Post on 27-Dec-2015
CONFIDENTIAL - FOR PROFESSIONAL INVESTORS ONLY
WHEB Listed EquityMay 2014
www.whebgroup.com
CONFIDENTIAL 2
Important information
This presentation, its contents and any related communication (altogether, the “Presentation”) is provided by WHEB Asset Management LLP (“WHEB Asset Management”) and: (1) does not constitute or form part of any offer or invitation to buy or sell any security including any shares in the FP WHEB Sustainability Fund (“Shares” and “Fund” respectively), or any offer to perform investment management or other investment business; (2) should not be relied upon and should not form the basis of any investment decision in relation to Shares or otherwise; any such investment decision should be made only on the basis of authorised material provided to you, legal documents and the advice of your professional advisers; (3) is not and should not be treated as advice of any kind, investment research or a research recommendation; (4) any opinions expressed in this Presentation should not be relied upon as an indication of future performance of the Fund, Shares or any stock market, or of any guarantee of any return from the Fund or Shares; (5) is in summary form and may refer to and may be materially affected by future events, and may contain statements, estimates and projections of anticipated future performance which reflect various assumptions which may or may not be within the control of WHEB Asset Management or be correct; (6) WHEB Asset Management has exercised all reasonable care in preparing this Presentation and it includes information from sources that we consider to be reliable, however no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the Presentation or as to whether any future event may occur, by WHEB Asset Management, its group companies and its or their directors, officers, employees, associates and agents (“WHEB Persons”); (7) is subject to change at any time and no WHEB Person is under any obligation to inform any person of any such change; (8) is only made available to recipients who may lawfully receive it in accordance with applicable laws, regulations and rules and binding guidance of regulatory bodies; (9) in the UK, is only directed at and available to persons who are Professional Clients or Eligible Counterparties; and (10) is not available to or directed at persons located in the U.S. or to U.S. Persons, as defined in SEC Rule 902 of Regulation S under the U.S Securities Act 1933, as amended, and does not constitute an offer to sell or a solicitation of an offer to buy securities in the United States, other than pursuant to an exemption under that act.
To the fullest extent permitted by applicable law, regulation and rule of regulatory body, WHEB Persons shall have no liability for any loss in relation to the Presentation, however arising including without limitation direct, indirect, consequential or loss of profit.
The prices of Shares and the income from them can fall as well as rise and you may not get back the amount originally invested. This can be as a result of market movements and also of variations in the exchange rates between currencies. Past performance is not a guide to future returns and may not be repeated.
By opening, reading and not returning this Presentation you agree to and acknowledge the above.
“WHEB Asset Management” is a trading name of WHEB Asset Management LLP, whose registered office is at 2 Fitzhardinge Street, London W1H 6EE and which is registered in England and Wales with number OC 341489. WHEB Asset Management LLP is authorised and regulated by the FCA with registered number 496413.
Fund Partners Limited (formerly IFDS Managers Limited) is the Authorised Corporate Director of the Fund and is authorised and regulated by the Financial Conduct Authority and has its registered office at Cedar House, 3 Cedar Park, Cobham Road, Wimborne, Dorset, BH21 7SB’.
FP WHEB Sustainability Fund is listed on ImpactBase, the online directory of impact investment funds and products.
3
WHEB: Leading Sustainability Boutique
CONFIDENTIAL
• Founded in 2002
• £370m of assets under management1
• Team formerly ran leading strategies at Jupiter, Henderson and Aviva
Source: 1WHEB Group Feb 2014
CONFIDENTIAL 4
WHAT IS WRONG WITH THE FUND MANAGEMENT
INDUSTRY?
Markets are beset by short-termism
CONFIDENTIAL 5
FTSE average holding period, 1966-20051
1966 1976 1986 1996 20060
1
2
3
4
5
6
7
8
Yea
rs
Source:1Bank of England/London Stock Exchange
This is a real quote!!
CONFIDENTIAL 6
“We’d like to help you update your models for the fact that Christmas falls on a Tuesday this year”US CFO
Fund Managers tend to hug benchmarks
CONFIDENTIAL 7
“As long as the music is playing, you’ve got to get up and dance, we’re still dancing.” Charles Prince, Citigroup CEO, July 2007
Benchmarks tend to be backwards Looking
CONFIDENTIAL 8
Is the Index a good starting point for constructing a portfolio?
Source: MSCI. Those shares coloured in red represent top 15 index constituents in 1993 that have since dropped out of the top 15. Those coloured in green represent new entrants to the top 15 list during the period.
