Active Portfolio Investors. Brown Bag Quarterly Lunch. June 2015

Transcription

1 Active Portfolio Investors Brown Bag Quarterly Lunch June 2015

2 Who is API Capital? Performance A consistent approach to targeting long-term outperformance with managed risk. Product Factor based investing is rapidly growing. Offering alpha on top of a factor strategy is the future of active management. Price Offered at an attractive fee in comparison to traditional active management. People An experienced team with well resourced partnerships. Pedigree A long history in portfolio management and investment. This report provides general information only and does not take into account the investment objectives, financial circumstances or needs of any person. To the maximum extent permitted by law, Active Portfolio Investors Pty Ltd, its directors and employees accept no liability for any loss or damage incurred as a result of any action taken or not taken on the basis of the information contained in the report or any omissions or errors within it. Applications can only be made on the form in the current Product Disclosure Statement (PDS). The PDS can be obtained by contacting API or on.au. Potential investors should consider the PDS before deciding whether to invest, or continue to invest, in the product. It is advisable that you obtain professional independent financial, legal and taxation advice before making any financial investment decision. API does not guarantee the repayment of capital, the payment of income, or the performance of its investments. Performance presented is net of investment management fees, administration fees and transaction costs. Quoted performance is annualised for periods of 1 year or greater. Active Portfolio Investors Pty Ltd AFSL

3 We are a long established boutique. 3

4 Bigger isn t Better: Better is Better 4

5 & No conflicts of Interest! 5

6 In a Nutshell API captures both factor style and Alpha opportunity Robust security selection process & sophisticated portfolio construction techniques... Combined with efficient re-balancing, risk management and trade implementation... = a smarter style factor portfolio 6

7 For the more classically educated.standing on the shoulders of giants?!! nanos gigantum humeris insidentes API alpha Factor Beta

8 API Capital Our Value Factor Giant. MSCI World Value Weighted versus MSCI World Total Return (USD) (May 1973 May 2015) Value factor achieves positive long term active returns. Addition of 0.91% p.a. since May This is an attractive return premium but MSCI World Value Weighted MSCI World Alpha can also be generated from asset selection, portfolio construction and trade implementation Source: MSCI 8

9 It s about stock selection too Valuation Matters Alpha 9

10 Factor Index = Good, Bad, & Ugly

11 a smarter portfolio GICS Sector Portfolio MSCI World MSCI World VW Financials 25.9% 20.7% 27.7% Consumer Discretionary 13.4% 13.0% 11.4% Energy 10.9% 7.3% 11.9% Information Technology 9.8% 13.5% 9.0% Industrials 9.9% 10.9% 10.7% Materials 6.9% 5.2% 5.7% Consumer Staples 6.5% 9.7% 7.7% Telecommunication Services 5.9% 3.3% 3.8% Health Care 7.1% 13.3% 7.7% Utilities 3.7% 3.1% 4.3% Region Portfolio MSCI World MSCI World VW North America 51.8% 61.0% 50.6% EMEA ex UK 20.2% 17.6% 21.9% UK 9.0% 7.9% 10.4% Asia Pacific ex Japan 7.5% 4.6% 4.7% Japan 11.5% 8.9% 12.4% Fundamentals Portfolio MSCI World MSCI World VW Securities held Price / Earnings Price / Book Value Dividend Yield 2.85% 2.38% 2.71% Next 12M ROE 16.7% 21.1% 16.8% Source: MSCI, Thomson Reuters, IBES 11

12 So what do you think? 12

13 Appendix 13

14 A Wide Variety of Giants MSCI World Factor Indices Annualised USD Net Total Return years ending 31 Mar 2015 (pa) Annualised USD Total Risk years ending 31 Mar 2015 (pa) WORLD 6.0% 12.2% 10.0% 8.5% 10.5% 14.2% Value Weighted 2.7% 11.5% 10.2% 9.1% 11.8% 15.1% Momentum 11.0% 14.5% 14.0% 8.5% 9.4% 12.5% Quality 9.8% 12.5% 12.2% 8.2% 9.8% 12.4% Minimum Volatility (USD) 13.2% 12.3% 11.7% 6.1% 8.5% 8.9% Growth 10.3% 12.9% 11.3% 8.8% 10.4% 14.3% High Dividend Yield 0.2% 10.2% 9.2% 8.1% 10.9% 13.4% Small Cap Value Weighted -1.2% 13.1% 10.8% 10.6% 12.6% 16.5% 14

