february,...
TRANSCRIPT
February, 2020
Prosperously navigating
unexpected events
with great skill and agility
2
AGENDA
Who We Are
Investment Methodology
Performance by sectors
Risk Management
Current Opportunity and Investment pipeline
Performance
Summary
3
DISCLAIMER: The information and opinions expressed herein are current as of this document date and Black Swan Dexteritas Inc. assumes no obligation to provide updates or
advise on further developments. Any reference should not be considered as investment advice or a recommendation to buy or sell nor should it be considered as any indication of the
portfolio of any Black Swan Dexteritas investment fund or how it will be invested. Commissions, trailing commissions, management fees and expenses may all be associated with fund
investments. Please read the prospectus before investing.
Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.
WHO WE ARE
4
BLACK SWAN
DEXTERITAS
(“BSD”)
TECHNOLOGY EXPERTISE
• Unique insight
from entrepreneurs leading
international tech development
based on needs creation
• Advisory Committee of tech leaders
who determine the global adoption
and success of new technologies
• Representation in all BSD-invested
tech sectors and sub-sectors, for
unrivalled expertise
• Portfolio Manager with 30 years of
portfolio management experience
across various asset classes at
asset management companies (LGT,
TAL, CIBC Asset Management), and
a pension (British Petroleum)
• Exceptional research team with a
wide breadth of knowledge in
research, finance, and engineering
• Intense due diligence process for our
stock selection process
• Unique risk management overlay
to minimize drawdowns and volatility
PORTFOLIO MANAGEMENT
EXPERIENCE
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INVESTMENT METHODOLOGY
SECTOR ASSESSMENT
• Life Cycle: Sectors in introduction and growth stages with
high Total Addressable Market (TAM)
• Competition: High barrier of entry with differentiated products
and services within the sector
COMPANY ANALYSIS
• Business Model: Public ccompanies with high recurring revenue,
easily able to leverage network effects, strong negotiating power
with suppliers and customers, and strong corporate governance
• Size: Target small (500M+) to large cap public companies with
established track record of executing the business.
• Growth: Public companies with high and/or consistent revenue
growth
• Valuation: Determine if opportunities exist based on our fair
value expectation of stocks versus current stock prices
PORTFOLIO CONSTRUCTION
• Weightings: Determine % of portfolio allocated to holdings
based on risk-reward expectations
• Diversification: Well-diversified across 35 to 40 holdings to
maximize risk-adjusted returns
• Hedging: Utilize derivatives and fixed income products to
minimize drawdowns and generate alpha
IDEATION
• BSD Investment Advisory Committee: seek out global
growth themes and trends to overweight and underweight
various subsectors
• Experienced investment team sourcing trade ideas and
discussing vital macro economical forces in play
• Draw on sector experiences from members of the committee and
discuss emerging technology from the private and public space
• Deep dive into industry verticals to identify beneficiaries in other
primary, secondary, and tertiary markets
PORTFOLIO CONSTRUCTION
IDEATION
SECTOR
ASSESSMENT
COMPANYANALYSIS
PUBLIC COMPANIES
TOP 10 STRATEGIC TECH TRENDS FOR 2020-2025
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INVESTMENT METHODOLOGY DIVERSIFICATION
BSD seeks out high potential technology sectors with promising unit sales projections and revenue
projections and minimizes exposure to low potential sectors
PORTFOLIO BY MARKET CAP PORTFOLIO BY TECH SUBSECTOR
$5B to $10B
5.0%
Over $10B
91.0%
As of January 31, 2020
BSD is well-diversified across 10 technology subsectors
across 30 to 35 holdings with minimal correlation.
