flexibility a key attribute in today’s - intelligence ... · pdf fileflexibility –...

$: Flexibility a key attribute in today’s - Intelligence ... · PDF fileFlexibility – a key attribute in today’s ... inc ETFs Dealer inventory Mutual fund ... Stephen Baines \HDUV¶H[SHULHQFH$
Flexibility – a key attribute in today’s

global credit markets

October 2014

Euan McNeil – Investment Manager, Fixed Income

Yields in Europe at historic lows

Source: Bloomberg, Barclays Live as at 7 October 2014

2

0

1

2

3

4

5

Oct 04 Oct 05 Oct 06 Oct 07 Oct 08 Oct 09 Oct 10 Oct 11 Oct 12 Oct 13 Oct 14

%

10-year bund yield (%) ECB Refinancing rate

Shrinking opportunities in European Investment Grade

Source: HSBC calculations, Dealogic as at 3 October 2014. Redemption date taken as earlier of call date or maturity date.

3

-200

0

200

400

600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ne

t co

rpo

rate

su

pp

ly lo

ca

l cu

rre

ncy (

bn

)

USD EUR

$bn

Growth in AUM against shrinking market liquidity

Source: ICI, NY Fed, Bloomberg, Haver Analytics, Citi Research

4

inc ETFs

Dealer

inventory

Mutual fund

assets

900

800

700

500

400

300

200

100

0

1995 2000 2005 2010

600

Change in gross position of corporate bonds from 2010 to 2013

Added impact of more aggressive banking regulation

Source: Goldman Sachs as at December 2013

5

-12

-10

-8

-6

-4

-2

0

2

JP

Mo

rga

n

Ba

rcla

ys

RB

C

No

mu

ra

Citig

rou

p

Je

ffe

rie

s

Mo

rga

n S

tan

ley

De

uts

ch

e B

an

k

HS

BC

Go

ldm

an

Sach

s

RB

S

Me

rrill

Lyn

ch

Cre

dit S

uis

se

UB

S

$bn

Need to seek cross-market opportunities

Source: Barclays Live as at 7 October 2014

6

80

100

120

140

Oct 13 Dec 13 Feb 14 Apr 14 Jun 14 Aug 14

bps

U.S. Corporate Investment Grade - OAS Euro-Aggregate: Corporates - OAS

Sterling Non-Gilts - OAS

7

Kames Investment Grade Global Bond Fund

Launch date 8 November 2007

Fund description To maximise total return (income plus capital) by investing

primarily in investment grade government and corporate

bonds in any currency which may be at a fixed or floating

rate, rated or unrated.

Performance objectives • To deliver at least 2nd quartile returns over rolling 12

months and 1st quartile returns over rolling 3-year periods

in the Lipper Global Bond Global Corporates sector.

• To outperform the Barclays Global Aggregate Corporate

index by 1.25% per year on a rolling 36 month basis.

Flexible approach Global remit broadens opportunity set to add value for

investors.

Experienced team Highly regarded and experienced team.

Share classes Primary share class – USD.

Currency-hedged share classes GBP and EUR.

Euan McNeil

Co-manager

Stephen Snowden

Co-manager

Morningstar RatingTM of 5 stars as at 30 September 2014 is relevant in Germany and Spain only. FWW rating relates to Germany only.

3.5

4.5

5.5

6.5

7.5

8.5

Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14

Ye

ars

Actively managing interest rate risk

As at 30 September 2014

8

Jan 2009-10

Global meltdown averted Jul 2011

Eurozone crisis emerges August 2012

Central bank support pays

dividends

0

20

40

60

Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14

%

Historical exposure to banking debt


9

Jan 2009-10

Global meltdown averted Jul 2011

Eurozone crisis

emerges

August 2012

Central bank support

pays dividends

0

20

40

60

80

100

120

140

Jun 09 Mar 10 Dec 10 Sep 11 Jun 12 Mar 13 Dec 13 Sep 14

Number of holdings

Conviction investing; focused portfolio construction

Source: Kames Capital as at 30 September 2014. *Morningstar, as at 30 September 2014. **Note index tracker funds have been excluded

