an alliance of best ideas · an alliance of best ideas 22 june 2017 this financial promotion has...

An alliance of best ideas 22 JUNE 2017

This financial promotion has been approved by Towers Watson Limited (Willis Towers Watson),

authorised and regulated by the Financial Conduct Authority.

This presentation includes certain information and materials prepared for Alliance Trust plc by

Willis Towers Watson. This presentation has been prepared for general information purposes

only and must not be relied upon in connection with any investment decision. Potential

investors should seek independent financial advice from a financial advisor who is authorised

under the Financial Services and Markets Act 2000 before making any investment decision.

The important information on pages 56 and 57 should be read in conjunction with this

document.

Agenda

Willis Towers Watson, Craig Baker & Stuart Gray

Black Creek Investment Management, Bill Kanko

Lyrical Asset Management, Andrew Wellington

Alliance Trust Board, Anthony Brooke

Lunch and meet the managers

Meet the Alliance Trust

Investment Team

willistowerswatson.com

Alliance Trust: a compelling proposition

Willis Towers Watson

June 22nd 2017

Craig Baker

© 2017 Willis Towers Watson. All rights reserved.


Alliance Trust – a compelling proposition

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.

Access Access to skilled managers not otherwise

available to UK retail investors

Conviction Custom-built, totally unconstrained and highly

concentrated portfolios

Competitive

cost All delivered at a very competitive total cost

Dividend

Growth

A blend of income and growth oriented managers to

continue the progressive dividend policy

Differentiation No other investment trust offers best ideas from

best-in-class managers* in the same way

Notes:* As rated by Willis Towers Watson


1. Differentiation – an alliance of best ideas


Eight best-in-class* managers

from across the world

Creating portfolios of

only their ‘best ideas’

Selected and managed by


* as rated by Willis Towers Watson


2. Conviction - the power of concentrated portfolios


Warren Buffett has successfully invested this way for over 60 years

High active share…

-0.30 -0.30

-0.50

-0.10 -0.10

0.20

0.00

0.70

0.80

1.00

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1 (Lowest) 2 3 4 5 6 7 8 9 10 (Highest)

Av

era

ge A

nn

ualised

Alp

ha

Deciles of Active Risk

Increasing level of active risk

Own less

of this

Own more

of this

Source: Sebastian & Attaluri (2014)


3. Access

*UK *UK

*UK


Only 3 of the 8 managers are otherwise available in the UK retail market and none in the 20 stock format


4. Dividend growth

0

2

4

6

8

10

12

14

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Pe

nce

Ordinary dividend per share

Alliance Trust is one of

only four investment

companies to have an

increased ordinary

dividend in each of

the last 50 years.


Source: Alliance Trust, AIC

Based on ordinary dividend per share paid up to the year ending 31 December 2016



5. Competitive cost


Source: Company Accounts most recent available as at December 2016 / Canaccord as at December 2016

Target assumes the Trust stays approximately at its current size.

0.3

2

0.4

5

0.4

6

0.5

2

0.5

2

0.5

8

0.5

9

0.6

5

0.7

0

0.7

1

0.7

5

0.8

0

0.8

5

0.8

9

0.9

3 0.7

2

1.0

0

1.0

1

1.0

9

1.2

0

1.3

1

1.3

9

1.5

8 1.2

0

0.2

7

0.4

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

AIC Global sector Ongoing charge from latest Reports and Accounts (%pa)

Ongoing charge (ex performance fee) Performance fees

Target

< 0.65


An alliance of best ideas


Eight best-in-class* managers

from across the world

Creating portfolios of

only their ‘best ideas’

Selected and managed by


* as rated by Willis Towers Watson

Outperformance target of 2% pa (net of all

costs) above the MSCI All Country World

Index over rolling three-year periods


Willis Towers Watson track record


Towers Watson Global

Equity Focus Fund

+3.1% panet of manager fees

since inception

Advisory charitable

foundation client

+2.8% pa*net of manager fees over

most recent 5 years available

* Performance is simulated using the actual returns the relevant subset of the

Foundation’s investments

Past performance and simulated past performance are not a reliable guide to future returns

Notes: The TW Global Equity Focus Fund data sourced from BNY Mellon Fund Services (Ireland) Limited and MSCI World data from MSCI Inc, as at 31 March 2017.

The TW Global Equity Focus Fund performance shown is for the USD Z Share Series, based on daily prices. The Z share series is net of underlying manager fees and expenses and gross of WTW fees. Inception date is 17 August 2015.

The simulated performance shown for the Advisory charitable foundation client is the equally weighted combination of all managers that Willis Towers Watson has proposed to the client that the client has hired, at various inception dates,

to manage a concentrated portfolio. The simulated performance data is net of manager fees and expenses and supplied by the foundation’s custodian, IFS State Street. MSCI All Country World Index data is supplied by MSCI Inc. Data is

for the 5 years to 31 March 2017, the latest date with available data.

