Investment managers - Association of Financial Mutuals › files › files › investment...
Transcript of Investment managers - Association of Financial Mutuals › files › files › investment...
Investment managers
panel
*Oliver Stones, Quilter
*Guy Ellison, Investec
*Craig Veysey, Sanlam Private Investments
AFM Presentation at The Belfry
Oliver Stones
18 October 2012
European Armageddon Postponed
4
FIXED INCOME – MARKET PERFORMANCE
Source: FTSE, Merrill Lynch and JPM Indices, 30 September 2012, figures are total return in GBP terms, unhedged, apart from Global HY and Global Corporates which are currency hedged
Q3 2012 Q2 2012 Q1 2012
UK Gilts 1.14% 3.76% -1.74%
UK Index-linked Gilts -2.64% 0.65% -1.51%
Global Sovereigns -0.03% 3.13% -3.35%
UK Inv Grade Corps 6.42% 2.08% 3.43%
Global Inv Grade 3.91% 1.67% 3.23%
Global High Yield 5.43% 1.09% 6.95%
EM Local Currency 1.79% 0.64% 5.34%
FTSE 100 4.19% -2.13% 4.78%
5
EUROPE’S WEB OF DEBT
Source: Bank for International Settlements, 2008, latest data available
6
EUROPEAN ANXIETY EASES… TEMPORARILY ?
Source: Bloomberg October 2012
7
FIXED INCOME – MAIN THEMES TODAY
Can Greece remain in the euro?
Will Spanish banks need recapitalisation?
Systemic risk implications on Italy and France
Will eurozone policymakers do what it takes to save the euro?
Will OMT (Outright Monetary Transactions) be ‘the’ solution?
European growth non-existent …
…whilst the rest of the world recovers?
Inflation is dead?
8
EUROZONE – POSSIBLE POLICY MEASURES
Further bank bailouts : use of European Stability Mechanism or European Financial Stability Fund?
ECB further action: rate cuts / Long Term Refinancing Option / Sovereign bond purchases / OMT
Fiscal Union: mutualisation of eurozone bonds or pooled debt redemption fund
Banking Union: Joint strict supervision of banks, eurozone deposit guarantee scheme
Pro-Growth measures: European Investment Bank infrastructure spending / QE
9
EUROZONE – ARMCHAIR POLITICS
ESM approved by Germany but 54% polled disagree, Merkel under pressure
EU elections now referendums on austerity programmes : France
Some surprise pro-Euro results however : Greece and Denmark
Will Spain take the ‘political poison’ of a bail out?
Opportunistic Catalonian independence bid sets uncomfortable precedent
Italian domestic politics will dominate in the New Year
Renegotiation of (Greek) bailout terms replaced by more time to satisfy the terms
10
GREEK EXIT MADE TANGIBLE
Greece fails to meet ‘Trioka’s austerity terms leading to…
Refusal of any further EU / ECB / IMF bail out money
Leading to complete bankruptcy
Social and economic breakdown
Loss of political control / Martial law
Imposition of capital controls
Immediate (but temporary) nationalisation of all banks
Redenomination of currency
Devaluation
Default leading to Debt-forgiveness
Stabilisation of new (old) currency at ‘comfortable’ level
Flow of ‘Hot money’ back into ‘cheap’ economy
Economic recovery / bonanza time?
11
FINANCIALS: CREDIT COVERAGE REMAINS WEAK
Source: Bloomberg (end of Q2 2012), July 2012
12
FINANCIALS: NPL / TOTAL LOANS
Italian Banks with highest NPLs
NPLs in Spain look questionable
Greek Banks
Lloyds stands out
Source: Bloomberg (end of Q2 2012), July 2012
*
*Non Performing Loans
13
FINANCIALS: LOAN LOSS RESERVES / NPAS
Source: Bloomberg (end of Q2 2012), July 2012
Italian & Spanish Banks appear under-reserved
Lloyds stands out
*
*Non Performing Assets
14
EURO RESILIENCE HAS BEEN REMARKABLE
Source: Bloomberg October 2012
15
THE TWO SPEED EUROPE – NOW ADD MORE AUSTERITY…
Source: Bloomberg October 2012
16
THE FUNDING COST ‘CORRECTION’ STILL HAS A LONG WAY TO GO
Source: Bloomberg October 2012
17
DISCLAIMER
This presentation has been prepared only for the recipient and date shown on the front page. It is not intended
for any other persons and should not be relied upon by other persons.