10

Number of

holdings**

Kames Investment Grade Global Bond 129

Lipper Global-Bond Global Corporates Median 169

Barclays Global Aggregate index 8,745

Barclays Euro Aggregate index 1,486

Highest number of holdings in sector* 844

Lowest number of holdings in sector* 24

Exploiting cross currency opportunities – primary market

Source: Bloomberg, mid-Z spread as at 7 October 2014

11

225

250

275

300

325

350

Jan 14 Mar 14 May 14 Jul 14 Sep 14

bp

s

EDF 5 ⅝ 12/29/49 ($) EDF 5 01/22/49 (€)

-40

-20

0

20

40

60

Jan 14 Mar 14 May 14 Jul 14 Sep 14

bp

s

Preferred dollar EDF bond to euro issue Spread differential: dollar bond outperformed

Spread differential between USD and euro bonds

Exploiting cross currency opportunities – secondary market

Source: Bloomberg, mid-Z spread as at 8 October 2014

12

0

10

20

30

40

50

60

70

Feb 14 Apr 14 Jun 14 Aug 14 Oct 14b

ps

Spread differential between euro and sterling bonds

Sold sterling issue and switched into euro issue Spread differential narrowed

250

300

350

400

450

500

Feb 14 Apr 14 Jun 14 Aug 14 Oct 14

Telefonica bond (€) 7.625% 09/29/49

Telefonica bond (£) 6.75% 11/29/49

bp

s

-25

-15

-5

5

15

25

35

45

55

Nov 07 Nov 08 Nov 09 Nov 10 Nov 11 Nov 12 Nov 13

%

Cumulative total return since inception Kames Investment Grade Global Bond B Inc USD

Lipper Global - Bond Global Corporates median

Barclays Capital Global Aggregate Corporate Index

Kames Investment Grade Global Bond Fund performance

Source: Lipper, NAV to NAV, noon prices, income re-invested, local currency, as at 30 September 2014. B (Inc) USD shares. Total return excluding initial charges, net of annual management charge.

Performance prior to the launch of the B (Inc) USD share class on 21 April 2010 is calculated based on the A (Inc) USD share class. Past performance is not a guide to future returns.

Morningstar RatingTM of 5 stars as at 30 September 2014 is relevant in Germany and Spain only. FWW rating relates to Germany only.

13

%1

year

2

years

3

years

4

years

5

years

Fund 6.7 10.2 27.0 21.4 37.2

Median 6.4 7.4 18.1 19.7 29.9

Outperformance 0.3 2.8 8.9 1.7 7.3

Quartile 2 1 1 2 1

Consistency of outperformance

Source: Lipper, NAV to NAV, noon prices, income re-invested, local currency, as at 30 September 2014. Kames Investment Grade Global Bond Fund B (Inc) USD shares and Lipper Global Bond

Global Corporates median. Total return excluding initial charges, net of annual management charge. Performance prior to the launch of the B (Inc) USD share class on 21 April 2010 is calculated

based on the A (Inc) USD share class. Past performance is not a guide to future returns.

14

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Nov 2

01

2

Dec 2

01

2

Ja

n 2

01

3

Feb 2

01

3

Ma

r 201

3

Apr

20

13

Ma

y 2

01

3

Ju

n 2

01

3

Ju

l 20

13

Aug

20

13

Sep

20

13

Oct 2

013

Nov 2

01

3

Dec 2

01

3

Ja

n 2

01

4

Feb 2

01

4

Ma

r 201

4

Apr

20

14

Ma

y 2

01

4

Ju

n 2

01

4

Ju

l 20

14

Aug

20

14

Sep

20

14

%

Outperformed every rolling 5-year period since launch

Strong risk-adjusted performance

Source: Lipper as at 30 September 2014. Kames Investment Grade Global Bond Fund B (Inc) USD shares and Lipper Global Bond Global Corporates median. Returns, income re-invested, volatility

and sharpe ratio are calculated on a monthly basis (annualised). Volatility is standard deviation. Performance prior to the launch of the B (Inc) USD share class on 21 April 2010 is calculated based on

the A (Inc) USD share class. Past performance is not a guide to future returns.

