Presentation by Humbert Garreau De Labarre
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12 avril 2023
MICROFINANCE
LA COMPAGNIE FINANCIÈREEDMOND DE ROTHSCHILD BANQUE
12 avril 2023 - Page 2
La Compagnie Financière Edmond de Rothschild Banque
LCF ROTHSCHILD GROUP : AN INTERNATIONAL FAMILY-OWNED INDEPENDANT GROUP
Founded in 1953 by Baron Edmond de Rothschild and now chaired by his son, Baron Benjamin de Rothschild.
Owned by the Rothschild Family, an international group headquartered in
Paris : for institutional money management.
Geneva : for private banking.
Assets under management of $ 80 billions.
Staff of 2 200.More than 100 portfolio managers (both institutional and private).30 branches.
12 avril 2023 - Page 3
La Compagnie Financière Edmond de Rothschild Banque
SHAREHOLDERS
Compagnie FinancièreSaint-Honoré
(Paris)
LA COMPAGNIE FINANCIÈRE HOLDING BENJAMIN ET EDMOND
DE ROTHSCHILD GENÈVE
La Compagnie Financière Edmond de Rothschild
Banque
• Chairman of the Supervisory Board : Baron Benjamin de Rothschild• CEO : Michel Cicurel
Caisse de Dépôt et Placement du
Québec
Banque PrivéeEdmond de Rothschild
(Genève)
Cogifrance(Paris)
12 avril 2023 - Page 4
La Compagnie Financière Edmond de Rothschild Banque
SUBSIDIARIES AND EXPERTISES
Edmond de RothschildAsset Management
Edmond de RothschildMulti Management
Edmond de Rothschild Corporate Finance
Edmond de Rothschild Private Equity PartnersInternational
Operations(China, Italy, Israel)
Edmond de Rothschild Financial Services
Assurances et ConseilsSaint Honoré
Private Banking, wealth management Private banking
Equity, fixed-income and diversified management
Structured Asset Management
Diversified and alternative Multi-management
Private equity
Mergers & Acquisitions
Insurance Brokerage
Asset Management Private bankingPrivate Equity
12 avril 2023 - Page 5
La Compagnie Financière Edmond de Rothschild Banque
TRENDS IN ASSETS UNDER MANAGEMENT
12 avril 2023 - Page 6
La Compagnie Financière Edmond de Rothschild Banque
MORNINGSTAR® RANKINGS
Regularly among the top 5Since 2002, La Compagnie Financière Edmond de Rothschild has systematically ranked among the top 5 European asset managers according to Global Investor / Morningstar
2005This leadership position has once again been confirmed by the 2005 rankings, naming us 5th best manager for equity funds, ahead of Schroders, Axa, Merrill Lynch, HSBC, Crédit Agricole…
45
Fund manager No. of funds ranked Average1 LCF Rothschild 40 3.35
2 UBS 113 3.253 CDC IXIS 41 3.22
4 Aviva 3.215 Schroder 66 3.20
6 50 3.19
BEST EQUITY MANAGER IN EUROPE 2003
T Rowe Price
Fund manager No. of funds ranked Average
1 68 3.74
2 American Century 95 3.65
3 Baillie Gifford 54 3.64
4 Threadneedle 94 3.52
5 LCF Rothschild 60 3.49
BEST TRANSATLANTIC FUND MANAGER 2002
Global Investor / Morningstar
75
45
Fund manager No. of funds ranked Average
2 LCF Rothschild 39 3.31
1 Storebrand 35 3.37
3 State Street 42 3.26
4 Robur 3.255 Barclay’s 45 3.24
BEST EQUITY MANAGER IN EUROPE 2004
40
12 avril 2023
Microfinance : a New Double Bottom Line Asset
Class
LA COMPAGNIE FINANCIÈREEDMOND DE ROTHSCHILD BANQUE
12 avril 2023 - Page 8
La Compagnie Financière Edmond de Rothschild Banque
The economically active poor – a huge need
2 billion people living under poverty threshold
500 million micro-enterprises
Informal rural & urban areas of emerging markets
A very dynamic, grassroots economic sector
USD 500 credit need per micro-enterprise per year
Need for credit, but also savings, insurance, pension, transfers
Demand is still largely unmet - a vast untapped potential
12 avril 2023 - Page 9
La Compagnie Financière Edmond de Rothschild Banque
Microfinance – a truly commercial approach
No need for charity but flexible provision of adapted financial services
No contradiction with social objectives
Lasting social impact through profitability
Greater outreach through commercialisation
Acceleration of growth through K markets access
Microfinance is a new segment of global finance
12 avril 2023 - Page 10
La Compagnie Financière Edmond de Rothschild Banque
Microfinance – investment impacts
Strong link to family economics
Stimulating grassroots entrepreneurship
Growth of micro and small businesses, job creation
Raising family living standards
Reinforcing self-esteem
Community & financial infrastructures development
Dynamic inter-generational virtuous cycles
➔ A very efficient way to alleviate poverty
➔ 2005, the UN year of Microfinance
12 avril 2023 - Page 11
La Compagnie Financière Edmond de Rothschild Banque
Micro-banks – Local financial services providers
Microfinance institutions as specialized financial intermediaries
Different legal formats (banks, NBFC, cooperatives, NGOs, etc.)