This presentation has been prepared for information purposes only and is not a solicitation or an offer to buy or
sell any security. It does not purport to be a complete description of our investment policy, markets or any
securities referred to in the material. The information on which the presentation is based is deemed to be
reliable, but we have not independently verified such information and we do not guarantee its accuracy or
completeness. All expressions of opinion are subject to change without notice. Any reference to the Quilter
model portfolio, which is used for internal purposes, is purely illustrative and should not be relied upon. The
figures quoted do not include charges.
Investors should remember that the value of investments, and the income from them, can go down as well as
up and that past performance is no guarantee of future return. You may not recover what you invest. Changes
in exchange rates may have an adverse effect on the value, price or income of foreign currency denominated
securities. Levels and bases of taxation can change. Investments or investment services referred to may not be
suitable for all recipients.
Quilter is the trading name of Quilter & Co. Limited, registered in England with number 01923571, registered
office at St Helen’s, 1 Undershaft, London EC3A 8 BB. Quilter is a member of the London Stock Exchange,
authorised and regulated by the UK Financial Services Authority and regulated under the Financial Services
(Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey
and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey)
Law 1987 to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects the
regulatory system that applies will be different from that of the United Kingdom.
Market Outlook For 2013
Guy Ellison – UK Equities
20 UK Gilts
Expensive Insurance
21 UK Gilts
Limited Upside From Here – Barring Armageddon
22 UK Credit
Still Some Value
23 UK Equities
2012 Looking Better Than May Have Been Expected
24 Equity vs. Credit Crossover Equity Yields Now Ahead Of ‘A’ Grade Debt
25 Reasons To Be Cheerful?
Equities (On Headline Measures) Still Look Cheap
26 Major Equity Markets
Despite The Uncertainty, Shaping Up To Be A Good Year
27 Gold
Where Could We Go From Here?
28 Oil
Geo-Political Insurance
29 Inflation
All Benign For Now
30 QE and Inflation
Where Is The Risk To Performance?
Equities Cash Property Gilts
Corporate
Bonds No of Years
Deflat ion 7.1 5.8 7.3 8.9 8.8 10
Inflat ion 0 – 2% 12.7 2.0 6.7 6.7 7.5 15
Inflat ion 2 – 4% 7.8 1.5 4.9 2.8 3.9 26
Inflat ion 4 – 6% 5.1 1.2 2.3 -0.3 1.7 16
Inflat ion over 6% -1.7 -2.5 -0.4 -4.3 -4.6 20
Total 6.0 1.1 3.8 1.8 2.5 86
Source: IWIN Research
Historic average annual performance for each asset class in different inflation scenarios
Group Offices
Bath
Belfast
Birmingham
Bournemouth
Cheltenham
Edinburgh
Exeter
Glasgow
Guildford
Leeds
Liverpool
London
Manchester
Reigate
Sheffield
www.investecwin.co.uk
Member Firm of the London Stock Exchange. Member of NYSE LIFFE.
Authorised and regulated by the Financial Services Authority.
Investec Wealth & Investment Limited is registered in England.
Registered No. 2122340. Registered office: 2 Gresham Street, London, EC2V 7QP.
Please note that the value of investments and the income derived from them may fluctuate and investors may not receive back the amount originally invested. Past performance is not necessarily a guide to the future. Current tax levels and reliefs may change and the investments and investment services referred to may not be suitable for all investors.
Stefan Ampenberger (1908 - 1983), detail from “The Red Sun”, oil on board, Sanlam Art Collection.
