investor day 2010 welcome - investis...
TRANSCRIPT
Investor Day 2010
Welcome
HansHufschmid
CEO
Agenda
Hans Hufschmid, CEOVernon Barback, COOMarty Veilleux, CFO
SummaryQ&A
Cocktails
Vision&
Strategy
VISION
STRATEGY
GROW CORE. EXPAND MARKET.
Grow core by serving complex global hedge fund clients.
Expand market with proven skill sets into new markets of banks, corporate treasury, endowments, insurance companies,
mutual and pension funds, proprietary desks, regional and custodial institutions, and managed services
Milestones
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Incorporated in LuxembourgOffices – London / New York
Risk Services
TA Associates Minority Interest
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
India Opening
TA
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Vernon Barback – President and COO
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Completed SAS 70 Type I
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
IPO – Main Market Listing, London Stock ExchangeCompleted SAS 70 Type II
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Bad Bank SpinoffInsurance Company
GM Asset Management
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
European Credit Management Lift-Out
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
JAN FEB MAR APR MAY TODAY AUG SEP OCT NOV DEC
10 Offices on 3 Continents1,700+ Employees
$139 Billion AuA190 Clients
Management Team
Hans Hufschmid
CEO
MartinVeilleux
CFO
AndreaDulberg
General Counsel
Ronald Tannenbaum
Managing Dir
JanZlotnick
CMO
Ira Rosenblum
ManagedServices
Tom KirkpatrickCRM and ERM
Jon Anderson
OTC and Valuations
NandiniSankar
Implementation & Regional COO
RobertDiazFund
Accounting& Operations
Robert Schwartz
CTO
MotriaMychajlukInternal Audit
Anthony Glickman
Risk Services
George Evans
Business Dev
JamesCasey
Investor Serv
VernonBarback
Pres & COO
397 YearsWall StreetExperience
NewMarkets
Industry Trends
Global Hedge Funds
0
2.5
5
7.5
10
0
0.5
1
1.5
2
1990 1995 2000 2005 2010
Thou
sand
s
$ tr
illio
ns
Assets Under Management (est) Number of FundsSource: Hedge Fund Research
Historical Trends
Outsourcing Drivers
Response to investor and regulatory demands
Technology requirements
Variable expenses
Core competencies
Institutionalization
Current Trends
Investor Landscape
Independent administration
Transparency
Managed accounts
Power shift to investors
Operational risk due diligence
Risk reporting
Current Trends
Hedge Fund Manager
LandscapeReturn of start-ups
Credit exposure and derivatives management
Valuation processes and controls
Investment bank prop desk closures
Fertile investment environment
Current Trends
RegulationsUnited States
Europe
Implications
Outsourcing Drivers
InvestorLandscape
RegulationsHedge Fund
Manager Landscape
More configurable
Real-time
More often
More detailed
Cost-efficient
Implications
More configurable
Real-time
More often
More detailed
Data Management
Cost-efficient
Competitive Environment
Service OfferingsFull-service Integrated Outsourcers Banks /
Investment Banks
Financial / Technology /
OtherGlobeOp CITCO State Street
Middle Office Outsourcing
Risk Services Partial Partial
OTC Processing Partial Partial Only JP Morgan
Other Middle Office Partial Partial
Back Office Outsourcing Back Office Partial Partial
Fund Administration Investor Services
Related Services
Prime Brokers
Global Custody
Competing Trading
Source: GlobeOp Management
Competitive Advantage Scalable infrastructure
Wall Street experience
Focused and nimble
Financial stability
Independence
Competitive Advantage
24 x 5
Complex products
Culture of remarkable service
1,000+ years tech development
VernonBarback
COO
5 Simple on Surface
5 Vital toOur Clients
5 How We Do What We Do
5 Sustainable Advantage
5 We Do It Well
Really Well
190Clients
1,700Employees
10Offices
100,000+TradesDaily
40,000+Reports
Daily
8,000+RecsDaily
50,000,000Items
ReconciledDaily
PrimeBrokers
CounterpartiesCustodians
Futures Commission Merchants
Daily
Trades Positions Cash Breaks Aged breaks P&L
ResolveBreaks
Publish P&L
Cash & PositionRecs
Approximately:$4.5 billion
100 managers860 investors
20,000Trades
Monthly
Counterparties 3rd Party Pricing
Sources
Scrub & Match
Monthly Trades, positions
and cash matched
Counterparties 3rd Party Pricing
Sources
Scrub & Match
Monthly
Counterparties 3rd Party Pricing
Sources
Pricing finalized Portfolio value
finalized Manager fee
calculated and paid
Trades, Position, Cash
Portfolio Value Report
Manager Fee Calculations
Monthly
Counterparties 3rd Party Pricing
Sources
Pricing finalized Portfolio value
finalized Manager fee
calculated and paid
Trades, Position, Cash
Portfolio Value Report
Manager Fee Calculations
Monthly Accountingfor 150 legal vehicles
150 trial balances
Lighthouse fees finalized
NAVs struck for all share classes
Counterparties3rd Party Pricing
Sources
Monthly
Statements available online
Individual statements860 investors
Counterparties3rd Party Pricing
Sources
Monthly
Shareholder ledger updated
Process redemption and subscriptions
Counterparties3rd Party Pricing
Sources
Statements available online
Monthly
BOOKS & RECORDS
COMPLETE
“Lighthouse is the brains, GlobeOp is the nervous system.”