Under $5B
4.0%
7
1.99%
3.63%
3.69%
3.95%
4.05%
7.13%
8.90%
13.42%
13.79%
Consumer Electronics
Technology Real Estate
Automation
Cyber Security
Consumer Services
Fintech
Communication Equipment
Semiconductors
Internet Software
HEDGING OVERLAY
HEDGING STRATEGY
The goal of the hedging strategy is threefold:
1. Minimize the portfolio’s drawdown
2. Lessen the portfolio’s volatility
3. Generate alpha
HEDGING TACTICAL PROCESS
There are 3 tactical steps in the execution of the hedging process:
1. The neutral market position is set at 20% of the stock portfolio, ex-cash
2. The hedging position will deviate from the neutral market position to underweight or
overweight, based on macro fundamental, technical, and capital flow factors
3. The combination of various futures instruments ( for example, S&P 500 futures,
Nasdaq 100 futures, and Russell 2000 futures) is determined by a proprietary
hedging model
HEDGING P&L IMPACT
The hedging strategy is an “insurance” policy in anticipation of an adverse market event
The hedging tactical process limits drawdowns, and potentially generates alpha
RISK MANAGEMENT
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BSD Global Tech S&P 500 Russell 2000 NASDAQ
Conversely, when we see certain signs of market
deterioration, we increase our hedging positions.
RISK MANAGEMENT
Our prudent risk management system allows us to navigate market corrections
and black swan events with lower drawdowns and higher returns
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CASE STUDY: MAY 2019 CORRECTION
BSD scales back our hedging positions accordingly as various market signals indicated probable upside to our portfolio
CASE STUDY
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BSD ^GSPC ^RUT ^IXIC
CASE STUDY: MAY 2019 CORRECTION
Our dynamic hedging strategy allows us to position our portfolio to minimize losses during market downturns
and maximize upside potential in recoveries
As market conditions deteriorate, our hedging
positions reduce our total portfolio drawdown,
allowing us to outperform our benchmark.
RISK MANAGEMENT
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CASE STUDY
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BSD Global Tech S&P 500 Russell 2000 NASDAQ
At the peak of the drawdown, BSD exhibited less drawdown
than the Nasdaq and Russell, as well as the S&P 500 Index.
Once the market has returned to its pre-correction
levels, BSD outperformed the Nasdaq and Russell,
as well as the S&P 500 Index.
RISK MANAGEMENT
Our prudent risk management system allows us to navigate market corrections
and black swan events with lower drawdowns and higher returns
11
CASE STUDY: MAY 2019 CORRECTION
CASE STUDY
CURRENT OPPORTUNITIES AND INVESTMENT PIPLINE
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CURRENT OPPORTUNITIES AND INVESTMENT PIPLINE
• DIGITALIZATION & ELECTRIFICATION
The automotive revenue pool will grow and diversify with new services
potentially becoming a ~USD 1.5 trillion market in 2030
• 5G DEPLOYMENT
The 5G market will grow to $1.23 trillion by 2026, according to a new report by
Ericsson announced at the Mobile World Congress
• BIG DATA
Worldwide Big Data market revenues for software and services are projected to
increase from $42B in 2018 to $103B in 2027, attaining a CAGR of 10.48%.
• DIGITAL TWINS
The digital twin market is expected to grow at a CAGR of 37.87%, to reach USD
15.66 Billion by 2023
• GAMING
Gaming market to grow at a CAGR of +11% toward 2021 to reach $180.1 billion
Source: Statista, Gartner, Ericson, Newzoo
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SEMICONDUCTORS ECOSYSTEM
SEMICONDUCTORS ECOSYSTEM
15
SEMICONDUCTORS
Semiconductors are a significant
part of modern life that the
average person probably doesn’t
think about them much.
They are vital to everything
from getting to work
(automobiles, elevators,
stoplights) to communicating
with customers, friends, and
family (computers, phones,
tablets).
As the Internet of Things becomes more of a reality, every imaginable product
will have semiconductors inside to enable communication and networking.
The long-term outlook for the semiconductor industry is arguably bullish as more
people upgrade their mobile devices and as new innovations such as self-driving
cars, cryptocurrencies, and AI applications take off. Indeed, semiconductor
companies should continue to find new customers as they explore these innovations
and expand into new world markets.
