ignis asset management
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The end of the road for European Equities?
Introducing Ignis Investments European FundsIntroducing Ignis Investments European Funds
Ignis European Growth and Ignis European Smaller companies• Managed by Ian Ormiston since 2007. Ian has 15 years experience in European g y y p p
Equities• AUM £1bn in European equities. Funds £67m and £12m respectively*.
Fund Characteristics• Bottom up process, quality/growth bias. Market inefficiencies are most prevalent
at the stock levelat the stock level.• Equal weighting; 50 to 70 stocks; short-term catalysts.
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*Source: Internal at 31 December 2010*Source: Internal at 31 December 2010
PerformancePerformance
Building on existing track record
since change insince change in investment
team* 1 year 2 years 1 year 2 years 31 months
to 31/03/2010 to 31/03/2010 to 31/03/2010 to 31/12/06 to 31/12/06 to 31/12/06
Ignis European Growth Fund 4.3 42.7 2.6 n/a n/a n/a
Singer & Friedlander European Growth Fund n/a n/a n/a 22.3 57.9 86.7
FTSE Europe Ex UK 8.7 48.8 2.6 20.1 49.1 72.2
Europe Ex UK Median Fund 4.9 45.0 1.9 18.2 45.8 68.9
Rank 48/86 66/103 46/97 14/98 11/91 8/90Rank 48/86 66/103 46/97 14/98 11/91 8/90
Quartile 3 3 2 1 1 1
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Source: Lipper bid to bid net income reinvested to 31/03/10.
Fund Singer & Friedlander European Growth to 31/12/06. *Ignis European Growth Fund 02/01/2007 – 30/03/2010.
Past performance is not a guide to the future.
Peer Group OutperformancePeer Group Outperformance
Ian Ormiston’s Performance Vs Peer Group
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Peer Group is the IMA Europe ex UK sector
Past performance is not a guide to the future.
The case for EuropeThe case for Europe
Short term returns have been stellar. The last ten years rather less soShort term returns have been stellar. The last ten years rather less so
23/4/10750 23/4/10
800
700 700
800
650
500
600
550
600
300
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A M J J A S O N D J F M A500
FTSE W EUROPE EX UK £ - TOT RETURN IND
HIGH 727 04 14/4/10 LOW 511 98 10/7/09 LAST 694 98 22/4/10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010200
300
FTSE W EUROPE EX UK £ - TOT RETURN IND
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HIGH 727.04 14/4/10,LOW 511.98 10/7/09,LAST 694.98 22/4/10
Source: DATASTREAM
HIGH 756.73 3/1/08,LOW 259.46 13/3/03,LAST 694.98 22/4/10
Source: DATASTREAM
The case for EuropeThe case for Europe
Multi managers flee Europe as debt
Could Europe be less popular?Could Europe be less popular?
Multi‐managers flee Europe as debt strife hits equities and euro Professional Adviser. 18/02/2010
Europe has become a no‐go zone Bank of America
Merrill Lynch 12/04/2010y / /
European banks face showdown over €1 trillion of debttrillion of debt Morgan Stanley 23/02/2010
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The case for EuropeThe case for Europe
Investors have voted with their feet: European equities have not seen any Investors have voted with their feet: European equities have not seen any substantial flows since 2000. A stark contrast to the US and UKsubstantial flows since 2000. A stark contrast to the US and UK
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Source: Source: CitiCiti. For all charts 8. For all charts 8thth April 2010April 2010
Which Europe are we afraid of?Which Europe are we afraid of?
One of the key attractions of Europe is its diversityOne of the key attractions of Europe is its diversity
Greek Key Statisticsy• GDP growth 2010E -2.6%• Govt Deficit/GDP 2009 13.6%• Govt Debt/GDP 2009 115%• Govt Debt/GDP 2009 115%
German Key StatisticsGDP h 2010E 1 6%• GDP growth 2010E 1.6%
• Govt Deficit/GDP 2009 3.3%• Govt Debt/GDP 2009 73%
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Source: GDP from consensus forecasts. April 2010. Deficit and Debt data from Source: GDP from consensus forecasts. April 2010. Deficit and Debt data from EcofinEcofin April 2010 April 2010
Which Europe are we afraid of?Which Europe are we afraid of?
Spot the difference Spot the difference –– Germany and Greece againGermany and Greece again
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So why? Cheap cheap cheapSo why? Cheap, cheap, cheap
European equities still attractive compared to government bonds and cheapEuropean equities still attractive compared to government bonds and cheapEuropean equities still attractive compared to government bonds, and cheap European equities still attractive compared to government bonds, and cheap compared to average earningscompared to average earnings
hh hh
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Source: Source: CitiCiti. 8. 8thth April 2010April 2010 Source: Source: CitiCiti. 8. 8thth April 2010April 2010
So why? European companies increasingly profitableSo why? European companies increasingly profitable
Since 1996 European EBIT margins converged with US: how far can this go?Since 1996 European EBIT margins converged with US: how far can this go?
