Post on 07-Dec-2014
description
Pictet Asset Management
Nidhi Mahurkar, Anthony Cheung, Olivier Doleires
November 2011
Pictet Total Return-Banyan
A long/short Asia ex-Japan fund
FOR PROFESSIONAL INVESTORS ONLY
Pictet Asset Management
1
3Pictet Total Return-Banyan Pictet Asset Management
PAM total return timeline
Alphanatics
(Mkt neutral,
Multi-Mgr)
Corto
(Europe, SMID)
PTR-Mandarin
(China)
9/2004 7/2006 10/2010
Global L/S
(Macro)
Q3/2012
PTR-Banyan
(Asia ex-Japan)
11/2011
Global L/S
(Trading)
Q1/2012
Europe Equity
Event Driven
Q2/2012
PTR-Corto
(Europe, SMID)
4/2010
Total AuM: USD 1.8 bn
Source: Pictet Asset Management, as at 30/09/2011
PTR-Kosmos
(Credit)
6/2011
Pictet Total Return-Banyan
2
5Pictet Total Return-Banyan Pictet Asset Management
Pictet Total Return-Banyan strategy at a glance
• Luxembourg UCITS, with weekly liquidity
• Long / Short equity strategy focused on Asia ex Japan
– proven ability to produce excellent returns while offering
downside protection
– the strategy has delivered 16.6% per annum (in USD, net of
fees) versus 14.0% MSCI EM Asia with lower volatility*
• Long bias with active management of the gross and net exposure to
provide downside protection
• Well defined process evolved over 15 years
– bottom-up stock selection allied to a proprietary screen to
identify opportunities
• Extensive experience investing in Asia
– lead managers born and educated in Asia with well developed
intelligence network on the ground
*Source: Pictet Asset Management, data from 31/07/2002-31/10/2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy that Nidhi
Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a
total return strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with the Global Investment Performance Standards (GIPS).
The data provided here is supplemental information.
6Pictet Total Return-Banyan Pictet Asset Management
Investment team
Nidhi MahurkarHead of Total Return Banyan
Olivier DoleiresInvestment Manager
Anthony Cheung Senior Investment Manager
20 years experience
EducationFirst class honours degree in Economics from M.S. University, Vadodara.
MBA from the Indian institute of Management, Bangalore.
HistoryPictet Asset Management 2001 to dateLazard 1996-2001American Express Bank 1991-1996
ResponsibilitiesStock selection and portfolio construction
6 years experience
EducationFirst class BSc in Economics from the London School of Economics
HistoryPictet Asset Management 2011 to dateGartmore 2008-2011 ABN Amro in Hong Kong 2007-2008Central Asset Investments Hong Kong 2005-2007
ResponsibilitiesStock selection and portfolio construction
11 years experience
EducationCertificat Fédéral de Capacité in Banking from the Commercial School in Fribourg and holds an Investment Administration Qualification (IAQ) from the Securities Institute London.
Chartered Alternative Investment Analyst (CAIA).
History
Pictet Asset Management 2000 to date
ResponsibilitiesPortfolio construction and risk management
7Pictet Total Return-Banyan Pictet Asset Management
Experienced investment team and well-resourced environment
Emerging Market Research (6 emerging market analysts)
Macro Economic Analysis(5 investment professionals)
PAM Strategy Unit*
(18 investment professionals)
Risk Management (7 investment professionals)
Other Investment TeamsEmerging Equities (9)
Emerging Debt (7)
Long/short China (3)
Long/short Credit (3)
Asian Equity Traders(2 professionals in London)
(2 professionals in Singapore)
Nidhi MahurkarHead of Total Return Banyan
Anthony Cheung Senior Investment Manager
Olivier Doleires
Investment Manager
Pictet Total Return-Banyan
INVESTMENT TEAM
* PAM Strategy Unit is an economic forum comprising senior investment professionals from equities, fixed income and balanced investment teams across PAM
8Pictet Total Return-Banyan Pictet Asset Management
Evolution of Asia ex Japan long/short strategy
-100
-50
0
50
100
150
200
250
300
350
400
450
Aug-
96
Aug-
97
Aug-
98
Aug-
99
Aug-
00
Aug-
01
Aug-
02
Aug-
03
Aug-
04
Aug-
05
Aug-
06
Aug-
07
Aug-
08
Aug-
09
Aug-
10
Aug-
11
%
Net Cumulative MSCI EM Asia Cumulative
Managed by
Nidhi Mahurkar
at Lazard as a
long only fund
Transfer
to
Pictet
Total Return objective set
(Cash and index futures
to manage downside risk)
Single name
shorts introduced
Source: Pictet Asset Management, data from August 1996 to August 2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy that Nidhi
Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a
total return strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with the Global Investment Performance Standards (GIPS). The
data provided here is supplemental information.