Fixed income presentation to the
Association of Financial Mutuals Craig Veysey, Head of Fixed Income
Sanlam Group
• Founded in 1918 in South Africa
• The Group has business interests elsewhere in Africa, Australia, India,
and Europe
• As at September 2012, Sanlam Investments had assets under
management of £40 billion.
• Sanlam Private Investments has £10bn AUM.
34
Staff (Dec 2011)
12,586
Sanlam only
Market cap
(Sept 2012)
£6.1 billion
Shareholders (Dec 2011)
520,586
Sanlam Private Investments (UK) Ltd
• Portfolio management
• Offshore investments
• Fiduciary & tax
• Investment advisory
• Managed funds
• Custodian services
35
Investment management: a round the clock job
Regular
fund
manager
meetings
Market timing/
tactical asset
allocation
Performance
monitoring &
reporting
Active or
passive for
a given
asset class
Investment:
A ROUND
THE CLOCK
JOB
36
Investment team at SPI (UK) Ltd
37
Richard Champion, ASIP
Chief Investment Officer
Pieter Fourie, CFA, CA (SA)
Head of Global Equities
William Ball, ACSI, IMC
Equity Analyst
Nick Levens, Chartered MCSI
Central Dealer
Emma Joel
Investment Team Coordinator
Sarah Hughes
Investment Team Desk Assistant
Paul Surguy, Chartered FCSI
Head of Managed Funds
Craig Veysey CFA, ASIP
Head of Fixed Income
Francois Kotze, IMC
Fixed Income Analyst
John Thornber,
Chartered FCSI
Strategist
Duncan Burden, IMC
Equity Analyst
James Mercier, IMC
Managed Funds Analyst
Expertise in bond portfolio management at SPI
• Bond fund management
• We manage the SPI Strategic Investment Grade Bond Fund
• Investment grade focus - high quality corporate and government bonds
• Global investment - UK and overseas, including emerging markets
• Active fund management - the fund will actively seek to enhance total returns
• Visible and transparent performance track record
• Segregated fixed income portfolio management
e.g. Manage an £85m gilt and corporate bond portfolio for SIP(Sanlam Investment& Pensions)
• Strict credit risk policy criteria
• Asset Liability Matching: outsourced to Sanlam Investment Management
• Solvency regulations: European model formula designed by SIP
38
Tailored solutions for Financial Mutual portfolios
• Clients requirements may be very different
- we work closely with & understand our clients concerns
- appropriate investment solutions provided
- specific investment guidelines agreed
- can assist with applying Solvency II regulations
- can assist with implementing Asset Liability matching
• Fixed income only and multi asset portfolio solutions
- direct global equities, direct global fixed income, fund approaches
- aim to add incremental value to client’s investment portfolios
- rigorous application of investment process to all portfolios
39
40
• Direct access to investment manager
• Tailored, diversified portfolios within agreed restrictions
• Solvency II and ALM assistance
• Detailed reporting provision, as agreed with client
• Ongoing reviews and regular meetings
• Full nominee/custody service
• In specie transfers
• Online valuation service
• Updated investment news and commentary at: www.spi.sanlam.co.uk
Overview of our services
Investment strategy
41
Robust fixed income investment process
• Rigorous and disciplined global investment process
• Top-down, macroeconomic view formed from monthly strategy meeting
involving Head of Fixed Income, Chief Investment Officer and other key
members of the investment team
• Highly risk-conscious approach that seeks to add incremental value
from a broadly-diversified bond portfolio
• Credit screening process on individual bonds, derived from internal
analysis, combined with external credit analysis and active bond asset
and sector rotation
42
Decision making process in bond portfolios
Portfolio
Decision
Politics Technology
Demographic
Macroeconomic
Structural view
Bottom up
Credit screen Credit analysis
Cyclical
Tactical
• growth
• inflation
• monetary policy
• events
• regional analysis
• relative valuation
• market technical's
• risk on/risk off
Risk analysis
• credit risk
• duration risk
• yield curve
• currency risk
• value at risk
• regional/country
• portfolio analytics
• guideline monitors
43
Bond portfolio allocation decision - September
Preferred investment ranges
Bond investment Category Structural* Cyclical+ Tactical- Weightings Duration Comments
Global duration risk 1 1 0 7-15yr We maintain duration risk in 5-7 year range, though see opportunities to add
from structural and cyclical perspective with bonds seen well supported .