Increasingly regulated entities (65% of BlueOrchard clients)
Know intimately the sector in which they operate
Created financial products adapted to target segment
Developed specific delivery channels (ensuring proximity)
Included sophisticated IT developments (ATMs, palm pilots, etc.)
12 avril 2023 - Page 12
La Compagnie Financière Edmond de Rothschild Banque
Micro-banks : strong track record of leaders
Solid profitability (ROE in the 20s is usual)
Very fast growth (average DMCF clients = 40% per year over last 3 years
Low portfolio at risk (average default rates of 3%), excellent diversification
Products and services range adapted to client need
Low D/E ratios, high solvency
Very good MIS systems and reporting capabilities
Solid governance and high professionalism of boards and management
Access to many commercial sources, no subsidies at all
12 avril 2023 - Page 13
La Compagnie Financière Edmond de Rothschild Banque
Microfinance – A nascent global financial segment
Increased attention and specific legislation by regulators
Audits by superintendents of banks
External annual audits by recognized local auditors
Ratings by top rating agencies and specialized rating agencies
Creation of credit bureaus
Formation of local intermediaries’ associations
Development of international microfinance networks
Multiplication of investment funds both in debt and equity
12 avril 2023 - Page 14
La Compagnie Financière Edmond de Rothschild Banque
Importance of global Microfinance funds
Provide diversification of funding sources to MFI
Provide fast and flexible access to funding
Complement the domestic capital offering
Serve as catalyst and demonstration effect for local capital
Maintain demanding reporting standards
Introduce Microfinance practitioners to new investors’ segment
Provide opportunity to investors of doing well by doing good
12 avril 2023 - Page 15
La Compagnie Financière Edmond de Rothschild Banque
Microfinance debt – a new asset class ?
Attractive to both institutional and individual investors
Unique combination of social and financial returns within same product
Very high and effective social impact
Appealing financial risk – return profile
Limited credit risk
High insulation of microfinance sector from macroeconomic shocks
Low correlation with other asset classes in portfolio
Attractive fast growing industry
12 avril 2023 - Page 16
La Compagnie Financière Edmond de Rothschild Banque
International capital markets and BlueOrchard
Microfinance market is huge and needs are largely unmet. The only long term source of funding able to meet global demand is the capital markets. Donor money and public subsidies will not be sufficient.
While domestic capital markets should become the main driver of growth of local microfinance, international capital markets do play an important role (complementary offering, diversification, international awareness, image building, catalytic effect)
BlueOrchard mission is to bridge the gap between Microfinance institutions and international capital markets by creating and developing financial investment products meeting the needs and requirements of both microfinance institutions and commercial investors
12 avril 2023 - Page 17
La Compagnie Financière Edmond de Rothschild Banque
BlueOrchard Finance
Staff of 10 finance professionals with presence in Geneva, London and New-York; A stable and committed shareholders’ base and board
Total current assets under management of $300 million invested in over 23 countries in more than 60 microfinance institutions.
