approaching global financials guy de blonay november 2007
TRANSCRIPT
Approaching Global FinancialsApproaching Global Financials
Guy de Blonay
November 2007
2
Introduction
Important and diverse sector
Opportunities
Case studies
Summary
Appendix
Agenda
3
Index Financial Services as % of Index
S&P 500 (US) 22.2%
CAC 40 (France) 23.3%
DAX (Germany) 27.6%
FTSE 100 (UK) 30.4%
Topix 100 (Japan) 27.2%
S&P/TSX Comp (Canada)
31.9%
All Ordinaries (Australia)
42.4%
MSCI World 26.6%
Source: Datastream at 31.01.2007.
Sector important and diverse
Sub-sectors:
Regional Banks
Investment Banks
Thrifts and Mortgage Banks
Broker Dealers
Asset Managers
Life Insurance
Non-Life Insurance (Including Reinsurance)
Speciality Finance (Credit Cards, Leasing, Financial Guarantors)
Exchanges
Property
The financial sector is an important part of global markets:
4
Approaching global financials
Strategy
Fundamentally-based long term capital growth through investment in the Financials sector; guided by combination top driven/bottom up stock analysis
Objective
Identify sub-sector fundamental themes and exploit them through investments in companies with prices that do not reflect longer-term trends
Be opportunistic and effective with capital by dynamically allocating it across multiple sub-sectors, capitalisations, growth/value categories and geographies
Liquid strategy with active management
Goal
Generate meaningful returns in any market conditions
Avoid “disasters”
5
Filtering and Portfolio Construction
Universe
Europe USUK Japan Asia Emerging markets
Best 15 – 20 themes chosen
Potential stock opportunities (within 15- 20 themes)
Detailed fundamental company analysis
Portfolio Active Management
“All of our ideas start with a view that a significant industry or company change, not yet being fully recognised by the market,
is imminent or in progress”
Risk Management
(15-20 themes/70-100 names)
6Source: IMF, OECD, Datastream, Credit Suisse research.
Opportunities – credit growthHousehold debt/GDP versus GDP per capita;
underleveraged countries in terms of consumer debt are circled
UKUS
Japan
Hong Kong
Indonesia
Korea
MalaysiaSingapore
Taiwan
Netherlands
Denmark
Germany
Portugal
SwedenIreland
Spain
Finland
BelgiumFrance
Greece
Italy
HungaryCzech RepublicPoland
S. Africa
0%
20%
40%
60%
80%
100%
120%
0 10000 20000 30000 40000 50000
GDP per capita (US$)
Hou
seho
lds
debt
/GD
P (%
)
Canada
Household leverage is low in many countries
7Source: IMF, OECD, Datastream, Credit Suisse research.
S. AfricaTaiwan
S. Korea
Portugal
Russia
PolandHungary
Czech Rep.Greece
New Zealand
Spain
Hong Kong
Singapore
Italy
Australia
Germany
Japan
France
UKBelgium
Finland
CanadaAustria
NetherlandsSweden
US
Denmark
Switzerland
Norway
0%
2%
4%
6%
8%
10%
12%
0 10 20 30 40 50 60 70 80
GDP per capita, US$ '000s
Life
pre
miu
ms,
% o
f GD
P
Life insurance product penetration and GDP per capita
Life company penetration is low in many countries
Opportunities – insurance penetration
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Exploiting the growing global savings pool
Global private wealth
Number of high net worth individuals and value of their wealth
HNWI (millions)
Value of wealth ($ trillion)
Value of wealth (% change y-o-y)
1997 5.2 19.1 -------
1998 5.9 21.6 13.1
1999 7.0 25.5 18.1
2000 7.2 27.0 5.9
2001 7.1 26.2 -3.0
2002 7.3 26.7 1.9
2003 7.7 28.5 6.7
2004 8.2 30.7 7.7
2005 8.7 33.3 8.5
Source: IFSL, based on data from Merrill Lynch Capgemini
9Source: Thomson Financial.