15

Key

Kames Fund

Median Fund

Sector

range Quartile

range

3 y

ea

rs

Return Return volatility Sharpe ratio

5 y

ea

rs

19.3

-1.4

8.3

5.7

-5

0

5

10

15

20

25 11.4

1.0

4.3 4.2

0

2

4

6

8

10

12

2.1

-0.3

1.8

1.3

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

10.5

1.6

6.5

5.4

0

2

4

6

8

10

12

11.5

2.8

4.9

4.1

0

2

4

6

8

10

12

14

1.7

0.2

1.2

1.0

0.0

0.5

1.0

1.5

2.0

Why Kames Investment Grade Global Bond Fund?

As at 30 September 2014. *Lipper. Past performance is not a guide to future returns. Morningstar RatingTM of 5 stars as at 30 September 2014 is relevant in Germany and Spain only. FWW rating

relates to Germany only.

Flexible Global remit broadens opportunity set to add value for investors

People Highly regarded managers with 36 years’ combined investment experience

Combined roles and collegiate culture

Performance Outperformance of Lipper Global Bond Global Corporates median

over 1, 2, 3 ,4, 5 years and since launch*

Highly rated

16

“We believe the managers’ experience, coupled with the support of a

well-resourced fixed-income team and rigorous company analysis,

makes this an attractive choice for investors.” (Morningstar 2014)

Appendices

17

Kames Capital’s fixed income team – focused and experienced


Kevin Telfer

19 years’ experience

Patrick Gillespie


Investment assistant

David Roberts


Alastair Mair


Cash

Colette Clements


Cash

Head of Fixed Income

Cash and Liability Matching

Yvonne Christie


John McNeill


Colin Finlayson


Sandra Holdsworth


James Lynch


Rates

Scott Fleming


Philip Milburn


Debbie King


Claire McGuckin


High Yield

Stephen Baines


Nicholas Chatters


Laura Gallacher


Non-financials

Philip Small


Non-financials

Stephen Snowden


Gregory Turnbull Schwartz


Financials

Paul Dilworth


Financials

Garvin Peoples


Financials

Euan McNeil


Non-financials

Iain Buckle


Collateralised

Investment grade credit

Alexander Pelteshki


Financials

Adrian Hull


Product specialists

Dawn Adams


18

Fixed income team structure: a break from tradition

19

Client

portfolios Analysts

Model

portfolios

Fund

Managers Dealers

Fixed income

investment managers

• Idea generation

• Decision making

• Implementation

• Execution

Traditional structure

Our structure

Dealers

Client portfolios

• Retail and

institutional clients

Our fixed income sources of alpha

• Portfolios marry top-down and bottom-up performance drivers

• Alpha contributors flexed through the cycle

Assetallocation

Ratingsselection

Stock

selection

Sector

selection

Curve

Duration

Alpha

contributors

20

Kames Investment Grade Global Bond Fund – Flexibilities

21

What we own and will own

Investment grade corporate bonds 67 – 100%

Government bonds 0 – 33%

High yield bonds 0 – 20%

Cash 0 – 20%

What we haven’t owned

and won’t own

Active Currency

Equity

Private Placement Debt

Convertible Bonds

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Nov 1

0

Ja

n 1

1

Ma

r 11

Ma

y 1

1

Ju

l 11

Sep

11

No

v 1

1

Ja

n 1

2

Ma

r 12

Ma

y 1

2

Ju

l 12

Sep

12

Nov 1

2

Ja

n 1

3

Ma

r 13

Ma

y 1

3

Ju

l 13

Sep

13

Nov 1

3

Ja

n 1

4

Ma

r 14

Ma

y 1

4

Ju

l 14

Sep

14

%

Outperformed every rolling 3-year period since launch

Consistency of outperformance

Source: Lipper, NAV to NAV, noon prices, income re-invested, local currency, as at 30 September 2014. Kames Investment Grade Global Bond Fund B (Inc) USD shares and Lipper Global Bond