Performance vs MSCI All Country World

index from 1 April 2012 to 31 March 2017

Performance vs MSCI World index since Fund’s

inception on 17 August 2015 to 31 May 2017


How it all works


Alliance Trust

PLC Board

WTW Investment

Committee

WTW Portfolio

Management team

WTW ongoing

review

AIFM agreement – investment objectives and controls

Gearing policy

Sets Target portfolio weightings by manager

Sets rebalancing ranges around the targets

Agrees actual gearing target level given market conditions

Manager research team identifying new manager ideas for consideration

Manager research team conviction in current managers

Asset research team providing market valuation views

Position level risk analysis

Daily updates to manager weightings, performance, cash levels, gearing levels etc.

Places trades if the Investment-Committee-agreed rebalancing ranges are breached

Manages liquidity position in portfolio

Willis Towers Watson is responsible for the overall investment and risk management of the portfolio


The Willis Towers Watson Investment Team


Portfolio Management

Team of 15Research

Team of 128

Craig

Baker

David

Shapiro

Mark

Davis

Stuart

Gray

Support

Team of 126

CIO

Chair of IC

Team sizes as at 31 December 2016

Leverage wider WTW resources

Asset Research Team: top-down thinking

Quant and systems: robust models and tools

Operational due diligence: evaluate non-investment related functions at fund managers

Large specialist Global Research team

Average experience of 17 years

Includes former equity portfolio managers

Range of perspectives across all relevant regions and mandates


Manager research We focus on qualitative factors supported by data analytics


Idea generation

Due diligence

Investment decision

Formal approval

Universe of

managersMultiple

research team

inputs

Desk-based

research

Onsite

meetings /

Engagement

Follow-up

research and

contact

ODD

approval

Devil’s

advocate

Final skill

thesis

Voted by asset managers as having the highest Quality of Research**

Notes: Figures included above are approximated and rounded. Sourced from Willis Towers Watson as at March 2017.

*Equity long-only products **Portfolio Institutional Consultants Survey 2016

3,740researched*

560 currently rated*

16,550universe*

184Top rating*Just over 40 top-rated ‘global equity’ products


Due diligence


..c

om

pe

titi

ve

ad

va

nta

ge

Su

sta

ina

bilit

y o

f..

Investment professionals

Approach/insight generation

Portfolio management

Firm and team stability

Opportunity set

Alignment

Evidence of growth in assets impinging on ability to generate alpha

Increasing level of competition in the market

Reduction in the size of the investible universe

A process which does not evolve

Decisions becoming consensus driven

Senior people becoming less involved in research

Asset management becomes a small part of revenues

Lock-ins about to mature

Change in fee or incentive structure reducing alignment of interests

Significant turnover or change in the investment team

Viability of asset management business is unclear

Distraction due to corporate activity

An investment made which conflicts with stated philosophy

Performance inconsistent with approach/style

Lack of understanding of risks being run

Departure of key individual(s)

Lack of succession planning

Poor team dynamics

Things we look for Things that can change…


Due diligenceQuantitative modelling

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson cl ient use only.

Holdings-Based Risk Analysis

Capacity Analysis

Combination Analysis

Trade Tool

Source: Willis Towers Watson, FTSE ICB, Factset. Portfolio data source: Manager


Breakdown by industry (ICB) (%) Breakdown by region (%)

Portfolio net weight Benchmark weight

Style tilt analysis (z-score) Net active weight by market cap size bucket (%)

Notes: Portfo lio data source: M anager Source: Willis Towers Watson, FTSE ICB, FactSet, M SCI Inc

Our risk estimate (RE) is o f one year tracking error o f the portfo lio relative to the benchmark index calculated using historical stock-level data for the most recent one year (1) or three year (3) period.

High quality

High growthLargecap

Cheap Positive momentum

-0.5

+0.2

+0.0

-0.3

-0.2 -0.2-0.4

+0.2

+0.6+0.5

+0.6

+0.3

-0.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Siz

e

Retu

rn o

nIn

veste

d C

apita

l

Retu

rn o

n E

quity

Sale

s g

row

th

Earn

ings

Per

Share

Gro

wth

Long-T

erm

EP

S g

row

th

Div

idend/P

rice

Book/

Price

Earn

ings/

Price

Cash

Flo

w/P

rice

Sale

s/P

rice

Mom

entu

m1 Y

ear

Mom

entu

m3 M

onth

99

0 0 0 0 0 0 0 0 1 0

56

156 8 8

0 3 3 0 0 0

0

20

40

60

80

100

North A

merica

Euro

pe e

x U

K(D

ev)

UK

Japan

Asi

a P

aci

fic

ex

Japan (

Dev)

Mid

dle

Eas

t &

Afr

ica (

Dev)

Adva

nced

Em

erg

ing

Seco

ndary

Em

erg

ing

Non-in

dex

countr

ies

Cash

&non-e

quity

Oth

er

9

5

25

10 11

5

0 0

1916

1 0

6 5

12 1310 11

3 3

22

13

0 0

0

5

10

15

20

25

30

Oil

& g

as

Basi

cm

ate

rials

Indust

rials

Consu

mer

goods

Health

care

Consu

mer

serv

ices

Tel

eco

mm

-unic

atio

ns

Util

itie

s

Fin

anci

als

Tec

hnolo

gy

Cash

Oth

er

-20-15-10-505

10152025

1 2 3 4 5 6 7 8 9 10

Small Large

ValueQuality GrowthSize Momentum

Portfolio analysis – individual managers have significant risk

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson cl ient use only.