RankMSCI World 30/6/1993
MSCI World 30/6/2013
1 1.3% AT&T 1.5% Exxon
2 1.3% Exxon 1.4% Apple
3 1.3% GE 1.0% Microsoft
4 1.0% Sumitomo 0.9% GE
5 1.0%Ind.Bank Japan 0.9% J&J
6 1.0%Daiichi Kangyo 0.9% Google
7 1.0% Fuji Bank 0.8% Chevron
8 0.9% Wal-Mart 0.8% Nestle
9 0.9% Coca-Cola 0.8% P&G
10 0.8% Toyota 0.8%Wells Fargo
11 0.8% Sakura Bank 0.7% IBM
12 0.8% Royal Dutch 0.7% JP Morgan
13 0.7% Tokyo Electric 0.7% AT&T
14 0.7% Philip Morris 0.7% HSBC
15 0.6% Merck 0.7% Pfizer
CONFIDENTIAL 9
Have Ethical Funds done enough to be different?
National Grid
7.5%
4.5%
4.2%
3.9%
3.7%
Shire
Tesco
Lloyds Banking Group
Prudential
Glencore Xstrata
Legal & General Group
BG Group
Vodafone
BT Group
3.6%
3.5%
3%
2.1%
1.6%
Source: Anonymous ethical fund fact sheet. Data as at 31 March 2014.
Fund Management Industry Lacks Transparency
CONFIDENTIAL 10
Active fund management full of “terminology, pseudoscience and sales patter”Michael Johnson, Centre for Policy Studies (CPS)
CONFIDENTIAL 11
IN SUMMARY!!• SHORT TERM• BACKWARD LOOKING• OPAQUE• HERD MENTALITY
CONFIDENTIAL 12
DOES SUSTAINABLE INVESTMENT HAVE ANY
ANSWERS?
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What is happening in the economy and society?
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Population
GDP
Paper consumption
Northern hemisphere average surface temperatureSpecies extinctions
Fisheries exploited
Loss of tropical rainforest and woodland
Water use
CO2 concentrationOzone depletion
Foreign investmentMotor vehicles
Source: New Scientist 18/08/2009 reporting Singer-Verlag, Berlin, Heidelberg, New York on unsustainable exponentials
1750 1800 1850 1900 1950 2000
CONFIDENTIAL 14
Traditional energy production is unsustainable
Source: UNEP
Energy Efficiency is part of the solution
1515
* Source: 1. McKinsey 2. Bloomberg 15/05/14 3. Johnson Controls annual report 2012
Lighting sales growth 2011-20201
-100%
0%
100%
200%
300%
400%
500%
Use of LEDs will cut energy use in general lighting worldwide by 24% by 20201
Retrofitting the Empire States Building cost $1m, which paid for itself in 18 months3 04/12 07/12 10/12 01/13 04/13 07/13 10/13 01/14 04/14
80
130
180
Performance2
Acuity Brands S&P Midcap 400
+90%2
CONFIDENTIAL 16
Half the population will live under water stress by 20301
Source: 1. Bank of America
Water efficiency doesn’t have to be very high tech
1717
Sources: 1. Geberit Annual Report 2013 2. Bloomberg 15/05/14
In 2013 alone, installed Geberit products saved 2,000 million m3, more than half of the annual water consumption of all German households.1
04/12 07/12 10/12 01/13 04/13 07/13 10/13 01/14 04/1480
100
120
140
160
Performance2
Geberit Swiss Market
+24%2
CONFIDENTIAL 18
World population is growing and ageing
Average global life expectancy: 1960 – 52 / 2011 – 681
1 http://projects.flowingdata.com/life-expectancy/
Health represents a broad and diversified opportunity
1919
Sources:
85+ age group requires 6x more healthcare products and services than those under 651
1 Hartman M et al. Health Affairs 2008;27:w1-w12, 2 INSEE, Kepler Care Home initiation March, 2014, 3 Bloomberg 15/05/14
French population growth by age (2010-60E)2
04/12 07/12 10/12 01/13 04/13 07/13 10/13 01/14 04/1480
100
120
140
160
180
200
220
Performance3
Orpea CAC
+78%3
CONFIDENTIAL 20
Global infrastructure is significantly underinvested
2 http://www.mckinsey.com/insights/mgi 3 Reuters
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Opportunities from infrastructure investment
Infrastructure investment required for mitigation and adaptation
Sources: 1http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/8-04032013-BP/EN/8-04032013-BP-EN.PDF 2 Bloomberg 15/05/2014
04/12 07/12 10/12 01/13 04/13 07/13 10/13 01/14 04/1480
100
120
140
160
180
200
220
Performance2
Hera FTSE MIB
+52%2
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Investing in Solutions to Sustainability Challenges
CONFIDENTIAL
Cleaner Energy
WaterManagement
EnvironmentalServices
Resource Efficiency
SustainableTransport
Health
Education
Well-being
Safety
CONFIDENTIAL 23
Long-term growth
The growth rates of the universe are weighted average growth rates of the individual stocks based on their current market capitalisations. The growth rates of MSCI World are weighted average growth rates of the constituents based on their weightings in the index.1The 5-year historical sales growth of individual stocks is calculated as: [((Most recent sales growth / Sales growth five years earlier) ^ 0.2) – 1 ] * 1003The 1-year forecast sales growth of individual stocks is calculated as: [(Sales estimate for current financial year / Comparable sales a year earlier) -1] * 100Source: Bloomberg. (5-year and 1-year data are the latest available from Bloomberg as at 31/3/2014.)
