Chiron Investment Management, · PDF fileAIM TRUE February 2018 For Investment Professional...
Transcript of Chiron Investment Management, · PDF fileAIM TRUE February 2018 For Investment Professional...
Chiron Investment Management
Quantamental Investment Process
1Q 2018
For Investment Professional Use Only 1
To determine if the Fund is an appropriate investment for you, carefully consider the
fund investment objectives, risk, and charges and expenses. This and other information
can be found in the fund (full and summary) prospectus which can be obtained by calling
1-877-9-CHIRON or by visiting www.chironfunds.com. Please read the prospectus
carefully before investing.
For Investment Professional Use Only 2
Executive Summary – Chiron
Ryan Caldwell Co-Founder
Chief Investment Officer
Enrico Gaglioti Co-Founder
Chief Executive Officer
• Founded in 2015 by Ryan Caldwell (formerly at Waddell & Reed,
co-managing $45 billion in AUM) and Enrico Gaglioti (former
partner at Goldman Sachs).
• Our firm is driven by innovative thinkers and world-class
investment experts. We combine distinguished investment talent
with time-tested business leadership, focused on institutional-
quality oversight and controls.
• Our unique “Quantamental” approach is an integrated combination
of rigorous Quantitative Analytics and deep Fundamental
Research.
• 100% Partner and Employee Owned. We treat our clients as
partners and engage with our investors in a way that is direct and
transparent. Our only business is managing money on behalf of
our clients.
• Our actively managed approach to investment management is:
Flexible, Disciplined, and Transparent.
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2015 2016 2017
Executive Summary – Chiron History
July, 2015: Chiron IM established
Aug, 2015: SEC Registered
Nov 30, 2015: CCAPX Fund Launch $25mm
Sep, 2016: US Mutual Fund Approved on 3 Major Wires
Dec, 2016: CCAPX Fund AuM: 350mm
Mar, 2017: UCITS Launch AuM: 100mm
Aug, 2017: CCAPX Fund AuM: 1.0B
Oct, 2017: SMid Equity Fund Launch
Dec, 2017: UCITS Fund AuM: 475mm
2018
Dec, 2017: CCAPX Fund AuM: 1.8B
Feb 2018: Chiron Firm AuM: 2.4B
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Jan, 2016 CCAPX available on all RIA custodian platforms
Chiron’s management team has over 175 years of financial services experience - with
proven track records and success as investors, risk managers and business builders.
Scott Prince Vice Chairman Former Partner, Goldman Sachs
Co-Founder, Eton Park Capital Management
32 Years of Experience
Eton Park MS
Enrico Gaglioti Co-Founder and CEO Former Partner, Goldman Sachs
23 Years of Experience
Goldman Sachs
Ryan Caldwell Co-Founder and CIO Former Senior Vice President, Waddell & Reed
Former Co-Portfolio Manager, Ivy Asset Strategy Fund
20 Years of Experience
Waddell & Reed / Ivy Funds
Kristen Richards Chief Compliance Officer Former SVP & Chief Compliance Officer, Waddell & Reed
22 Years of Experience
Waddell & Reed / Ivy Funds
JP Armenio Chief Administrative Officer Former Managing Director, Morgan Stanley
Former CEO, Mizuho Securities Asia
24 Years of Experience
Morgan Stanley Mizuho
SkyBridge
Kirsten Pickens Head of Distribution Former Head of National Accounts & Retirement Sales,
Waddell & Reed
22 Years of Experience
Waddell & Reed / Ivy Funds ING
Leadership
Marc Spilker Chairman Former Co-Head, Goldman Sachs Investment Management, Former President, Apollo Global Management 31 Years of Experience
Apollo Goldman Sachs
Shailendra Panchal Chief Risk Officer Former VP / Securities Division Risk, Goldman Sachs
17 Years of Experience
Goldman Sachs
Goldman Sachs
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Organizational Structure & Governance
Chief Admin Officer
JP
Armenio
Chief Compliance
Officer
Kristen Richards
Chief Risk
Officer
Shailendra Panchal
Head of
Distribution
Kirsten Pickens
Head of Fundamental
Research
Grant Sarris
Head of Quantitative Research
Brian Cho
Enrico Gaglioti, CEO Ryan Caldwell, CIO
Head of
Trading
Peter Bianco
Non-Investment Business Operations
Investment & Portfolio Management
The Chiron Team has great depth and breadth of industry experience, from an array of established institutions.
