asset yield drifts lower than cost of capital Deterioration in quality of cash flow Limited external and/or internal growth Unfavorable change in management strategy 14

15 Top 10 Country Allocation May 31, % 35% 30% 30.2% 34.7% Delaware Investments Global Real Estate Securities (Rep Account) FTSE EPRA/NAREIT Global Real Estate Index 25% 20% 19.1% 17.5% 15% 14.0 % 13.0 % 10% 5% 8.6% 8.6% 5.3% 5.0% 4.3% 5.8% 3.5% 3.8% 3.0% 3.3% 1.6 % 1.5% 1.0 % 1.7% 0% United States Hong Ko ng Japan A ustralia France United Kingdo m Singapo re Canada China Netherlands Weightings shown are current as of the above date. Source: FactSet 15

16 Performance (periods ended May 31, 2009) Delaware Investments Global Real Estate Securities Composite (gross of fees)* 5.79% 5.88% 0.0% -25.0% % % -50.0% % % YTD 1 Year Since Inception (31/01/07) Global Real Estate Securities Composite FTSE EPRA/NAREIT Global Real Estate Index * Performance results are presented before the deduction of Delaware Investments investment advisory fees. Management fees, and other expenses incurred in the management of the account will reduce your return. After inclusion of management fees, performance for the 1 year and since inception periods was % and %, respectively. Please see slide 24 for important composite disclosures. 16

17 Recent Buy Idea Shimao Property Holdings Source: Worldscope/FactSet 17

18 Fundamental Evaluation Shimao Property Holdings Why is Stock Depressed? Monetary authorities raised interest rates to slow overheated property market Supply exceeded demand Is Reason for Depressed Valuation Fixable? Underlying demand drivers in Shimao s regions are secular Solid balance sheet Catalyst / Change Government stimulus in November 2008 Margin improvement Pricing increases in 2H 09 Increase in NAV through land bank acquisitions 18

19 Stock Valuation Shimao Property Holdings - Targeting high potential return opportunities - Attractive valuation relative to company history Price 50 Day Moving Avg 200 Day Moving Avg Fiscal Year Sales - Millions (Left) Sales Grow th, Year/Year (Right) 150% Relative Strength vs. FDSAGG China / Finance -SEC % 50% % '04 '05 '06 '07 '08 40 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 NTM Price to Earnings Average Fiscal Year Earnings Per Share (Left) EPS Growth, Year/Year (Right) 400% % 200% Price to Sales Average '04 '05 '06 '07 ' '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 100% 0% -100% Source: Worldscope/FactSet 19

20 China Primary residential selling price growth - Figures showing price stabilization in most cities 20

21 Biography Babak (Bob) Zenouzi Senior Vice President, Senior Portfolio Manager Bob Zenouzi is the lead manager for the domestic and global REIT effort at Delaware Investments, which includes the team, its process, and its institutional and retail products, which he created during his prior time with the firm. He also focuses on opportunities in Japan, Singapore, and Malaysia for the firm s global REIT product. Additionally, he serves as lead portfolio manager for the firm s Dividend Income products, which he helped to create in the 1990s. He rejoined Delaware Investments in May In his first term with the firm, he spent seven years as an analyst and portfolio manager, leaving in 1999 to work at Chartwell Investment Partners, where from 1999 to 2006 he was a partner and senior portfolio manager on Chartwell s Small-Cap Value portfolio. He began his career with The Boston Company, where he held several positions in accounting and financial analysis. Zenouzi earned a master s degree in finance from Boston College and a bachelor s degree from Babson College. He is a member of the National Association of Real Estate Investment Trusts and the Urban Land Institute. 21

22 Delaware Global Real Estate team Role Years of experience Bob Zenouzi Senior Vice President, Lead Portfolio Manager Japan, Emerging Markets, Singapore, U.S. 22 Damon Andres, CFA Vice President, Senior Portfolio Manager Continental Europe, Eastern Europe, Emerging Markets, U.S. 18 Scott Hastings, CFA Assistant Vice President, Equity Analyst U.K., Canada, Continental Europe, Eastern Europe, U.S. 6 Hardy Zhu Equity Analyst China, Hong Kong, Australia/New Zealand 8 22

23 Global Real Estate Securities Composite Performance Disclosures: Global Real Estate Securities composite Delaware Investments has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS ). Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries. Delaware Management Business Trust ( DMBT ) is a registered investment adviser offering a comprehensive array of diversified investment management strategies across all major asset classes. Additional information regarding the firm s policies and procedures for calculating and reporting performance results is available upon request. A complete list and description of Delaware Investments composites is available upon request. The Delaware Global Real Estate Securities composite seeks to buy stocks in the global real estate market that are priced low compared to the companies' current dividends and growth prospects. This composite was created in Composite returns are derived from all discretionary fee paying accounts. Performance results are shown as total returns, net of dividend withholding taxes, assume reinvestment of dividends and capital gains as well as no reductions for taxes, are presented before and after the deduction of Delaware Investments investment advisory fees, and are calculated in U.S. dollars. Delaware Investments investment advisory fees are described in Part II of our Form ADV. Delaware Global Real Estate Securities, the fee schedule is as follows: first $50 million, 0.80%; next $50 million, 0.75%; amounts over $100 million, 0.70%. Management fees, and any other expenses incurred in the management of the account, will reduce your return. After inclusion of management fees, annualized performance for the periods of 1 year and since inception through March 31, 2009, would have been % and %, respectively. The actual fee schedule may vary. Internal dispersion is calculated using the asset-weighted standard deviation of the annual returns of all the portfolios that were included in the composite for the entire year. Standard deviation is only shown if the composite has at least six accounts that were managed for the full calendar year. The performance data presented here should not be taken as any guarantee or other assurance as to future results. The Global Real Estate Securities composite is benchmarked against and compared to the FTSE EPRA/ NAREIT Global Real Estate Index. Dividends relating to the index are reinvested after deduction of withholding taxes, applying the rate to nonresident individuals who do not benefit double taxation treaties. The net benchmark uses withholding tax rates applicable to Luxembourg holding companies (as Luxembourg applies the highest rates). The information presented is available for institutional one-on-one presentations only. It is not intended and should not be construed to be a presentation of information concerning any mutual fund, including the Delaware Pooled Trust. 23