9Pictet Total Return-Banyan Pictet Asset Management
Asia ex Japan long/short strategy monthly performance
9.4-0.4-3.20.610.92.73.7-2.5-9.35.68.61.2-7.02010
2.0-1.78.90.2-7.32.52002
69.010.23.514.43.28.96.77.67.81.7-6.4-4.42.52003
18.12.610.73.15.34.7-1.8 -1.8-8.20.11.52.4-0.62004
31.76.59.9-6.910.2-3.68.23.23.3-3.0-9.49.02.92005
JUN
-11.9
39.5
-29.3
26.3
28.5
Total return
-7.7
-4.9
-1.9
-4.9
2.4
AUG
-6.7
9.4
-5.1
8.2
5.5
SEP
-0.4
-1.0
-2.7
7.2
5.3
OCT
5.4
-0.2
-9.6
11.2
NOV
4.9
0.1
-0.8
2.3
DEC
-6.7
-3.8
-7.8
0.2
6.3
JAN
-1.2
-1.6
1.8
-1.5
-4.7
FEB
9.9
1.3
-3.1
0.3
1.4
MAR
4.3
6.5
-2.0
6.2
9.3
APR
-4.1
13.7
-4.0
7.7
-8.0
MAY
0.1
-4.9
-5.0
2.6
-2.8
1.2
10.9
-4.0
9.9
-1.1
JUL
2011
2009
2008
2007
2006
Asia markets strategy % performance (net of fees - USD) as of 31.10.2011
Source: Pictet Asset Management, data from 31/07/2002-31/10/2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy that Nidhi
Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a
total return strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with the Global Investment Performance Standards (GIPS).
The data provided here is supplemental information.
• No double digit monthly loss since inception
10Pictet Total Return-Banyan Pictet Asset Management
Asia ex Japan long/short strategy performance
24.8%20.0%Annualised volatility
MSCI EM
Asia
Pictet Asia
ex Japan L/S
0.97%
0.46%
14.0%
237.3%
1.47%Sortino ratio
0.70%Sharpe ratio
16.6%Annualised return
313.0%Cumulative return
Source: Pictet Asset Management, data from 31/07/2002-31/10/2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy that Nidhi
Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a
total return strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with Global Investment Performance Standards (GIPS). The
data provided here is supplemental information.* Data as at end of October 2011.