Rob Swan, COO, Lighthouse
“Our partnership with GlobeOp is a core component of Lighthouse’s business.”
Rob Swan, COO, Lighthouse
July 2007 – Middle Back Office Services April 2008 – Advent Geneva Read-Only Access January 2009 – Administration Services November 2009 – Tax Preparation Services
February 2010 – Advent Partner Read-Only Access June 2010 – Managed Services September 2010 – Financial Statement Production
ServicesMiddle Back Office
Daily
Fund Admin
Monthly (Weekly)
Risk Reporting
Daily/Weekly/Monthly
Managed Services
IT Infrastructure
Capture trades Security master Reconciliations and break
reporting Loans and OTC transaction
lifecycle management P&L reporting and
attribution Portfolio valuation “8:00am pack” – middle
office reporting suite UCITs compliance
Independent valuations Independent NAV prep Fund accounting Shareholder statements Shareholder subscriptions
and redemptions AML Financial reporting Tax reporting Independent NAV
transparency reporting Independent performance
decomposition Independent performance
metrics
Sensitivities Stress testing Scenario analysis Full VAR suite Portfolio aggregation Risk attribution Ad hoc reporting
Secure data center Connectivity Server and database
administration Back-up and disaster
recovery Business continuity Office build out and
desktop support Email and Blackberry
infrastructure
How We DoWhat We Do
People
ProcessesTechnology
RemarkableService
Technology
Technology Is
Robust$40 million
Annual Spend
1,000s of Man YearsFlexibleRedundant
Brilliantly TransparentReal-TimeRich in
FunctionFormidableHuge Barrier
to Entry
Secure
Best Overall Fund Administrator Technology
Continue to invest: Maintain edge
Trade Status
OTC Documentation
Custom Desktop Rollout
Processes
Complete
Accurate
Timely
{ Confidential }
GoCheck
Six Sigma quality aims to reduce process output variation.
Its measure of quality strives for near perfection (3.4 defect parts
per million opportunities).
Six Sigma
Detecting DefectsAnalyzing Root Causes
Changing Manufacturing Processes
Six Sigma
Stronger ControlsLearn and Apply
Continue to MeasureCulture of Client Satisfaction
People
Jewel in Our CrownHigh-quality
Jewel in Our CrownScalable
Jewel in Our CrownTime Zone
Jewel in Our CrownBest Practices for Employee Satisfaction
TrainingSkills DevelopmentCompensationCareer Development
GoCheck
GoCheck
Follow the Sun
Global Strength – Management
India US UK Grand Total
Headcount
2005 28 94 43 165
2010 139 168 85 392
Average Tenure2005 1.30 2.38 2.67 2.27
2010 4.49 4.40 5.38 4.65
Remarkable Service
Why Are Our Clients Happy?
We’re Focused
We’re Nimble
We’re Unconstrained
We’re Motivated
We Apply the Same Rigor of Our Processes and Technology
to Client Service
So What DoesRemarkable Service Look Like?