SEMICONDUCTORS
Semiconductor market size worldwide from 1987 to 2020
16
33
45 49 51 5560
77
102
144
132137
126
149
204
139 141
166
213
227
247.7255.6
248.6
226.3
298.3 299.5291.6
305.6
335.8 335.2 338.9
412.2
468.8
409
433
In Billions USD
In 2020, sales are expected to reach 433.03 billion U.S. dollars worldwide.
Semiconductors are crucial components of electronics devices and the industry is
highly competitive. The year-on-year growth rate in 2018 is expected to see growth
rates of 15.9 percent.
BIG DATA HARDWARE ECOSYSTEM
17
Sensing Hardware
The Cloud
Data Analytics
Output Hardware
Sensing Hardware: Equipment that
collects consumer inputs: smartphones
(as personal location and activity
sensors), security cameras (collect
timestamp data and gender and age
bracket), sensors (motion and
temperature), POS terminals
(collecting consumer purchasing
behaviors), etc.
The Cloud: Where all the data
collected from the sensing hardware is
stored.
Data Analytics: Where all the data
gets analyzed and interaction
decisions get made (can be housed in
the cloud).
Output Hardware: How the customer
gets the desired experience.
SEMICONDUCTORS
SEMICONDUCTORS
SEMICONDUCTOR DEVICES
18
SEMICONDUCTORS
SEMICONDUCTOR COMPANIES
19
AnalogDigital
Manufacturing
Memory, CPU,
GPU, FPGA,
MCU, DSP
Power management,
Sensor, Radio
frequency,
Discretes, Opto
$3
$13
$17
$24
$38
$47
$59
$109
$158
DSP
Sensor
MCU
Discretes
Opto
MPU
Analog
Logic
Memory
$3
SEMICONDUCTORS
Distribution of Worldwide Semiconductor Sales By Product Segment 2018
20
In Billions USD
% Change over
last year
+ 27.4%
+ 6.9%
+ 10.8%
+ 5.9%
+ 9.2%
+ 11.3%
+ 4.4%
+ 6.2%
- 0.6%
SEMICONDUCTORS
THE WORLD’S TOP 10 SEMICONDUCTOR COMPANIES
21
$75.70
$69.80
$36.20 $34.20
$30.90
$16.50 $16.40 $13.90
$12.30 $11.60
Samsung Intel SK Hynix TaiwanSemiconductor
MicronTechnology
Broadcom Qualcomm TexasInstruments
Toshiba Nvidia
In Billions USD
Samsung is a Korean conglomerate that is actually made up of
about 70 individual companies. Samsung Electronics makes mobile
devices such as smartphones, and it manufactures television sets
and appliances. The company also creates semiconductors.
SEMICONDUCTORS
THE WORLD’S TOP 10 SEMICONDUCTOR COMPANIES
22
1. Intel - Sales: $69.8 billion
Intel Corp. (INTC) is an integrated device manufacturer that designs and
manufactures motherboard chipsets, network interface controllers and integrated
circuits. The company is headquartered in Santa Clara, Calif., and was founded in
1968 with $2.5 million in funding arranged by American venture capitalist Arthur
Rock.
2. Samsung - Sales: $75.7 billion
Samsung is a Korean conglomerate that is actually made up of about 70 individual
companies. Samsung Electronics makes mobile devices such as smartphones, and
it manufactures television sets and appliances. The company also creates
semiconductors.
3. Taiwan Semiconductor : Sales: $34.2 billion
Taiwan Semiconductor Manufacturing Company (TSM) claims to be the world's
largest dedicated independent pure-play semiconductor foundry. Pure-play
foundries only fabricate integrated circuits and do not have any in-house design
capabilities. Many leading semiconductor companies outsource the manufacturing of
their components to Taiwan Semiconductor to cut labor costs while investing capital
in research and development.