The investment process and business operations are closely coordinated, but managed separately by design.
1 Finance 1 Analyst 9 Sales 2 Research 2 Analysts 1 Trader
Operating Committee
Chairs: Enrico Gaglioti, CEO Ryan Caldwell, CIO Compliance Operations Distribution Technology Trading Finance Human Resources Administration Media / PR Firm Strategy
Investment Committee
Chairs: Enrico Gaglioti, CEO Ryan Caldwell, CIO Investment Views Asset Allocation Portfolio Positioning Performance Investment Process Opportunities Trading Issues Research Analytics / Data
Risk Committee
Chairs: Marc Spilker, Chairman Scott Prince, Vice-Chairman Portfolio Level Security Level Counterparty Exposure Market Risk Sector Concentration Liquidity Region Concentration Cash Flow Technology Risk Operation Risk
1 Prod Dev Total Team: 26
For Investment Professional Use Only 6
Ryan Caldwell Chief Investment Officer
• 2000 – 2014: Ryan helped lead decision-
making and served as Co-Portfolio Manager
for 40-Act Funds
• 2005 – 2014: Co-Managed Waddell & Reed’s
flagship Ivy Asset Strategy Fund (WASAX),
Waddell & Reed Asset Strategy Fund
(UNASX), Ivy Funds VIP; $45B+ at 2014
peak. (2005 – 2007, Assistant PM)
• 2009: Named to Institutional Investors list of
“Rising Star of Mutual Funds”
• 2007: Was a finalist for “Morningstar Manager
of the Year”
Grant Sarris Portfolio Manager:
Fundamental Research
• 2003 – 2013: Grant served as a Portfolio
Manager at Kornitzer Capital Management,
where he co-managed a number of equity
mutual funds, including the Buffalo Small
Cap Fund, Buffalo Mid Cap Fund, and
Buffalo Emerging Opportunities Fund.
• 1991 – 2003: Grant was with Waddell &
Reed, and served as PM on multiple Small
Cap funds.
• 2013 – 2015: Grant managed his personal
portfolio
Brian Cho Portfolio Manager:
Quantitative Strategies
• 2002 – 2015: Brian co-founded Empirical
Research Partners LLC, an independent
research boutique. As Partner and Director
of Quantitative Research, he managed all
quantitative research efforts for the firm.
• Achieved the highest two rankings in the
Institutional Investor All-American Research
Team each year from 2003 through 2014 in
both the Portfolio Strategy and Quantitative
Research categories.
• 1993 – 2002: Brian was with SC Bernstein,
where he was a Principal and served as
Senior Analyst.
Grant Sarris: Waddell & Reed
Ryan Caldwell: Waddell & Reed
Brian Cho: Empirical Research Partners
2000 2003 2005
~$200mm
AuM
$45B+
AuM
Investment Team
2014
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For Investment Professional Use Only 14
• Equity
Developed Market
Emerging Market
• Fixed Income
Developed Market
Emerging Market
Government
Municipal
Corporate
High Yield
• Cash
• Commodities
• Currencies
• Stocks
• Bonds
• Futures
• ETFs
Portfolio Construction & Guardrails
Our investment process is an actively managed framework that allows us to quantify fundamental factors, systematize our approach, and apply judgment to asset allocation and security selection.
The fund may use derivatives contracts both to seek returns, or more frequently to protect the value of its assets against adverse
movement across markets.
Asset Category % Range
Equities 25-80%
Fixed Income 10-50%
Emerging Markets 0-25%
Cash 0-50%
Market Capitalization
Large Cap ($15B+)
Mid Cap ($2.5B - $15B)
Small Cap (<$2.5B)
Capital Structure
Senior Debt
Junior Debt
Mezzanine / High Yield
Convertible Bonds
Preferred Equity
Equity
Guardrails Asset Classes Instruments
• Listed Options
• Structured Notes
• OTCs
Swaps
Forwards
Credit Default
Protection
Hedge
For Investment Professional Use Only 8
In a “Core and Satellite” portfolio, the strategy can be implemented in different ways. With its flexible style and liquid profile, it can fit as an allocation in Tactical, Satellite, or Core.
As a highly dynamic strategy, it can fit in these various ways as part of an overall risk or active budget.
The investment process described herein is included as a general illustration of
the process the investment team follows and may change over time.
Chiron Capital Allocation Fund
C
Portfolio Positioning
• Global
• Multi Asset Class
• Cross Market Cap
• All Sector
• Up / Down Cap
Structure
• Style Agnostic
Tactical
Liquid
Opportunistic
Dynamic
Satellite
Flexible
Active, Alpha-Seeking
Liquid Alternative
Core
Multi Asset
Globally Diverse
Full Cycle
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Deep Market
& Company Research
1. Gather / Process Data 2. Analyze Data 3.Interpret Data & Implement
Quantitative Analytics Fundamental Research
Proprietary Quantitative Models
At Chiron, we have a unique investment process that combines rigorous quantitative modeling with deep fundamental research. Our quantitative work helps guide our fundamental research team in both asset allocation and security selection, across market capitalization, capital structure, and investing styles.
Data Sets
45+ Global Markets
Factor Framework
Quantitative Fundamental
The investment process described herein is included as a general illustration of the
process the investment team follows and may change over time.
Quantamental Investment Process
Quantamental Investing
4000+ Companies ~100
Companies
Portfolio
Domain Dispersion
Dispute Core
Top Down
~400 Companies
For Investment Professional Use Only
Bottom Up
10
Market Reaction Valuation
Capital Spending
+
Share Buy-backs
Dividends
Earnings Quality
+
+
Revenues
+
Free Cash Flow
Earnings
+
+
ROE, ROA
Price Trend
+
Turnover
Momentum
+
+
Volatility
Cash Flow Yield
+
Dividend Yield
Earnings Yield
+
+
Price Multiple
Total: 30 Factors Total: 16 Factors Total: 13 Factors
Super Factors
75 Individual Factors
Total: 16 Factors
Our Factor Framework takes in and processes large quantities of data to feed into our proprietary quantitative models. Four Super Factor categories comprise a wide array of individual factors.
The investment process described
herein is included as a general
illustration of the process the
investment team follows and may
change over time.
Price Multiple
1. Gather / Process Data 2. Analyze Data 3.Interpret Data & Implement
Quantitative Analytics Fundamental Research
1. Process Data – Factor Framework
4000+ Companies
45+ Global Markets
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Capital Deployment
Our Domain and Dispersion models represent the initial steps in our top down asset allocation – in terms of asset class mix as well as regional and sector focus. They serve to create the “wireframe” of the portfolio.
2. Analyze Data – Domain & Dispersion
Domain Model
The Domain Model measures on a global and regional basis
what style is being rewarded: Value or Growth. It is an anchor
point for our top-down allocation and allows our strategy to
adapt to different phases of the market.
Top Down – Asset Allocation
Dispersion Model
The Dispersion Model measures “cheapness” or “richness” of
securities within industry sectors and geographical regions and
directs us to where the growth and value opportunities are.
1. Gather / Process Data 2. Analyze Data 3.Interpret Data & Implement
Quantitative Analytics Fundamental Research
Dispersion
Yield Curve
Market Dynamics
Management Behavior &
Investor Reaction
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Our Core and Dispute models then deliver the bottom up analytics that drive security selection. Their granular company level insights identify the candidates that will populate the key components of the portfolio.
2. Analyze Data – Core & Dispute
Core Model
The Core Model ranks companies by potential for outperformance and
is a key driver of alpha. Used for both equity and credit selection – we
take the highest ranking decile and apply deep-dive fundamental
research to find the highest conviction ideas.
Bottom Up – Security Selection
Dispute Model
The Dispute Model identifies characteristics that commonly lead to
underperformance, such as high valuation, high cash burn, low
profitability, and poor momentum. We not only use this model to
identify companies to avoid, but to construct our proprietary hedge.
1. Gather / Process Data 2. Analyze Data 3.Interpret Data & Implement
Quantitative Analytics Fundamental Research
Underperformance
Characteristics
Earnings Quality
Capital Deployment
Valuation
Market Reaction
Earnings Quality
Capital Deployment
Valuation
Market Reaction
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Outperformance
Characteristics
Unattractive Companies
Portfolio
The final step of our Quantamental process takes the outputs from our proprietary quantitative framework, which represent rigorous, disciplined, and non-emotional guideposts for our Fundamental Research team. Combined with their human judgment and intellectual interpretation, the process culminates in portfolio construction, implementation, and results.
3. Interpret Data & Implement
1. Gather / Process Data 2. Analyze Data 3.Interpret Data & Implement
Quantitative Analytics Fundamental Research
The investment process described herein is included as a general illustration of the
process the investment team follows and may change over time.
Fundamental Research
Capital Structure
Position Sizing
Instrument Selection
Portfolio Implementation
~400 Companies
~100 Companies
Sell-Side Research
Corporate Access
Management Meetings / Calls
Analyst Meetings
Earnings Reports
Financial Modeling
Dispute Model
Attractive Companies
Core Model
Target Markets
Dispersion Model
Target Sectors
Style
Domain Model
Asset Mix
For Investment Professional Use Only 14
0
1
2
3
4
5
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Our proprietary Chiron Market Domain Indicator is a measure of the market’s condition, which we observe on both a global and
regional basis. It defines the style being rewarded (Value or Growth), and in essence tells us “what game the market is playing”.
This “big picture” understanding of the market creates a valuable Anchor Point for top-down allocation decisions – which is key to our
style-agnostic and full market cycle approach. This foundation allows our strategy to adapt to different phases of the market, and in
essence tells us “how to play the game”.
5 - Full Growth
4 - Growth
3 - Neutral
2 -Value
1 - Deep Value
Chiron Domain – Anchor Point
For Investment Professional Use Only
Growth
15
•
•
•
•
•
•
•
•
•
•
Chiron Domain – Asset Allocation Framework
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(3)
(2)
(1)
0
1
2
3
4
5
6
7
8
U.S. Canada U.K. ContinentalEurope
Japan Asia(ex-Japan)
LatinAmerica
China SouthAsia
Korea& Taiwan
EMEA World
Sta
ndard
Devia
tions
Range Current Level Year Ago
Source: Chiron Investment Management, LLC. 1Emerging markets regional data since 1992.
Developed Markets Emerging Markets
The Chiron Dispersion Indicator measures how we believe investors are valuing equities. When Dispersion is
wide (above 1 standard deviation), we believe investors are valuing the most expensive stocks very differently
than the market average. When Dispersion is narrow (0 to -1 standard deviations), investors are valuing all
equities relatively the same. Similar to bond spreads, when the indicator is narrow and rising, distress is building.
When the indicator is wide and falling, valuations are narrowing and distress is falling.
Chiron Dispersion Model – By Region
For Investment Professional Use Only 17
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Dispute Basket Equity Universe (Developed Market*)
*The Chiron Equity Universe for the Developed Market consists of Large and Mid-Cap Developed Market Stocks in all developed countries within MSCI All Country World Index. Dispute Basket refers to the worst 10% of the Chiron Dispute Model
Growth of Dollar
Time
Period
Equity
Universe
Dispute
Basket
Spread
(Difference)
Spread
Annualized
YTD -2.1% -1.0% 1.1% 1.1%
1 Year 11.4% 10.5% -0.9% -0.9%
5 Years 74.8% 25.5% -49.3% -7.2%
10 Years 121.8% 5.4% -116.4% -7.8%
20 Years 432.8% -67.7% -500.4% -14.2%
Our Dispute Model measures likelihood of failure (or underperformance). Historically, over short and long periods,
its negative performance versus our broader universe is both meaningful and consistent.
Equity Universe 10 Yrs: 121.8%
Spread: 10 Yrs: -116.4% Annual: -7.8%
Dispute 10 Yrs: 5.4%
Dispute Model – Spotting Underperformers
The investment process described herein is included as a general illustration of the process the investment team follows and may change over time. The statements herein are based on the beliefs and
assumptions of our portfolio management team and on the information currently available to our team at the time of such statements. Although we believe that the expectations reflected in these
statements are reasonable, we can give no assurance that these expectations will prove to be correct. The information contained in this presentation does not, in any way, constitute investment advice.
Opinions, forecasts, assumptions, estimates and commentary or other discussions of potential future events and their impact on any investment strategy are based solely on the opinion of Chiron and
may change without notice at any time. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher.
The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.
For Investment Professional Use Only
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Marc Spilker, Chairman • Former President of Apollo Global Management and a member of the firm’s Executive
Committee (December 2010 to March 2014)
• 20-year career at Goldman Sachs, serving as co-head of Investment Management Division
(IMD) and a member of firm-wide Management and Risk Committees.
• Previously served on the Investment Advisory Committee at Google, was a member of the
American Stock Exchange, and on the boards of the Chicago Mercantile Exchange, the
Philadelphia Stock Exchange, the Stone and Bridge Street Funds, BrokerTec, and
Bondbook, LLC.
Kirsten Pickens, Partner, Head of Distribution • Former Senior Vice President and Head of National Accounts and Retirement Sales for Ivy
Funds Distributor, Inc., a subsidiary of Waddell & Reed, having joined in 2003.
• Awarded “Rising Star of Mutual Funds” by Institutional Investor (2010).
• Previously VP, National Account Director for the Independent/Regional Channel with ING
Funds and at Seligman funds in various distribution roles.
• Member of the Sales Force Marketing Committee of the Investment Company Institute, and a
Member of Money Management Institute. She holds her Series 24, Series 7, Series 6, and
Series 63 FINRA securities licenses.
Scott Prince, Vice Chairman • Vice Chairman of Chiron Investment Management, LLC and co-founder of GPS
Investment Partners.
• Former Co-Managing Partner of Skybridge Capital from 2007 to 2012
• Partner at Eton Park Capital Management from launch in 2004 until 2007, heading global
trading and the fund’s derivatives business.
• Co-head of Equities Trading and Global Equity Derivatives at Goldman Sachs through
2004, named a Goldman Sachs Partner in 1998, and served on the firm's Finance
Committee, Equity Division's Risk and Operating Committees
Ryan Caldwell, Co-Founder, Chief Investment Officer • Partner and Chief Investment Officer of Chiron Investment Management, LLC.
• Lead portfolio management decision-making at Waddell & Reed for a suite of funds
totaling $40 billion, including Ivy Asset Strategy, W&R Asset Strategy, and Ivy Funds/VIP
(2000-2014).
• Named to the Institutional Investors list of ‘Rising Stars of Mutual Funds’ (2009) and was
a finalist for Morningstar Manager of the Year (2007). Board adviser to Haymon
Boxing/Premier Boxing Champions and has previously a Director to Delta Topco Group
(Formula One), and board adviser to Legendary Entertainment.
Enrico Gaglioti, Co-Founder, Chief Executive Officer • Former Partner at Goldman Sachs & Co serving as the Global Head of Equity Sales and as
Advisory Director for the Investment Management Division.
• Started at Goldman Sachs in 1998, was named Managing Director in 2001, and became
Partner in 2002. He served on the Firm-wide Business Standards Committee, Securities
Division Executive and Operating Committees, and the Hedge Fund/Private Equity Screening
Committee.
JP Armenio, Chief Administrative Officer • Led Tantalus Capital’s activities as a venture investor, advisor, and co-founder of several
early stage technology companies.
• Former Chairman and Chief Executive Officer of Mizuho Securities Asia Ltd. (2012).
• Served as Managing Director and Global Head of Structured Products for Morgan Stanley
with the Global Wealth Management Division. Formerly Head of Structured Products
Distribution for the Institutional Securities Division and sat on the Promotion and New
Products Committees for the Equity Division.
• Mr. Armenio has an MBA from The Wharton School in Finance, and a BA in Economics and
International Relations from Claremont McKenna College.
Kristen Richards, Managing Director, Chief Compliance Officer • 22 years of experience in the mutual fund/'40 Act industry, most recently as Senior Vice
President, Associate General Counsel and Chief Compliance Officer for Waddell & Reed
Investment Management Company/Ivy Investment Management Company. At Waddell &
Reed/Ivy, she was instrumental in building the Investment Management Compliance
Department. She served as Secretary to the Waddell/Ivy registered companies and was
instrumental in the establishment of the firm’s UCITS fund channel, Ivy Global Investors.
• Ms. Richards earned her law degree from the University of Kansas in 1995 and maintains
her Series 7 and Series 24 FINRA securities licenses.
Shailendra Panchal, Chief Risk Officer • Previously spent 15 years at Goldman, Sachs & Co., including the last 10 years as a
senior risk manager in the Global Securities Services business of the firm.
• Brings extensive experience in risk oversight across multi-asset class portfolios
encompassing a wide variety of strategies.
• Mr. Panchal holds an MBA from the University of Maryland and a Bachelor of Chemical
Engineering (with the highest rank among his graduating class) from the Gujarat
University, India.
Management Biographies
For Investment Professional Use Only 19
Disclosures
The Chiron Capital Allocation Fund is distributed by SEI Investments Distribution Co. (SIDCo). SIDCo is not affiliated with Chiron Investment Management Company.
Investing involves risk, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. High yield bonds involve greater risks of
default or downgrade and are more volatile than investment grade securities, due to the speculative nature of their investments. The Fund uses investment techniques
that are different from the risks ordinarily associated with equity investments. Such techniques and strategies include REIT risk, derivative risks, foreign investment
and emerging markets risks, which may increase volatility and may increase costs and lower performance.
Chiron Investment Management, LLC is a registered investment adviser.
Chiron Investment Management is an active manager that uses a variety of analytical tools and market “signposts” that inform its investment decision making. The
materials contained herein are provided for illustrative purposes only and are not intended to constitute “investment advice” or an investment recommendation within
the meaning of the federal, state, or local securities laws. These charts contain historical market data only and do not reflect actions that were or might have been
taken by the Chiron Investment Management team if faced with similar data inputs. You are solely responsible for evaluating and acting upon the information
contained in these materials if you choose to act on them without the involvement Chiron Investment Management as your adviser. Chiron Investment Management
will not be liable for any direct or incidental damages or losses resulting from applying any of the information obtained from these materials or from any other source
mentioned. Chiron Investment Management does not render any legal, tax or accounting advice and the educational and market information contained in this material
should not be construed as such. Please consult with a qualified professional for advice in these disciplines.
The variables selected for use in the computations shown are for illustrative and educational purposes only and were selected in the sole opinion of Chiron Investment
Management, LLC and may change without notice at any time.
Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Forward-looking statements are not guarantees of future
results. They involve risks, uncertainties and assumptions, there can be no assurance that actual results will not differ materially from expectations. Past performance
is no guarantee of future results. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission
from Chiron Investment Management, LLC.
© 2015-2018 Chiron Investment Management, LLC. All rights reserved.
Not a Deposit Not FDIC Insured May Lose Value No Bank Guarantee Not Insured By Any Federal
For Investment Professional Use Only 20
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