Risk Summary

Active risk 9.1% Portfolio volatility 18.6%

Active money 99% Benchmark volatility 12.9%

Beta 1.29

Number of stocks

Portfolio 20

Benchmark 2465


The Alliance Trust portfolio – as at end May 2017



Breakdown by industry (ICB) (%) Breakdown by region (%)

Portfolio net weight Benchmark weight

Style tilt analysis (z-score) Net active weight by market cap size bucket (%)

Notes: Portfo lio data source: M anager Source: Willis Towers Watson, FTSE ICB, FactSet

Our risk estimate (RE) is o f one year tracking error o f the portfo lio relative to the benchmark index calculated using historical stock-level data for the most recent one year (1) or three year (3) period.

High quality

High growthLargecap

Cheap Positive momentum

-0.3

+0.0 +0.1 +0.0 +0.1 +0.1

-0.2-0.1

+0.0 +0.1 +0.1 +0.1+0.2

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Siz

e

Retu

rn o

nIn

veste

d C

apita

l

Retu

rn o

n E

quity

Sale

s g

row

th

Earn

ings

Per

Share

Gro

wth

Long-T

erm

EP

S g

row

th

Div

idend/P

rice

Book/

Price

Earn

ings/

Price

Cash

Flo

w/P

rice

Sale

s/P

rice

Mom

entu

m1 Y

ear

Mom

entu

m3 M

onth

49

1910

38

0 3 50 3 0

56

156 8 8

0 3 3 0 0 0

0

20

40

60

80

100

North A

merica

Euro

pe e

x U

K(D

ev)

UK

Japan

Asi

a P

aci

fic

ex

Japan (

Dev)

Mid

dle

Eas

t &

Afr

ica (

Dev)

Adva

nced

Em

erg

ing

Seco

ndary

Em

erg

ing

Non-in

dex

countr

ies

Cash

&non-e

quity

Oth

er

53

15

11 10

17

1 1

1815

3

0

65

12 1310 11

3 3

22

13

0 0

0

5

10

15

20

25

Oil

& g

as

Basi

cm

ate

rials

Indust

rials

Consu

mer

goods

Health

care

Consu

mer

serv

ices

Tel

eco

mm

-unic

atio

ns

Util

itie

s

Fin

anci

als

Tec

hnolo

gy

Cash

Oth

er

-6

-4

-2

0

2

4

6

1 2 3 4 5 6 7 8 9 10

Small Large

ValueQuality GrowthSize Momentum

Risk Summary

Active risk 2.2% Portfolio volatility 13%

Active money 81% Benchmark volatility 12.9%

Beta 1.0

Number of stocks

Portfolio 182

Benchmark 2465

Meet Bill KankoBlack Creek Investment Management Inc.

Black Creek Investment Management

Investment-Driven• Priority on investing rather than asset gathering

• Controlled growth

Profile• Located in Toronto, Canada

• Founded in 2004

• $7.1 billion USD AUM with global client base

• Focused, boutique manager of global andinternational equity portfolios

*There are some exceptions to this policy

Independent• Privately owned by Partners of Black Creek

• All senior investment team members are equity shareholders in the firm

Strong Alignment of Interests• Employees required to have 100% of listed equity

investments in Black Creek strategies *

• Investment team compensated based on long-term client performance

Richard Jenkins, MBA• 31 years of global investment experience

• Previous experience with Invesco Trimark

Black Creek team bios

TIGHT, COHESIVE GROUP, STRONG INVESTMENT CHARACTER

Bill Kanko, CFA• 36 years of global investment experience

• Former head of global equity at Invesco Trimark

Matias Galarce, CFA, MBA• 16 years of investment experience

• Previous experience in venture capital and management consulting

Heather Peirce• 25 years global investment experience

• Previous experience with Gryphon, Invesco Trimark and RBC

Jonathan Ruel, CFA• 5 years investment experience

• Previous experience with Fiera Capital and Burgundy

Evelyn Huang, CFA, MBA• 13 years of global investment experience

• Previous experience with Invesco Trimark

Samir Jhaveri, CFA, MBA• 16 years of global investment experience

• Previous experience with McLean Budden and OMERS

Melissa Casson, CFA, MBA• 8 years investment experience

• Previous experience with Oppenheimer Funds and Sanford C. Bernstein

Differentiation & Conviction

Black Creek portfolios do not look like any market index

Significant conviction in the companies we do hold

10.1%

0.0%0%

2%

4%

6%

8%

10%

12%

MSCI ACWI Alliance Trust

Apple Inc 1.97% -

Alphabet Inc 1.43% -

Microsoft Corp 1.25% -

Amazon.com Inc 0.97% -

Facebook Inc 0.86% -

Johnson & Johnson 0.85% -

Exxon Mobil Corp 0.81% -

JPMorgan Chase & Co 0.71% -

Nestle SA 0.64% -

Wells Fargo & Co 0.59% -

56.5%

0.2%0%

10%

20%

30%

40%

50%

60%

Alliance Trust MSCI ACWI

ICICI Bank Ltd (ADR) 6.61% 0.01%

Accor SA 6.47% 0.02%

Nielsen Holdings PLC 6.21% 0.03%

OC Oerlikon Corp AG 5.85% -

Daikin Industries Ltd 5.60% 0.06%

Cap Gemini SA 5.40% 0.04%

HeidelbergCement AG 5.14% 0.03%

Borgwarner Inc. 5.09% 0.02%

Santander Mexico 5.09% 0.01%

Inovalon Holdings Inc. CL 5.03% -

Benchmark Top 10 Holdings Black Creek Alliance Trust Top 10 Holdings

As of May 31, 2017. Source MSCI.