Europe EBIT margin % (lhs)Europe EBIT margin % (lhs) USEBIT margin % (lhs)USEBIT margin % (lhs) Spread % points (Spread % points (rhsrhs))
Since 1996, European EBIT margins converged with US: how far can this go?Since 1996, European EBIT margins converged with US: how far can this go?
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AverAver
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2EB
IT m
argi
n E
BIT
mar
gin
rage spread: 1.7rage spread: 1.7
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77% points
77% points
98 08060402
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700 10F90 96949291
097 0705030199 099593 11F
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Source: Source: RedburnRedburn Partners, September 2009.Partners, September 2009.
Does country of listing tell us the whole story?Does country of listing tell us the whole story?
Look at Anheuser BuschLook at Anheuser Busch InbevInbev the world’s largest brewerthe world’s largest brewerLook at Anheuser Busch Look at Anheuser Busch InbevInbev, the world s largest brewer, the world s largest brewer
ABI sales and EBITABI sales mix
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Source: Bloomberg 03/10Source: Bloomberg 03/10
Does country of listing tell us the whole story?Does country of listing tell us the whole story?
OrOr InditexInditex the fast growing parent of the Zara retail chainthe fast growing parent of the Zara retail chainOr Or InditexInditex, the fast growing parent of the Zara retail chain, the fast growing parent of the Zara retail chain
Inditex sales and EBITInditex sales mix
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Source: Bloomberg 04/10Source: Bloomberg 04/10
How do we seek to capture the opportunity?How do we seek to capture the opportunity?
Through stock picking we are finding the best opportunities in Germany NorwayThrough stock picking we are finding the best opportunities in Germany NorwayThrough stock picking we are finding the best opportunities in Germany, Norway Through stock picking we are finding the best opportunities in Germany, Norway and the Netherlands and the Netherlands
The fund has no exposure to Greece or Portugal. Exposure to Ireland, Italy and The fund has no exposure to Greece or Portugal. Exposure to Ireland, Italy and Spain is to companies with a majority of international salesSpain is to companies with a majority of international sales
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ConclusionConclusion
Don’t give up on European equities nowDon’t give up on European equities now
▪ Not all European economies are in crisis – and currency weakness an opportunity
▪ Many high quality global companies listed in ‘crisis’ markets▪ Many high quality global companies listed in crisis markets
▪ Stock picking the key to generating alpha
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Appendicespp
Key FeaturesKey Features
A lowA low risk highrisk high return propositionreturn proposition
Characteristics• Target minimum 3% alpha and information ratio around 1
A lowA low--risk highrisk high--return propositionreturn proposition
• Target minimum 3% alpha and information ratio around 1.• Bottom up process, quality/growth bias. Market inefficiencies are most
prevalent at the stock level.• Equal weighting (2% large; 1% small cap no conviction investing); 50 to 70• Equal weighting (2% large; 1% small cap – no conviction investing); 50 to 70
stocks; short-term catalysts.• Aim to deliver consistent first quartile performance in short and medium term,
leading to top decile performance long-termleading to top decile performance long term.
IAN ORMISTON BSc MSc ASIP – Investment Manager (Europe)Investment Experience: 15 yearsIan graduated from London School of Economics in 1994 with a Masters degree in Economic History aftercompleting a BSC in 1993. He began his career with Asahi Life Investment Europe in 1994 before movingto Singer and Friedlander in 2000. He joined Ignis Asset Management’s European team in January 2007and is a member of the UK Society of Investment Professionals and the Institute of Investment ManagementResearch.
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Investment ProcessInvestment Process
Sources of Ideas• team experience
Investment Shortlist• fundamental research
Portfolio Construction• set price targets
Simple But EffectiveSimple But Effective
p• 3rd party research and
sales (specialists)• screening – liquidity
and value
fundamental research
• company and analyst meetings
• identify catalysts
set price targets
• risk control - clustering
• sell discipline
5050--70 Stock 70 Stock PortfolioPortfolio
1000 Stocks1000 Stocks 100 Stocks100 Stocks
• Bottom up process• Avoid big thematic and market bets
F t k ifi f t (t i ll 70 80% f i k d t )
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• Focus on stock specific factors (typically 70-80% of risk and return)
Di lDisclosure
This presentation is for professional clients and investment professionals only and should not be relied upon by retail clients.This document does not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase any investment, nor
shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract for the same.
Past performance in not a guide to the future.The value of the investments and any income from them can fall as well as rise and is therefore not guaranteed.
Exchange rate movements may cause the value of overseas investments to fluctuate.
Ignis Asset Management is the trading name of the Ignis Asset Management Limited group of companies which includes Ignis Asset Management Limited, *Ignis Investment Services Limited and *Ignis Fund Managers Limited.
Issued by Ignis Investment Services Limited. Registered in Scotland Number SC101825. Registered Office: 50 Bothwell Street, Glasgow G2 6HR
*Authorised and regulated by the Financial Services AuthorityAuthorised and regulated by the Financial Services Authority.
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