OCTOBER 2013 Convertibles and the Great Rotation For Professional Investors and Advisers Only
Jan 19, 2015
O C T O B E R 2 0 1 3
Convertibles and the Great Rotation
For Professional Investors and Advisers Only
RWC
| RWC 1
Convertible Bond – asymmetric return profile
Junk – distressed credits with high likelihood of a company default.
Bond proxy – parity value significantly below bond floor and therefore insensitive to movements in the underlying equity. Delta range between 0% and 20%.
Balanced convertibles – most attractive risk/return profile. Rate of change in sensitivity to equity price accelerates as equity rises and decelerates as equity falls. Delta range between 20% and 70%.
Equity proxy – virtual equity with delta 70% - 100%. Importantly bond floor significantly below the convertible price and therefore provides little support as equity falls.
RWC
| RWC 2
Why invest in Convertible Bonds? – Ideal for Multi-Asset Portfolios
Source: Bloomberg, UBS, RWC
Why buy convertibles:
• Upside potential of equities and downside protection of bonds
• Provides an asymmetric risk/return profile
• Strong risk adjusted returns
• Low duration asset class
• Lower duration exposure within a fixed income portfolio
• Low correlation with other fixed income instruments
• Increases diversification within a multi-asset portfolio
• Improves efficient frontier
• Provides exposure to volatility through embedded call options
• Long-only investors can benefit from volatility exposure
• Equity exposure without taking all the downside risk
if equities fall
• Puts, resets and takeover ratchets (which can be particularly attractive in this market environment)
Annualised Return & Volatility of Global Equities, Convertibles & Bonds (1996 – June 2013)
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Convertible Bonds Equities Government Bonds
Annualised Return (LHS) Annualised Std. Dev. (LHS) Sharpe Ratio (RHS)
RWC
| RWC 3
Performance Comparison
Source: UBS, Citi, RWC, September 2013
Global Convertible Bonds vs. Global Equities
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
UBS Global Focus Convertible Index MSCI World Equity Index
RWC
| RWC 4
Performance Comparison
Source: UBS, Citi, RWC, September 2013
RWC Asia Convertibles vs. MSCI Asia Ex-Japan Equity Index
60
65
70
75
80
85
90
95
100
105
110
Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13
MSCI Asia Ex-Japan Equity Index RWC Asia Convertibles
RWC
| RWC 5
Convertible Bonds – Correlation Analysis
Source: Bloomberg, MSCI, BoA-ML, RWC. Data as at end of 1996 to end of 2012. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.
Asset Class Correlation with
Convertibles Bonds Annualised Volatility
Global Convertible Bonds 1.00 8.89
Global 7-10yr Corporate Bonds 0.13 5.52
Global 3-5yr Corporate Bonds 0.08 4.99
Global 7-10yr Sovereign Bonds -0.06 11.58
Global 3-5yr Sovereign Bonds -0.04 10.65
US Treasuries/Agencies 7-10yr -0.22 6.25
US Treasuries/Agencies 3-5yr -0.23 3.32
US 3month T-Bills -0.08 0.34
RWC
| RWC 6
Convertible Bonds Through Monetary Cycles
Sources: Chart: Bloomberg, MSCI, UBS, BoA-ML, RWC. December 2012. Table: Bloomberg, MSCI, UBS, BoA-ML, RWC. December 2012.
Performance Through Monetary Cycles Performance in Different Interest Rate Environments
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
0
50
100
150
200
250
300
1997 2000 2003 2006 2009 2012
UBS Global Focus Convertible Bond IndexMSCI World Total Return Equity IndexBoA-ML 1-3yr Global Investment Grade Corporate Bond IndexG3 Base Rates
Equities Convertible
Bonds Corporate
Bonds
FALLING INTEREST RATES
February 2001 - August 2004 -13.7% -2.4% 28.7%
September 2007 - March 2009 -51.2% -28.4% -4.7%
FLAT INTEREST RATES
January 1997 - August 1999 57.2% 36.1% 13.6%
March 2009 - December 2012 96.7% 46.5% 29.7%
RISING INTEREST RATES
August 1999 - February 2001 2.7% 13.2% 4.2%
August 2004 - September 2007 73.3% 34.3% 15.3%
RWC
| RWC 7
Equities Convertible
Bonds Corporate
Bonds
EXPANSIONARY PERIOD
January 1997 - November 2000 65.8% 49.2% 15.7%
August 2001 - August 2007 74.7% 37.8% 42.1%
March 2009 - December 2012 80.0% 43.0% 26.9%
RECESSIONARY PERIOD
November 2000 - August 2001 -19.6% -4.6% 5.0%
August 2007 - March 2009 -44.8% -24.4% -0.8%
Convertible Bonds Through Business Cycles
Sources: Chart: Bloomberg, MSCI, UBS, BoA-ML, NBER, RWC. December 2012. Table: Bloomberg, MSCI, UBS, BoA-ML, RWC. December 2012.
