AMG Funds. AMG Chicago Equity Partners Small Cap Value Fund. June 2015

Transcription

1 AMG Funds AMG Chicago Equity Partners Small Cap Value Fund June 2015

2 AMG Funds Overview XXAMG Funds is a wholly owned subsidiary and the U.S. retail distribution arm of Affiliated Managers Group, Inc. (AMG) Assets Under Management $48.0 Billion AMG is a global asset management company with investments in leading boutique investment management firms Subadvised Assets Under Assets Service $10.1 Billion $6.7 Billion Assets Under Service $8.4 Billion Assets Under Management $8.0 Billion XXAMG Funds provides access to many of AMG s boutique investment Affiliates through our family of mutual funds, separately managed accounts, alternative funds and asset-allocation products In addition, we oversee and distribute a number of complementary mutual funds subadvised by unaffiliated investment managers About AMG Funds 1 ffsubsidiary of Affiliated Managers Group, Inc. (AMG) f f$48.0 billion under management Includes $12.3 billion of Aston Asset Management s mutual funds and separately managed accounts f f$8.4 billion under service Includes $1.4 billion of Aston Asset Mangement s separately managed accounts f f$10.1 billion subadvised assets ff153 employees Includes 38 Aston Asset Management Employees 1 As of June 30,

3 AMG Chicago Equity Partners Small Cap Value Fund Overview XXFund Subadvisor: Chicago Equity Partners, LLC (CEP) XXFund AUM: $13.5 million 1 XXThe Fund seeks long-term capital appreciation by investing in equity securities of small-cap value companies XXThe Fund invests at least 80% of its total assets in stocks of small-capitalization U.S. companies. CEP considers a company to be a small-capitalization company if, at the time of purchase, its market capitalization is within the market capitalization range of the companies represented in the Russell 2000 Index. Share Class Ticker Inception Expense Ratio Gross/Net 2 Minimum Investment Maximum Sales Load 12b 1 Fees 1 As of June 30, 2015 Investor Class CESVX 12/31/ %/1.35% $2,000 ($1,000 IRA) 0.25% 2 The Fund s Investment Manager has contractually agreed, through at least May 1, 2016, to limit Fund operating expenses. The net expense ratio reflects this limitation, while the gross expense ratio does not. Please refer to the Fund s Prospectus for additional information on the Fund s expenses. Service Class CESSX 12/31/ %/1.10% Institutional Class CESIX 12/31/ %/0.95% $100,000 ($25,000 IRA) $1,000,000 ($50,000 IRA) 2

4 Why Invest In Actively Managed Small-Cap Value Stocks? CEP believes small-cap value can be viewed as an inefficient segment of the U.S. stock market XXVast universe of stocks XXTend to be underfollowed by the financial analyst community XXMay have unrecognized growth potential XXSmaller company size may allow for faster growth potential XXTargets for acquisition XXUndervalued stocks may be only temporarily out of favor 3

5 Chicago Equity Partners, LLC Overview XXChicago Equity Partners (CEP) has a 25-year history of institutionally focused investment management across equities and fixed income AMG Affiliate since 2006 Total of 40 employees with an average professional-level tenure of 15 years $9.6 billion in assets under management for more than 100 institutional clients around the world 1 XXCEP employs a disciplined investment approach Focus on clearly defined and process-oriented strategies that are repeatable and scalable Deliberate approach to taking investment risks for which CEP believes the portfolio will be appropriately compensated Long-standing commitment to continued innovation in its investment approach 1 As of June 30,

6 CEP s Team Approach to Portfolio Management CEP s equity team, led by founding partner, David Coughenour, CFA, employs an accomplished 13-member team of industryleading investment professionals who have spent an average of 18 years working together. Equity Equity Portfolio Portfolio Management Team Team Equity Quantitative Portfolio Management ResearchTeam Trading XXIndustry-specific analysis XXStock-specific analysis XXPortfolio construction XXRisk control XXAlpha model research and development XXRisk model research and development XXPortfolio attribution analysis XXNew product development XXStudy academic and industry trends XXExecute trades XXMonitor trade effectiveness XXAccess new trading platforms 5