MSCI EM Asia
Pictet Asia ex Japan L/S
-10.1%19.4%74.2%-52.8%41.6%33.2%27.5%15.3%51.0%-8.7%
-11.9%9.4%39.5%-29.3%26.3%28.5%31.7%18.1%69.0%2.0%
2011*201020092008200720062005200420032002
Portfolio in USD, net of fees versus MSCI EM Asia
Pictet Asia ex Japan L/S
0
100
200
300
400
500
600
Jul-
02
May
-03
Mar
-04
Jan-
05
Nov
-05
Sep-
06
Jul-
07
May
-08
Mar
-09
Jan-
10
Nov
-10
Sep-
11
MSCI EM Asia
11Pictet Total Return-Banyan Pictet Asset Management
Capturing the upside
12.7%
10.9%
6.7%
Jul-09
12.8%16.7%7.7%11.8%15.1%MSCI EM Asia
9.1%6.5%6.3%8.2%13.7%Pictet Asia ex
Japan L/S strategy
Average 5
best
months
April-09Jan-06Sept-07May-09
7.8%6.7%6.8%7.0%11.7%Eurekahedge Asia
Ex Japan L/S
On average over the 5 best-
performing months of the
Eurekahedge Asia Ex Japan
L/S, the strategy outperformed
the Eurekahedge peer group
Source: Bloomberg and Pictet Asset Management, data from 31/07/2002-31/10/2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy
that Nidhi Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund
adopted a total return strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with Global Investment Performance Standards
(GIPS). The data provided here is supplemental information.
5 best months of the Eurekahedge Asia Ex Japan L/S, in USD net since July 2002
0
36
9
1215
18
May-09 Sep-07 Jan-06 Apr-09 Jul-09 Average 5
best months
Eurekahedge Asia Ex Japan L/S Pictet Strategy MSCI EM Asia
%
12Pictet Total Return-Banyan Pictet Asset Management
Protecting the downside
-12.5%
-5.0%
-6.3%
Jun-08
-16.0%
-5.5%
-8.1%
Average 5
worst
months
-16.6%-14.3%-12.7%-24.1%MSCI EM Asia
-5.1%-7.8%-6.7%-2.7%Pictet Asia ex Japan
L/S strategy
Sep-08Jan-08Sep-11Oct-08
-7.4%-8.4%-8.5%-9.8%Eurekahedge Asia
Ex Japan L/S
When Eurekahedge Asian peer
group suffered their largest
negative performance, the
strategy successfully
controlled losses
Source: Bloomberg and Pictet Asset Management, data from 31/07/2002-31/10/2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy
that Nidhi Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund
adopted a total return strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with Global Investment Performance Standards
(GIPS). The data provided here is supplemental information.
5 worst months of the Eurekahedge Asia Ex Japan L/S, in USD net since July 2002
-25
-20
-15
-10
-5
0
Oct-08 Sep-11 Jan-08 Sep-08 Jun-08 Average 5
worst months
Eurekahedge Asia Ex Japan L/S Pictet Strategy MSCI EM Asia
%
Investment approach
3
14Pictet Total Return-Banyan Pictet Asset Management
Our key beliefs
• Bottom-up investing is the key to success in equity
markets over time
• Only cash flows matter, not reported earnings
• Look for non-linear growth opportunities in Asia
• Valuation focused approach, we also look at prospects
• Filter out the noise and avoid overcrowded trades
• Take advantage of momentum based mispricing
• Greater market inefficiencies persist in Asia providing
a favourable environment for stock picking
15Pictet Total Return-Banyan
Investment process summary
IDEA
GENERATION
PROPRIETARY QUANTITATIVE
SCREENING
Focus on free cash-flow
QUALITATIVE IDEA SOURCING
Pictet equity analysts
External research network
PORTFOLIO
CONSTRUCTION
Scenario based risk reward
assessment
HOLT Cash Flow Return on
Investment
Market Expectations - What is
priced in
MEET & EVALUATE MANAGEMENT
Industry factors
Franchise factors
Management track-record
Corporate governance
TYPICAL EXPOSURE
Gross: 100-170%
Net: 40-90%
POSITIONS
Long: 20-60
Short: 0-30
SCALING AND SIZING POSITIONS
±2,000companies±1200 Large & Mid Caps
( > USD 500m)
±800 Small Caps
( USD 250-500m)
FUNDAMENTAL
ANALYSIS
±150companies
RISK
MANAGEMENT
INVESTMENT TEAM
Pro-actively managing risk
Dynamic stop loss
INDEPENDENT RISK TEAM