0
50
100
150
200
250
300
1997 2000 2003 2006 2009 2012
NBER Recession DatesUBS Global Focus Convertible Bond IndexMSCI World Total Return Equity IndexBoA-ML 1-3yr Global Investment Grade Corporate Bond Index
Performance Through Business Cycles
Performance in Expansionary and Recessionary Periods
RWC
| RWC 8
Convertible Bond Volatility
Source: Bloomberg, MSCI, UBS, CBOE, RWC. December 2012 Table: Bloomberg, MSCI, UBS, CBOE, RWC. December 2012
0
10
20
30
40
50
60
70
Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12
VIX (3-month Moving Average)
Annual Volatility of UBS Global Focus Convertible Bond Index (3-month Moving Average)
VIX
Average Equities
Convertible Bonds
January 1997 - January 2004 24.0 45.1% 55.0%
January 2004 - June 2005 14.7 12.2% 1.2%
June 2005 - July 2007 12.7 50.1% 29.3%
July 2007 - August 2008 23.0 -15.7% -10.4%
August 2008 - December 2009 36.4 -9.5% 3.5%
December 2009 - December 2012 21.4 24.1% 16.2%
Performance in Different Volatility Environments
0
5
10
15
20
25
0
10
20
30
40
50
60
70
Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12
VIX (3-Month Moving Average) (LHS)Annual Volatility of VIX (3-Month Moving Average) (RHS)
Equity Volatility Developments
Equity Volatility and Convertible Bond Volatility
RWC
| RWC 9
Delta / Equity Sensitivity (disciplined portfolio construction)
• Balanced delta exposure of between 30 – 50%, focused on high convexity names (Gamma)
• Provide upside equity exposure with bond floor protection
Global portfolio - diversified by region and sector
• Avoid regional delta and sectorial concentrations
• New issue calendar
Optimum approach is index unconstrained
• Convertibles are issued opportunistically & fashionable sectors enjoy heavy issuance (TMT bubble, property in 2007)
• Equity sensitivity usually highest at equity markets peaks, and vice versa / indices can be misrepresentative
Focus on high credit quality and use of internal ratings where bonds are non-rated
• Typically a minimum of 50% in formally rated investment grade securities
• High emphasis on valuing non rated securities (typically 40% of the convertible universe)
Volatility
• Focus on cheap implied volatility within convertible bonds & low volatility of returns within fund
• Volatility provides diversification within a multi-asset class portfolio
Little or no use of “Synthetic” structures
• Implied volatility compression / liquidity and transparency / potentially high concentration of credit risk to financial counterparties
Objective: To provide long term capital appreciation through a well balanced portfolio of global convertible bonds, focusing on stock selection and disciplined management to give the optimal profile throughout the market cycle.
RWC Global Convertibles Fund – Philosophy & Approach
RWC
| RWC 10
RWC Global Convertibles – Delta Breakdown
Source: RWC / Nomura
End of September 2013
Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range
Delta Contribution RangeDelta Exposure vs. Region vs. Region WeightDelta Contribution by Region
Delta Contribution by Sector
0.1
0.4
2.7 3.0
7.4
10.7
8.2
9.7
6.4
3.0
-
2
4
6
8
10
12
10 20 30 40 50 60 70 80 90 100
Cons. Disc. 59%
Finan. 40%
Indust. 57%
IT 60%
Telec. Sv c. 49%
Health Care 70%
Cons. Stap. 39%
Mat. 59%
Energy 46%
Util. 59%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
9.6
7.1
6.1
10.0
1.4
6.7
1.9
3.2
4.1
1.5
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Cons. Disc.
Finan.
Indust.
IT
Telec. Svc.
Health Care
Cons. Stap.
Mat.
Energy
Util. SUM = 51.6
South America 64.8%
North America 59.4%
Japan 56.3%
Europe 52.4%
Af rica 45.5%
Weighted Av erage
Delta 51.6%
Australia 44.8%
Asia 40.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1.8%2.7%
10.3%
8.4%
16.5%
19.6%
12.5% 13.1%
7.6%
3.2%
0%
5%
10%
15%
20%
25%
10 20 30 40 50 60 70 80 90 100
1.4
24.7
5.3
13.0
0.7
0.2
6.4
0.0 5.0 10.0 15.0 20.0 25.0 30.0
South America
North America
Japan
Europe
Africa
Australia
AsiaSUM = 51.6
WeightedAv erage
Delta51.6%
RWC
| RWC 11
UBS Global Focus –Delta Breakdown
Source: RWC / UBS
Delta Contribution by Region
Delta Contribution by Sector Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range
Delta Contribution RangeDelta Exposure vs. Region vs. Region Weight
0.4
0.9
2.3
3.7
6.0
8.7
7.1 7.2
9.4
3.5
-
1
2
3
4
5
6
7
8
9
10
10 20 30 40 50 60 70 80 90 100
Cons. Disc. 51%
Finan. 41%
Indust. 57%
IT 63%
Telec. Sv c. 39%
Health Care 57%
Cons. Stap. 42%
Mat. 42%
Energy 36%
Util. 46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
6.9
7.3
6.7
10.9
1.3
5.8
1.5
3.0
3.9
2.0
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Cons. Disc.
Finan.
Indust.
IT
Telec. Svc.
Health Care
Cons. Stap.
Mat.
Energy
Util. SUM = 49.2
South America
68%North
America 57%
Japan 55.1%
Europe 49.8%
Af rica 43.6%
Weighted Av erage
Delta 49.2%
Asia 31%
Australia 25.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
10.3%
5.7%
9.1%
10.4%
13.4%
15.8%
10.7%9.8%
11.1%
3.6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
10 20 30 40 50 60 70 80 90 100
2.4
19.0
2.9
18.0
0.7
6.1
0.1
0.0 5.0 10.0 15.0 20.0
South America
North America
Japan
Europe
Africa
Asia
AustraliaSUM = 49.2
WeightedAv erage
Delta49.2%
End of September 2013
RWC
| RWC 12
Example: Equinix Convertible Bonds (Aug 2010 – Dec 2011 )
Source: Nomura, Bloomberg, RWC, 2012
75
85
95
105
115
125
135
Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11
EQIX 2.5% 2012 CBs EQIX 3% 2014 CBs EQIX Stock
1. EQIX shares fall by 33% after the company's lowered revenue guidance for Q3'10 and FY'10 by 2% and 1%, respectively. Our analysis led us to believe that the share price reaction was far overdone, and that our fundamental thesis remained intact. In response to the 33% decline in share price, the more conservative EQIX 2.5% convertible bonds lose only 8% of their value. The higher-delta 3% 2014 convertible bonds lose 16% of their value.