15 MSCI Factor Index YoY Growth +30% Factor Index AUM (USD Bill) Q Q Q Q Q Source: MSCI Q Earnings Call 15

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17 Never Have So Few Countries Been Owed So Much By So Many

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23 Greek banks no longer funded by Greeks 23

24 China: Get the State out of the economy 24

25 API Global Diversified Fund Characteristics Active Exposures as at May 2015 vs MSCI World Value Weighted (TE: 2.1%) vs MSCI World (TE: 2.7%) Compared to MSCI World Value Weighted Index: Book to Price Book to Price Higher active risk from asset selection Dividend Yield Earnings Yield Dividend Yield Earnings Yield Similar or enhanced exposure to value factors Momentum Leverage Momentum Leverage Higher exposure to momentum to avoid value traps Size E Size E Slight midcap bias Common Factor Asset Selection Covariance Common Factor Asset Selection Covariance Source: MSCI 25

26 Evaluate and score securities Capturing risk factor and adding alpha Global Stock Universe Proprietary VMQ screen identifies Alpha opportunities. Preserves factor risk attributes of each stock Construct portfolio Optimise portfolio to capture factor style from highest risk-adjusted expected alpha stocks Trade event time not calendar time based on an index rebalance schedule More timely use of stock price and factor information Update market pricing and valuation data API Research (VMQ score) Optimise Expected Alpha API Portfolios Capture factor style and add Alpha Pre-trade verification and sanity check Risk controlled Monitor and attribute performance Efficient trading 26

27 Capturing Value Factor Exposure Identify & impose constraints relative to MSCI World Value Weighted Index Active stock weights: +/- 1% Country and industry weights: +/- 2% Portfolio beta approx. 1 (no market timing) Valuation Factors less controlled provides alpha Momentum factor exposure held approx. equal to, but not less than, MSCI World Control other factor exposures to keep portfolio active risk around 2% pa Trade off expected alpha from its risk contribution Maximise Value exposure in risk controlled manner Capture the Style Factor Return, not just a style tilt 27

28 Smarter portfolios II API Global Diversified Fund (GDF) Aim to outperform MSCI World by 2-3% pa over rolling 5 year periods with 2.5-3% tracking error Alpha forecasts provided by VMQ screen Performance as at 31 May 2015 (AUD) 1 month (%) 3 months (%) Since inception (%) Holds stocks with preferred attributes based on MSCI World Value Weighted Index characteristics Portfolio construction optimised by sophisticated risk management software. API Global Diversified Fund MSCI World MSCI World Value Weighted Source: API, MSCI Transparently captures Value style factor characteristics with fewer securities, risk control, and additional expected alpha. *API Global Diversified Fund performance shown as gross of fees. Based on Model portfolio. Inception date 31 December

29 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 API Capital Smarter portfolios I API High Conviction Fund (HCF) HCF holds up to 25 securities Has returned 25.7% pa since inception in July 2011 Stocks selected from VMQ combined with fundamental outlook Active return since inception MSCI World: 5.3% pa MSCI WldVW: 6.3% pa Total Absolute Return (AUD) API High Conviction Fund MSCI World MSCI World Value Weighted 1000 Performance as at 31 May 2015 (AUD) 3 mths (%) 1 yr (%) 3 yrs (% p.a.) 800 API HCF MSCI World MSCI World Value Weighted Source: API, MSCI *API HCF performance shown as gross of fees. Currently offered as Separately Managed Account (SMA). Inception date 15 July

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