UK Gilt -1 -1 0 0-10% 7-15yr Gilts may benefit from perceived 'flight to quality' , but government
debt fundamentals a concern over long term. Near term risks elevated.
UK Index Linked Gilt 1 1 0 0-20% 10 to 30 Index linked gilts may be added to for inflation protection, particularly
over longer term with QE seen stoking inflation pressures.
GBP IG Corporates 1 1 0 50%-90% 5 to 30 GBP IG remains favoured for spread enhancement in low yield environment
amid highly supportive global monetary policy. BBB's provide value still.
GBP High Yield 0 1 0 0-10% 1 to 5 High yield may outperform in near term, with supportive monetary
policy and hunt for yield. Not looking to add further in near term though.
US Treasuries -1 1 0 0% None Fed balance sheet expansion not seen as positive for US Treasuries.
Concerns in near term due to credit rating/fiscal cliff.
US Treasury Index Linked 1 1 1 5-10% 10-20yr Inflation protection will be maintained near term in portfolio
USD Investment Grade 1 1 0 0-10% 5 to 15 Spread product can remain supported, with Fed balance sheet expansion
Not as much value as for GBP IG.
EUR Governments -2 -1 -1 0% None Avoid European government long term. Fundamentals remain poor,
though short dated bonds of peripherals should receive support.
EUR Investment Grade -2 -1 0 0-5% 1 to 5 Some isolated European corporate areas may be supported near term
by improving sentiment. Avoid Euro FX risk after recent rally.
Commodity FX Bonds 2 1 2 5-20% 3 to 15 Structurally we like commodity FX, and tactically we think QE perception
will support such an active position in portfolio. Will add on weakness.
Developing Market Bonds USD 1 1 0 0-10% 5 to 15 Attractive opportunities available. Searching for tactical entry
points for cyclical and structural view
Developing Markets LCL 2 1 2 5-20% 5 to 15 Some emerging economy bond markets look attractive and we are
seeking expsoure near term to higher real yield opportunities
non GBP FX investments 1 2 1 10-20% 1 to 10 GBP remains a concern from debt/GDP perspective, & more QE.
Tactically add non GBP risk in emerging markets and commodity markets.
Structural*1-5 years
Cyclical+ 3-12 months
Tactical- 1-3 months
44
Credit analysis screen
• Analyse 20,000+ bonds through proprietary filtering process to
determine potential bonds for portfolio inclusion/exclusion
• Filtering process includes-credit rating, liquidity, sector, currency, bond
structure, duration, geography
• Credit analysis, both internal and external, also conducted on suitable
bonds
• Suitable bonds that meet quality criteria are chosen to then fit allocation
decision within portfolio guidelines
45
Fixed income risk management tools
• Interest rate duration risk
monitoring
• Diversification - max 5% per
corporate bond issuer
• Credit quality - investment grade
focus
• Credit sector weight monitoring
• Currency weighting - max 5% per
non-sterling currency, except US
dollar
46
About the Fixed Income team at SPI
Craig Veysey CFA, MA, ASIP
• Craig Veysey is Head of Fixed Income & the lead Fund Manager of the SPI Strategic
Investment Grade Bond Fund. He has almost 14 years investment experience, and has been
responsible for directly held bond investments, at SPI’s since March 2009.
• Craig has previously managed global bond funds at both Scottish Widows Investment
Partnership and WestLB Mellon Asset Management, and earlier in his career was also a
senior member of the Global Fixed Income team at HSBC Investment Management. He
qualified as an Associate of the UK Society of Investment Professionals in 2001 and became
a Chartered Financial Analyst in 2003. Craig has a degree in Economics from Liverpool
University and a Masters Degree in Finance and Investment from Exeter University.