Value at Risk
Liquidity
Leverage
50 - 90Positions
CLOSING DISCIPLINESFIVE ALPHA OPPORTUNITIESQUINTILE RANKING DAILY RISK REPORT
GLOBAL MACRO ECONOMIC AND SECTOR VIEWS
16Pictet Total Return-Banyan Pictet Asset Management
Output ~150 Companies
Systematic, repeatable and reliable process
QUANTITATIVE
PROPRIETARY SCREENING MODEL
updated weekly
3 stock specific filters
• Valuation
• Earnings revisions momentum
• Earnings quality
Focus on free cash flow
Databases
QUALITATIVE
• Management meetings
(~ 400 per annum)
• Industry contacts
• Pictet research analysts
• Sell side research
• Intelligence networks
• Buy side contacts
Output ~150
Companies
List of potential longs and
shorts grouped in quintiles
Output ~150 Companies
Idea generation
17Pictet Total Return-Banyan Pictet Asset Management
Fundamental analysis: five alpha opportunities
Unexpected negative earnings surprises
ShortsLongs
5
4
3
2
1
No shorting of small cap stocksOverlooked, under-researched securities with high
potential alpha based on competitive advantage,
can include potential M&A targets
Small caps
Unexpected positive earnings surprisesEarnings surprise
Overly optimistic expectations resulting in
unsustainable valuations, catalyst needed to correct
mispricing
Unjustifiably pessimistic market expectations,
undervalued assets and cash flows, catalysts
needed to correct mispricing
Mispriced
securities
Negative management change, overly aggressive
M&A, overleveraging of balance sheets, negative
shift in industry dynamics
Cost cutting, asset disposals, deleveraging, positive
management change or positive shift in industry
dynamics
Restructuring /
turnaround plays
Competitively disadvantaged companies, flawed
business models, poor cash flow generation,
unattractive valuation
Companies with dominant market positions,
consistently strong operations, attractive cash flow
characteristics on relatively inexpensive valuations
Structural winners /
losers
18Pictet Total Return-Banyan Pictet Asset Management
Portfolio construction
100-170%Typical gross exposure*
1-3% at costTypical short positions
1.5-5% at costTypical long positions
20% at single stock level, 50 bps at portfolio level Dynamic stop loss (shorts only)
40-90%Typical net exposure*
The fund is denominated in USD. Currency risk
Contracts for Difference, Options, Indices, Stock Futures,
Total Return Swaps Short exposure
Single stocks, Contracts for Difference, Options, IndicesLong exposure
50-90 (longs: 20-60, shorts: 0-30)Number of positions
* Excluding extreme market conditions - These figures represent anticipated typical exposure and not limits. There may be occasions
when we are net short.
Closing disciplines
• continuous monitoring of
expectations
• better opportunities
• disciplined price targets
• thesis no longer valid
• technical analysis
19Pictet Total Return-Banyan Pictet Asset Management
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
220%
240%
260%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
MSCI EM Asia TRI USD Cuml. Return GROSS NET
Asia ex Japan long/short strategy net and gross exposure
Take directional risk exploiting
the long term outperformance
of Asia ex Japan
Long and short approach across
macro environment
Defensive positioning in poor
markets
Source: Pictet Asset Management, data from 31/07/2002-31/10/2011, in USD net of fees. Past performance is no guarantee of future
performance. The track record is a client strategy that Nidhi Mahurkar has managed since July 1996 and brought to Pictet in May 2001
and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a total return
strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with
Global Investment Performance Standards (GIPS). The data provided here is supplemental information.
