EuroFundLux GEDI Equity Dividend Strategy

October 2019

Euromobiliare AM Sgr

EuroFundLux GEDI

Equity Dividend Strategy

2

Euromobiliare AM SGR – asset management capabilities

OUR HISTORY OUR FIGURES

1984Euromobiliare A.M. is established in Milan (Italy),

where it is still based.

2001The company is granted the proxy to manage

mutual funds of Euromobiliare IF Luxembourg

SICAV.

2007The company is pioneer in multi-manager and

sub-advisories in Italy and in Europe.

2018The company is appointed Management

Company by Euromobiliare IF Lux SICAV.

12,5 BN EURThe company manages 7,4 BN EUR in Italy domiciled

mutual funds and 5,1 BN EUR in Lux SICAV funds.

60 PeopleThe company employs 60 people, 49 in Milan and 11 in

Luxembourg.

56 Mutual FundsThe company manages 56 mutual funds across a

variety of investment strategies.

3 ESG FundsThe company established its ESG process in 2018 and

is developing a full range of ESG funds.

3

Euromobiliare AM SGR is part of Credem Group

Top 10 among the major Italian listed bank

groups

A stable shareholding structure

Rating in line with the Italian rating

Asset solidity with liquidity ratios (Basel 3)

higher than the objectives set for 2018

Credit quality with the lowest exposure among

Italian banks listed with NPL and non-performing

loans

Retail business: a business model with focus on

commercial banking, wealth management and

asset management

CET

NPL Ratio

*Italian average value of the so-called «significant institutions» banks (Source: ECB, Supervisory Banking

Statistics H12019 )

*

4

Our European equity team

Massimo Aloi

Portfolio Manager

Mutual funds

Experience in Euromobiliare AM SGR

Past experiences

Education

Azioni Italiane 150 €/mln

Euro Equity 191 €/mln

Joined in 2008 as lead porfolio manager on Italian equities.

1997 – 2008 ABN Amro, lead portfolio manager Italian and

European equity

1993 – 1997 Banca Popolare di Friuladria, equity portfolio manager

Honours Degree in Economics, University of Venice Ca’ Foscari

PIR Funds 152 €/mln

GEDI 149 €/mln

Pier Luca Bonvicini

Portfolio Manager

Mutual funds

Experience in Euromobiliare AM SGR

Past experiences

Education

Azioni Italiane 150 €/mln

Euro Equity 191 €/mln

1996 – 2007 BNL Gestioni, European equity manager

1992 – 1999 Ernst & Young, senior auditor

PIR Funds 152 €/mln

GEDI 149 €/mln

Joined in 2007 as equity portfolio manager with a focus on

derivatives strategies.