47
Francois Kotze, IMC
• Francois Kotze joined SPI (UK) as a Fixed Income Analyst in March 2012. Francois has a
degree in economics from the University of Bath which included a year on placement in the
fixed income team of UBS Global AM. Francois is currently a candidate for CFA level 1.
Think Personal - please contact us
48
• Craig Veysey
• T: +44 (0)20 7280 8726 | M: +44 (0)7738 409 964
• Francois Kotze
T: +44 (0)20 7280 8748
• Address: Sanlam Private Investments (UK) Ltd
10 King William Street | London | EC4N 7TW
Appendix
49
Sanlam
• 1918 - Sanlam founded
• 1922 - Introduce disability cover - 1st in SA
• 1953 - 800 staff members move to “Sanlamhof”, Bellville. Current
Sanlam Head Office
• 1967 - Launch of 1st Sanlam Unit Trust
• 1993 - SA‟s 1st BEE transaction. Sale of Metropolitan to black-
controlled, NAIL
• 1998 - Demutualisation on JSE & Namibian Exchange
• 2004 - Sale of 10% of Sanlam shares to Ubunto-Botho
50
What do Sanlam do?
• Leading financial services group in South Africa
• Provide financial solutions & products to retail clients (individuals) &
institutional clients. These include:
• life insurance
• savings & investments
• short-term insurance
• banking
• health
• advice
51
Extent of Sanlam business
52
Shareholders
(Dec 2011)
520 586
Market Cap
(Sep 2012)
£6.1 billion
# Staff
(Dec 2011)
12 586
Sanlam only
Sanlam Investments
53
• Apart from the UK, the Group has business interests elsewhere in
Africa, Australia, India, and Europe.
• As at September 2012, Sanlam Investments had assets under
management of £40 billion.
Capital
Management
SCM
SPE
Property
Equities
Debt
Asset
Management
SIM
Gen-X
SSS D
Satrix
Wealth
Management
SPI
SPI (UK)
Merchant
Summit
Employee
Benefits
GR
SUS
SSS-EB
RFA
Simeka
International
SIIP
SIM-Global
Sami
Sanlam UK
SGS
Investment
Services
SMMI
SCI
Blue Ink
Graviton FP
Graviton WM
A brief history of Sanlam Private Investments
• SPI was formed in 1999 under the brand Gensec Private Clients, a Sanlam
subsidiary.
• Following the acquisitions of leading private client businesses ABN Amro SA and
Merrill Lynch Private Clients SA, Gensec rebranded to Sanlam Private
Investments in 2001.
• In March 2008, Principal Investment Management Ltd become part of the
Sanlam Group and rebranded to SPI on the 24 September 2012.
• In the past 12 years Sanlam Private Investments has grown to become South
Africa’s 2nd largest private wealth manager, with operations in South Africa, UK,
Switzerland and Australia and some £10 billion assets under management.
• Established in 1999 and headquartered in Cape Town, the SPI team comprises
400 people across 23 international offices, managing £10bn in assets under
management and administration for 30,000 clients.