Net and gross exposure since July 2002
% o
f A
UM
Cum
ula
tive
Retu
rns
August 07
May 09
20Pictet Total Return-Banyan Pictet Asset Management
Risk management and monitoring
Investment team responsible for
daily risk control
Independent risk team responsible
for ongoing monitoring of risk:
- Volatility
- Exposure limits
- VaR
- Individual stock limits
- Portfolio concentration
- Single factor exposure
- Market cap
- Liquidity
- Country & sector breakdown
- Stress testing
Risk tool – APT
Regular formal review with Head of
Performance and Risk and Head of
Total Return Equities
OVERALL
PORTFOLIO
• On-going monitoring of
overall risk
characteristics
• Analysis of major
common risk sources
• Liquidity constraints:
90% of the total portfolio
can be liquidated in 1
week
• Gross and Net exposure
EXCEPTIONS
• Any breaches or problems
are immediately brought
to the attention of the
investment manager
• Investment manager to
take appropriate action
INDIVIDUAL
SEGMENT LEVEL
• Liquidity
• Long - Mkt Cap>USD500m
• Short - Mkt Cap >USD1bn
• Long Small Cap - Max 10%
(Mkt Cap USD250m –
USD500m)
• Price movement greater
than 15% triggers a review
• Analysis of diversification
of bets and success rate of
different types of bets
21Pictet Total Return-Banyan Pictet Asset Management
Portfolio composition &
technical details
4
22Pictet Total Return-Banyan Pictet Asset Management
2.7Tata Motors
2.7Li & Fung
3.1Itc – Dematerialised
3.4Hdfc Bank
2.9Hero Motocorp
Top 5 long positions in %
Portfolio allocation Asia ex Japan long/short strategy
Long
-2.6
0.0
0.0
-8.4
0.0
-5.2
-2.1
0.0
0.0
Short
2.4Utilities
0.7Telecom. Services
0.0IT
15.6Financials
7.7Cons. Staples
16.2Cons. Discretionary
7.0Industrials
7.5Materials
Sector breakdown in %
7.9Energy
ShortLongCountry breakdown in %
0.0
-2.1
0.0
0.0
0.0
-5.2
-11.1
0.5Thailand
5.3Singapore
0.7Philippines
3.1Indonesia
26.5India
4.2Hong Kong
24.7China
Source: Pictet Asset Management, as at 31 October 2011. Nidhi Mahurkar has managed this strategy since July 1996. She brought it to Pictet in May 2001 and has managed it throughout her tenure with
Pictet Asset Management. A long only mandate at inception the fund adopted a total return strategy in July 2002 using long and short investments in Asian ex Japan countries.
83.4Gross
46.7Net
Exposure in %
23Pictet Total Return-Banyan Pictet Asset Management
-6.122.7USD 5b-15b
-2.710.7USD 1b-5b
ShortLong%
-18.3
-9.5
0.0
27.0More than USD 15b
4.7Less than USD 1b
65.1Total
Market cap analysis
ShortLong%
100.0
0.0
0.5
99.5
100.0Total*
4.61 to 5 days
95.0Less than 1 day
0.4More than 5 days
Days to liquidate*
Portfolio allocation Asia ex Japan long/short strategy
* Days to liquidate positions in the portfolio using one fifth of the average three months trading volume
Source: Pictet Asset Management, as at 31 October 2011.Nidhi Mahurkar has managed this strategy since July 1996. She brought it to Pictet in May 2001 and has managed it throughout her tenure
with Pictet Asset Management. A long only mandate at inception the fund adopted a total return strategy in July 2002 using long and short investments in Asian ex Japan countries.