Philosophy

1. CONCENTRATE ON WINNING BUSINESSES

“Long-term customer value comes first. That drives market share, then profitability,

the ability to reinvest, scale advantages, and ultimately dominant businesses.”

Richard JenkinsManaging Director

2. FIND UNIQUE INSIGHTS...

...that indicate a Winning Business will be bigger and/or more profitable than the market thinks. Market opinion may be inaccurate due to timeframe, misunderstood business strategy and/or significant short-term price dislocations

Black Creek’s Philosophy Versus Conventional Practice

Conventional Mindset Black Creek Mindset

Time Horizon Next two-to-three years Next 10 years

Find Quality Businesses Winning Businesses

Research Focus Profitability Customer Value, Market Share, Unique Insights

MetricsMay not Relate to Real Business Value(P/E; ROIC)

Relate to Real Business Value(Cash Flow)

Investment Process

Followed List: 800-900 Companies• Leader in their field• Gaining market share• Competent, shareholder-friendly

management• Investing to grow• Reasonable return on capital

Idea

Detailed Due Diligence• 175-225 annually

Pass• 5-10 annually• Write Formal Thesis Sheet

No - Contingency

No - Never

1 Maintain Followed ListPotential to be a Winning Company

2Develop IdeaThat the company will be bigger and/or more profitable than the market thinks

3Conduct Detailed Due DiligenceCustom research to confirm company is a Winning Business and Thesis is correct

Develop Ideas: Connecting the Dots

Strong Customer Value Proposition

...May lead to long-duration market share growth/profitability the market does not recognize.

Timeframe Mismatch...A Winning Business becomes undervalued due to short-term developments that are not important in the long-term.

Strategic Transformation ...Potential for change in the business model to propel the company.

Management Change...May result in a shift to a Winning Business strategy and/or more shareholder-friendly Management.

2

The idea comes first...then detailed due diligence

3Conduct Detailed Due Diligence

The valuation anomaly directs due diligence – different company-by-company

Emphasis

Confirm Winning Business

• Market leader/gaining share?

• R&D strategy?

Assess Management

• Alignment with Winning Business strategy?

• Shareholder friendly?

Assess Valuation

• Long-term DCF analysis (10 years)

• FCF and FCF yield

Confirm Competitive Advantage

• Porter and SWOT analysis

3Daikin Industries

The valuation anomaly directs due diligence – different company-by-company

The Company

• The global leader in air conditioning systems for commercial and residential use

Proprietary Idea

• AC Increases productivity; low penetration of AC in developing markets; above GDP market growth

• Achieve energy efficiency and environmental controls via Daikin technology and systems

• Company’s ability to achieve synergies across geographies through product distribution, management practices and production

Source StatPro 2016

3Anta

The Company

• Anta is the leading domestic sportswear brand in China

Proprietary Idea

• Anta offers value for money products, 30% cheaper than Nike and Adidas for 80% of the quality

• Significant investments in systems and supply chain allow for better managed growth

• Leveraging other brands (Fila, Descente) into its infrastructure

• Good corporate governance, ownership

Source StatPro 2016

3Portfolio and Risk Management


Risk Management

Position Weightings

Dynamic process. Constantly re-evaluate Thesis and Valuation.

Portfolio Turnover

Generally 25%-35% of the dollar value of the portfolio annually.

Cash Allocation

Fully-invested policy.

Individual Company-Level

• Define risk as the permanent loss of capital. Market volatility is not loss of capital – but a reflection of short term demand and supply.

• Rather, the volatility of the underlying operations of the business are the most relevant risk factors within the investment process.

Portfolio-Level

• Understand drivers of risk company-by-company and how they interplay.

• Is there overlap by geography, industry or fundamental factor?

• Human qualitative analysis versus formal software.

Black Creek Alliance Trust Holdings

Accor SA ICICI Bank Ltd (ADR)

Anta Sports Products Ltd Inovalon Holdings Inc. CLA

Borgwarner Inc. Koninklijke DSM NV

Cap Gemini SA Nielsen Holdings PLC

Daikin Industries Ltd OC Oerlikon Corp AG

Distribuidora Internacional Oracle Corp

FTI Consulting Inc. Santander Mexico

Galaxy Entertainment Group Santen Pharmaceutical Co Ltd.