54
Solvency II stress testing (1)
55
Credit quality step
duration i
up to 5 0.9 %. duration i 1.1 %. duration i 1.4 %. duration i 2.5 %. duration i 4.5 %. duration i 7.5 %. duration i 3%. duration i
More than 5 and up
to 10
4.50% + 0.53 %.(
duration i -5)
5.50% + 0.58%.(
duration i -5)
7% + 0.70%.(
duration i -5)
12.50% + 1.50%.(
duration i -5)
22.50% + 2.51%.(
duration i -5)
37.50% + 4.20%.(
duration i -5)
15% + 1.68%.(
duration i -5)
More than 10 and up
to 15
7.15% + 0.50 %.(
duration i -10)
8.40% + 0.50 %.(
duration i -10)
10.50% + 0.50 %.(
duration i -10)
20% + 1 %.(
duration i -10)
35.05% + 1.80 %.(
duration i -10)
58.50% + 0.50 %.(
duration i -10)
23.40% +
1.16%.(
duration i -10)
More than 15 and up
to 20
9.65% + 0.50 %.(
duration i -15)
10.90% + 0.50 %.(
duration i -15)
13% + 0.50 %.(
duration i -15)
25% + 1 %.(
duration i -15)
44.05% + 0.50 %.(
duration i -15)
61% + 0.50 %.(
duration i -15)
29.20% +
1.16%.(
duration i -15)
More than 20 12.15% + 0.50 %.(
duration i -20)
13.40% + 0.50 %.(
duration i -20)
15.50% + 0.50 %.(
duration i -20)
30% + 0.50 %.(
duration i -20)
46.55% + 0.50 %.(
duration i -20)
63.50% + 0.50 %.(
duration i -20)
35% + 0.50%.(
duration i -20)
Maximum modified
duration (in years)
176 173 169 140 107 73 130
NRAAA AA A BBB BB B and below
Spread shock on bonds
The latest level 2 text stresses the value of the assets held by the factor shown in the table
below depending on their credit rating and modified duration (where duration is never lower
than 1):
Source: Draft Implementing measures Solvency II (issued on 31
October 2011)
Solvency II stress testing (2)
56
The value of the annuity liabilities will also decrease to allow for the increase in the
matching premium subject to the limitations. The table below shows the factor to be
applied to the change in the fundamental spread the matching premium will only
increase for bonds with credit ratings above BB. Although the level 2 text wording is
confusing we have interpreted the table below as saying that for more risky assets
there will be no compensating increase in the discount rate and thus decrease in the
technical provisions. For lower risk assets the contribution to the matching
adjustment can be increased to compensate partially for the fall in the assets.
Credit quality step AAA AA A BBB BB B NRReduction factor 45% 50% 60% 75% 100% 100% 100%
Source: Draft Implementing measures Solvency II (issued on 31 October 2011)
Credit Risk Tolerances example
57
Risk limitAssurance
provider
Gilts 25% to 100%
Supranationals, and AAA w ith gov't guarantee 0% to 50%
AAA corporates 0% to 50%
AA corporates 0% to 33%
A corporates 0% to 33%
BBB corporates 0% to 15%
Below BBB corporates 0%
33%
>A: 1,000
=<A: 500
300
10%
500
20%
Large, AAA rated
OECD members *
30%
20%
>1
A
0.5
A
1
10
10
0Head of
Investments
Highest available
15
AAA
AAA
BBB
90
* Australia, Austria, Canada, France, Germany, Netherlands, Norw ay, Sw eden, Sw itzerland, UK and USA
Maximum % corporate bonds in any one country (other than UK)
Approved list for acceptable countries for £ denominated bonds
Maximum % corporate bonds in f inancial sector
Maximum % corporate bonds in any other (i.e. non-financial) sector
Maximum nominal holding w ith any one counterparty (£k)
Minimum nominal issue size (£m)
Maximum % corporate bonds that are subordinated
Maximum nominal holding w here an added layer of risk exists e.g. subordination, liquidity or
recoverability (£k)
AFH
Minimum # of reinsurers
Minimum reinsurer credit rating
Maximum unsettled balance (£m)
Minimum credit rating
Maximum # of payments in arrears
Maximum net exposure to any one counterparty (£k)
Minimum short term counterparty credit rating
Head of
Investments
Maximum exposure to any one counterparty (£m)
Maximum outstanding term to maturity (days)
Minimum sovereign rating of foreign domiciled holdings
Minimum rating of liquidity funds
Minimum rating for commercial paper, certif icates of deposit, f loating rate notes
Category
AFH
Limits on
investment
type (as %
total fund)
Maximum % corporate bonds below AA
Maximum loan to any one individual policyholder (£k)Head of
FinanceMaximum loan to any one individual trading partner (£k)
AFH
Source: Sanlam Investment and Pensions
58
2012/06/29 2012/07/31 2012/08/31
MINTAN and MINCON
Scenario
-50 bps on the Short End : 100 bps on the Long End 1 681 973 3 114 644 643 568.59
0 bps on the Short End : 0 bps on the Long End 1 654 202 2 978 955 739 674.27
50 bps on the Short End : -100 bps on the Long End 1 590 116 2 819 712 729 697.74
MINFLA
Scenario
-50 bps on the Short End : 100 bps on the Long End -40 879 177 446 220 604.30
0 bps on the Short End : 0 bps on the Long End 33 106 218 637 206 226.14
50 bps on the Short End : -100 bps on the Long End 80 844 232 453 190 710.26
Assets less Liabilities
Non Parallel Stresses
The table below shows the non parallel stress using the 2 year point
as the pivot. Non-parallel stresses are within mandate limits.
