willem appel

Download Willem appel

Post on 28-Jan-2018



Economy & Finance

0 download

Embed Size (px)


  • Roodhals Capital

    Willem Appel - CEO

    Co-PM - Branta Solutions Fund

    12 November 2010

    Credit and SustainabilityTBLI Conference London 2010

    Workshop 25: TBLI and Fixed Income

  • Important Notice

    Roodhals Capital - Confidential 2

    This document has been provided to you by the principals of Roodhals Capital B.V. ("Roodhals") forinformation purposes only.

    Roodhals Capital B.V. and Stichting Bewaarder Branta Solutions Fund (Branta Solutions Fund, orthe Fund) are incorporated in the Netherlands and are specifically NOT authorised or regulated bythe Netherlands Authority for the Financial Markets, the Financial Services Authority in the UnitedKingdom nor by any other regulatory body in any other jurisdiction.

    This document is for private circulation only. The information and opinions contained in thisdocument are for background purposes only, do not purport to be full or complete and do notconstitute investment advice nor the arranging of deals in investments. No reliance may be placedfor any purpose on the information and opinions contained in this document or their accuracy orcompleteness. No representation, warranty or undertaking, express or implied, is given as to theaccuracy or completeness of the information contained in this document and no liability is acceptedfor the accuracy or completeness of any such information or opinions.

    This document does not constitute or form part of any offer to issue or sell, or any solicitation of anyoffer to subscribe or purchase, any investment or to provide services nor shall it or the fact of itsdistribution form the basis of, or be relied on in connection with, any contract therefore.Specifically, neither Roodhals nor its principals has provided you with this document for the purposeof soliciting any investment in the shares of any investment or service contemplatedherein, whether by you or any other person and any such investment can only be made on the basisof the full Information Memorandum of the Fund.

  • Characteristics of Sustainable Investment compared

    3Roodhals Capital - Confidential

    Sustainable Investment

    Screening based SRI


    Risk Managed,Beta 1

    Bias Opportunistic, Trend-based, Alpha

    Best-in-class,Tracking error

    High sectorconviction

    Credit Opportunity

    HY; L/S credit; capital structure arbitrage

    TBL credit fund Cleantech loans and bonds

    Exposure to Scalable solutions, all sectors

    Index-plus Innovation, new industries

    Likely credit quality

    HG to HY and Loans HG HY, Loans

    Scalability High, albeit research intensive

    Limited by screening costs

    Limited now, improving

  • Can a corporate credit portfolio be sustainable and profitable?

    4Roodhals Capital - Confidential

    Creditors dont own a company

    Shareholders ownership rights create responsibility (UN PRI etc.)

    Equitable subordination risk

    Lenders: screening is crucial pre-funding, do not expect much protection from covenants

    Bondholders/rating agencies: vulnerable to bad news

    Make opportunity of sustainable development central thesis

    Tendency to focus on downside risk of the unsustainable

    Solutions based portfolio, including step-changes

    Consider sustainability in all sectors and industries

    Reputational risk

    Higher with screening-based allocation models (BP spill)

    A green company is not necessarily a sustainable company

  • Rationale for credit

    5Roodhals Capital - Confidential

    General idiosyncrasies of sustainable investment1:

    Status Quo: it takes a Herculean effort to displace existing technologies.

    Scale: solutions need to be scalable to make a dent in most sustainability issues.

    Size: the enormity of investment to achieve sustainability targets.

    Speed: solutions should deliver returns in time: economic, political and ecological time.

    Credit markets provides diversification of funding sources for sustainable investment

    Sustainable investment offers positive dynamics for corporate credit over time:

    Improving credit quality with size

    Growing cash flow emphasis with scale

    Enhanced sustainability: reduced default risk

    1After Angelo Calvello Environmental Alpha 2009.

  • Current Opportunities in Credit

    6Roodhals Capital - Confidential

    Corporate Bonds

    Tailwind since early 2009 - Graph spreads

    Cleantech sector hit snag: bonds offer better value relative to equity

    Interest rates a concern

    Next stage Loans for renewable energy generators

    $200bn of projects, over half financed with private equity. Less than 2% financed with debt (source: BNEF)

    Opportunity for DCM: finance based on future cash flows

    Likely need for industry consolidation (for example Green GECCO in Germany)

    New governance model for structured credit?