2. Due to the drop in the share price, the profiles of the two convertibles undergo a significant transformation. The 2.5% 2012 convertibles move from a delta of 33% with a gamma of 1.5 to a delta of only 12% with a gamma of 0.9. At this point, the 2.5% 2012 convertible bonds offer very little equity participation, but they do retain some convexity. Meanwhile, the 3% 2014 convertible bonds move from a 70% delta to a 37% delta, whilst gamma increases from 0.4 to 1.6. Given the dramatic change in the profiles of the two convertible bonds, as well as our fundamental view on the company, switching from the 2012 bonds to the 2014 bonds becomes a very attractive trade. It is in these situations that active management of a convertible bond fund becomes especially important.
3. As the EQIX share price stages a recovery, the 3% 2014 convertible bond is able to participate to a greater degree than the 2.5% 2012 bond. Over this period, the stock delivers investors a total return of 33.3% with a vol of 31.3%. The 2012 2.5% convertible bonds a total return of 11.1% with a vol of 6.9%. The 2014 3.0% convertible bonds deliver a total return of 24.9% with a vol of 14.2%.
O C T O B E R 2 0 1 3
Global Convertibles Fund
For Professional Investors and Advisers Only
RWC is an active investment manager
• Independent and owner managed since its foundation in 2000 and centered around skill-based, active fund management.
• Experienced and trusted portfolio managers accomplish the best results when they are free from artificial restrictions. Our portfolio managers take full accountability for investment decisions, having no house investment style.
• Our clients – we invest on behalf of both intermediaries and institutions that look to us to grow the real value of their assets without exposing them to undue risks.
Focus on longevity and stability
• Employee ownership generates a level of stability and professionalism essential to the ongoing strength of a fund management business.
• Strong focus on performance and a solid risk management culture lies at the heart of our business which is built around highly-talented portfolio managers.
• An unconstrained approach to investing means that our portfolio managers can express their views without hindrance or artificial restrictions. We offer fund management expertise with a strong focus on liquidity.
• Matching fund capacity with the investment approach ensures long-term success of our investment processes.
RWC Introduction to RWC
| RWC 14
RWC
| RWC 15
Delta / Equity Sensitivity (disciplined portfolio construction)
• Balanced delta exposure of between 30 – 50%, focused on high convexity names (Gamma)
• Provide upside equity exposure with bond floor protection
Global portfolio - diversified by region and sector
• Avoid regional delta and sectorial concentrations
• New issue calendar
Optimum approach is index unconstrained
• Convertibles are issued opportunistically & fashionable sectors enjoy heavy issuance (TMT bubble, property in 2007)
• Equity sensitivity usually highest at equity markets peaks, and vice versa / indices can be misrepresentative
Focus on high credit quality and use of internal ratings where bonds are non-rated
• Credit quality of the overall portfolio is typically investment grade equivalent, no securities rated below B-
• High emphasis on valuing non rated securities (c. 50% of the convertible universe)
Volatility
• Focus on cheap implied volatility within convertible bonds & low volatility of returns within fund
• Volatility provides diversification within a multi-asset class portfolio
No use of “Synthetic” structures
• Implied volatility compression / liquidity and transparency / potentially high concentration of credit risk to financial counterparties
Objective: To provide long term capital appreciation through a well balanced portfolio of global convertible bonds, focusing on stock selection and disciplined management to give the optimal profile throughout the market cycle.
RWC Global Convertibles Fund – Philosophy & Approach
RWC
| RWC 16
Cheapness to Fair Value
Source: Nomura, March 2013
-14
-12
-10
-8
-6
-4
-2
0
2
4
Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12
Japan Cheapness to Fair Value
-30
-25
-20
-15
-10
-5
0
5
Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12
Asia ex Japan Cheapness to Fair Value
-20
-15
-10
-5
0
5
10
Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12
Europe Cheapness to Fair Value
-35
-30
-25
-20
-15
-10
-5
0
5
Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12
US Cheapness to Fair Value
RWC
| RWC 17
RWC Infrastructure & Support
• Former Lead Manager of Morgan Stanley Global Convertible bond fund
• Extensive long – only portfolio management expertise and track record
• Broad macro/fixed income experience • Previously Global Fixed Income
Product Specialist at Fortis Investments
• Credit research & company modelling
• Former Credit Analyst for Morgan Stanley Global Convertible Fund
• Quantitative expertise • Former member of equity fund
management team focusing on Asian equities
Davide Basile
Esther Watt, CFA Michelle Shi
Lakshman Harendran
• Leverages internal trading capabilities
• System for automated convertible exchange being considered
• Bi-weekly analyst meetings • Informal and free flowing information
exchange • Leveraging of internal expertise
• Client support • Reporting literature & updating
• Operational support • Corporate actions / cash
management • Reconciliations • Portfolio Analytics support
Operations Trading Support Client Reporting Other Inv. Teams
RWC Global Convertibles – Investment Team
RWC
| RWC 18
• Continual monitoring process to assess appropriate “Greek” adjusted exposures
• Delta adjusted see – through analysis • Portfolio credit attribution and delta adjusted
breakdown • Modified duration exposure portfolio analysis • Implied volatility curve monitoring
• Gamma focused portfolio adjustment • Strong emphasis on Call and Put monitoring • Liquidity
• Portfolio built bottom-up, focused on absolute (not relative) returns • Seek diversification across industry, country and sector (on delta basis) • Maintain balanced delta profile • Scrutinise portfolio for unintended risks • Execution an integral part of process due to nature of market
• Decide macroeconomic landscape and top down risk levels • Assess market liquidity • Determine exposure levels
• Delta / Omega / Rho / Vega • Determine convertible trends • New issuance
Equity • Screening model to filter universe • Emphasis on value and cash flow factors • Rigorous fundamental assessment • Global perspective – identification of anomalies & themes
Credit • Research focused on ascertaining strength of bond floor • Trends in credit ratios seen as important as actual level of ratio • Equity market often provides lead indication of deterioration in credit fundamentals