Asset Liability Matching (1)
-£500 000.00
-£400 000.00
-£300 000.00
-£200 000.00
-£100 000.00
£0.00
£100 000.00
£200 000.00
£300 000.00
£400 000.00
£500 000.00
-200 bps -150 bps -100 bps -50 bps 0 bps 50 bps 100 bps 150 bps 200 bps
MINTAN and MINCON combined - Parallel Stress
31-Aug-12 29-Jun-12 31-Jul-12
Source: Sanlam Investment Management
59
Non Parallel Stresses
The table below shows the non parallel stress using the 2 year point
as the pivot. Non-parallel stresses are within mandate limits.
Asset Liability Matching (2)
2012/06/29 2012/07/31 2012/08/31
MINFLA
Scenario
-50 bps on the Short End : 100 bps on the Long End -40 879 177 446 220 604.30
0 bps on the Short End : 0 bps on the Long End 33 106 218 637 206 226.14
50 bps on the Short End : -100 bps on the Long End 80 844 232 453 190 710.26
Assets less Liabilities
-£300 000.00
-£250 000.00
-£200 000.00
-£150 000.00
-£100 000.00
-£50 000.00
£0.00
£50 000.00
£100 000.00
£150 000.00
-200 bps -150 bps -100 bps -50 bps 0 bps 50 bps 100 bps 150 bps 200 bps
MINFLA - Parallel Stress
31-Aug-12 29-Jun-12 31-Jul-12
Source: Sanlam Investment Management
Sources: Bloomberg, SPI
Portfolio Statistics
Yield to maturity 3.97
Distribution Yield 5.25
Average Duration 6.85
Average Rating A
90%
6% 4%
Currencies
GBP USD MXN
6% 6%
43%
40%
5%
Credit Ratings
AAA AA A BBB <BBB
23%
4%
19%
14%
15%
6%
6% 2%
2% 4% 4% 1%
Sectors
Banks & Insurers*
Other Financials*
Consumer
Telecoms
Utilities
Industrial
Basic materials
Energy
Diversified
Supranational
Index Linked Govts
Other Government
Cash
48%
16%
12%
6%
2% 3%
3% 2% 5%
2% 1%
0%
Country Exposure
Great Britain
United States
Germany
Mexico
Spain
France
Bond Fund portfolio structure, 1st Oct 2012
-SPI Strategic Investment Grade Bond Fund
Rating Price Yield Income
Yield Weight
MCDONALD'S CORP 5.875% 2032 A 134.11 3.45 4.38 2.82
CENTRICA PLC 4.25% 2044 A 97.75 4.38 4.35 2.67
BHP BILLITON FINANCE LTD 3.25% 2024 A 99.83 3.27 3.26 2.56
US TREASURY INF/ LINK 3.625% 2028 AAA 159.19 2.86 2.28 2.53
PETROBRAS GLOBAL 5.375% 2029 BBB 100.96 5.29 5.32 2.43
TESCO PLC 5.5% 2019 A 116.52 2.92 4.72 2.35
MEX ICAN GOVERNMENT 6.5% 2022 A 108.94 5.32 5.97 2.31
RWE AG 7% able BBB 105.13 6.08 6.66 2.27
AMGEN INC 4% 2029 A 99.47 4.04 4.02 2.24
ELECTRICITE DE FRANCE 5.5% 2041 AA 110.77 4.80 4.97 2.23 *Callable
60
Active bond portfolio management (1)
0
1
2
3
4
5
6
7
Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12
Yiel
d -
%
Buy Point BP 4% 2014
Bond holding period return: 22.2% Fund performance impact: 1.4% (Average position size: 6.4% portfolio) As at 26/06/2012
61
Active bond portfolio management (2)
4
5
6
7
8
9
10
11
12
Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12
Yiel
d -
%
Buy Point Soc Gen 5.4% 2018
Bond holding period return: 15.4% Fund performance impact: 0.6% (Average position size: 4.1% portfolio) As at 26/06/2012
