1. The Next Fund Manager 2010
INVICTUS
Global
Emerging
Market Fund
Presented By:
Nelson Lim
Darryl Koh
K o h Yo n g S e n g
2. The Scenario
• Windstorm from Atlantic Ocean made a
landfall in New York
• Caused billions of dollars in damages and
brought businesses in New York to a standstill
3. Agenda: The Preview
Fund Composition – The Overview
Reassuring Investors – The Effects
Adjusted Fund Portfolio – The Strategy
Investment – The Analysis
Opportunities
The Overview The Effects The Strategy The Analysis
4. Invictus Global Emerging Markets Fund
Fund Composition
DWS Lion Fund
Fix Income
20%
30%
United GEMs
First State GEM Investments
Leaders 10%
55%
Equities Aberdeen Global
70% Opportunities
15%
The Overview The Effects The Strategy The Analysis
5. Effects of Natural Disaster on
Financial Markets
• Past Similar Case: Hurricane Katrina(Aug 2005)
– Caused damages in excess of US$100 billion
– Devastated several US states and disrupted oil supply
Hurricane Katrina
Hurricane Katrina
• Effects of Hurricane Katrina on Financial Markets:
– Initial fall in stock prices
– Shortly after, Markets recovered and continued to rise
higher than before disaster
The Overview The Effects The Strategy The Analysis
6. Effects of Natural Disaster on
Financial Markets
• Observed similar findings during Hurricane
Andrew (1992), Hurricane Hugo (1989) and
even during should be advised not to do
Investors September 11 Terrorist Attack
panic exit as this will result in selling at
an unfavourable price
The Overview The Effects The Strategy The Analysis
7. How will our Fund be Affected
• Pre-dominantly invested in Emerging Markets
• Minimum exposure in US markets (≈3%)
• Negative impacts of US markets on our fund
should be minimal
The Overview The Effects The Strategy The Analysis
8. How will our Fund be Affected
• However, we need to take a Cautious Approach!
– Economy is just recovering
– Fragile state
– Possibility of triggering another recession in US
The Overview The Effects The Strategy The Analysis
10. Implementing Changes to
Portfolio Composition
Maintaning •Moderately
Existing Aggressive
Strategy
Maintaining •Emerging
Key Revenue Markets
Driver
The Overview The Effects The Strategy The Analysis
11. Moderately Aggressive Portfolio
Composition
United GEM
Investments, 10%
Fixed
DWS Lion Income, 30%
Fund, 20% First State
GEM, 45%
Global Equity, 70%
Aberdeen, 10%
Construction, 5%
Material , 10%
The Overview The Effects The Strategy The Analysis
12. Moderately Aggressive Portfolio
Composition
United GEM
Investments, 1
DWS Lion 0%
Fund, 20%
Increasing US Incurring Focus on High
Sovereign Additional Grade
Risk, especially Debt to Investmenet
Eurozone finance Corporate
reconstruction Bonds
The Overview The Effects The Strategy The Analysis
13. Emerging Market as Key
Revenue Driver
Global
Markets, 45 Emerging
% Markets, 55
%
The Overview The Effects The Strategy The Analysis
14. Analysis of Investment
Opportunities
Construction,
5%
Material , 10%
The Overview The Effects The Strategy The Analysis
15. URS Corporation
• Leading US federal government contractor
• Provides planning, design and program and
construction management services for
public buildings
• Strong fundamentals, with stable growth in
earnings
• Participated in the rebuilding work in the
aftermath of Hurricane Katrina
The Overview The Effects The Strategy The Analysis
16. URS Corporation
•Annualized return of approximately 17%
between 2005 and 2007, compared to 10-yr
annualized return of 13%
The Overview The Effects The Strategy The Analysis
17. ArcelorMittal
• World’s largest steel company
• 10% of world’s steel output in 2007
• 23% of steel sales to USA, 39% to EM
• Demand of steel, a key material for
construction, is expected to rise substantially
during the rebuilding stage of natural disaster
recovery
The Overview The Effects The Strategy The Analysis
18. ArcelorMittal
• Annualized return of approximately 49%
between 2005 and 2007, compared to
10-yr annualized return of 10.7%
The Overview The Effects The Strategy The Analysis
19. • Largest steel producer in China,tord largest in
Share price is highly correlated 3 world steel
price
the world
• An increase in demandgiven the will raise the
High growth potential for steel likelihood on
increase in demand of steel caused by disaster