Honours Degree in Economics, University of Modena

5

Our track-record on Italian and Euro equities

Azioni Italiane

0

50

100

150

200

250

300

Jan

-09

Ma

y-0

9

Se

p-0

9

Jan

-10

Ma

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Jan

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7

Jan

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8

Se

p-1

8

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-19

Ma

y-1

9

Euromobiliare Azioni Italiane MSCI Italy TR

Euro Equity

80

90

100

110

120

130

140

150

Ap

r-1

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Jun

-14

Au

g-1

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18

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Ap

r-1

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Jun

-19

Euromobiliare IF Euro Equity DJ Euro STOXX 50 TR

Ann. Extra-Perf: 2,6%

Ann. TEV: 1,7%Ann. Extra-Perf: 6,6%

Ann. TEV: 2,4%

Data gross of fees, 31.12.08-31.08.19 Data gross of fees, 30.04.014-31.08.19

6

A new way of thinking of INCOME

Corporate

Bonds

High Dividend

Stocks

GEDI

Interest

Rate RiskLiquidityYield

Equity

Risk

Predictable

Return

LowDecreasing No Good

No HighStable High

High

Low

Stable No No High Good

7

Dividend Yields are compelling vs government and corporate yields

-2

0

2

4

6

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dic-

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mag

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ott-1

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apr-1

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giu-

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nov-

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apr-1

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set-1

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feb-

19

lug-

19

Perc

enta

ge Y

ield

HY

IG

BTP

BUND

European equity dividend

yields are stable amid

collapsing government and

corporate yields

8

-2

0

2

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6

Dec-

09

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-10

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0

Mar

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Apr-1

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Sep-

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Jul-1

9

Perc

enta

ge Y

ield

Axis Title

Europe is traditionally the region where dividend yields are most generous

JAPAN TOPIX

US S&P 500

EUROPE STOXX 600

9

However every source of income has risks associated

European HY

European IG

German Bund

Duration* Volatility**Yield* Rating*Max

Drawdown**

3,72,8 BB- -6,1

5,2 2,00,2 A-

3,1

-2,2

-0,7 10,0 AAA 4,8 -5,9

Italy BTP 1,0 8,7 BBB 8,2 -12,5

European

High Dividend3,9 -

IG

Equivalent13,4 -18,4

* As of 31.08.2019 ** Over 5 years, as of 31.08.2019

10

GEDI: an equity income strategy with managed volatility

Growing and sustainable dividend equity portfolio…

High and sustainable income from dividends complemented by the

possibility to sell call options…

Portfolio volatility and equity beta are managed actively through cash,

index futures and put options

Our long term goal is to achieve a total return consistent with the portfolio

dividend yield maintaining a strong control on portfolio volatility.

11

Income and volatility

Strategy highlights

Target dividend yield 4% from a diversified portfolio of growing and sustainable dividend

stocks, eventually complemented with call option premiums.

Expected volatility 4-7% on an annual basis. The fund has a Mifid Risk Profile 4, MAX

Value at Risk 6,7% on a monthly basis, 99% confidence.

Investment universe Focus on Euro Area large cap stocks.

Average exposure to UK stocks is 25%. No exposure to US and Asian stocks.

No bias towards Italy (average weight 10-15%).

Investment process

The stock selection process is the same as for the Euromobiliare flagship equity funds with

a focus on visibility of cash flows and dividend coverage.

The fund managers do not invest in stocks with dividend yield <2,5%.

The fund managers have no «a priori» sector bias and do not exclude any sector, even if

high dividend sectors are overrepresented (energy, utilities, consumer staples, financials).

Liquidity The equity porfolio is very liquid.

The fund managers only employ index futures and listed options on indices and (at a

lower extent) single stocks.

12

Outline of the investment strategy

RETURN

80-90% growing and sustainable dividend European stocks

selected on a bottom-up basis.

10-20% cash, money market instruments or short dated

government bonds as margin for derivatives.

Core portfolio

Sell OTM Calls

ADDITIONAL INCOME

Covered call strategy, sell opportunistically «out of the money»

call options on indices or single stocks within the equity portfolio in

order to generate additional income from premia.

The fund managers sell call options when the upside on the

underlying stock or index is limited.

Beta management

PROTECTION

Manage beta actively in the 0,20-0,70 range through cash, index

futures and put options.

The fund managers build put protection on a non-systematic

and cost efficient way.

13

Investment philosophy of the equity portfolio

• No benchmark positions

• Focus on European stocks, the region that traditionally exhibits higher dividends

• Focus on dividend sustainability rather than dividend maximization

• Buy undervalued stocks

• Moderate portfolio concentration (40-50 stocks)

• Low turnover (10-20%)

• Sector diversification (MAX single sector 20%)

• Single stock diversification (MAX single stock 5%)

• Active hedging of FX exposure (GBP exposure is currently fully hedged)