7 Investment Philosophy Chicago Equity Partners investment philosophy is based on well-established financial and behavioral theory. CEP seeks to generate alpha by exploiting market inefficiencies through a systematic, risk-controlled process. XXEquity markets are mostly efficient Due to fundamental and behavioral biases, however, market inefficiencies persist that may be exploited through a systematic, research-intensive process XXChanges in fundamentals drive stock prices CEP s Core Beliefs Analyzing a combination of earnings, valuation, growth, balance sheet and other relevant metrics creates what we believe is the best opportunity to identify and exploit market inefficiencies XXStructured analysis plus disciplined decision making equals success We believe the best means of generating alpha combines systematic analysis of fundamental variables with rigorous implementation by a team of seasoned industry experts, creating a process that is transparent, explainable, and scalable XXAn intensive research focus that seeks to add value through stock selection Results XXA diversified 1 portfolio of companies with attractive valuation ratios, quality balance sheets and positive growth and momentum expectations XXA disciplined approach to taking only those risks for which CEP believes it will be appropriately compensated 1 Diversification cannot assure against market loss 6

8 Chicago Equity Partners Investment Process Overview The investment process has three components. 1 2 Combine sophisticated quantitative methods with a qualitative implementation plan to distinguish potential winners from losers Alpha Generation Portfolio Construction Seek to optimize the portfolio as a team, neutralizing size, industry and sector exposures while emphasizing security selection Stable and Repeatable Risk Management There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate his or her ability to invest for the long term, especially during periods of downturn in the market. 3 Utilize a proprietary risk model to take a disciplined approach to taking only those risks for which CEP believes the portfolio will be appropriately compensated 7

9 Alpha Generation: Stock Selection Model CEP s stock selection process combines sophisticated quantitative methods with a qualitative implementation plan. Alpha Generation Portfolio Construction Stable and Repeatable Risk Management Data Collection Alpha Calculation Start with a broad universe of companies where CEP: XXCollects fundamental company data XXVerifies and substantiates data inputs For each company: XXCalculate the score for each factor XXVary factor emphasis across five super sectors: technology/media/telecom, non-cyclicals, cyclicals, energy, financials XXCalculate a forecast return (alpha) score XXRank within industry, relative to peers Qualitative Input On a fundamental basis, the portfolio management team: XXVerifies data before and after stock-level calculations XXAddresses information not captured by the quantitative model including legal, regulatory, accounting or other idiosyncratic issues XXApply overlay to complex factors available only because of fundamental team input 8

10 Alpha Generation: Factor Groupings Alpha Generation Portfolio Construction The stock selection model pursues an intersection approach that combines a broad set of fundamental and behavioral factors to select the stocks CEP believes are most likely to outperform and underperform. The factors are classifies into four broad categories: Value, Quality, Momentum and Growth. Stable and Repeatable XXEarnings Quality XXRelative Strength Risk Management XXShareholder Yield XXM&A Activity XXCapital Discipline XXBalance Sheet Quality Quality Momentum XXUpward Earnings Revisions XXEarnings Momentum XXDownward Earnings Revisions Varied Sector Emphasis XXPrice-to-Earnings XXPrice-to-Book Valuation Growth XXCash Flow XXExpected Growth XXCash-to-Market Value XXReturn on Equity 9

11 Portfolio Construction: Market Phase Identification Model Alpha Generation Portfolio Construction XXFactor timing model aims to identify the right time to emphasize or de-emphasize certain factors XXBuilt to catch large shifts in investor preference, not short-lived head fakes Stable and Repeatable Risk Management XXPhases are identified using proprietary measures of momentum, market technical analysis and macro factors XXApplied by varying factor constraints during portfolio construction, not by changing the alphas or model weights XXAddresses traditional complaints about difficulty of quant models at inflection points MPI Implementation Market Phase Portfolio Exposure Adjustments Expansion Momentum Factors Beta/Vol Downturn Quality Factors Beta/Vol Rebound Value Factors Beta/Vol 10