price of steel
Share Price Chart for
Baosteel (2005-2009)
The Overview The Effects The Strategy The Analysis
20. Projected Fund Performance
Invictus Global Emerging Markets Fund
Proportion Returns Std Dev
Security 10-yr Annualize Projected
First State GEM Leaders SGD
United Baosteel, 0.45 Annualized
11.25% d Return 2-yr
5.30
GEM, 1
Aberdeen Global Opportunities 5%
Return between Annualized
SGD 0% First 0.10 2.49% 2005-07 Return
4.84
DWS
United GEMs Investments SGD State
0.10 6.84% 2.04
Lion GEM, 4 URS 13.0% 17% 17%
Fund, 2Lion Fund
DWS 5% 0.20 Corp. 2.70% 0.46
0% Arcelor Mittal 0.05 49% 27.40
URS Corporation Arcelor 10.7% 49% 49%
0.05 Mittal 17% 6.92
Baosteel Group 0.05 11.1% 13.02
Aberdeen, Arcelor
Expected Returns URS
Bao 3.9% N/A 11.1%*
10% Mittal, 5
Corp, 5% % steel10.39% (7.79%)
Std Dev
5.532 (3.937)
Coefficient of Variation * approximated using rise in steel price from 2005-07
0.53 (0.51)
The Overview The Effects The Strategy The Analysis
21. Looking Forward
PROPOSED STRATEGY IMPLEMENTATION
Current 2011 2012 Onwards
MAIN STRATEGY
• Divest into US • Capitalize and reap the • Re-Analyse Market
disaster recovery profits of projected Conditions
industries growth in disaster
• Explore
recovery companies
• Balance of portfolio opportunities
Allocation
• Consistent with
Objectives
BACKUP STRATEGIES
• US market becomes too volatile
• Re-allocate portfolio by pulling out of USA
• Possible use of gold fund as hedging tool
Overview Challenges Implications Measures Evaluation
23. Appendix
Slides: Additional Fund Information:
Client Profile
Fund Composition First State GEM Leaders Fund
Aberdeen Global Opportunities Fund
Effects on Capital Market United GEMs Investments Fund
Effects on the Fund DWS Lion Bond Fund
United Gold and General Fund
Investment Opportunities Original Fund Overview
Implementing Changes B.Strategy 1 – Bearish EM Outlook
B.Strategy 2 – Bearish Equities
Moderately Aggressive Portfolio First State Peer Comparison/ Additional Info
Key Revenue Driver Aberdeen Peer Comparison/ Additional Info
United GEMs Peer Comparison/ Add Info
Analysis of Opportunities DWS Lion Bond Peer Comparison/ Additional Info
United Gold & General Fund Additional Info
URS Corp
Arcelor Mittal
Baosteel New Assets Information:
Projected Fund Performance Analysis on URS Corporation
Looking Forward Analysis on Arcelor Mittal
Analysis on Baosteel
24. Client Profile
• Moderately aggressive investors
• Mid to long-term investment horizon
• Willing to withstand short-term fluctuations
25. •Diversification
Main Strategy
•Cushion downside
risk
•More emphasis on Fixed Income
global bond funds Funds
(30%)
Equities Commodity
Funds Funds
(70%) (Backup)
Invictus
•Mid to Long Term Global •Hedging purpose
Capital Appreciation Emerging •Times of highly
•Main driver of return Market Fund volatile market
•Key focus on Emerging conditions
Markets
26. First State GEM
Leaders
• Consistently outperforming the emerging
market
• 5-yr annualized returns of 11.25%
• Low volatility with standard deviation of 5.3%
Performance of First State GEM Leaders Fund Versus MSCI Emerging Markets Index
27. First State GEM
Leaders
• Strong emphasis on Asia – region of high
growth
• Heavily focused on defense industries –
creating stable growth
28. • Uptrend shift, consistently support by 100-day
and 200-day moving average since mid-July 2009
• Highest returns (2.49%) with least volatility
(4.84%) among peers
29. • Investments in developed countries
• Primary allocations in financials, energy and IT
• Well poised to capture effects of economic
recovery
30. United GEMs
Investments
• Stable growth even in times of volatile market
conditions
• Highest annualized returns per unit risk taken
• Impressive excess return (alpha) of 0.35
Performance of United Global Emerging Markets versus MSCI World Index and MSCI Asia EX Japan
31. United GEMs
Investments
• Significant interests in Brazil and
Russia, complementing First State GEM Leaders
• Focused on government bonds and corporate
bonds from defense industries, providing stability
Asset Allocation - by Country Asset Allocation - by Industry
Brazil Energy
3.00%
13.13% 5.38% Indonesia 9.68% 11.14% 5.01% Financials
7.94%
Mexico
41.88% Government
7.85% Philippines
10.58% Russia Government Agency
USA 57.74%
16.42% Special Purpose
Others Entity
4.76% Utilities
32. • Resistant to market fluctuations
• Stable growth of 2.70% (annualized)
• 2X Sharpe ratio of competing funds at 0.11
Performance of DWS Lion Fund versus MSCI World Index and MSCI Asia EX Japan
33. • Mainly in developed Asian countries which are
less affected by recent economic crisis
• Comprising of corporate bonds from key
sectors such as banking and transportation
Asset Allocation - by Country Asset Allocation - by Industry
5.23% 11.16% Banks
Singapore
26.34% Real Estate
South Korea 37.24%
8.61% Transport
USA
10.79% Finance
64.21% Hong Kong
18.40% Electronic
Others
Others
10.29%
3.75%
3.98%
34. • Used as a hedging tool given negative
correlation with the global market
• Cumulative return of 88.25%, 6.16% YTD
Annualised Standard Sharpe
Fund Current NAV
Return Deviation Ratio
United Gold & General Fund 15.57% 10.10 0.10 1.861
35. • Over 70% investments in gold and precious
metals good hedging instrument
• Used as backup strategy to hedge against
downside risk of a possible W-shaped recovery
36. Original Fund Overview
Invictus Global Emerging Markets Fund
Proportion Returns Std Dev
First State GEM Leaders
SGD
0.55 11.25% 5.30
Aberdeen Global
Opportunities SGD
0.15 2.49% 4.84
United GEMs Investments
SGD
0.1 6.84% 2.04
DWS Lion Fund
0.2 2.70% 0.46
United Gold & General Fund
0 15.57% 10.10
Expected Returns
7.79
Std Dev
3.937
Coefficient of Variation
0.51
37. Backup Strategy 1
Bearish Expectations on Emerging Markets
Backup Strategy + Gold Options
10% Std
Proportion Returns
20% Dev
First State GEM Leaders 0.2 11.25% 5.30
SGD
20% Aberdeen Global 0.4 2.49% 4.84
Opportunities SGD
United GEMs Investments 0.1 6.84% 2.04
SGD
DWS Lion Fund 0.2 2.70% 0.46
10% United Gold & General 0.1 15.57% 10.10
40% Fund
Expected Returns 6.03
Std Dev 4.302
Coefficient of Variation 0.71
38. Backup Strategy 2
Bearish Expectations on Equities Market
Backup Strategy + Gold Options
10% Proportion Returns Std Dev
20% First State GEM Leaders
0.2 11.25% 5.3
SGD
Aberdeen Global
Opportunities SGD
0.2 2.49% 4.84
United GEMs Investments
30% 0.2 6.84% 2.04
SGD
20% DWS Lion Fund 0.3 2.70% 0.46
United Gold & General
Fund 0.1 15.57% 10.1
Expected Returns 6.48
20% Std Dev 3.584
Coefficient of Variation 0.55
43. Aberdeen Global – Peer Comparison
Current
Annualised Standard Sharpe NAV
Fund Alpha Beta
Return Deviation Ratio (caa
03/02/10)
Aberdeen Global
2.49% 4.84 0.30 1.06 0.01 0.80
Opportunities SGD
United International
-1.73% 4.33 -0.07 0.98 -0.07 1.59
Growth Fund
Henderson Global
1.97% 5.38 0.11 0.93 0.00 1.32
Technology
Schroder Global
1.09% 4.97 0.09 0.91 -0.02 1.76
Smaller Companies
49. DWS Lion Bond – Peer Comparison
Annualized Standard Alpha Beta Sharpe Current
Return Deviation Ratio NAV
Fund
(caa
03/02/10)
DWS Lion Bond 2.70% 0.46 0.05 0.07 0.11 1.48
SGD
1.03% 1.72 (0.06) 0.85 (0.05) 1.20
Legg Mason
Global Bond
Trust
LionGlobal Bond 1.98% 1.1 0.06 0.08 0.05 1.56
A SGD
54. Effects of Hurricane Hugo and Camille
on Financial Markets
• Markets move upwards subsequent to the
occurrence of the natural disasters
55. Correlation between US and EM equity
markets
• Past financial market trends have shown slight
positive co-relation between US equities and
Emerging Markets equities
MSCI Emerging Markets Index
S&P 500
Dow Jones
56. Analysis of URS Corp
• Average increase of 15% in EPS for the past 5
years
• Healthy financial leverage, D/E ratio of 17%
• Operating income at approx. 5% of revenue,
increasing over the past 5 years.
• Revenue from Federal sector (energy and
construction) increased by 67% over past year
• Key Competitors: Fluor & Jacobs Engineering
• Key Competitive Advantage: Relationship with
Government
57. Analysis of Arcelor Mittal
• Showing signs of recovery
from the economic crisis
• Improved EDITBA and CF
from Operations in 2009
• Improved leverage with a
USD13.7 billion reduction
in debt since the
economic crisis
• Key Competitors:
Ternium, US Steel Corp.
• Outperformed during
Hurricane Relief
58. Analysis of Baosteel
• Low financial leverage, D/E Ratio approx. 10%
• CF from operating activities take up 50% of
net CF of the year in 2009
• Good growth potential with heavy
investments in research and development
• Key Competitors: Angang Steel, Wuhan Iron
and Steel