SEMICONDUCTORS
THE WORLD’S TOP 10 SEMICONDUCTOR COMPANIES
23
4. SK Hynix - Sales: $36.2 billion
This South Korean company makes and sells semiconductor products. It also is
involved in automobile electronics, storage, and computing solutions. While it may
not be a household name among American consumers, SK Hynix is one of the
fastest-growing semiconductor manufacturers, and its chips are probably found in
some of your newer electronic devices.
5. Micron Technology - Sales: $30.9 billion
Idaho-based Micron Technology (MU) markets semiconductor products on an
international basis. Its products are used in computers, consumer electronics,
automobiles, communications, and servers. It creates flash RAM products as well as
rewritable disc storage solutions.
6. Broadcom - Sales: $16.5 billion
Broadcom (AVGO) was the source of major news when it was purchased by its rival
Avago for $37 billion back in 2015. Their products serve four primary markets:
• Wireless communications
• Enterprise storage
• Wired infrastructure
• Industrial
It manufactures semiconductor devices and analog devices and provides interfaces
for computers' Bluetooth connectivity, routers, switches, processors, and fiber optics.
SEMICONDUCTORS
THE WORLD’S TOP 10 SEMICONDUCTOR COMPANIES
24
7. Qualcomm - Sales: $16.4 billion
Close behind Broadcom is Qualcomm, Inc. (QCOM), which designs and markets
wireless telecommunications products and services. Telecommunications
companies worldwide use Qualcomm's patented code division multiple access
(CDMA) technology, which has played an integral role in the development of a
single international standard for wireless communications. Its Snapdragon chipsets
are found in many mobile devices.
8. Texas Instruments - Sales: $13.9 billion
Texas Instruments Inc. (TXN) designs and fabricates semiconductors for
manufacturers worldwide. The company is a major manufacturer of chips for mobile
devices, digital signal processors, and analog semiconductors, and still
manufactures the product it first became widely known for: calculators.
9. Toshiba - Sales: $12.3 billion
Toshiba (TOSYY) is a Japanese electronics company that manufactures consumer
products such as televisions PCs and tablets. It also creates systems for industrial
companies, railways, security firms, broadcasters, and even elevators.
10. Nvidia - Sales: $11.6 billion
Nvidia (NVDA) is perhaps best known for its line of both consumer and high-end
video graphics cards found in computers of all shapes and sizes. These graphics
processing units, or GPUs, are popular among computer gamers, digital artists, and
those who work with computer-aided design alike.
SEMICONDUCTORS
SEMICONDUCTORS FUTURE OPPORTUNITIES
25
Potentially, automotive and industrial
sectors present larger opportunities
as compared to other sectors. The
development of smart cars and
connected cars presents huge
potentials for semiconductor industry.
In the recent times, researches in the
automobile domain have laid huge
emphasis on increasing the rider as
well as passenger comfort and safety
in the cars during driving.
Electronics implementations has found increasing applications in the automotive
sector for improving the passenger as well as rider safety, and comfort. As a result,
concepts such as Advanced Driver Assist Systems (ADAS), In-vehicle Infotainment,
autonomous vehicles, connected cars, and car telematics have gone through various
R&D process, and have been put for commercialization. Although, these
technologies are in their initial stages of commercialization and market development,
many automotive OEMs across the globe have been instrumental in the integrations
of these technologies.
PERFORMANCE
PERFORMANCE METRICS* FUND RETURNS
FUND S&P 500
Return Since Inception
YTD Return
60 Day Return
20 Day Return
Daily Standard Dev.
Sharpe Ratio
Sortino Ratio
Correlation
55.69%
0.92%
-0.06%
0.00%
0.78%
0.55
0.77
-
91.82%
-0.45%
6.19%
-0.16%
0.82%
0.80
0.92
0.96
* Management fees and expenses may be associated with investments. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rate of return is the historical compounded total return including changes in share value and reinvestment of all dividends.
October 1, 2013 to January 31, 2020
26
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD S&P 500 YTD
GLOBAL TECH FUND MONTHLY PERFORMANCE SINCE INCEPTION
BSD has outperformed our portfolio benchmark with lower risks through active diversification across various subsectors
2013 1.32% 0.35% 2.82% 4.55% 9.60%
2014 -2.08% 3.63% -2.07% -4.39% 2.38% 2.80% 2.21% 3.53% -1.64% 4.95% 2.89% -1.51% 10.69% 11.43%
2015 0.53% 5.39% -0.16% 2.98% 0.90% -0.91% 0.43% -6.67% -1.48% 9.68% 0.63% -0.76% 10.16% 0.47%
2016 7.41% -2.78% 5.31% -0.02% 2.33% -0.29% 3.66% 0.65% 1.63% 0.38% -3.75% -0.71% -1.63% 9.50%
2017 4.97% 2.14% 2.99% 2.08% 3.85% -2.55% 2.68% 2.12% 0.51% 3.41% 0.11% -0.20% 24.49% 19.42%
2018 2.89% 0.63% -0.62% -1.57% 4.11% -1.63% 0.63% 1.72% -2.18% -7.87% 2.70% -7.41% -10.01% -6.55%
2019 7.09% 1.55% -0.91% 1.86% 0.44% 0.70% 1.83% -0.27% -0.13% -1.43% 0.52% -0.85% 10.62% 29.59%
2020 0.92% 0.92% -0.45%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
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BSD S&P 500
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HOW BSD COMPARES TO OTHER HEDGE FUNDS
HEDGE FUND STRATEGIES* 2014 2015 2016 2017 2018
RETURN RETURN RETURN RETURN RETURN
PERFORMANCE
BSD Global Technology Hedge Fund
Absolute Return
Multi-Region
Equal Weighted Strategies
Relative Value Arbitrage
Macro/CTA
Fixed Income - Credit
Global Hedge Fund
Equity Hedge
North America
Emerging Markets Composite
Market Directional
Event Driven
10.69%
0.67%
1.71%
-0.56%
-3.06%
5.09%
-1.86%
-0.60%
1.37%
-4.13%
-8.03%
5.13%
-4.06%
Our outperformance relative to other funds are indicative of our core competency in
generating outsized returns and navigating a challenging market environment
* Hedge fund index data is provided by Hedge Fund Research Index (HFRI) as of January 2018.
10.16%
2.86%
-1.19%
-1.54%
-3.10%
-1.96%
-4.38%
-3.64%
-2.33%
-9.35%
-5.26%
-8.58%
-6.94%
-1.63%
0.31%
1.95%
3.78%
1.03%
-2.93%
4.97%
2.50%
5.49%
4.14%
6.77%
9.86%
10.50%
24.99%
3.91%
6.58%
6.10%
4.28%
7.43%
4.55%
8.04%
12.78%
6.25%
8.99%
4.68%
7.22%
-10.02%
-0.49%
-5.90%
-5.35%
-1.17%
-3.25%
-2.55%
-6.72%
-9.42%
-7.62%
-7.55%
-12.54%
-11.68%
28
SUMMARY
• We bring unique, proven strengths
• Principal with 30 years of portfolio management experience
• Dynamic stock selection methodology
• Disciplined risk management process
• Our expertise in technology is unparalleled
• Team consisting of seasoned entrepreneurs that have co-founded billion dollar companies
• Global networks of advisors and analysts examining tech vendors and tech end-users
• Significant out-performance in risk-adjusted returns
• The BSD Global Tech Hedge Fund returned 55.69% since inception versus S&P 500 index
return of 91.82%
• Exhibited only 83% of the benchmark volatility
• Hedging strategy acts as an “insurance policy” in anticipation of adverse market events,
by limiting drawdowns and often generating alpha
* Management fees and expenses may be associated with investments. Investment funds are not guaranteed, their values change frequently and past performance may not be
repeated. The indicated rate of return is the historical compounded total return including changes in share value and reinvestment of all dividends.