Global Corporates median. Total return excluding initial charges, net of annual management charge. Performance prior to the launch of the B (Inc) USD share class on 21 April 2010 is calculated

based on the A (Inc) USD share class. Past performance is not a guide to future returns.

22

14.8

28.0

56.4

0.8 7.3

23.5

61.9

7.4

0

20

40

60

80

GBP EUR USD Other

% fund (pre-FX hedge) % index

Market exposure (%)

Fund positioning versus Barclays Global Aggregate Corporate index


23

Sectors % fund % index

Banks 30.81 29.72

Industrials 31.72 37.44

TMT 8.68 13.23

Other Financials 18.08 11.63

Utilities 4.30 7.98

Collateralised 4.88 0.00

Sub-Sovereign 1.30 0.00

Government 0.00 0.00

Cash 0.23 0.00

1.2 5.1

29.1

43.7

14.9

0.8

5.0

0.2 0.8

11.2

45.7 42.4

0

10

20

30

40

50

AAA AA A BBB BB B N/RInvestment

Grade

Cash

% fund % index

Ratings breakdown (%)

Fund size $153m

• Absolute Return Bond Fund

– Genuine absolute return fund seeking

outperformance with low volatility

– Invests in global debt instruments in any currency

• Strategic Global Bond Fund

– Invests in global debt instruments in any currency

– Ranges from AAA government bonds through to

high yield, corporate bonds and emerging market

• High Yield Global Bond Fund

– Invests primarily in high yield bonds in any

currency

– Ability to invest in selected investment grade

bonds

Other fixed income capabilities across the risk spectrum

Source: Kames Capital. Based on annualised standard deviation of daily returns. 3 Years to September 2014. Offshore figures are based on Monthly noon Lipper prices grossed up for the AMC.

24

Historic annualised volatility

0%

1%

2%

3%

4%

5%

6%

7%

KamesAbsolute

Return BondFund

KamesStrategic

Global BondFund

KamesInvestment

Grade GlobalBond Fund

Kames HighYield GlobalBond Fund

Global Aggregate offers Yield and Diversity

Source: Barclays Live as at 6 October 2014

25

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Oct 04 Oct 05 Oct 06 Oct 07 Oct 08 Oct 09 Oct 10 Oct 11 Oct 12 Oct 13

Yie

ld d

iffe

ren

tia

l (%

)

Global Aggregate Corporates - Euro Aggregate Corporates

This document is not intended for retail distribution and is directed only at investment professionals. It should not be distributed to, or relied upon by, private

investors.

All data in this presentation is sourced to Kames Capital unless otherwise stated.

The views expressed in this document represent our understanding of the current and historical positions of the market. They should not be interpreted as a

recommendation or advice.

Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and is not guaranteed.

The primary share class has changed from A to B with effect from 31 December 2013. In order to provide performance data from inception, performance is

based on track record extensions on this fund’s B share class where launched more recently than the A share class. Performance prior to launch of B share

class is calculated on the A share class.

The Kames Investment Grade Global Bond Fund is registered in the United Kingdom, Ireland, Austria, Germany, Jersey, Guernsey, Luxembourg, Malta,

Netherlands and Switzerland. Not all available shareclasses are registered in every country. Please email [email protected] for the list of

shareclasses registered in your jurisdiction.