Client Satisfaction Survey
2007 2008 2009
MartyVeilleux
CFO
Recurring Revenue
Positive AuA Trend
History of GrowthRevenue
Adjusted Operating Profit
Expanding Margins
Cash Flows from Operations
Modest Cap-x
MomentumECM impact on revenues
ECM impact on profits
Interim Management Statement
Recurring Revenue
1H 2010:MBA Comprised 92% of Revenue
Recurring Revenue
Visibility
StickyClient Base
GrowthDrivers
OrganicClient performance
Net Subscriptions
New fundsNew clients
New markets/servicese.g. Managed Services
Unbundled servicesStrategic growth
Lift-outs
M&A Driven by recurring revenue~190 clients
High level of client satisfactionCritical servicesSwitching costsFocus on core competenciesInnovation helps retention
P&L History($ in thousands) 1H
20062H
20061H
20072H
20071H
20082H
20081H
20092H
20091H
2010Total
Growth
Revenues $63,660 $71,442 $77,795 $88,188 $94,505 $90,667 $79,151 $77,332 $89,428 40%
Expenses 56,681 62,879 85,072 64,950 77,100 69,863 113,280 62,486 69,336
Operating Profit 6,979 8,563 7,277 23,238 17,405 20,804 (34,129) 14,846 20,092 188%
Interest (income) / expenses, (net) 1,620 1,327 1,169 (292) (274) (250) (157) 45 225
Profit (loss) before income tax 5,359 7,236 (8,446) 23,530 17,679 21,054 (33,972) 14,801 19,867 271%
Income tax expense (benefit) 2,600 2,916 (429) 8,888 5,306 11,391 (14,292) 1,101 7,026
Net income (loss) 2,759 4,320 (8,017) 14,642 12,373 9,663 (19,680) 13,700 12,841 365%
Adjusted Operating Profit
Operating profit 6,979 8,563 7,277 23,238 17,405 20,804 (34,129) 14,846 20,092Depreciation & amortization exp 4,112 4,320 4,625 5,136 5,279 4,890 4,471 4,222 3,841Share-based compensation exp 1,884 2,396 3,145 3,962 2,548 495 2,023 1,860 1,442Legal claims and tax reserves 175 7,000 (9,936) (210) 43,500Costs related to water damage 459 (613) (570)Listing fees 9,015 6
Adjusted operating profit $12,975 $15,454 $16,967 $22,406 $24,619 $25,409 $15,865 $20,928 $25,375 96%
AOP % of revenue 20.4% 21.6% 21.8% 25.4% 26.1% 28.0% 20.0% 27.1% 28.4%
Revenue History
63,6
60
71,4
42
77,7
95
88,1
88
94,5
05
90,6
67
79,1
51
77,3
32
89,4
28
($ in thousands) 1H 2006 2H 2006 1H 2007 2H 2007 1H 2008 2H 2008 1H 2009 2H 2009 1H 2010
MBA $59,032 $66,607 $72,853 $81,903 $87,844 $83,963 $74,077 $71,807 $81,988
Risk Reporting 4,593 4,565 4,262 4,446 4,007 4,263 3,318 3,452 3,640
Transaction Solutions 35 270 680 1,839 2,654 2,441 1,756 2,073 3,800
TOTAL $63,660 $71,442 $77,795 $88,188 $94,505 $90,667 $79,151 $77,332 $89,428
% of MBA Revenue 93% 93% 94% 93% 93% 93% 94% 93% 92%
AuA Drivers and History New clients
New funds fromexisting clients
Client fundperformance
Subscriptions
Redemptions
Terminations
5876
97 88109
139
2005 2006 2007 2008 2009 2010 AugustAuA
$ in billions
2009 AuA Growth
88109
Dec 2008 Reds/Terms Subscriptions Performance New clients New funds Dec 2009
$ in billions
2009 AuA Growth
88109
(46)
Dec 2008 Reds/Terms Subscriptions Performance New clients New funds Dec 2009
$33b first half
$ in billions
2009 AuA Growth
88109
(46)20
Dec 2008 Reds/Terms Subscriptions Performance New clients New funds Dec 2009
Stronger in second half
$ in billions
2009 AuA Growth
88109
(46)20
14
Dec 2008 Reds/Terms Subscriptions Performance New clients New funds Dec 2009
Positive every month
$ in billions
2009 AuA Growth
88109
(46)20
1428
Dec 2008 Reds/Terms Subscriptions Performance New clients New funds Dec 2009
Notable wins
$ in billions
2009 AuA Growth
88109
(46)20
1428
5
Dec 2008 Reds/Terms Subscriptions Performance New clients New funds Dec 2009
Existing clients
$ in billions
2009 AuA Growth
88109
(46)20
1428
5
Dec 2008 Reds/Terms Subscriptions Performance New clients New funds Dec 2009
$ in billions
YTD 2010 AuA Growth
109139
(22) 284 17 3
Dec 2009 Reds/Terms Subscriptions Performance New clients New funds Aug 2010
$ in billions
Adjusted Operating Profit
aexcludes share-based compensation.b1H 2009 includes $1.6 million one-time costs related to exit of leased data center; AOP would have been 22.1% of revenues without this charge.