24Pictet Total Return-Banyan Pictet Asset Management
Pictet Total Return-Banyan
P USD P USD LU0637929778
I USD* I USD LU0637929265
Class ISIN Code
1.60%
1.10%
Management Fee
0.40%
Adm & Custody Fees
0.40%
(*) Minimum initial investment: USD 1,000,000
• Reference currency: USD
• Legal status: Luxembourg SICAV - Part I - UCITS
• EU Saving Directive: in scope, tax
• NAV calculation: weekly on Friday
• Notice period: 5 business days prior to NAV (5pm on Friday, Luxembourg time)
• Performance fee: 20% with high watermark
• Hurdle rate: USD LIBOR 3 months
• Launch date: 2 November 2011
• Hedged share classes: available on demand (EUR, GBP, CHF)
Conclusion
5
26Pictet Total Return-Banyan Pictet Asset Management
Pictet Total Return-Banyan – Concluding messages
Proven ability to produce
excellent returns by
capturing Asian market
growth while offering
downside protection
A portfolio management
team with extensive
emerging markets
experience, local language
skills and a local network
of contacts
The strategy has delivered
16.6% per annum (in USD,
net of fees) versus 14.0%
MSCI EM Asia with lower
volatility
UCITS compliant with
weekly liquidity
LONG/SHORT STRATEGY INVESTMENT TEAM
COMPELLING
RISK RETURN PROFILE LEGAL FRAMEWORK
Source: Pictet Asset Management, data from 31/07/2002-31/10/2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy that Nidhi
Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a
total return strategy in July 2002 using long and short investments in Asian ex Japan countries. Pictet Asset Management claims compliance with Global Investment Performance Standards (GIPS). The
data provided here is supplemental information.
Appendices
6
28Pictet Total Return-Banyan Pictet Asset Management
Fundamental analysis
Source: Pictet Asset Management, data from Sept 2002 to September 2011. Gross allocation, rebased to 100. The track record is a client strategy that Nidhi Mahurkar has managed since July 1996
and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a total return strategy in July 2002 using
long and short investments in Asian ex Japan countries.
0
50
100
150
200
250Se
p-02
Mar
-03
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Gro
ss e
xpos
ure
%
Structural winners / losers Restructuring /
Turnaround plays
Mispriced
securities
Earnings
surprise
Small
Cap
Portfolio allocation September 2002 – September 2011
Managing beta & exploiting alpha opportunities
29Pictet Total Return-Banyan Pictet Asset Management
Long – structural winner: Bank Rakyat (Indonesia)
• Leader in microfinance (32% of loans) in Indonesia with the best
operating metrics of almost any bank in the world driven by
ongoing demand for high yield consumer credit
• Good credit quality, rising pre-provision profitability
• Screens as cheap relative to growth and profitability at 10.2 x
2012 P/E, 2.6x 2012 P/B for a 31% ROE and strong positive
earnings revisions
Source: Pictet Asset Management, as at 27 September 2011.
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
Mar
10
Apr
10
May
10
Jun
10
Jul 1
0
Aug
10
Sep
10
Oct
10
Nov
10
Dec
10
Jan
11
Feb
11
Mar
11
Apr
11
May
11
Jun
11
Jul 1
1
Aug
11
Last Price Source : Bloomberg
We believe no other
Indonesian bank can seriously
compete with BRI’s dominance
in the sub IDR 50m loan
category – where it has
already cornered the market
Bank Rakyat (YTD +9.5%)
30Pictet Total Return-Banyan Pictet Asset Management
Long – structural winner: ITC (India)
• India’s leading diversified consumer goods company -market leader
in cigarettes and a portfolio of strong consumer brands
• Strongly rising operating and free cash flow driven by higher profits
from cigarettes
• ROEs rising sharply as the company has increased dividend pay
out ratio from 50-80%
• Non cigarette capex stable and declining as percentage of cash
flow – efficiency ratios moving in the right direction
• Still on a high growth trajectory with strong earnings revisions
Source: Pictet Asset Management, as at 27 September 2011.