14

Stock Example 1: MOWI

0,9

1

1,1

1,2

1,3

1,4

1,5

1,6

1,7

1,8

0

20

40

60

80

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160

1803

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7

31

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18

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31

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/20

19

Cumulative Rel. Perf. Vs STOXX 600 MOWI

Market leader >20% market share of the global farmed

salmon market

Management good track record, focus on operations,

strong biology background

Macro social trend more protein and omega3

demand

Mid term growth increasing demand should support

mid single digit demand growth

Defensive profile geo sales: EU 50%, USA 20%,

ASIA 5%, EM 15%

Geo origin volumes: Norway 60%, Scotland 15%,

Canada 13%, Chile 12%

Valuation P/E ’20 14x vs «food, beverage & tobacco»

>19x

Dvd yield >5% vs «food, beverage & tobacco» =3%

(sustainable <70% CF)

MOWI is a market leader in salmon production. It offers an

attractive dividend yield with a growing business and attractive

valuations vs consumer staples.

15

Stock Example 2: ENEL

Strategic update in November may be a positive

catalyst

Valuation relative to peers the stock is not expensive

P/E ‘20 13x utilities 15x

Sustainable Dvd yield with a floor of 0,28 (19’) 0,32

(20’) 0,34 (21’) at the end of plan 20’

Strong exposure on renewables with an

accelerating growth a stable margin

Low level of leverage 2,4 Net Debt/Ebitda 2019

Strong operating cash flow that cover all of capex

and stable dvd pay out ratio of 70%

Exposure to Latin America: 1/3 Ebitda

ENEL is an Ieading utility company with a compelling and

sustainable dividend yield.

0,8

0,85

0,9

0,95

1

1,05

1,1

1,15

1,2

1,25

1,3

0

20

40

60

80

100

120

1403

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7

31

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31

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30

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19

31

/07

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19

31

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19

Cumulative Rel. Perf. Vs STOXX 600 ENEL

16

Portfolio characteristics: investment rationale and dividend yield

BNP Paribas

Intesa

HSBC

Lloyds

Mediobanca

Endesa

Aviva

BP

Red Electrica

Deutsche Post

Deutsche Tel.

Enav

Koninljke

BASF

Saint Gobain

Sanofi

Unilever

Danone

Terna

Total

Glaxo

Munich RE

Allianz

Amundi

Enel

ERG

Astrazeneca

BAE Systems

Rio Tinto AXA

Nokia

Volkswagen

Reckitt Benckiser

Italgas

MOWI

DVD

>5%

DVD

4-5%

DVD

<4%

Banks

8% of equity ptf

CF generators

54% of equity ptf

Growth stories

27% of equity ptf

Transformation

10% of equity ptf

31%

45%

24%

17

Active management of the net equity exposure

85%88%

86% 86%83%

85%

82% 82% 82% 82% 81% 80% 80% 81% 80% 80%83%

79% 78% 79% 79%82% 82%

38% 39%

35%34%

28%31% 30% 31%

35%33%

38%

31%34% 33%

39% 38%41%

55%

47% 49%47%

36%

45%

750

760

770

780

790

800

810

820

830

840

850

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

Equi

ty In

dex L

evel

Allo

catio

n

GROSS EQUITY EXPOSURE NET EQUITY EXPOSURE DJ STOXX 600

Market Risk AversionOpportunity

Increase Net Exposure

Market Risk TakingCaution

Decrease Net Exposure

The net Equity exposure has been managed within the 30-50% range following a contrarian approach.

18

Due to stock selection equity beta is consistently lower than net exposure

77%

85% 85%83%

86%83% 85% 86%

89% 89% 90%87%

85% 84% 85% 85% 84% 83%81%

84%

56%

67% 67%64%

69%

64%66% 68%

74% 73% 74%70%

67%64%

67% 66% 66%63%

59%

64%

0,66

0,68

0,7

0,72

0,74

0,76

0,78

0,8

0,82

0,84

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

GROSS EXPOSURE BETA EQUIVALENT GROSS EXPOSURE BETA

The ex-ante beta of the stock portfolio is 0,70-0,80. The beta equivalent gross equity

exposure is therefore about 20% lower.

19

Sector diversification is key

Sector allocation is influenced by the dividend nature of the strategy, however the managers carefully

monitor sector exposure keeping the top sector (utilities) <15% and net short positions (IT and

consumer discretionary) <3%. Net positions are also balanced between cyclicals and defensives.

-10,0%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

Consumer Staples Consumer Discretionary Energy

Financials Industrials IT

Real Estate Materials Health Care

Utilities Communications

20

Calibration of the option strategy

TRADING RANGE

No Hedging

Yield enhancement

Sell put 5-10% OTM

Sell call 5-10% OTM

RISING MARKET

Hedging

Buy put 5-10% OTM

Yield Enhancement

Sell call ATM

FALLING MARKET

Close Hedging

Eventually buy call

The fund managers define hedging strategies and yield enhancement through options

according to their market view.

21

Daily monitoring of the option and futures hedging strategy

The managers have continuosly under control geographic and sector biases deriving from the

option and futures hedging strategy.

STOCK PORTFOLIOINDEX

FUTURESOPTIONS NET EXPOSURE

Consumer Staples 12,9% -2,8% -1,5% 8,7%

Consumer Discretionary 1,4% -1,1% -2,7% -2,4%

Energy 8,4% -2,6% -1,8% 3,9%

Financials 18,7% -3,3% -4,8% 10,6%

Industrials 5,7% -1,6% -2,4% 1,8%

IT 1,6% -0,2% -1,6% -0,3%

Real Estate 0,0% -0,2% -0,1% -0,3%

Materials 4,3% -1,8% -1,1% 1,4%

Health Care 9,2% -1,7% -1,2% 6,3%

Utilities 15,2% -0,5% -2,6% 12,1%

Communications 3,9% -0,9% -0,8% 2,2%

NA 0,6% 0,6%

Total 81,9% -16,7% -20,5% 44,7%

STOCK

PORTFOLIO

INDEX

FUTURESOPTIONS

NET

EXPOSURE

IT 15,3% -7,7% 7,6%

FR 18,1% -4,0% 14,1%

GE 12,2% -3,2% 9,0%

NE 2,5% -1,2% 1,3%

SP 5,2% -1,0% 4,2%

IE 0,0% -0,1% -0,1%

BE 0,0% -0,3% -0,3%

CZ 0,0% 0,0%

AS 0,0% 0,0%

FI 1,6% -0,1% 1,5%

SZ 0,0% 0,0%

GB 25,0% -16,8% -2,9% 22,1%

NO 2,2% 2,2%

Total 82,1% -16,8% -20,5% 2,2%Portfolio data as of 12.09.19

Portfolio data as of 12.09.19

22

Management history

Low volatility high dividend equity portfolio

Concentrated portfolio (30 stocks) focused

on stable sectors

European focus with US exposure

Covered call strategy on single stocks in

portfolio

Systematic protection through a Put

Spread Strategy

Portfolio average beta 0,25

Growing and sustainable dividend stocks

Diversified portfolio (40-50 stocks), all

sectors are represented

European focus

Opportunistic sale of call options on

single stocks and indices

Opportunistic beta management through

cash, futures and puts

Variable Beta (0,30-0,70)

November 2015 – June 2018 Since June 2018

23

Full track-record

Source Bloomberg. Data as at 27/09/2019.

Return of share class B (inst)

Cumulative Return vs market index – itd

80,0

85,0

90,0

95,0

100,0

105,0

110,0

115,0

120,0

EUROFUNDLUX GB ENH DV GEDI-B DJ STOXX 600

Management change

NOME TR Volatility MAX DD

EUROFUNDLUX GB ENH DV GEDI-B 4,8% 4,9% -5,4%

DJ STOXX 600 14,1% 11,3% -18,4%

24

Euromobiliare track-record



Cumulative Return vs market index – itd

80,0

85,0

90,0

95,0

100,0

105,0

110,0

EUROFUNDLUX GB ENH DV GEDI-B DJ STOXX 600

NOME TR Volatility MAX DD

EUROFUNDLUX GB ENH DV GEDI-B 2,0% 4,0% -4,0%

DJ STOXX 600 4,9% 11,7% -13,7%

25

Beta and alpha generation



-5,00%

-4,00%

-3,00%

-2,00%

-1,00%

0,00%

1,00%

2,00%

3,00%

4,00%

5,00%

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

25/1

1/2

01

6

25/0

3/2

01

7

25/0

7/2

01

7

25/1

1/2

01

7

25/0

3/2

018

25/0

7/2

01

8

25/1

1/2

01

8

25/0

3/2

01

9

25/0

7/2

01

9

ALPHA ROLLING 52 WEEK

BETA ROLLING 52 WEEK

Management change

26

Max drawdown



-18,00%

-16,00%

-14,00%

-12,00%

-10,00%

-8,00%

-6,00%

-4,00%

-2,00%

0,00%

27

/11

/20

15

27

/01

/20

16

27/0

3/2

016

27

/05

/20

16

27

/07

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16

27

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16

27

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27

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27

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7/2

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27

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27

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18

27

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27

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27

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19

27

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19

27

/07

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19

27

/09

/20

19

EUROMOBILIARE TR FLEX 5

DJ STOXX 600

Management change

27

Plot of monthly returns ordered by DJ Stoxx 600 returns



-8,0%

-6,0%

-4,0%

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

DJ STOXX 600

EUROMOBILIARE TR FLEX 5

Capital

protection in

falling

markets

Outperform in

sideways

markets

Lag in

Momentum

markets

28

Asset allocation incl. derivatives

Dati al lordo dell’esposizione in strumenti derivati

Elaborazione a cura dell’ufficio MPI

Total Allocation(Net of derivatives)

Gross of Derivatives Allocation

Dividend yield 3,7%Equity derivatives -37,4%Compelling level

Net of

derivatives

Data as of 30.09.2019

75,8%

24,2%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0%

European Equities

Money Market

38,4%

24,2%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0%

European Equities

Money Market

29

Stock portfolio

Geographic Allocation

Dati al lordo dell’esposizione in strumenti derivati


Sector Allocation Data as of 30.09.2019

12,6%

15,3%

15,5%

4,9%

1,4%

1,5%

24,5%

2,1%

Germany

France

Italy

Spain

Netherlands

Finland

UK

Norway

16,6%

4,4%

11,1%

5,7%

3,9%

15,2%

1,6%

1,5%

10,7%

6,4%

0,6%

Financials

Materials

Consumer Staples

Industrials

Telecom

Utilities

Consumer Discretionary

IT

Health Care

Energy

NA

30

EuroFundLux GEDI: stock portfolio 2/2

Top 10 holdings


Data as of 30.09.2019

ISIN STOCK WEIGHT

GB0009252882 GLAXOSMITHKLINE PLC 3,9%

GB0009895292 ASTRAZENECA PLC 3,9%

GB00B10RZP78 UNILEVER PLC 3,7%

IT0003128367 ENEL SPA 3,7%

FR0000120271 TOTAL SA 3,2%

GB0007980591 BP PLC 3,1%

IT0003242622 TERNA SPA 3,1%

FR0000120578 SANOFI 2,9%

DE0008404005 ALLIANZ SE-REG 2,9%

FR0000120644 DANONE 2,7%

31

Name EurofundLux Global Enhanced Dividend

Vehicle Luxembourg SICAV

Risk Profile (KIID) 4

ISIN

LU0284573598 (A – retail acc)

LU1315880978 (D – retail dist)

LU0284573911 (B - institutional acc)

LU1315881273 (P – private acc)

LU1600976390 (Q – private dist)

Asset manager Euromobiliare AM SGR

Management fee

max 2,20% p.a. (A and D share class)

max 1,20% p.a. (P and Q class)

0,80% p.a. (B - institutional)

Asset under Management EUR M

EuroFundLux Global Enhanced Dividend - GEDI: factsheet

149

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Disclaimer

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