12 Portfolio Construction Alpha Generation Portfolio Construction XXPortfolio optimized on as-needed basis, weighed against costs of trading XXPeriodic formal rebalancing of entire portfolio to reflect significant data updates Stable and Repeatable Risk Management XXMarket phase identification determines factor constraints XXSeeks to optimize the portfolio within constraints XXNeutralize size, style and sector exposure vs. Russell 2000 Value Index XXEmphasize stock selection 11

13 Risk Management and Structure Alpha Generation Stable and Repeatable Portfolio Construction Risk Management XXCEP employs its own proprietary risk-management framework, which is flexible, transparent and integrated with the firm s alpha engine XXTarget tracking error of basis points XXBuild a portfolio with a risk-profile similar to that of the Russell 2000 Value Index with a focus on stock selection There can be no guarantee that the target tracking error shown above will be met or that losses will be avoided. 12

14 Appendix 13

15 Portfolio Manager Biographies David C. Coughenour, CFA, Founder, Managing Director and Chief Investment Officer Equities Mr. Coughenour, a Portfolio Manager with more than 25 years of industry experience, oversees all of Chicago Equity Partners equity products. He was instrumental in developing CEP s proprietary quantitative model and is involved in its ongoing developmental efforts. He has held several positions in the firm, including Energy Analyst. Mr. Coughenour earned a bachelor s degree from Duke University. He holds the Chartered Financial Analyst (CFA) designation and is a member of the CFA Institute, the Chicago Quantitative Alliance and the CFA Society of Chicago. Robert H. Kramer, CFA, Founder, Managing Director and Portfolio Manager Mr. Kramer, a Portfolio Manager with more than 27 years of industry experience, oversees the quantitative research, trading and technology groups at Chicago Equity Partners. In addition, he is the Portfolio Manager for the healthcare sector. Prior to co-founding CEP, he worked at the Feldman Group and GE Credit Corporation. He earned a bachelor s degree in industrial engineering and an M.B.A. from the University of Illinois. He holds the Chartered Financial Analyst (CFA) designation and holds a CPA certificate. Additionally, he is a member of the CFA Institute, the Chicago Quantitative Alliance and the CFA Society of Chicago. Patricia A. Halper, CFA, Partner and Managing Director Ms. Halper, a Portfolio Manager with 17 years of industry experience, is a member of Chicago Equity Partners quantitative analysis group, which is responsible for the firm s proprietary quantitative model and its ongoing developmental efforts. Prior to joining our firm, she worked at the institutional futures sales desk at Paine Webber. Ms. Halper holds a bachelor s degree in mathematics from Loyola University Chicago and a master s degree in financial mathematics from the University of Chicago. She holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute and the Chicago Quantitative Alliance. Additionally, she is on the Corporate Advisory Board of La Rabida Children s Hospital, and is a board member of the CFA Society of Chicago. William C. Murray, Director and Portfolio Manager Mr. Murray, a member of Chicago Equity Partners portfolio management team with more than 24 years of industry experience, is responsible for the technology and commercial services sectors. Mr. Murray holds a bachelor s degree in business administration from the University of North Carolina and a master s degree from the Kellogg Graduate School of Management at Northwestern University. He holds the Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst (CAIA) designations, and is a member of the CFA Institute, the CFA Society of Chicago, and the CAIA Association. 14

16 Equity Investment Team Biographies Keith E. Gustafson, CFA Partner and Managing Director Mr. Gustafson is a member of Chicago Equity Partners quantitative analysis group, which is responsible for the firm s proprietary quantitative model and its ongoing developmental efforts. Prior to joining our firm, he held positions at Ibbotson Associates and SEI Corporation. Mr. Gustafson earned bachelor s degrees in history and economics from University of Pennsylvania, an MBA from Loyola University Chicago, and a master s degree in financial economics from the University of London. He holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute, the CFA Society of Chicago, the Chicago Quantitative Alliance, the American Finance Association, and the American Economics Association. George Gao, CFA Director Mr. Gao is a member of Chicago Equity Partners quantitative analysis group, which is responsible for CEP s proprietary quantitative model and its developmental efforts. Prior to joining Chicago Equity Partners, he developed and designed software at Cap Gemini and taught programming at Shanghai Jiaotong University in China. Mr. Gao earned bachelor s and master s degrees in computer science from Shanghai Jiaotong University and a master s degree in financial mathematics from the University of Chicago. He holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute and the CFA Society of Chicago. Abhay Munot, CFA Director Mr. Munot is a member of Chicago Equity Partners quantitative analysis group, focusing on financial mathematics and programming that support our proprietary quantitative model. Mr. Munot earned a bachelor s of engineering from VJTI and a master s degree in computer science from Cleveland State University. He holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute and the CFA Society of Chicago. Michael J. Lawrence, CFA Director Mr. Lawrence, a portfolio manager and a member of Chicago Equity Partners fundamental analysis team, is responsible for the energy, industrials, materials, and utilities sectors. Previously, he was a quantitative analyst in our firm. Prior to joining Chicago Equity Partners, Mr. Lawrence worked in the consulting group of SEI Corporation. He earned a bachelor s degree and an MBA from DePaul University. He holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute and the CFA Society of Chicago. 15