($ in millions) 1H 2006 2H 2006 1H 2007 2H 2007 1H 2008 2H 2008 1H 2009 2H 2009 1H 2010Revenues $63.7 $71.4 $77.8 $88.2 $94.5 $90.7 $79.2 $77.3 $89.4Costs
Employeea 33.7 36.9 40.2 41.8 45.7 42.9 38.8 35.9 42.9Technologyb 8.8 9.8 10.6 11.8 12.0 12.3 13.1 9.9 9.6Occupancy 2.9 4.2 4.7 5.3 5.3 5.7 5.4 5.2 5.3Other 5.3 5.1 5.3 6.9 6.9 4.4 6.0 5.4 6.2TOTAL COSTS 50.7 56.0 60.8 65.8 69.9 65.3 63.3 56.4 64.1
Adjusted Operating Profit - $ $13.0 $15.4 $17.0 $22.4 $24.6 $25.4 $15.9 $20.9 $25.4% of Revenues
Employee costsa 53.0% 51.7% 51.7% 47.4% 48.4% 47.3% 49.0% 46.4% 47.9%Technology costsb 13.8% 13.7% 13.6% 13.4% 12.7% 13.6% 16.6% 12.8% 10.8%Occupancy costs 4.5% 5.9% 6.1% 6.0% 5.6% 6.3% 6.8% 6.7% 5.9%Other expenses 8.3% 7.1% 6.8% 7.8% 7.2% 4.8% 7.6% 7.0% 7.0%
Adjusted Operating Profit - % 20.4% 21.6% 21.8% 25.4% 26.1% 28.0% 20.0% 27.1% 28.4%
20.4% 21.6% 21.8%25.4% 26.1% 28.0%
20.0%
27.1% 28.4%
Operating Expenses
CompensationTwo-thirds of AOP costs
Average annual salaryUS $94kUK $95k
India $12kGlobal $39k
66% – 69% of employees based in India since 2007
TechnologyIncludes software license fees, data fees, network and
telecom costs, maintenance and support contracts
$9.6 million 1H 2010 vs $13.1 million 1H 2009(2009 included $1.6m lease exit costs)
Approx 50/50 fixed vs variable
OccupancyEight leased facilities, two owned facilities
Capacity to grow
Other ExpensesIncludes travel & entertainment expenses, audit fees,legal fees, tax accounting fees, BOD fees, advertising
and promotional expenses, foreign exchangetransaction gain/loss, and other expenses
Cash Flow from Operations Positive every year
Seasonality
Primary drivers: Adjusted operating profit Working capital Taxes
Funds: Recurring capital
expenditures Capital investments
$ in millions
(1.8)
8.3 14
.2
7.8 22
.2
17.0
25.9
29.3
15.2
2006 2007 2008 2009* 2010*First Half Second Half
*Excludes cash flow impact of settlement payments and related tax benefits.
Other Key Items
Average Basis Points on MBA Business
1H 2010 approximately 14 basis points
New client pricing reflects workload, along with size and complexity of mandate
Focus is adjusted operating profit marginContinuous expansion with addition of new business
Capital Spending$8.5 million 2009 vs $17.8 million 2008
2008 included purchase of new (Yorktown Heights, NY) data centerand expansion of existing (Harrison, NY) data center
$1.9 million 1H 2010 vs $5.3 million 1H 2009
Taxation1H2010: reported tax rate 35%
29% tax rate excluding $1.2m non-cash accounting correction
2009: reported tax rate 69% benefit; core tax rate 25%
2008: reported tax rate 43%; core tax rate 33%
ECM – Potential Financial ImpactRevenue
Profit
Shares and Free Float
SharesCommon shares 91.4 million
Beneficiary certificates (BCs) 12.2 millionCombined 103.6 million
Stock options ~20 million ($2.66 average strike price)
RSUs 1.3 million
Free Float53%
Less than 30% through September 2009
2H 2010 IMS – Issued 22 September
Growth in AuARecord level $139 billion* as at 31 August 2010
29% increase through first eight months of 2010
Approximate increase of $20 billion since 30 June 2010New clients = $15 billion
New funds, existing clients = $0.5 billionSubscriptions = $8 billion
Redemptions and terminations = $5 billionClient fund performance = $1.5 billion
*Client fund performance is recorded one month in arears, therefore, 31 August 2010 balance does not include client fund performance of August 2010
Further Diversification of Client BaseECM lift-out: Demonstrates capabilities and broad appeal
GM Treasury OTC derivative collateral management services
Follows:Various managed accounts mandates
Valuation services for pension fund managerAdministration for bank spin-off with illiquid assets
Cash of $65 millionAs at 31 August 2010
Up $5 million since 30 June
What’s Next
Stage 1People,
Processes& Technology
Stage 2Investment
in India
Stage 3Focus on
Productivity
Stage 4Sales &
Marketing
Q&A
IMPORTANT NOTICE Certain statements in this presentation are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties, or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. Forward-looking statements regarding past trends or activities should not be taken as representations that such trends or activities will continue in the future. Accordingly, undue reliance should not be placed on forward-looking statements.!