Galp Energia SA Schneider Electric SE

HeidelbergCement AG










HeidelbergCement AG










HeidelbergCement AG










HeidelbergCement AG

Black Creek Summary

Our Edge has translated into consistently strong performance

• Excess return versus Benchmark and Peers over all rolling three and five year periods since inception

Concentrated, high-conviction portfolios

• Fit well in multi-manager structures

We have an Edge

Investment-DrivenCulture

Concentrate on Winning Businesses

Long-term Investment Horizon

Meet Andrew Wellington Lyrical Asset Management

250 West 55th Street, 37th Floor

New York, NY 10019

T: 212.415.6600 F: 212.415.6699

LAM U.S. Value Equity

Portfolio Review

June 22, 2017

Presenter:

Andrew Wellington, Chief Investment Officer

37

U.S. Value Equity

Business Update

• Firm AUM: ~$7.7B

• Firm Headcount: 26 employees

• Recent Hire: John Mullins (Senior Analyst)

38

U.S. Value Equity

Andrew Wellington, Chief Investment Officer

Lyrical Asset

Management

Co-founder, Strategy Architect, and Lead Portfolio Manager of top 1% value equity product (eVestment

Alliance database) for the eight year period ended December 31, 2016

New Mountain

Capital

Co-managed the $1.2 billion New Mountain Vantage fund – a value-oriented, long-only, activist investor

hedge fund

Neuberger

Berman

Managed the institutional mid-cap value product, generated strong investment performance, and earned a

5-Star Morningstar rating, as AUM tripled to over $3 billion

Pzena Investment

Management

Hired as the firm’s first research analyst and promoted to partner and member of the three person investment

committee

University of

Pennsylvania

Graduated summa cum laude and was the top graduating senior from the University of Pennsylvania’s

Management & Technology Program, simultaneously earning degrees from the Wharton School of Business

and the Engineering School

39

U.S. Value Equity

Investment Strategy Highlights

• 20 U.S. Listed Stocks

• Selected from Top 1,000

• Pure Bottom Up

PRODUCT DESCRIPTION

• Value

• Quality

• Analyzability

STOCK SELECTION

• Limited Single Stock

Exposure

• Limited Industry Exposure

• Low Turnover

PORTFOLIO CONSTRUCTION

40

U.S. Value Equity

Investment Process: Idea Generation

• Proprietary investment screening

―Nearly all investment ideas are identified using a proprietary investment screen

―Starts with a universe of the top 1,000 U.S. traded common stocks by market capitalization

―Estimates the fair value of each stock in the universe from estimated long-term

normalized earnings

―Long-term normalized earnings analysis is appraised by a statistical extrapolation based on the historical earnings trend line and consensus

estimates of forward earnings

• Qualitative idea selection

―Personally review the top ~100-200 stocks with the greatest discounts to estimated fair value

―Use additional data to identify promising research candidates, including: five year average return on assets and equity; historical earnings

consistency; debt-to-EBITDA; forward consensus estimates of earnings and earnings growth

―Leverage personal knowledge base of ~700 stocks from investing experience

Idea Generation

Research


41

U.S. Value Equity

Investment Process: Research

― Analyze financial statements

― Perform financial ratio analysis

― Calculate ROIC and Balance Sheet

metrics

― Review past earnings calls: replays,

transcripts, presentation decks

― Review past investor presentations:

broker conferences and investor days

― Review relevant sell side research

coverage

― Assess management quality and

decision making

Idea Generation

Research


“The function of security analysis may be described under three headings: Descriptive, Selective, and Critical”

– Securities Analysis: Principles and Techniques, Benjamin Graham and David Dodd, 1934

― Develop an in-depth understanding

of the business

― Identify sources of past business

variability

― Evaluate business threats and

opportunities

― Assess management’s business

plan and financial objectives

― Estimate forward growth and

profitability

― Compute target valuations based

on a multiple of 5-year forward

earnings

― Do we have conviction in our 5-year

forward normalized earnings

estimate?

― Is there adequate upside to fair

value?

― Is the potential return sufficient for

the risks and uncertainties?

DESCRIPTIVE

Marshall the Important Facts

SELECTIVE

Express Specific Judgments

CRITICAL

Apply Standards to the Facts

42

U.S. Value Equity

Investment Process: Portfolio Management

• Select the best ~20 risk-adjusted investment opportunities

• Create a portfolio with as much balance and diversity as possible

• Strictly limit concentration risk

• Maintain strict valuation-based sell discipline

Idea Generation

Research


43

U.S. Value Equity

Process Success Rate

Investment Success Rate (Relative Performance)

This chart shows the percentage of holdings in the LAM – EQ composite for each period specified that produced a return (including dividends) greater than the return of the S&P

500. Past performance is not necessarily indicative of future results. A complete list of the advisor’s recommendations is available upon request.

66%

50%

62%

43%

50%

83%

59%

55%

73%

64%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ITD 2017 2016 2015 2014 2013 2012 2011 2010 2009