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000E
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US
$ m
illio
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Global announced M&A deals – financials consistently active
Mergers and acquisitions
10
Europe ex UK sector concentration: top 5 companies as % of total sector market cap
Source: Credit Suisse.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%C
ap G
ood
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Pha
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ard
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Sector consolidation
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Playing sub-sector themes
Trend Long Avoid
2002 Market outlook uncertain Money brokers US market sensitive stocks
Lloyds of London Asset managers
European property Investment banks
2003 Market consolidation Investment banks Insurance
Low interest rates Asset managers Online brokers
High liquidity Irish and UK property Insurance brokers
2004 Stronger equity markets Investment banks US insurance
Surge property valuation outside G7 Private banking US asset managers
Low interest rates Eastern European property UK domestic banks
2005 Market sentiment positive Asset managers UK domestic banks
M&A activity increasing Emerging markets Insurance brokers
Low inflation Japanese Brokers Large Cap US regional banks
2006 Market sentiment positive Investment banks Canadian regional banks
M&A activity Asset managers US regional banks
Liquidity Emerging markets Insurance brokerage
Global growth Diversified financials US regional banks
2007 Re-pricing of risk Asset managers Spanish domestic
Low inflation Emerging markets UK banks
12
National Bank of Greece – share price
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
Case studies
National Bank of Greece
Ranked 27th amongst the strongest banking groups in Europe (at 06.07.2007)
Core profit comes from South East Europe
Expectations for dynamic growth
Turkiye Garanti
Third largest private bank in Turkey
GE Capital owns 26% stake
Finances 16% of Turkey’s exports and 14% of its imports
Turkiye Garanti – share price
13
Shenzhen Investment – share price
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
Case studies
Shenzhen Investment
A mid-market property developer in southern China
45.7%-owned by Shenzhen's city government
H1 2007 net profit rose sharply on property revaluation gains
Citigroup
The world’s largest company*
Global, diversified financial services business model
Restructuring measures announced H1 2007
Citigroup – share price
* Source: Forbes Global 2000, March 2007. Ranking is based on a mix of four metrics: sales, profit, assets and market value.
14
Northern Rock – share price
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
Case studies
Northern Rock
5th largest UK mortgage lender
Business model depends on funding from wholesale credit markets
September 2007 - sought emergency funding from Bank of England
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Global - greater opportunities and diversification
Global financial services are an attractive and diversified asset class
Current environment is positive:
- Global growth, driven by BRIC countries (represented 26% of Global GDP in 2006 and this is expected to rise)
- Low inflation, low interest rate environment provides supportive conditions
- Global liquidity and strong M&A activity driving capital markets
- Significant private equity capital raised in 2006 alone
- Increasing consumer activity in both loans and savings
Summary
16
Appendix
17
Fund Manager Profile: Guy de Blonay
Director with 11 years’ investment experience
Manager of the CC&L Global Financials Fund since launch in May 2006
Manager of the New Star Financials Hedge Fund since launch in April 2002
Manager of the New Star Global Financials Fund (OEIC), top specialist financialfund since inception*
Formerly at Jupiter Asset Management Ltd, 1995-2001
Stephen WhittakerUK team of 9
Mark BealeUS team of 2
Richard PeaseEuropean team of 10
Brian CoffeyEmerging markets team of 5
Chris BurlingJapan team of 3
Ian BeattieAsia team of 3
“…more ideas are generated by a team but decisions are best left to the individual…”
Leverage off the New Star network for real-time information sharing and security analysis:
Nick BrindPan-European financials specialist
Emily AddersonFinancials Analyst
Mick GrovesTrader for Pan-European markets
Mark HurleyTrader for US and Asia (incl. Japan)
Team:
**
* Source: Lipper Hindsight at 31.08.07 since launch (28.12.01), performance based on financial peer group comprising financial funds held within the IMA Specialist Sector. ** Source: Citywire at 31.08.07 Fund Manager ratings are based on assessing individual fund managers outperformance against appropriate benchmarks over a period of 36 months.
18
Important information
Past performance is not necessarily a guide to future performance. The value of investments and any income from them may fall as well as rise and investors may not get back the amount originally invested. The value of investments may also increase or decrease as a result of changes in exchange rates between currencies. The opinions expressed here are solely those of the fund manager at the time of print and should not be interpreted as investment advice.
The New Star Global Financials Fund (formerly the WorldInvest Management Fund) (the "Fund") opened to retail investment on 19 May 2003. Performance history for the Fund includes that of the WorldInvest Management Fund which was launched on 28 December 2001.The Fund invests in a specialist sector, which may be less liquid and produce more volatile performance than an investment in a spread of investment sectors.
This presentation is for professional investors, professional advisers and other financial institutions only and should not be provided to or relied upon by private investors. This presentation should not be distributed to any third parties. The Fund should be viewed as an investment suitable only for investors who can fully evaluate and bear the risks involved. This document does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Distribution of this document and the offering of shares in certain jurisdictions may be restricted and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. If this is the case, this Fund cannot be the subject of active marketing in your jurisdiction.
The Fund is registered for sale in the UK, France, Spain, Italy and Singapore (recognised).
Full details of the Fund can be found in the prospectus. Any decisions should be made solely on the basis of the relevant documents, which are available on request from New Star. The Simplified Prospectus is also available upon request.
The shares referred to in this document have not been and will not be registered under any United States securities laws, and except in a transaction that does not violate the United States securities laws, may not be directly or indirectly offered or sold in the United States of America, or any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States person.
New Star Investment Funds Limited is the ACD for the Fund, and the Investment Manager is New Star Asset Management Limited. Both firms are authorised and regulated in the UK by the Financial Services Authority.
New Star Investment Funds is the trading name of New Star Investment Funds Limited, part of the New Star Marketing Group. New Star Investment Funds is not authorised to give investment advice and only provides information on the New Star Group’s products.
Issued by New Star Investment Funds Limited.