62
Active bond portfolio management (3)
Bond holding period return: 15.8% Fund performance impact: 0.3% (Average position size: 1.9% portfolio) As at 08/09/2012
6.0
6.5
7.0
7.5
8.0
8.5
9.0
28
May
12
04
Jun
12
11
Jun
12
18
Jun
12
25
Jun
12
02
Jul 1
2
09
Jul 1
2
16
Jul 1
2
23
Jul 1
2
30
Jul 1
2
06
Au
g 1
2
13
Au
g 1
2
20
Au
g 1
2
27
Au
g 1
2
03
Se
p 1
2
Yie
ld %
Buy Point Telefonica 5.445% 2029
63
Active bond portfolio management (4)
0.6
0.61
0.62
0.63
0.64
0.65
0.662.4
2.6
2.8
3
3.2
3.4
3.6
09
Fe
b
16
Fe
b
23
Fe
b
01
Mar
08
Mar
15
Mar
22
Mar
29
Mar
05
Ap
r
12
Ap
r
19
Ap
r
26
Ap
r
03
May
10
May
17
May
24
May
31
May
07
Jun
14
Jun
21
Jun
28
Jun
05
Jul
%
Buy Point Bond Sell Point
Currency Trade Date US Treasury 3.125% 15/02/2042
GBPUSD
Bond holding period return: 8.28% Pure bond return: 5.23% Currency Return: 3.05% Fund performance impact: 0.11% (Average position size: 1.54% portfolio) As at 09/07/2012
64
Bond Fund performance since inception
65
98
99
100
101
102
103
104
105
106
107
108
02
Mar
09
Mar
16
Mar
23
Mar
30
Mar
06
Ap
r
13
Ap
r
20
Ap
r
27
Ap
r
04
May
11
May
18
May
25
May
01
Jun
08
Jun
15
Jun
22
Jun
29
Jun
06
Jul
13
Jul
20
Jul
27
Jul
03
Au
g
10
Au
g
17
Au
g
24
Au
g
31
Au
g
07
Se
p
14
Se
p
21
Se
p
28
Se
p
Bond Fund NAV* IMA £ Strategic Bond Sector Gilts
Source: Morningstar, Bloomberg*P Accumulation Share Class
SPI Strategic Investment Grade Bond Fund: 7.4%IMA £ Strategic Bond Fund Peer Group: 6.2%FTSE Actuaries Gilt All Stocks: 4.7%
This information is directed at investment professionals (e.g. authorised intermediaries) only and is not
suitable for distribution or communication to any other person
This article is for information purposes and should not be treated as a forecast, research or advice to buy or
sell any particular investment or to adopt any investment strategy. Any views expressed above are based on
information received from a variety of sources which we believe to be reliable, but are not guaranteed as to
accuracy or completeness by Sanlam Private Investments (UK) Ltd. Any expressions of opinion are subject
to change without notice.
Reproduction of this commentary is not allowed in whole or in part without prior written agreement from
Sanlam Private Investments (UK) Ltd
Issued by Sanlam Private Investments (UK) Ltd
Authorised and regulated by the Financial Services Authority
Part of the Sanlam Group
Past performance is not a reliable indicator of future results.
Investing involves risk. The value of investments, and the income from them, may fall as well as rise and is
not guaranteed. Investors may not get back the original amount invested
Disclaimer
66
Investment managers
panel
*Oliver Stones, Quilter
*Guy Ellison, Investec
*Craig Veysey, Sanlam Private Investments