44

U.S. Value Equity

Position MV Percent

CASH (USD) 1.18%

Western Digital Corporation (WDC) 5.69%

Aetna Inc. (AET) 5.37%

Liberty Interactive Corporation QVC Group Class A

(QVCA) 5.30%

Anthem, Inc. (ANTM) 5.26%

Broadcom Limited (AVGO) 5.24%

Whirlpool Corporation (WHR) 5.19%

Corning Inc (GLW) 5.15%

Eaton Corp. Plc (ETN) 5.10%

Aflac Incorporated (AFL) 5.04%

TE Connectivity Ltd. (TEL) 5.04%

Flex Ltd. (FLEX) 4.96%

Suncor Energy Inc. (SU) 4.92%

Johnson Controls International plc (JCI) 4.78%

AerCap Holdings NV (AER) 4.71%

Lincoln National Corporation (LNC) 4.69%

Celanese Corporation Class A (CE) 4.56%

Western Union Company (WU) 4.55%

EOG Resources, Inc. (EOG) 4.54%

Ameriprise Financial, Inc. (AMP) 4.48%

Goodyear Tire & Rubber Company (GT) 4.27%

TOTAL 100.0%

SECTOR WEIGHTINGS May 31, 2017

Consumer Discretionary

15%

Energy10%

Financials19%

Health Care11%

Industrials15%

Information Technology

26%

Materials5%

Note: No exposure to Consumer Staples, Telecommunication Services, or Utilities

Alliance Trust Account Holdings

U.S. Value Equity

Stock Example: Whirlpool Corp. (WHR)

Business Background• Leading global producer of home appliances with presence in ~100M homes worldwide

• #1 market share on every major continent

• Products include home laundry, refrigeration, home cooking, dishwashers and air conditioning

appliances

• Sales driven more by replacement demands than by new home builds

Current Trends• Increased branded business from 80% to 95%

• More balanced geographic mix with global scale in manufacturing

• Post housing bubbles, unit growth resumes though current volumes are still well below 30-year trend

Earnings and Valuation• Successfully grew its EPS at CAGR of

~20% over the last three years

• Consensus 2016 & 2017 EPS estimated to

be $14.69 & $17.07, respectively

• Believe they can grow EPS at an

annualized rate of 15-20% per year over

the next few years and 10-12% per year

thereafter

• Valuation currently ~11.0x 2016 & 9.5x

2017 consensus EPS

• Estimate fair value is more than 50%

higher than our original cost

Disclaimer: This communication does not constitute a recommendation to purchase or sell securities. A purchase of the securities mentioned herein entails not only the potential for profit but also the risk of loss. Lyrical Asset Management LP

(“LAM”) disclaims any duty to update the information contained herein. Moreover, the information presented is based upon data provided by third party providers. LAM disclaims responsibility for any inaccuracies in such data. A list of all

recommendations by LAM is available upon request. Past performance is not necessarily indicative of future results.

U.S. Value Equity

Stock Example: Lincoln National Corp. (LNC)

Business Background• Products include: life insurance, annuities, group protection, retirement plan services

• Record of strong, consistent performance with low earnings volatility

• Sells through distribution network of 87,000 individual advisors

• Solid risk management and capital management

• Robust statutory capital ratios

Current Trends• Have pivoted to life insurance sales with less long-term guarantees due to decline in interest rates

• New Dept. of Labor regulations regarding qualified retirement plans may be an overhang for some investors.

• Regulations may benefit company, as increased regulation tends to favor large incumbents.

Earnings and Valuation• Successfully grew its EPS from

$3.13 in 2010 to $5.46 in 2015

• Consensus 2016 & 2017 EPS

estimated to be $6.13 & $6.94,

respectively

• Believe they can grow EPS at an

annualized rate of 8-10%

• Valuation currently ~6.9x 2016 &

6.1x 2017 consensus EPS

• Estimate fair value is more than

100% higher than our original cost




U.S. Value Equity

Stock Example: Flex Ltd. (FLEX)

Business Background• Second largest electronics manufacturing services company in the world

• Evolved from contract manufacturer to value-added design, manufacturing,

and logistics partner through “Sketch-to Scale” model

• Uses in-house supply-chain technology to organize distribution of products efficiently

Current Trends• End markets have grown faster than global GDP

• Sketch-to-Scale has grown from 7% of revenues in 2013 to an expected 23% in 2017.

• Expanding market into new, higher margin categories including medical devices, connected

home and car systems, and AR/VR devices

• Company has committed to return of 50% of annual free cash flow to shareholders each year

Earnings and Valuation• Believe they can grow top line sales in

low single digits

• Believe they can grow operating

incomes in the high single digits and

earnings at ~15% per annum

• Valuation currently ~14.0x 2017

consensus EPS

• Estimate fair value is more than 35%

higher than our original cost




48

U.S. Value Equity

Monthly P/E Ratios vs. Market (Large Value Select)

25%24%

31% 32% 31% 30%

35%

29%

33% 33%

36% 36% 36%

42%

12.4x

17.6x

0x

2x

4x

6x

8x

10x

12x

14x

16x

18x

20x

04/3

0/16

05/3

1/16

06/3

0/16

07/3

1/16

08/3

1/16

09/3

0/16

10/3

1/16

11/3

0/16

12/3

1/16

01/3

1/17

02/2

8/17

03/3

1/17

04/3

0/17

05/3

1/17

PE

(N

TM

)

Market Premium LAM SPX

Note: The data has been obtained from FactSet. While that information is believed to be reliable, Lyrical Asset Management LP accepts no responsibility for such data.