Kames Capital Investment Company (Ireland) Plc operates two different methods of hedging share classes. Full details of these can be found in the prospectus.

This document is accurate at the time of writing but can be subject to change without notification. Kames Capital Investment Company (Ireland) plc, is an

umbrella type open-ended investment company with variable capital registered in the Republic of Ireland (Company Number 442106), registered office at 25-28

North Wall Quay, International Financial Services Centre, Dublin 1. Board of Directors: Andrew Bell (UK), Mike Kirby (Ireland) and Bronwyn Wright (Ireland).

Kames Capital Investment Company (Ireland) plc is regulated by the Central Bank of Ireland. Kames Capital is an Aegon Asset Management company and

includes Kames Capital plc (Company Number SC113505) and Kames Capital Management Limited (Company Number SC212159). Both are registered in

Scotland and have their registered office at Kames House, 3 Lochside Crescent, Edinburgh, EH12 9SA. Kames Capital plc is authorised and regulated by the

Financial Conduct Authority, (FCA reference no: 144267). Kames Capital plc is the Investment Manager and Marketing Agent for Kames Capital Investment

Company (Ireland) plc. Kames Capital Management Limited is an appointed representative of Scottish Equitable plc (Company Number SC144517), an Aegon

company, whose registered office is 1 Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (PRA/FCA reference no: 165548).

Important information

26

For Investors in Austria - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme registered in Austria by the Austrian

Financial Market Authority (Finanzmarktaufsichtsbehörde). The Prospectus, Supplement and Key Investor Information for Kames Capital Investment Company

(Ireland) plc are available free of charge from UniCredit Bank, Austria AG, 8398 Global Securities Sales & Services, PO Box 35, A-1011, Vienna, Austria. Tel:

00 43 50505/58515.

For Investors in Germany - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme registered in Germany by BaFin. The

Prospectus, Supplement and Key Investor Information for Kames Capital Investment Company (Ireland) plc are available free of charge from CACEIS Bank

Deutschland GmbH Lilienthalallee 34-36, D-80939 Munich.

For Investors in Luxembourg - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme registered in Luxembourg by the

Commission de Surveillance du Secteur Financier. The Prospectus, Supplement and Key Investor Information for Kames Capital Investment Company (Ireland)

plc are available from CACEIS Bank Luxembourg 5, allée Scheffer, L-2520 Luxembourg.

For Investors in Malta - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme authorised by the MFSA to market its units

in Malta. The Prospectus, Supplement and Key Investor Information for Kames Capital Investment Company (Ireland) plc are available free of charge from

Michael Grech Financial Investment Services Limited, 78A, Fleur de Lys Road, Birkirkara, BKR 9062, Malta (Tel: +356 21 441003).

For Investors in the Netherlands - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme registered in the Netherlands

by the Netherlands Authority for Financial Markets in Amsterdam. The Prospectus, Supplement and Key Investor Information for Kames Capital Investment

Company (Ireland) plc are available free of charge from our website www.kamescapital.com (Dutch edition of the Key Investor Information only).

For Investors in Switzerland - On March 26th 2009, the Swiss Financial Market Supervisory Authority FINMA authorised the distribution to the public of the

shares of Kames Capital Investment Company (Ireland) plc (the “Company”) in or from Switzerland in conformity with article 120 of the Federal Law on

Collective Investments of Capital dated June 23rd 2006. The Company was authorised as a Foreign Collective Investment Scheme. The articles of the

Company, the Extract Prospectus for Switzerland, the Key Investor Information (Swiss edition), the annual and semi-annual Report for Switzerland of the

Company can be obtained free of charge on our website www.kamescapital.com or from the Representative in Switzerland, BGG Banque Genevoise De

Gestion, 15, Rue Toepffer, 1206 Geneva, Switzerland, (Tel : + 41 22 3479040; Fax: + 41 22 3479327).

Important information

FPID: 2014/18900

27

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