70
90
110
130
150
170
190
210
230
Mar 09
May
09
Jul 0
9
Sep
09
Nov
09
Jan
10
Mar 10
May
10
Jul 1
0
Sep
10
Nov
10
Jan
11
Mar 11
May
11
Jul 1
1
Last Price Source : Bloomberg
We believe the stock is still
cheap relative to consumer
peers in Asia
ITC (YTD +11%)
31Pictet Total Return-Banyan Pictet Asset Management
Short – mispriced security: Sinopharm (China)
• The largest pharmacy distributor in China screening as grossly
overvalued
• Red Alert on our screen with P/E 28x, price/cash flow 23x, P/B 2.6x
vs 12% ROE - poorly valued on HOLT cash flow returns
• Highly exposed to government policy changes
• Negative catalyst as NDRC announced first batch of pricing cuts on
provincial drug tenders
• The company's balance sheet showed considerable deterioration
• Closed short after 23% return
Our quantitative screen
highlights Sinopharm - an
expensive stock with very poor
cashflow generation
15
17
19
21
23
25
27
29
31
31 M
ay 1
1
07 J
un 1
1
14 J
un 1
1
21 J
un 1
1
28 J
un 1
1
05 J
ul 1
1
12 J
ul 1
1
19 J
ul 1
1
26 J
ul 1
1
02 A
ug 1
1
09 A
ug 1
1
16 A
ug 1
1
23 A
ug 1
1
30 A
ug 1
1
06 S
ep 1
1
Last Price Source : Bloomberg
Sinopharm
Source: Pictet Asset Management, as at 27 September August 2011.
Short
Cover Position closed
end SeptemberCover
32Pictet Total Return-Banyan Pictet Asset Management
Short – structural loser: Agricultural Bank of China (China)
• Low LDR with no way to leverage as monetary policy will not loosen
in 2H
• Early signs of NPL risks in Local Government Financing Vehicles
• Valuation at 1.7x P/B , 20% ROE extremely vulnerable as medium
term ROE likely to fade to 14% on our scenario analysis
• The bank went through the IPO price and derated from P/B1.7x to
P/B1.1x 1 year forward - P/B in a space of 6 months - position
closed Source: Pictet Asset Management, as at 27 September 2011.
Two key valuation drags:
capital raising pressure &
asset quality likely to affect
the bank's earnings and
growth strategy in a negative
way
Agricultural Bank of China: 32% return
2.00
2.40
2.80
3.20
3.60
4.00
4.40
4.80
5.20
25
-Feb
-11
11
-Ma
r-1
1
25
-Ma
r-1
1
08
-Ap
r-1
1
22
-Ap
r-1
1
06
-Ma
y-1
1
20
-Ma
y-1
1
03
-Ju
n-1
1
17
-Ju
n-1
1
01
-Ju
l-1
1
15
-Ju
l-1
1
29
-Ju
l-1
1
12
-Au
g-1
1
26
-Au
g-1
1
09
-Sep
-11
23
-Sep
-11
Last price Source: Bloomberg
ShortShort
Position closed
end September
33Pictet Total Return-Banyan Pictet Asset Management
Differentiation versus Asian and Global Hedge Funds
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
R Squared R Squared in Up Markets R Squared in Down Markets
Eurekahedge Asia ex Japan Long/Short Equity Dow Jones Credit Suisse Hedge Fund Index MSCI EM Asia
0.280.610.66Pictet Asia ex Japan L/S strategy
Beta in down
markets
Beta in up
marketsBeta
0.150.280.61MSCI EM Asia
0.020.310.36Dow Jones Credit Suisse Hedge Fund
Index
R Squared in
down markets
R Squared in
up marketsR Squared
0.110.480.63Eurekahedge Asia ex Japan Long/Short
Equity
Differentiated from Asian and
global hedge funds,
particularly in down markets
Demonstrated high ability to
generate returns independently
from market movements
Source: Hedge Fund Intelligence, MSCI, Dow Jones Credit Suisse, 24 August 2011
Past performance is no guarantee of future performance. The track record is a client strategy that Nidhi Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed
throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a total return strategy in July 2002 using long and short investments in Asian ex Japan countries.
34Pictet Total Return-Banyan Pictet Asset Management
Why Asia ex Japan equities long/short?