Fundamental Analysis
Portfolio Construction
Macroeconomic and Thematic Insights
Risk Disaggregation
Investment Process – Disciplined, Proven Approach
RWC
| RWC 19
• Create Company Model / Fundamental assessment / Valuation • Balance sheet and Cash flow analysis • Fundamental in understanding effect on company based on developing market trends
• Capacity • What is the adequate weight for the new holding based on credit worthiness • Issue size in relation to portfolio size
• Portfolio interaction • Vital to understand how new position interacts with overall portfolio • New delta adjusted sectoral, regional exposure and credit exposure
• Constructive exclusion • Does new position come at expense of existing position within the fund • Basis for re-evaluating current portfolio holdings
• Constantly update company model • As new information becomes available company models must be updated • Integrating new results releases and re-evaluating original rational for inclusion
• Positive target levels • Each position within the fund has a target level the convertible team believes the
equity/credit or convert can achieve • Once target levels are reached the position is re-evaluated for exclusion from
portfolio or re-evaluation of target levels based on updated information • Negative target levels
• Each position has a lower level which acts as a catalyst if position does not perform as expected
• Upon breach of the lower level, understanding rational (credit worsening / liquidity driven sell-off/company specific forecast misses / general market movement) may lead to selling position or resetting targets
• Capacity • Based on performance of position and fund flows weightings must be constantly
reconsidered
• New issues tend to come to market in a rapid book build method
• Focus is on cheapness of the deal based on: • Structure of bond (coupon / maturity / Puts &
Calls) • credit assumptions to determine bond floor in
conjunction with structure • Equity structure component (strike on call option /
convertibility of bond / equity volatility • Implied volatility of new issues
• Scenario analysis of variable terms • Once a convertible bond is determined as cheap
additional factors considered: • Issue size • Expected investor involvement (long-only / Hedge
Fund) • Underwriter • Grey Market • Rarity value
• Once participation in a new issue has occurred we re evaluate the holding as a new position and determine whether to hold or consider the trade a short term holding
• Participating in the new issue market may often be a short term trade that can generate significant alpha given the tendency of new issues to be brought to market at a slight discount to fair value
• Overall portfolio managed as a single unit • Optimised for gamma exposure • Delta / Omega / Rho exposure viewed in aggregate
Existing Positions
New Positions
Portfolio
New Issues
Investment Process - Methodology
RWC
| RWC 20
RWC Global Convertibles – Delta Breakdown
Source: RWC / Nomura
End of September 2013
Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range
Delta Contribution RangeDelta Exposure vs. Region vs. Region WeightDelta Contribution by Region
Delta Contribution by Sector
0.1
0.4
2.7 3.0
7.4
10.7
8.2
9.7
6.4
3.0
-
2
4
6
8
10
12
10 20 30 40 50 60 70 80 90 100
Cons. Disc. 59%
Finan. 40%
Indust. 57%
IT 60%
Telec. Sv c. 49%
Health Care 70%
Cons. Stap. 39%
Mat. 59%
Energy 46%
Util. 59%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
9.6
7.1
6.1
10.0
1.4
6.7
1.9
3.2
4.1
1.5
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Cons. Disc.
Finan.
Indust.
IT
Telec. Svc.
Health Care
Cons. Stap.
Mat.
Energy
Util. SUM = 51.6
South America 64.8%
North America 59.4%
Japan 56.3%
Europe 52.4%
Af rica 45.5%
Weighted Av erage
Delta 51.6%
Australia 44.8%
Asia 40.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1.8%2.7%
10.3%
8.4%
16.5%
19.6%
12.5% 13.1%
7.6%
3.2%
0%
5%
10%
15%
20%
25%
10 20 30 40 50 60 70 80 90 100
1.4
24.7
5.3
13.0
0.7
0.2
6.4
0.0 5.0 10.0 15.0 20.0 25.0 30.0
South America
North America
Japan
Europe
Africa
Australia
AsiaSUM = 51.6
WeightedAv erage
Delta51.6%
RWC
| RWC 21
UBS Global Focus –Delta Breakdown
Source: RWC / UBS
Delta Contribution by Region
Delta Contribution by Sector Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range
Delta Contribution RangeDelta Exposure vs. Region vs. Region Weight
0.4
0.9
2.3
3.7
6.0
8.7
7.1 7.2
9.4
3.5
-
1
2
3
4
5
6
7
8
9
10
10 20 30 40 50 60 70 80 90 100
Cons. Disc. 51%
Finan. 41%
Indust. 57%
IT 63%
Telec. Sv c. 39%
Health Care 57%
Cons. Stap. 42%
Mat. 42%
Energy 36%
Util. 46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
6.9
7.3
6.7
10.9
1.3
5.8
1.5
3.0
3.9
2.0
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Cons. Disc.
Finan.
Indust.
IT
Telec. Svc.
Health Care
Cons. Stap.
Mat.
Energy
Util. SUM = 49.2
South America
68%North
America 57%
Japan 55.1%
Europe 49.8%
Af rica 43.6%
Weighted Av erage
Delta 49.2%
Asia 31%
Australia 25.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
10.3%
5.7%
9.1%
10.4%
13.4%
15.8%
10.7%9.8%
11.1%
3.6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
10 20 30 40 50 60 70 80 90 100
2.4
19.0
2.9
18.0
0.7
6.1
0.1
0.0 5.0 10.0 15.0 20.0
South America
North America
Japan
Europe
Africa
Asia
AustraliaSUM = 49.2
WeightedAv erage
Delta49.2%
End of September 2013
RWC
| RWC 22
RWC Global Convertible Bond Holdings – Delta Evolution
Source: RWC/ UBS
10
15
20
25
30
35
40
45
50
55
60
Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12
Del
ta (%
)
UBS Global Focus Index (EUR Hedged) Delta RWC Global Convertibles Fund Delta
RWC
| RWC 23
RWC Global Convertibles – Credit Breakdown
Source: RWC/ UBS
End of September 2013
Credit Category Delta ContributionNR Distribution
Credit Categories vs. Delta Exposure vs. Portfolio WeightsRanked Credit Rating Attribution
B+
BB
BB-
B
BB+
B-
BBB-
AA-
BBB+
AAA
BBB
A
A-
BBB 0.51 Av . Credit
Rating Score
-0.40 -0.20 0.00 0.20 0.40 0.60
AAA 31.9%
AA- 49.8%
A 41.9%
A- 53.3%
BBB+ 50.8%
BBB 55.8%
BBB- 51.2%
BB+ 56.5%
BB 55.8%
BB- 70.1%B+ 66.4%
B 50.5%
B- 50.3%
Inv .Grade Delta Av erage 51%
-
Non Inv .Grade Delta Av erage 60.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1.6
0.4
7.6
5.4
10.7
13.2
4.7
8.1
3.2
4.0
0.9
0.5
0 2 4 6 8 10 12 14
AAA
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
0.9
1.6
2.9
5.5
4.1
11.0
7.6
3.5
5.1
3.9
4.3
0.9
0.3
0 2 4 6 8 10 12
AAA
AA-
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
RWC
| RWC 24
RWC Global Convertibles – Interest Rate Sensitivity & Volatility Breakdown
Source: RWC/ UBS
End of September 2013
Interest Rate Sensitivity vs. Credit Rating vs. Portfolio Weight Interest Rate Contribution by Currency
Rho Exposure by Currency and Yield Curve Segment Vega vs. Difference between Implied and Historical Vol.