17 Equity Investment Team Biographies Martin D. Morris, CFA Director Mr. Morris, a portfolio manager and a member of Chicago Equity Partners fundamental analysis team, is responsible for the aerospace, capital goods, machinery, discretionary, and telecom sectors. Mr. Morris earned a bachelor s degree in economics and business from Cornell College. Mr. Morris holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute and the CFA Society of Chicago. James T. Palermo, CFA Director Mr. Palermo, a portfolio manager and a member of Chicago Equity Partners fundamental industry analysis team, is responsible for the financial sector. Prior to joining our firm, Mr. Palermo held positions at Manufacturers Hanover Trust and the Bank of Boston. Mr. Palermo earned a bachelor s degree in economics from the Wharton School of the University of Pennsylvania and an MBA from the University of Rochester. He holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute and the CFA Society of Chicago. Patrick J. Morris, CFA Partner and Managing Director Mr. Morris is Chicago Equity Partners senior trader, and oversees all of the firm s trading and trading systems. Mr. Morris earned a bachelor s degree in finance from Northern Illinois University and an MBA from DePaul University. He holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute and the CFA Society of Chicago. Tereck Fares, CFA Director Mr. Fares is a member of Chicago Equity Partners trading team. Prior to joining our firm, he worked with the corporate finance group of Bank of America. Mr. Fares earned a bachelor s degree in business administration from University of California at Berkeley. He holds the Chartered Financial Analyst (CFA) designation, and is a member of the CFA Institute, the CFA Society of Chicago, and the Security Traders Association of Chicago. Patrick Sullivan Associate Mr. Sullivan is a member of Chicago Equity Partners trading team, where he focuses on U.S. equities. Prior to joining our firm, he worked for the institutional trading desk of Ryan Beck and Company. Mr. Sullivan earned a bachelor s degree in finance from DePaul University. 16

18 Disclosures Investors should carefully consider the Fund s investment objectives, risks, charges and expenses before investing. For this and other information, please call or visit for a free prospectus. Read it carefully before investing or sending money. The Fund is subject to risks associated with investments in small-capitalization companies, such as erratic earnings patterns, competitive conditions, limited earnings history and a reliance on one or a limited number of products. The stocks of small capitalization companies may experience greater price volatility than those of larger, more established companies. Investments in international securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets. The Fund is subject to special risk considerations similar to those associated with the direct ownership of real estate. Real estate valuations may be subject to factors such as changing general and local economic, financial, competitive, and environmental conditions. The Fund invests in value stocks, which may perform differently from the market as a whole and may be undervalued by the market for a long period of time. The Russell 2000 Value Index is an unmanaged, market-value weighted, value-oriented index comprised of small stocks that have relatively low price-to-book ratios and lower forecasted growth values. Unlike the Fund, the Russell 2000 Value Index is unmanaged, is not available for investment and does not incur expenses. The Russell 2000 Value Index is a trademark of Russell Investments. Russell is a trademark of Russell Investments. The Fund invests in value stocks, which may perform differently from the market as a whole and may be undervalued by the market for a long period of time. Value stocks may underperform growth stocks during given periods. Funds are distributed by AMG Distributors, Inc., a member of FINRA/SIPC. For more information, call