Risk-return profile versus other hedge fund strategies and markets
Source: Pictet Asset Management, data from July 2002 to October 2011, in USD net of fees. Past performance is no guarantee of future performance. The track record is a client strategy that Nidhi
Mahurkar has managed since July 1996 and brought to Pictet in May 2001 and has managed throughout her tenure with Pictet Asset Management. A long only mandate at inception the fund adopted a
total return strategy in July 2002 using long and short investments in Asian ex Japan countries.
31.07.2002-31.10.2011
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
0% 5% 10% 15% 20% 25% 30%
Annualized Volatility
Annu
aliz
ed R
etur
n
Pictet Asia ex Japan L/S Strategy MSCI EM Asia Eurekahedge Asia ex Japan L/S
MSCI World Citigroup WGBI CS EM Hedge Fund Index
35Pictet Total Return-Banyan Pictet Asset Management
Investment team
Nidhi MahurkarHead of Total Return Banyan
Nidhi joined Pictet Asset Management in 2001
from Lazard Asset Management where she focused
on country funds and global emerging markets
sector research, covering utilities, financials and
technology. Prior to Lazard, she worked at
American Express Bank.
At Pictet Nidhi has been managing a Asia total
return strategy since 2002. Prior to her current
position she has been leading Asia ex Japan and
Global Emerging Markets portfolio construction
teams.
Nidhi is born and educated in India She graduated
with a first class honours degree in Economics
from M.S. University, Vadodara and has a MBA
from the Indian institute of Management,
Bangalore.
Nidhi is fluent in English, Hindi and Marathi.
Anthony Cheung Senior Investment Manager
Anthony joined Pictet Asset Management in
May 2011. Anthony was previously at
Gartmore Investment Management as an
investment manager in the global emerging
markets team, specialising in China and
industrials. Before Gartmore, he worked at
ABN AMRO Asset Management and Central
Asset Investments in Hong Kong covering
long/short Asian strategies.
Anthony is born and brought up in Hong Kong.
He has a first class BSc in Economics from
the London School of Economics.
Anthony is fluent in English, Mandarin and
Cantonese.
Olivier DoleiresInvestment Manager
Olivier joined Pictet & Cie in 1999 and moved to
Pictet Asset Management in 2000. Before joining
the Pictet Total Return-Banyan team, Olivier spent
5 years as an Investment Manager in the Multi-
Asset and Total-Return team in Geneva where he
was managing Absolute Return funds.
At the beginning of his career at Pictet Asset
Management, Olivier spent six years in London and
Geneva setting up the Hedge Funds Servicing unit.
Olivier obtained a Certificat Fédéral de Capacité in
Banking from the Commercial School in Fribourg
and holds an Investment Administration
Qualification (IAQ) from the Securities Institute
London. He is also a Chartered Alternative
Investment Analyst (CAIA).
This marketing document is issued by Pictet Funds (Europe) S.A. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of or located in any locality,
state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, regulations, annual and semi-
annual reports may be relied upon as the basis for investment decisions. These documents are available on www.pictetfunds.com or at Pictet Funds (Europe) S.A., 3 Boulevard Royal, L-2449 Luxembourg.
The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Funds (Europe) S.A. has not taken any
steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax
treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this
investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.
The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested.
Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.
Past performance is neither guarantee nor a reliable indicator of future results. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This
marketing material is not intended to be a substitute for the fund’s full documentation or for any information which investors should obtain from their financial intermediaries acting in relation to their
investment in the fund or funds mentioned in this document.
This document is for professional investors only.
www.pictet.com
Pictet Asset Management SARoute des Acacias 60, 1211 Geneva 73
Pictet Asset Management LimitedAuthorised and regulated by the Financial Services Authority
Moor House, Level 11
120 London Wall
London EC2Y 5ET
For more information, please contact:
Risk factors
The value of an investment can go down as well as up and investors may not get back the full amount invested. The value of overseas securities will be subject to exchange rate fluctuations. Any views or opinions expressed in the preparation of this document are based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources.