Transcript
SELECTION, ALLOCATION, RISK MANAGEMENTInvestment Team:
Anthony EZE; Eugene SHIYANOV; Marian BENTANCURT
INVESTMENT PORTFOLIO~ BETA FINANCE
AGENDA
AGEN
DA
BETA FINANCE - AGENDA
•Investment Case
•Our Team
•Investment Process and Portfolio Characteristics
•Macroeconomic Outlook. Applying Macro Analysis for our Investment decisions
•Asset Allocation
•Portfolio Performance
•Risk Management
INVESTMENT CASE
INVESTM
ENT CASE
BETA FINANCE
•We combine Macroeconomics for Financial Forecasting analysis together with Portfolio Theory and Management tools to build a Portfolio on a proven Strategy.
•The firm’s investment style is strategically focused but quick to take advantage of opportunities presented by the market. The firm focuses on investing in companies by emphasising structure and manager performance, good fundamental businesses with strong competitive positions, reasonable valuations and a solid management focused on shareholder value.
•One of the main principles that we consider at the moment of structuring our Portfolio is Diversification in terms of geographies and Industries.
OUR TEAM
OU
R TEAMBETA FINANCE
•The experienced international team of Beta Finance joined from well known asset managers, hedge funds investment and commercial banks and renowned Financial Institutions.
•Our professionals are specialized in the following areas:
INVESTM
ENT TEAM
PROFILES
Eugene SHIYANOV
Investment BankingM&A and Capital Markets
Marian BENTANCURT
Macroeconomic AnalysisInternational Finance
Anthony EZE
FX Sales, TradingStructured Products
INVESTMENT PROCESS AND PORTFOLIO CHARACTERISTICS
INVESTM
ENT PRO
CESS AND
PORTFO
LIO CH
ARACTERISTICSBETA FINANCE
Portfolio Structure:Portfolio Structure:
Common Stock
Gafisa (Brazil)Vale (Brazil)RWE (Germany)Deutsche Bank (Germany)Guaranty Trust Bank (Nigeria)First Bank (Nigeria)Goldman Sachs Group (USA)Seagate Technology (USA)3i Infotech (India)
Alternative Investments
iShares Silver Trust ETF (USA)
MACROECONOMIC OUTLOOK. APPLYING MACRO ANALYSIS FOR OUR INVESTMENT DECISIONS
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Vale (Brazil)Vale (Brazil)
Listed on BOVESPA
Vale is a diversified miner, focusing mainly iron ore, but also fertilizers, nickel, copper, etc. It is the number 1 producer of iron ore in the world.
We think that the increase in the demand of commodities from Emerging Markets countries for infrastructure (roads, houses, etc) and consumption goods (cars, washing machines, etc) will be reflected in the financial statements of the company. This improvement will be traduced in higher prices for the stocks of the company. For this reason we decided to include Vale stocks in our portfolio.
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RWE (Germany)RWE (Germany)
Listed on DAX
RWE is one of Europe’s five leading electricity and gas companies. It is active in the generation, trading, transmission and supply of electricity and gas. More than 70,000 employees supply over 16 million customers with electricity and approximately 8 million customers with gas. In fiscal 2009, RWE recorded about €48 billion in revenue.
We expect an increase in the local and Asian demand for consumer goods, which we think will help to sustain the current growth in the German economy being reflected in its level of production.
The above mentioned increase in production should lead to a rise in the demand for power/electricity, hence our inclusion of RWE. As the economy picks up, the company will increase its revenues from its ongoing operations under this favourable context. The price of the shares of the company would rise.
We believe that Monetary conditions in Germany will remain very favourable. Domestic demand will also be stimulated by the further improvement of the labour market. We expect a growth private consumption.
The Federal Ministry of Economics and Technology announced an increase in GDP for the next quarter as a recovery in the country is expected from 2009. We expect it will continue its positive path in 2011.
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Deutsche Bank (Germany)Deutsche Bank (Germany)
Listed on DAX
Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. Its businesses are mutually reinforcing. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With 81,929 employees and about 2,000 branches in 72 countries (as of June 30, 2010), Deutsche Bank offers unparalleled financial services throughout the world.
We have a positive outlook for the German Economy which will also be accompanied by and acceleration in consumption and an increase in investors confidence in the marked which will contribute to a higher demand d for financial services. We also expect the Pace of M&A to Increase in the last quarter of 2010 and 2011.
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Guaranty Trust Bank (Nigeria)Guaranty Trust Bank (Nigeria)
First Bank (Nigeria)First Bank (Nigeria)
Listed on NSE
Guaranty Trust Bank Plc provides various retail, corporate, and commercial banking services. It primarily offers call accounts, savings accounts, currents accounts, domiciliary accounts, and fixed/tenured deposits. The company’s banking services include retail banking, granting of loans and advances, equipment leasing, corporate finance, and money market activities and related services, as well as foreign exchange operations. First Bank of Nigeria is one of the Nigeria's oldest financial institutions founded in 1894 as Bank of British West Africa and listed on the Nigeria Stock Exchange in 1971. The bank currently has the largest network in the country and also offers offshore financial services through it London branch. The banks assets are in the excess of N100billion.
We think that as a result of Government financed spending (for what we will analyze the fiscal balance to GDP) combined with the global recovery the global economy, Guaranty Trust Bank and the First Bank of Nigeria will experience an improvement in the next 6 months of 2010, showing a positive effect in the prices of the stocks. That is why we have chosen them for our portfolio.
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Goldman Sachs Group (USA)Goldman Sachs Group (USA)
Listed on NYSE
The Goldman Sachs Group, Inc. (Goldman Sachs) is a bank holding and a global investment banking, securities and investment management company. The Company provides a range of financial services to customers, including corporations, financial institutions, governments and high-net-worth individuals.
We consider that the economy of the US will expand gradually in 2010 (measured by growth in real GDP (real ann. % change).
We expect an increase in Mergers and Acquisitions, that we think will have a positive effect in the prices of the stocks.
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Seagate Technology (USA)Seagate Technology (USA)
Listed on NYSE
Seagate is the world leader in hard disk drives and storage devices for enterprise, desktop, mobile computing, consumer electronics, and external/networking storage solutions markets. Seagate products span the storage application landscape, including data centers, mainframes, workstations, desktop and notebook PCs, netbooks, digital video recorders, gaming consoles, home entertainment devices, external backup and networked storage.
We expect an expansion of the US will specially in the Tech sector increasing the price of Seagate Technology stocks.
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3i Infotech (India)3i Infotech (India)
Listed on NSEI
3i Infotech is a global Information Technology company which provides technology solutions to over 1500 customers in more than 50 countries across 5 continents, spanning a range of verticals. The Company provides software products, IT services and Business Process Outsourcing (BPO) for a variety of industry verticals including Insurance, Banking, Capital Markets, Mutual Funds & Asset Management, Wealth Management, Government, Manufacturing and Retail.
We expect an increase in demand for new technologies in India which will have a positive impact on 3i Infotech.
We believe that the overall economic outlook for India for the next two quarters will be stable, reflecting a consolidation in its growth path and improvement in its fiscal position
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iShares Silver Trust ETF (USA)iShares Silver Trust ETF (USA)
Listed on NYSE
The objective of the iShares Silver ETF is to reflect, at any given time, the price of silver. We consider it an efficient way to invest in the metal without dealing with expenses of holding a physical amount of silver in the possesion of the investors.
Silver is also fast becoming a critical component of emerging technologies.
We think that in the actual macroeconomic scenario, considering the global impact of the financial, investors flight to safe assets (commodities – gold in particular) over rising concerns about the health of the global economy and sustainability. Investing in Silver as a store of value could be a good short-term alternative.
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US Gross Domestic Product IUS Gross Domestic Product I
Regarding the Gross Domestic product of the United States, Beta team considers that the increase in GDP that has been observed by studying the year over year change could be a signal of gradual recovery of the Economy of the country.The recent data provided by the Bureau of Economic Analysis of the US Department of Commerce and also by the Federal Reserve of the United States reflects this recovery, which reaches a 4.5% increase in Q3 2010 compared to the same quarter in 2009.
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US Gross Domestic Product IIUS Gross Domestic Product II
However, after running a regression, we observed that the total variation of S&P 500 (Risk Premium) could not be completely explained by changes in GDP. In fact, we have found a low coefficient of determination and beta of a 0,13, which means that a unit change of GDP, only implies a change on the dependent variable, in this case S&P 500 of only 0,13. For this, is that we have also studied and taken into account other macro economic indicators to develop our investment strategy and defining the stocks to be included in our portfolio.
Considering what has been said, we expect a stronger US output: Consumer spending has started to accelerate and it could be a sign of recovery in consumer confidence and the “return” of economic agents to the stock markets. The upturns in exports could also contribute to explain the US GDP growth. As a consequence, we have a positive outlook on Q4 2010 which we consider will show a positive change of 5%.
ASSET ALLOCATION
ASSET ALLOCATIO
NCapital Allocation
Portfolio Weights
Equity
0.79 Alt Investments 0.21
VALE
0.07 GTB 0.12 MERVAL 0.15
GAFISA
0.07 GOLDMAN 0.05 i-SHARES 0.06
RWE
0.10 SEAGATE 0.08
DEUTSCHE
0.10 3i 0.08
FBN
0.12
PORTFOLIO PERFORMANCE
PORTFO
LIO PERFO
RMAN
CEPortfolio Return
Net-Asset Value vs. S&P500 (before fees)BETA Investments:Weighted• Return – 0.21%• Volatility – 0.78%
Equally Weighted• Return – 0.20%• Volatility – 0.81%
Optimally Weighted• Return – 0.47%• Volatility – 3.24%
S&P500:• Return – 0.16%• Volatility – 0.68%
PORTFO
LIO PERFO
RMAN
CEBy Country
By Investment
*India and Brazil with –ve returns
PORTFO
LIO PERFO
RMAN
CEModel Analysis
*Better than expectation
Beta Alpha Actual Alpha
VALE 0.75 1.45% -0.05%
GAFISA 0.85 1.24% -0.45%
RWE 0.57 -0.41% -0.09%
DEUTSCHE 1.52 -0.50% 0.03%
FBN 0.44 1.46% 0.22%
GTB 0.75 2.92% 0.14%
GOLDMAN 1.03 0.62% -0.02%
SEAGATE 1.52 -0.08% -0.04%
3i 0.75 0.70% -0.45%
MERVAL 0.24%
i-SHARES 0.17%
RISK MANAGEMENT
RISK MAN
AGEM
ENT
Risk Management Process
1. Risk Analysisβ Review of our exposures to loss β Based on VaR, CVaR & LPSD
2. Risk Controlβ Identify risky assetsβ Agree on appropriate control measures
[divesture, outright closure, diversification]
3. Risk Transferβ Diversification across low correlated economies
or negatively correlated
RISK MAN
AGEM
ENT
Risk Management Process
1. Risk Analysisβ Review of our exposures to loss β Based on VaR, CVaR & LPSD
2. Risk Controlβ Identify risky assetsβ Agree on appropriate control measures
[divesture, outright closure, diversification]
3. Risk Transferβ Diversification across low correlated economies
or negatively correlated
If significant change in initial fundamentals,
4. Risk Review & Refinementβ Refine strategies/investments based on current
fundamentals
THANK YOU
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