-
5
10
15
20
25
0 to 1 1 to 2 2 to 3 3 to 4 4 to 5 5 to 6 6 to 10 10 to 14 14 to 18 >18
GBP
OTHER
EUR
JPY
USD
AAA -1.08
AA- -3.41
A -2.38A- -1.04
BBB+ -1.1
BBB -1.55
BBB- -1.65
BB+ -1.64
BB -1.85BB- -1.45
B+ -1.42
B -0.89
B- -1.94
Inv .Grade Rho W. Av erage -1.6
-
Non Inv .Grade Rho W. Av erage -1.58
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
-
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0 EUR USD GBP JPY OTHER
-60%
-40%
-20%
0%
20%
40%
60%
-0.2 0 0.2 0.4 0.6 0.8
Portf olio Vega of 42.6%
His
toric
al -
Impl
ied
Vol
atili
ty Cheap Option
Expensiv e Option
RWC
| RWC 25
RWC Global Convertibles – Portfolio Characteristics
Source: RWC/ UBS
End of September 2013
Number of Holdings 128
Credit Rating BBB
Delta 51.6%
Gamma 0.91 Current Yield 2.1%Yield to Put or Mat. -5.4%
Conversion Premium 19.0%Historical - Implied Vol. -4.0%
Vega 42.5%Omega -1.6%Rho 1.52-
Region
Sector
Credit Rating Implied
Credit Rating (formal rating)
Base Currency
Key Details
1.23.2
6.62.72.6
12.21.71.6
3.83.22.5
0.953.5
4.4
0 10 20 30 40 50 60
AAAAA-
AA-
BBB+BBB
BBB-BB+
BBBB-B+
BNR
Cash
60.8
20.2
4.0
2.2
0.4
0.7
8.6
3.1
0 20 40 60 80
USD
EUR
GBP
HKD
CNY
KRW
JPY
SGD
0.4
24.7
15.9
41.6
9.4
1.5
2.1
4.4
0 10 20 30 40 50
Australia
Europe
Asia
NorthAmerica
Japan
Africa
SouthAmerica
Cash
16.4
17.9
10.7
16.7
2.8
9.6
4.7
5.5
9.0
2.5
4.4
0 5 10 15 20
Cons. Disc.
Finan.
Indust.
IT
Telec. Svc.
Health Care
Cons. Stap.
Mat.
Energy
Util.
Cash
2.83.2
7.010.4
8.019.6
14.96.2
9.25.6
6.51.7
0.54.4
0.0
0 5 10 15 20 25
AAAAA-
AA-
BBB+BBB
BBB-BB+
BBBB-B+
BB-
Cash
% %
%
%
%
-
RWC
| RWC 26
RWC Global Convertibles – Top 10 Holdings
Source: RWC/ UBS
End of September 2013
By Weight By Delta# Name Weight # Name Weight Delta
1 Daimler (Aabar) 4% 16 2.5% 1 Saw ai Pharmceutical 0% 15 0.3% 100.0%2 Siemens 1.65% 19 (WW) 2.5% 2 BioMarin Pharm 1.875% 17 0.4% 98.4%3 Galp Energia (ENI SpA) 0.25% 15 2.4% 3 Covanta Holding Corp 3.25% 14 0.4% 98.0%4 Linear Technology 3% 27 2.1% 4 Ford 4.25% 16 0.3% 95.2%5 Intel 3.25% 39 2.0% 5 Cubist Pharm 2.5% 17 0.5% 94.6%6 Glencore 5% 14 1.9% 6 Asahi Brew ery 0% 28 0.5% 94.5%7 Archer-Daniels 0.875% 14 1.7% 7 Lennar Corp (144A) 2% 20 0.4% 93.4%8 China Unicom 0.75% 15 1.7% 8 Xilinx Inc 2.625% 17 0.4% 90.6%9 Standard Chartered (Temasek) 0% 14 1.6% 9 Novellus Systems 2.625% 41 0.5% 89.8%10 Ares Capital 5.75% 16 1.6% 10 Nokia Oyj 5% 17 0.4% 88.6%
By Yield to Put/Mat By Gamma# Name Weight Yield to Put/Mat # Name Weight Gamma
1 China Precious Metal Resources 7.25% 18 0.1% 12.6% 1 FLEXium Interconnect Inc 0% 16 0.3% 9.17%
2 PennyMac (PennyMac Mtg) (144A) 5.375% 20 0.3% 6.2% 2 Nippon Meat Packers #5 0.7% 2.85%
3 Drillsearch Energy 6% 18 0.4% 4.5% 3 Boston Properties (144A) 3.625% 14 1.3% 2.51%
4 Starw ood Property Trust 4.55% 18 0.8% 3.5% 4 Linear Technology 3% 27 2.1% 2.43%
5 Steinhoff 6.375% 17 0.5% 3.3% 5 Sainsbury 4.25% 14 1.0% 2.35%
6 Redw ood Trust 4.625% 18 0.6% 3.1% 6 LifePoint Hospitals 3.5% 14 0.9% 1.81%
7 Comtech Tel 3% 29 0.4% 2.8% 7 CapitaMall Trust 2.125% 14 0.6% 1.79%
8 Hologic 2% 37 (2010) (B) 0.5% 2.7% 8 Pennon Group Plc 4.625% 14 0.5% 1.73%
9 Ares Capital 5.75% 16 1.6% 2.6% 9 BioMed Realty (144A) 3.75% 30 0.5% 1.70%
10 BioMed Realty (144A) 3.75% 30 0.5% 2.5% 10 PPR (Artemis) 3.25% 16 0.7% 1.66%
Global Convertibles Fund A P P E N D I C E S
RWC
| RWC 28
Repeat of 2008 Unlikely
Source: RWC, Bloomberg, Barclays Capital, Greenwich Survey. June 2013.
Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.
HF (%) Long Only (%)
2007 63 37
2008 64 36
2009 45 55
2010 46 54
2011 41 59
2012 41 59
Europe CB Market - Changing balance between long-only and hedge fund investors
US CB Market - Changing balance between long-only and hedge fund investors
HF (%) Long Only (%)
2007 76 24
2008 76 24
2009 62 38
2010 55 45
2011 52 48
2012 51 49
500
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
29/08/2008 03/09/2008 08/09/2008 13/09/2008 18/09/2008 23/09/2008 28/09/2008
Chart 1: September 2008
MSCI World Total Return Index UBS Global Focus Convertibles IndexS&P 50 Total Return Index Euro Stoxx Total Return Index
-20%
-15%
-10%
-5%
0%
29/07/2011 03/08/2011 08/08/2011 13/08/2011 18/08/2011
Chart 2: End of July 2011 - August 19th 2011
MSCI World Total Return Index UBS Global Focus Convertibles IndexS&P 50 Total Return Index Euro Stoxx Total Return IndexS&P 500 Total Return Index
S&P 500 Total Return Index
RWC
| RWC 29
Why invest in Convertible Bonds? – Ideal for Multi-Asset Portfolios
Source: Bloomberg, UBS, RWC
Why buy convertibles:
• Upside potential of equities and downside protection of bonds
• Provides an asymmetric risk/return profile
• Strong risk adjusted returns
• Low duration asset class
• Lower duration exposure within a fixed income portfolio
• Low correlation with other fixed income instruments
• Increases diversification within a multi-asset portfolio
• Improves efficient frontier
• Provides exposure to volatility through embedded call options
• Long-only investors can benefit from volatility exposure
• Equity exposure without taking all the downside risk
if equities fall
• Puts, resets and takeover ratchets (which can be particularly attractive in this market environment)
Annualised Return & Volatility of Global Equities, Convertibles & Bonds (1996 – June 2013)
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Convertible Bonds Equities Government Bonds
Annualised Return (LHS) Annualised Std. Dev. (LHS) Sharpe Ratio (RHS)
RWC
| RWC 30
Convertible Bonds – Correlation Analysis
Source: RWC, Bloomberg, UBS, MSCI, BoA-ML. Data as at end of 1996 to end of 2012. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.
Asset Class Correlation with
Convertibles Bonds Annualised Volatility
Global Convertible Bonds 1.00 8.89
Global Large-Cap Stocks 0.87 18.18
Global Mid-Cap Stocks 0.88 19.01
Global 7-10yr Corporate Bonds 0.13 5.52
Global 3-5yr Corporate Bonds 0.08 4.99
Global 7-10yr Sovereign Bonds -0.06 11.58
Global 3-5yr Sovereign Bonds -0.04 10.65
US Treasuries/Agencies 7-10yr -0.22 6.25
US Treasuries/Agencies 3-5yr -0.23 3.32
US 3month T-Bills -0.08 0.34
RWC
| RWC 31
New Issuance Trends
Source: UBS, 30 September 2013
• Issuance has recently been picking up on a global basis but is still subdued relative to past levels
• Convertibles are an appealing financing vehicle and issuance increase as economy grows
0
2
4
6
8
10
12
Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13
US$
bn
Monthly Convertible Issuance 2012-13
US Europe Asia Japan Other
0
20
40
60
80
100
120
140
160
180
200
220
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(ann.)