Five investment products and partnerships with leading financial institutions, including La Compagnie Financière Edmond de Rothschild Banque
A robust investment track-record : over 350 loans made in more than five years, without any defaults to date
12 avril 2023
Saint-Honoré Microfinance :an investment socially useful and
profitable
12 avril 2023 - Page 19
La Compagnie Financière Edmond de Rothschild Banque
SAINT-HONORÉ MICROFINANCE’S STRENGTHS
An opportunity to participate in the development of poorer regions by encouraging entrepreneurship
A stable investment thanks to high portfolio diversification
Microfinance institutions and investment partnerships included in the fund are rigorously selected
High quality fund management performed by reputable professionals
12 avril 2023 - Page 20
La Compagnie Financière Edmond de Rothschild Banque
INVESTMENT STRATEGY
Saint-Honoré Microfinance aims to develop micro-entrepreneurship, via the development of microcredit and microbanking establishments.
Saint-Honoré Microfinance, a SICAV-type fund, is accordingly putting forth a clear and contained investment strategy.
Saint-Honoré Microfinance provides funding to local specialized institutions in charge of transferring and redistributing funds to microbanks (MFIs) and subsequently to microbusinesses.
12 avril 2023 - Page 21
La Compagnie Financière Edmond de Rothschild Banque
COMPLEMENTARY KNOWHOW
BlueOrchard Finance Edmond de Rothschild Asset Management (1)
The Saint-Honoré Microfinance SICAV is managed jointly by
Loan and stakeholding management
• Fund and investment company financing
• Cooperative and small institution network financing
• Investing in shares of local and regional funds
Financial fund management
• Global asset allocation
• Cash and liquidity management
(1) Edmond de Rothschild Asset Management, subsidiary of La Compagnie Financière Edmond de Rothschild.
12 avril 2023 - Page 22
La Compagnie Financière Edmond de Rothschild Banque
SELECTING MICROFINANCE INSTITUTIONS
Selecting microfinance institutions is accomplished through a rigorous and consistent process
Quantitative & qualitative criteria analysis
• Most recent audited accounts• Portfolio review (number of loans outstanding, maturities, etc…) • Cost structure • Review of possible lags in loan redemption• Data double-checked against rating agency information
On-site Evaluations• To contact microfinance
institutions, meet their boards and managers, and review capital allocation
• To contact micro-entrepreneurs who are MFI customers, and check on the consistency of services offered
12 avril 2023 - Page 23
La Compagnie Financière Edmond de Rothschild Banque
PORTFOLIO DISTRIBUTION
• 60 % debt, via the funding of local and regional microfinance institutions the geographical location of which is determined by qualitative, criteria-based, selection decisions.
• 20 % to 30 % maximum Dexia Micro-Credit Fund shares and possibly shares of another microfinance fund
Dexia Micro-Credit Fund is a Luxemburg investment company (SICAV) set up seven years ago. The fund is diversified and active in 20 countries with 50 client MFIs. Its investments are in sound microfinance institutions, and provide investors with risk diversification.
• 10% cash at most (exceedable however during investment period).
Cash
Dexia Micro Credit Fund
MFI debt
Saint-Honoré Microfinance’s asset allocation template
12 avril 2023 - Page 24
La Compagnie Financière Edmond de Rothschild Banque
FUND FEATURES
Fund type : Luxemburg Part II investment company (SICAV)
Composition : Loans
Expected return : 3 % to 4 %
Valuation : monthly
Exit rule : quarterly (January, April, October, December) with one month’s notice
Initial unit price : 5 000 €
Entry fee : 2 % maximum
Exit fee : 0 %
Management fee : 3 %
Assets currency : Euro
12 avril 2023 - Page 25
La Compagnie Financière Edmond de Rothschild Banque
Avertissement / Legal information
The data, comments and analyses in this bulletin reflect the opinion of the LCF Rothschild Group with respect to the markets and their trends, regulation and tax issues, on the basis of its own expertise, economic analyses and information currently known to it. However, they shall not under any circumstances be construed as comprising any sort of undertaking or guarantee whatsoever on the part of the Group.
In no event shall the LCF Rothschild Group assume responsibility for any decision to invest, to disinvest or to maintain a position on the basis of these comments or analyses.
It is the responsibility of each and every investor to obtain the various regulatory prospectuses for each fund or financial product prior to making any investment and to analyse the risk incurred and establish his or her own opinion, independent of the LCF Rothschild Group, and where necessary, to take specialist advice regarding such questions, and especially in order to determine the relevance of such investment to his or her own financial situation.
Past performance and volatility is no guide to the future. The value of investments may fall and rise and performance is not constant over time.
The prospectuses of the funds mentioned are available upon request and may be found on our websites (www.lcf-rothschild.fr or www.edrfund.com).
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