Universe MSCI World0%
2%
4%
6%
8%
10%
12%
5-year Historical Sales Growth1
Universe MSCI World0%
2%
4%
6%
8%
10%
1-year Forecast Sales Growth2
CONFIDENTIAL 24
FP WHEB Sustainability Fund Top 10 Holdings
Quanta Services – Energy Infrastructure
2%
1.9%
1.9%
1.8%
1.8%
Orpea – Nursing Homes
Xylem – Water Management
Covidien – Medical Devices
Novo Nordisk – Diabetes Treatment
Praxair – Gases and Coatings
Trimble – Resource Efficiency
Borg Warner – Emission Reduction
Thermo Fisher – Life Sciences
1.8%
1.8%
1.8%
1.8%
1.8%
Source: Bloomberg. Data as at 30 April 2014.
Pentair – Water Management
CONFIDENTIAL 25
WHAT DO WE MEAN BY “INTEGRATED ESG”?
“FUNDEMENTAL RESEARCH”?“ENGAGEMENT”?
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Most analysts miss half the picture
CONFIDENTIAL
A narrow financial focus… …ignores vital information
How heat pumps work *
1. Universe Formation
Companies provide solutions to sustainability challenges
At least one third of its business coming from one of our nine themes
Heat pumps regarded as renewable energy in the European Union
Research intensive process…
2727
LONG-TERM SUSTAINABLE GROWTH | INTEGRATED STOCK-LED RESEARCH | FOCUSED INDEPENDENT CLIENT-DRIVEN | PERFORMANCE AND UPDATE
Over 28,900 active trading companies1
* Source: East Tech Electrical
2. Idea Generation
Used quant screen to identify Nibe, a quality company, thinly covered by brokers
Investment universe (over 1,000 stocks)
Investment universe
(over 1,000 stocks)
Company background
Nibe Industrier is a European market leader for heat pumps and wood-burning stoves
4. Portfolio Monitoring
4.5 year average holding period…
2828
LONG-TERM SUSTAINABLE GROWTH | INTEGRATED STOCK-LED RESEARCH | FOCUSED INDEPENDENT CLIENT-DRIVEN | PERFORMANCE AND UPDATE
* Source: Bloomberg as of 2 May 2014
3. Fundamental Analysis
01/12 04/12 07/12 10/12900
1000
1100
Swedish market (OMX)
Valuation disciplineInitiated a position at a 4-year low P/E (13x)
*
Fundamental focus Did not shy
away from high quality Co amid European crisis
-16%*
Quarterly results reviewsResults continued to validate our investment thesis
05/12 11/12 05/13 11/1380
100
120
140
160
180
200
Nibe (% return since holding)
Financial angle- Consistent revenue and
earning growth- High profitability and
returns even during tough market conditions
Sustainability angle- Increasing interest in
renewable energy- Low market penetration- Supportive govt policies
(e.g. UK)
Management meetingLearnt the latest
development of the Co and the sector
EngagementVoted against the Co
due to the lack of independent sub-
committees
EngagementVery satisfactory response
from the chairman
+91%*
Identifying higher quality management teams…
2929
Fundamental Analysis: Faiveley 58% / Wabtec 63%
• Sector is highly exposed to business ethics risks though long-term contracts, role in public procurement, Transparency International Bribe Payers’ Index.
• Our analysis indicated that Faiveley has weaker governance, related party transactions, lack of independence, poor disclosure
• Faiveley had poorer management of business ethics issues when compared to Wabtec
Transparent: Who holds us to account?
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• Full list of holdings published on website
• Comprehensive quarterly Engagement and Voting Report
• Independent Investment Advisory Committee (below) reviews holdings quarterly
• 12-month trailing average holding period published monthly
• Summary Minutes of Investment Advisory Committee meeting published
“Sunlight is the best disinfectant”1
1U.S. Supreme Court Justice Louis Brandeis
Ebba SchmidtResponsible Investment Manager at the UK Pension Protection Fund (PPF)
David Lloyd OwenWaste and Water Industry Expert
Nick RobinsCo-Director UN Inquiry into the Design of a Sustainable Financial System
Ben GoldsmithCo-founder of WHEB Group
Geoff HallChairman of WHEB Asset Management. Former Chief Investment Officer at Allianz Insurance Plc
Tristan HillgarthFormer CEO Invesco Europe, and Head of Jupiter Private Clients
LONG-TERM SUSTAINABLE GROWTH | INTEGRATED STOCK-LED RESEARCH | FOCUSED INDEPENDENT CLIENT-DRIVEN | PERFORMANCE AND UPDATE
CONFIDENTIAL
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Conclusion
CONFIDENTIAL
Leading team
Growth
Integrity
Every stock in our universe provides a solution to a sustainability challenge1
Universe growing faster than MSCI World Index1
Long track-record of out-performance
1
2
3
FP WHEB Sustainability Fund
1Source: WHEB Listed Equity estimates