US$
bn
Annual Convertible Issuance 2000-2013
US Europe Asia ex-Japan Japan Other
RWC
| RWC 32
Performance of RWC Global Convertibles Fund
Source: Bloomberg & RWC as at 30 September 2013. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13
Cu
mu
lati
ve R
etu
rn
RWC Global Convertibles Fund - Cumulative Return
RWC Global Convertible Bond Fund UBS Global Focus Hedged (EUR) CB Index
RWC
| RWC 33
Portfolio Construction and Limits – Fund Structure
Portfolio construction and limits
• Diversified by security: 100-135 holdings
• Security concentration limits (initial limit 5%, absolute maximum 10%)
• Reference index: UBS Global Focus CB Index (hedged to base currency)
• Normally fully hedged to base currency (minimum 80% hedged)
• No tracking error limits. Focus on sharpe ratio rather than information ratio
Fund structure
• Luxembourg SICAV – UCITS IV
• Daily priced, daily liquidity
• Retail and institutional share classes (€25,000 and €10m minimums respectively)
• Fees
• A share class 1.5% annual management charge
• B share class 0.8% annual management charge
• Available in fully hedged share classes – USD / EUR / GBP / CHF
• USD / EUR / CHF / GBP Institutional Distribution / GBP share classes – registered for reporting status for 2010
• Registered for sale: UK / Luxembourg / Switzerland / Italy / Germany / France (EUR share classes only)
• Investment Manager: RWC, London
• Custodian / Administrator: Banque Privee Edmond de Rothschild Luxembourg
RWC
| RWC 34
Breakdown of Global Convertible Bond Universe
Source: UBS, September 2013
Market Capitalisation (US$bn)
• Total convertible market cap approximately $459bn
• Total number of issues: 1,924
• Average issue size in the US and Europe larger than other regions
• Improved liquidity in the US and Europe
• Although US market mainly concentrated to certain sector issuance, opportunity still present given larger issue market
• Asia and Japan offer attractive structures and usually more attractive valuations
• Significant proportion of issues not rated. Implied ratings on these bonds are a mixture of sub investment and investment grade bonds
• Investment grade portion of the CB universe has shrunk (about 35%), mainly driven by new high yield issuance and financial downgrades
• Index relative investment may lead to excessive high yield exposure, while similar yield may be achieved through investing in rated convertibles
Credit Ratings Number of Issues
US 206
Europe 115
Asia Ex-Japan 74
Japan 26
Other 38
US 717
Europe 335 Asia Ex-
Japan 501
Japan 83
Other 288 AAA 0.1% AA 0.3%
A 6.7%
BBB 12.4%
BB 8.3%
B 8.9%
CCC 2.5%
D 0.0%
CC 0.1% C 0.1%
Non Rated 60.7%
RWC
| RWC 35
Convertible Bonds – A Snapshot of 2008 & 2009 / 2 Extraordinary Years
Source: Bloomberg, Hedge Fund Research
Sharp Reduction in Equity markets and subsequent recovery
• Markets fell sharply in 2008, contributing to the decline in convertibles
• Markets subsequently recovered some of the loss in 2009, however long only convertibles recovered by a greater extent
Credit significantly wider and subsequent recovery
• Credits widened significantly following the Lehman Bankruptcy in 2008
• Dramatic improvement from the 1st quarter of 2009
Reduced leverage and higher funding costs
• Reduced availability of leverage and increasing funding costs have negatively affected convertible arbitrage funds which rely heavily on leverage. Convertible bonds were sold as positions became too expensive to hold
• Leverage returned but to a much lower degree in 2009, but convertibles recovered regardless mainly driven by long only convertible investors
Short selling restrictions
• The short selling ban adversely affected the valuations of CBs as convertible arbitrageurs became unable to delta-hedge their positions. Over 7,000 securities with a total market cap of almost $3trillion were subject to short sale bans.
• This ban has now been reversed
Redemptions
• Heavy redemptions from the convertible asset class caused a spiral of forced selling in a weak market, further propagating the spiral by forcing prices lower
• Conversely 2009 saw significant inflows into the convertible asset class mainly favouring the long-only strategies, allowing recovery in pricing
RWC
| RWC 36
Davide Basile - Head of RWC Global Convertibles Team
Joined RWC in January 2010
Morgan Stanley Investment Management, 2005 – 2009
• Previously Head of Convertible Bonds and lead portfolio manager
• Responsible for the management of convertible accounts and institutional convertibles
• Responsible for convertible bond management of multi-asset class portfolios
Morgan Stanley International & Co. 2003 – 2005
• Member of the Morgan Stanley Convertible fund management team
• Responsible for portfolio and risk management on convertible bond funds
Morgan Stanley International & Co. 2001 – 2003
• As part of the client strategy group involved in derivative structuring for portfolio protection
Bachelor of Material Science Engineering, Imperial College, London
“The unique selling points of convertible bonds do hold true through a multitude of different cyclical market environments.”
Davide Basile, Portfolio Manager
RWC
| RWC 37
RWC Convertible Bond Funds
As at end September 2013
1 Fund managed by Davide Basile since January 2010. 2 Previously “RWC Cautious Absolute Rate & Currency Fund” launched on 29th December 2006; re-launched and renamed “RWC Core Plus Fund” on 1st October 2013 and managed as stated above. 3 The specific variables are the overall market capitalisation of the asset class and the weighted average delta level of the asset class (given that the Fund targets the 30%-50% delta range). Currently, the market cap of the asset class is about $420bn and the weighted average delta level is at 45%-50% and so we believe that $2.1bn is an appropriate level (or about 50bps of the total cap of the asset class), if the delta of the asset class where to deviate substantially from our desired investment range, then 25bps of the market cap would be more appropriate. 4 Please note that a 3 day redemption period applies for the RWC Asia Convertibles Fund.
RWC Global Convertibles Fund RWC Asia Convertibles Fund RWC Core Plus Fund
Lead Manager Davide Basile Davide Basile Co-managed by Michelle Shi
Davide Basile Co-managed by Lakshman Harendran
Approach
To achieve high risk-adjusted returns from a diversified global portfolio of convertible securities. The Fund combines four main sources of return: top-down macro and thematic positioning, bottom-up equity security selection, careful credit analysis and the blending of the derivative features of convertibles.
To achieve high risk-adjusted returns by investing in a portfolio of convertible bonds issued by Asian corporates. The Fund combines four main sources of return: top-down macro and thematic positioning, bottom-up equity security selection, careful credit analysis and the blending of the derivative features of convertibles.
To generate strong returns with low volatility whilst minimising drawdowns by using the convexity and capital protection that are inherent in convertible bonds, whilst enhancing the profile of returns with complementary asset classes and derivative exposure.
Reference Index UBS Global Focus CB Index (hedged to base currency)
UBS Asian ex Japan Focus CB Index (hedged to base currency)
Benchmark: 1 month LIBOR (currency specific)
Launch Date 29 December 20061 8 June 2011 1 October 20132
AuM USD 1,761.9m USD 37.5m USD 6.7m
Capacity The level of AUM which the Fund’s current trading strategy would begin to be constrained or restricted is a function of the investible universe of convertible bonds.3
The Fund has a capacity of $350m given its current liquidity profile. The capacity of the Fund could be amended due to the size of the investible universe and client liquidity requirements.
The Fund has a relatively large capacity of at least $5bn given its global and multi-asset investment universe.