49

U.S. Value Equity

Indexed EPS (Large Value Select)

-

50

100

150

200

250

2007 A 2008 A 2009 A 2010 A 2011 A 2012 A 2013 A 2014 A 2015 A 2016 A 2017 E 2018 E

SPX4.5% CAGR75% EPS R2

-29.6% PT

LAM8.3% CAGR86% EPS R2

-30.1% PT

Note: This chart depicts the historical change of earnings per share of the companies comprising the long holdings of Lyrical Asset Management LP ("LAM") as of June 1, 2017, using equal weights as of all dates, and the change in earnings per share of the Standard & Poor's 500 Index over the same period. Actual weights of LAM's holdings varied over time. Earnings per share is computed using consensus earnings data per FactSet, which include certain adjustments from reported, GAAP earnings. The R-squared data shows the correlation to the dotted best fit line, and is indicative of the stability of earnings over the period shown.

50

U.S. Value Equity

Organizational Resources and Teams

Marketing Team

Gary Faccenda

Godfrey Gill

John Jonson

David Merklin

Craig Feldman

Daniel Lachcik

Ian Stock

Client Relations

Client Relations

Client Relations

Client Relations

Advisor Relations

Advisor Relations

Advisor Relations

–

–

–

–

–

–

–

Investment Team

Caroline Ritter

David Roeske

John Mullins

Co-Portfolio Manager

Associate Portfolio Manager

Senior Analyst

–

–

–

Operations Team

Jeffrey Moses

Ted Gage

Craig Lifschutz

Daniel DeSerio

Monica Frazee-Lee

Elan Kattan

Michael Layman

Matt Stevens

Chief Operating & Compliance Officer

Chief Financial Officer

Managing Director

Director – Operations & Trading

Controller

Accounting and Operations Associate



–

–

–

–

–

–

–

–

Founder,

Chief Investment Officer

Andrew Wellington

Founder,

Chief Executive Officer

Jeffrey Keswin

Administrative Support

Rachel Kitson

Jill Brown

Lauren Paolino

Denise Olsen

Executive Assistant

Executive Assistant

Executive Assistant

Executive Assistant

–

–

–

–

51

U.S. Value Equity

Investment Team

Caroline Ritter

Co-Portfolio Manager

• Chief Investment Officer at Pilot Advisors, a Multi-Cap Value strategy with $800 million in AUM

• Co-Portfolio Manager of the Core Value product at Equinox Capital with $1 billion in AUM

• Generalist analyst at PIMCO Equity/Oppenheimer Capital for the Large-Cap Value Fund (Morningstar’s #1 ranked 5-year record) and Mid-Cap Value Fund

(Morningstar’s #2 ranked on 10-year record)

• One of only four research analysts at Pzena Investment Management during the period when returns outperformed the market by more than 20% CAGR,

and AUM increased nearly tenfold to over $6.5 billion

• Research analyst at Goldman Sachs for a 5-star Morningstar ranked large cap value fund

• Graduated summa cum laude and class valedictorian from SUNY Stony Brook with degrees in Economics and Applied Mathematics

David Roeske

Associate Portfolio Manager

• Analyst at Soundpost Partners, a long-short equity hedge fund, since April of 2008.

• Analyst at Canaan Partners, an early-stage venture capital firm in Menlo Park, CA, and prior to that, an analyst at Rustic Canyon Partners, an early-stage

venture capital firm in Santa Monica, CA.

• Graduated with distinction from Stanford University in 2004 with a B.A. in International Relations.

John Mullins

Senior Analyst

• Senior Analyst at Clearfield Capital Management, a long-short hedge fund focused on value-oriented special situations investing

• Analyst at Elm Ridge Capital, a long-short, deep value equity hedge fund, and prior to that, an analyst at Orbis Investment Management, a deep value and

contrarian long-only equity manager

• Graduated cum laude and with distinction from Yale University and received an MBA from the Stanford Graduate School of Business

52

U.S. Value Equity

Managing Partner Biography

Jeffrey Keswin

Managing Partner of Lyrical Partners

• Founded Lyrical Partners in 2004

– Established Lyrical Multi-Manager, which won InvestHedge Awards in 2006, 2007, 2008, and 2011

– Established Lyrical-Antheus Realty Partners, a series of multi-family real estate funds

– Established Lyrical Asset Management, a long-only, value-centric asset manager

– Seeded multiple single manager hedge funds

• Co-founded Greenlight Capital and served as Co-President from 1996 to 2002

– Greenlight was named the “Top Emerging Hedge Fund Manager” at the Alternative Awards in 1998

• Helped build Siegler, Collery & Co., a high-performing investment firm that came to be esteemed as a leading training camp for

value-oriented managers from 1991 to 1995

• Analyst in the corporate finance department of Bear, Stearns & Co, Inc. from 1990 to 1991

• Graduated summa cum laude from the University of Pennsylvania’s Management & Technology Program, simultaneously earning

degrees from the Wharton School of Business and the Engineering School

53

U.S. Value Equity

Our Unique Proposition

Stock Selection

• Value – Seek investments with minimum 35% upside to fair value;

Not “relative” value or “core” value

• Quality – Only invest in good businesses, generally capable of producing

double-digit returns on invested capital

• Analyzability – Only invest in businesses we can understand and analyze and avoid situations that are

excessively complex or require specialized technical knowledge

• No Catalysts – Do not seek or require a visible stock catalyst, event, or trigger.