    In 2007 Alt-A market started a MBS governance crisis

    Restructuring and workouts provide opportunity for distressed investors

    A sustainable MBS, model 2.0, would be a game changer in financial markets

    Crossover index 5Y

    12/08 11/10

  • Invest in todays opportunities from tomorrows sustainability challenges

    Branta is an alternative investment fund focused on sustainability.

    Launched in July 2009 with seed capital from , an initiative of APG Investments.

    The opportunity: trend towards sustainable development as a value driver for companies.

    Pursuit of absolute returns in the 13-18% range while seeking to maintain portfolio volatility of 8-12%.

    Corporate multi-strategy model of equity and debt investments to mitigate risk and limit market correlation.

    Branta Solutions Fund

    Roodhals Capital - Confidential 7

  • 8

    The Branta EdgePerformance from Thematic Drivers

    Long Term Sustainability Themes

    Focus on Agriculture/Food, Renewables, Resources, Engineering and Materials

    Select investible, scalable and material themes

    Current and Near Term Market Trends

    Key drivers: Resources, Population and Environment

    Select Market moving trends

    Identification of Companies and Value Triggers

    Companies: select beneficiaries from the trend

    Value Triggers: soft or hard, look for a quantifiable effect

    Portfolio composition and management



    Equity long/short, credit or event

    Roodhals Capital - Confidential




    * Fo





    m U






  • Brantas Investable Trends


    * EROI = energy return on investment (Energy acquired/Energy expended)

    Theme Key Investment Angle Examples of recent trends

    Agri/Food Meeting global demand amid economic and ecological challenges.

    Consolidation and price recovery in the fertilizer sector Price pressure on premium processed food brands Changing technology in irrigation and water treatment Seed technology to gain greater acceptance and demand

    Renewables and Technology

    Renewables, energy efficiency and CO2 reduction targets will change energy mix. Renewable energy is currently challenged in capital markets and government budgets.

    Semiconductor sector benefits from led and solar tech. Feed-in-tariffs for solar and wind energy lowered in most

    markets Renewable energy to take the back seat to economic

    recovery concerns

    Engineering Opportunities from adaptation to carbon constrained world; creators of technologies for diversified sources of energy

    Renewed worldwide focus on nuclear energy Demand for safety and improved infrastructure in

    offshore drilling

    Resource Inflation

    Global demand and strategic inventories remain supportive of commodity prices. Key resources are metals and energy.

    China and India in strong pursuit of natural resources Uranium demand to strengthen, as nuclear energy

    capacity to rise over time The large oil firms to switch focus to natural gas from

    renewable energy, citing footprint and EROI*

    Materials Products and Services

    More companies are pursuing sustainable products and services for profits and strategic (stakeholder) reasons.

    Ships ballast regulation to prevent exotic species contamination will benefit filtration industry

    Increased competitiveness of high-EROI* products

    Sustainability is a financial performance driver

    Roodhals Capital - Confidential

  • Roodhals Capital - Confidential 10

    Multi-Strategy Model

    SEGMENTS Large cap Mid cap Small cap


    Investment horizon*Indicative

    allocation*50% 30% 20%


    and special situations

    Long: 3 months to 2 years

    Short : 1 month to 1 year50%

    Investment value from:

    Sustainability strategy

    Balanced stakeholder


    High liquidity and quality of


    Theme focus:



    Supply Chain

    Strong value profile and

    fundamentals-based investment.

    Winners in sustainability:

    Exceptional growth potential


    Clean tech

    CreditLong: 3 months

    to 2 yearsShort : 1 month to 1 year


    Event driven 1 to 6 months 25%

    * % of Exposure. Actual allocations and holding periods may vary significantly from the indicative allocations in the table.

    Delivering the risk-return and liquidity objectives

    The manager will look at a companys capital stru