Fund Structure Luxembourg SICAV – UCITS IV Daily priced, daily liquidity, 1pm CET dealing cut-off4
Retail and institutional share classes (base currency 25,000 and 10,000,000 minimums respectively) Investment Manager: RWC, London Custodian / Administrator: Banque Privee Edmond de Rothschild Luxembourg
Share Classes Available in fully hedged share classes – USD / EUR / CHF / GBP / GBP Institutional Distribution
Available in fully hedged share classes – USD / EUR / GBP
Available in fully hedged share classes – USD / EUR / GBP / CHF
Annual Management Fees
A share class 1.5% B share class 0.8%
A share class 1.8% B share class 0.9%
A share class 1.35% B share class 0.7%
Performance Fees The Fund does not levy a performance fee. 10%; quarterly; only applied to performance over an annualised rate of 8% with a high watermark.
10%; quarterly; only applied to performance over the relevant reference index with a high watermark.
Please contact us if you have any general questions or would like to discuss any of our strategies.
RWC
60 Petty France, London, SW1H 9EU Tel: +44 20 7227 6000 Fax: +44 20 7227 6003 Email: [email protected] Web: www.rwcpartners.com
RWC Contact
| RWC 38
RWC Risk Warnings & Disclaimers
This document contains information relating to RWC Partners Limited, RWC Focus Asset Management Limited and RWC Asset Management LLP (collectively, “RWC”), each of which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”), and services provided by them and may also contain information relating to certain products managed or advised by RWC (“RWC Funds”).
RWC may act as investment manager or adviser, or otherwise provide services, to more than one product pursuing a similar investment strategy or focus to the product detailed in this document. RWC seeks to minimise any conflicts of interest, and endeavours to act at all times in accordance with its legal and regulatory obligations as well as its own policies and codes of conduct.
The services provided by RWC are available only for and this document is directed only at, persons that qualify as Professional Clients or Eligible Counterparties under rules of the FCA. It is not intended for distribution to and should not be relied on by any person who would qualify as a Retail Client.
In addition, although certain sub-funds of RWC Funds SICAV are recognised schemes for the purposes of Section 264 of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”), all other RWC Funds are unregulated collective investment schemes for the purposes the FSMA, the promotion of which either in or from the United Kingdom is restricted by law. Accordingly, this document is issued and approved by RWC Limited for communication by RWC Partners only to, and is directed only at, persons reasonably believed by it to be of a kind to whom it may communicate financial promotions relating to unregulated collective investment schemes by virtue of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, as amended (the “Order”), or the Conduct of Business Rules of the FCA. Such persons include: (i) persons outside the United Kingdom; (ii) persons having professional experience of participating in unregulated collective investment schemes; and (iii) high net worth bodies corporate, partnerships, unincorporated associations, trusts, etc. falling within Article 22 of the Order. Any unregulated collective investment schemes described herein are available only to such persons, and persons of any other description may not rely on the information in this document.
Where this document is received outside the United Kingdom, it is the responsibility of every person reading this document to satisfy himself as to the full observance of the laws of any relevant country, including obtaining any government or other consent which may be required or observing any other formality which needs to be observed in that country. Nothing in this document constitutes an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Interests in RWC Funds are available only in jurisdictions where their promotion and sale are permitted.
No person receiving this document may further distribute it, or copies of it, to any other person or publish any of its contents, in whole or in part, for any purpose.
This document is provided for informational purposes only. The information contained in it is subject to updating, completion, modification and amendment. RWC does not accept any liability (whether direct or indirect) arising from the reliance on or other use of the information contained in it. The information set out in this document is to the reasonable belief of RWC, reliable and accurate at the date hereof, but is subject to change without notice. In producing this document, RWC may have relied on information obtained from third parties and no representation or guarantee is made hereby with respect to the accuracy or completeness of such information. Performance figures and data analysis within this document are shown and calculated net of fees and expenses and represent the reinvestment of dividends and income. Market index information shown within this document is included to show relative market performance for the periods indicated and not as standards of comparison. Such broadly based indices are unmanaged and differ in numerous respects from the portfolio composition of RWC Funds.
This document does not constitute offer or solicitation to anyone in any jurisdiction of or to acquire interests in any RWC Fund. Investment in any RWC Fund should be considered high risk. Past performance is not a reliable indicator of future results and may not be repeated. The value of investments in RWC Funds and the income from them may fall as well as rise and may be subject to sudden and substantial falls. Changes in rates of exchange may cause the value of such investments to fluctuate. An investor may not be able to get back the amount invested and the loss on realisation may be very high and could result in a substantial or complete loss of the investment. In addition, an investor who realises their investment in RWC Funds after a short period may not realise the amount originally invested as a result of charges made on the issue and/or redemption of such investment. The value of such interests for the purposes of purchases may differ from their value for the purpose of redemptions. No representations or warranties of any kind are intended or should be inferred with respect to the economic return from, or the tax consequences of, an investment in RWC Funds. Current tax levels and reliefs may change. Depending on individual circumstances, this may affect investment returns. There is no guarantee that the securities referred to in this document will be held by RWC Funds in the future. Nothing in this document constitutes advice on the merits of buying or selling a particular investment. This document does not constitute investment, legal or tax advice.
This document expresses no views as to the suitability or appropriateness of the RWC Funds or any other investments described herein to the individual circumstances of any recipient. Potential investors in the RWC Funds should refer to the latest relevant Full Prospectus, KIID and latest Annual and Interim Reports for more information.
A United Kingdom investor may not have the right (otherwise provided under the FCA Handbook of Rules and Guidance) to cancel any agreement constituted by acceptance by or on behalf of an RWC Fund of an application for interests in an RWC Fund. In addition, most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in an RWC Fund. Investors in an RWC Fund will not receive compensation under the Financial Services Compensation Scheme in the United Kingdom in the event that the fund is unable or likely to be unable to satisfy claims against it.
This document is issued by RWC Partners Limited, a company registered in England and Wales (No. 03517613) with its registered address at 60 Petty France, London SW1H 9EU. . | RWC 39