Portfolio Construction

• Bottom-Up – Benchmarks and macro do not influence stock selection or portfolio construction

• Diversified – Portfolio of 20 stocks; strict policy limits on industry and position concentrations

• Long-Term – Trade sparingly, historical portfolio turnover of ~15% per annum; seek to maximize risk-

adjusted returns over the longer term

“Among our fellow

deep value managers,

we have yet to find one

with the quality

characteristics

of our portfolio.”

Meet Anthony BrookeNon-Executive Director, Alliance Trust


Alliance Trust – a compelling proposition


More consistent outperformance over the long-term

than a single core portfolio, at a competitive cost

Access• Access to skilled managers not otherwise

available to UK retail investors

Conviction• Custom-built, totally unconstrained and highly

concentrated portfolios

Competitive

cost• All delivered at a very competitive total cost

Dividend

Growth

• A blend of income and growth oriented managers to

continue the progressive dividend policy

Differentiation• No other investment trust offers best ideas from

best-in-class managers* in the same way

Notes:* As rated by Willis Towers Watson

Important Information 1/2

• This financial promotion has been approved by Towers Watson Investment Management Limited ("Willis Towers Watson"), authorised and regulated by the Financial Conduct Authority.

This presentation includes certain information and materials prepared for Alliance Trust PLC (the “Company”) by Willis Towers Watson. Unless stated specifically otherwise, this

presentation is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are for information purposes only.

• This presentation has been prepared for general information purposes only and must not be relied upon in connection with any investment decision. Under no circumstances should this

presentation nor any of the information contained within it be considered a substitute for specific professional advice. Potential investors should seek independent financial advice from a

financial advisor who is authorised under the Financial Services and Markets Act 2000 before making any investment decision.

• All financial investments carry risk. The value of an investment, and the income derived from it, if any, may go down as well as up and an investor may not get back the amount invested.

Past performance is not a guide to future performance. This document contains certain forward‐looking statements with respect to the financial condition, results of operations and

businesses and plans of the Company and its subsidiaries (the “Group”). These statements and forecasts involve risk and uncertainty because they relate to events and depend upon

circumstances that have not yet occurred. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these

forward‐looking statements and forecasts. As a result, the Group’s actual future financial condition, results of operations and business and plans may differ materially from the plans, goals

and expectations expressed or implied by these forward‐looking statements. The Company undertakes no obligation publicly to update or revise forward‐ looking statements, except as

may be required by applicable law and regulation (including the Listing Rules of the Financial Conduct Authority). Nothing in this presentation should be construed as a profit forecast or be

relied upon as a guide to future performance.

• The presentation is based on information available to Willis Towers Watson at the date of this material and takes no account of subsequent developments after that date. In preparing this

material Willis Towers Watson has relied upon data supplied to it by third parties. Whilst reasonable care has been taken to gauge the reliability of this data, Willis Towers Watson provides

no guarantee as to the accuracy or completeness of this data and Willis Towers Watson and its affiliates and their respective directors, officers and employees accept no responsibility and

will not be liable for any errors or misrepresentations in the data made by any third party.

• The entities within the Willis Towers Watson group responsible for the management of the Alliance Trust investment portfolio are Towers Watson Investment Management (Ireland)

Limited (TWIMI), Trinity Point, 10-11 Leinster Street South, Dublin, register number 528835, authorised and regulated by the Central Bank of Ireland as the AIFM, and, Towers Watson

Investment Management Limited (TWIM), authorised and regulated by the Financial Conduct Authority( reference number 446740) as the investment manager and a delegate of the AIFM.

Important Information 2/2

• In the absence of its express written agreement to the contrary neither the Company nor Willis Towers Watson and its affiliates and their respective directors, officers and employees

accept any responsibility and will not be liable for any consequences howsoever arising from any use of or reliance on this presentation.

• NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA OR ANY

JURISDICTION FOR WHICH THE SAME COULD BE UNLAWFUL. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN

ANY JURISDICTION, INCLUDING IN THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA

• The value of investments and the income from them may go down as well as up and are not guaranteed. Investors may not get back the amount invested.

• Past performance is not a guide to future performance. Future returns are not guaranteed.

• The Trust has underlying holdings which are denominated in currencies other than Sterling and therefore may be affected by movements in exchange rates. Consequently, the value of

these investments may rise or fall in line with exchange rates.

• Whilst care has been taken in compiling the content of this presentation, no representation or warranty, express or implied, is made by Alliance Trust as to its accuracy or completeness.

Some slides may been compiled from external sources. Whilst these sources are believed to be reliable, the information has not been independently verified and therefore no

representation is made as to its accuracy or completeness.

• The opinions expressed are those held by Alliance Trust at date of issue and are subject to change. Examples used are to demonstrate our investment philosophy and should not be

interpreted as recommendations to buy or sell.

• Alliance Trust may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that a relatively small movement,

down or up, in the value of the Trust’s assets will result in a magnified movement, in the same direction, of that NAV. This may mean that you could get back nothing at all.

• Alliance Trust PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office, 8 West Marketgait, Dundee DD1 1QN. Alliance Trust PLC gives no

financial or investment advice.

an alliance of best ideas · an alliance of best ideas 22 june 2017 this financial promotion has...

Documents