Ci062624 strat bond presentation - citywire 25 april electronic version
-
Upload
citywirewebsite -
Category
Economy & Finance
-
view
381 -
download
4
description
Transcript of Ci062624 strat bond presentation - citywire 25 april electronic version
1
PERFORMANCE OVERVIEWCONSISTENT RETURNS DEMONSTRATED
Aviva Investors Strategic Bond
* *Since Inception: 22nd September 2008. Source: Date as of End March 2013: Retail Share Class 1 Inc.,Total Return, net income reinvested, net of management fees. Past performance is not a guide to the future
Aviva Investors Strategic Bond Fund
66.52% Fund vs. 38.89% Peer Group (since inception*)
-20
-10
0
10
20
30
40
50
60
70
80
Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13
Chris Higham, CFA
This document is for investment professionals only. It is not to be viewed by or used with retail clients.
AVIVA INVESTORS STRATEGIC BOND FUND
DISPELLING MYTHS & IDENTIFYING OPPORTUNITIES
Citywire Wealth Manager Retreat, April 2013
James Vokins, CFA
3
MYTH 1: THE GREAT ROTATIONDEMOGRAPHICS
Aviva Investors Strategic Bond
Demographics continue to support bonds
Population in the age group 60+ (%)
0
5
10
15
20
25
30
35
1950 1975 2000 2025 2050
World More developed regions Less developed regions
Source: Deutsche Bank, October 2012Any future returns and opinions expressed are based on the internal forecasts of Aviva Investors and should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors.
4
MYTH 1: THE GREAT ROTATIONDEMAND
Aviva Investors Strategic Bond
Money still out of cash
Source: Deutsche Bank Investor Positioning and Flows as at 31 March 2013. Past performance is not a guide to the future.
5
MYTH 2: FEAR OF INTEREST RATES RISING
Aviva Investors Strategic Bond
Source: ONS, OBR as at 31 March 2013Any future returns and opinions expressed are based on the internal forecasts of Aviva Investors and should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors.
Budget deficit still high
Public Sector Net Borrowing (PSNB) fan chart
6
MYTH 2: FEAR OF INTEREST RATES RISING
Aviva Investors Strategic Bond
Source: RBS, Bloomberg. Any future returns and opinions expressed are based on the internal forecasts of Aviva Investors and should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors.
Market implied rates lower for even longer
7
MYTH 3: CORE INFLATION
Aviva Investors Strategic Bond
Inflation is only a UK concern
-2
-1
0
1
2
3
4
5
6
Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Ha
rmo
nis
ed
Ind
ex o
f C
on
su
me
r p
rice
s (%
)
US Inflation UK Inflation EU Inflation
Source: Bloomberg as at 31 March 2013. Past performance is not a guide to the future.
8
UK inflation protection is expensive
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2006 2007 2008 2009 2010 2011 2012
UK US Germany Italy
MYTH 3: CORE INFLATION
Aviva Investors Strategic Bond
Source: Aviva Investors as at March 2013. Past performance is not a guide to the future.
9
MYTH 4: VALUATION – ARE CORPORATE BONDS EXPENSIVE?
Aviva Investors Strategic Bond
Government bonds are expensive
0%
10%
20%
30%
40%
50%
60%
0
1
2
3
4
5
6
7
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
iBoxx Sterling Non-Gilts iBoxx Sterling Gilts % Yield Spread (RHS)
Source: Aviva Investors as at March 2013. Past performance is not a guide to the future.
Yie
ld (
%)
% Y
ield
Spre
ad
10
MYTH 4: VALUATION – ARE CORPORATE BONDS EXPENSIVE?
Aviva Investors Strategic Bond
Note: Implied defaults calculated using 35 % recovery rate. Historic defaults calculated using Moody’s default data since 1970 and current index ratings composition. Source: Morgan Stanley Research, Bloomberg, Moody’s as at31 March 2013. Past performance is not a guide to the future.
Enough compensation for defaults
11
MYTH 4: VALUATION – ARE CORPORATE BONDS EXPENSIVE?
Aviva Investors Strategic Bond
Source: Moody’s, based on trailing twelve-month speculative-grade corporate default rate forecasts . Past performance is not a guide to the future.
Defaults expected to remain at low levels
Global Speculative-Grade Default Rates (Actual and Forecast)
12
MYTH 4: VALUATION – UK VS. US AND EUROPE
Aviva Investors Strategic Bond
Source: BofA Merrill Lynch indices. as at 31 March 2013. Past performance is not a guide to the future.
GBP much better value than Euro
13
MYTH 5: POSITIVE CREDIT SPREADS?EUROPEAN PERIPHERY
Aviva Investors Strategic Bond
Source: Bloomberg as at 31 March 2013. Past performance is not a guide to the future.
Negative credit spreads in Europe
-150
-100
-50
0
50
100
150
200
250
0
1
2
3
4
5
6
7
8
9
Ma
r 08
Sep
08
Ma
r 09
Sep
09
Ma
r 10
Sep
10
Ma
r 11
Sep
11
Ma
r 12
Sep
12
Telefonica 2033 Spain 2032 Spread
Yie
ld (
%)
Spre
ad (b
ps)
14
MYTH 5: POSITIVE CREDIT SPREADS?EMERGING MARKETS
Aviva Investors Strategic Bond
Source: JPMorgan, Indices: CEMBI BROAD, EMBIGLOBAL astat 31 December 2012. Past performance is not a guide to the future.
A lesson from Emerging Markets?
0
2
4
6
8
10
12
31-Dec-01 31-Dec-03 31-Dec-05 31-Dec-07 31-Dec-09 31-Dec-11
Yie
ld (
%)
EM Corporates EM Sovereign
15
MYTH 6: LIQUIDITY IN CREDIT MARKETS
Aviva Investors Strategic Bond
Source: Morgan Stanley Research, Bloomberg, Trace as at 31 March 2013. Past performance is not a guide to the future.
Liquidity in other markets?
16
MYTH 6: LIQUIDITY IN CREDIT MARKETS
Aviva Investors Strategic Bond
Source: Morgan Stanley Research, Bloomberg, Federal Reserve Bank of New York, Markit iBoxx, as at 31 March 2013. Past performance is not a guide to the future.
Liquidity unchanged for 4 years
17
MYTH 7: FUNDS VS. RETAIL CORPORATE BONDS
Aviva Investors Strategic Bond
Inefficiency in Retail corporate bond market
Source: Bloomberg as at 31 March 2013. Past performance is not a guide to the future.
1. New Beazley deal
Issuer Beazley plc
Maturity 09/28/2019
Coupon 5.375%
Rating BBB
Size £75million
Use of ProceedsBuy back more
expensive debt 80
85
90
95
100
105
Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13
2. Original Beazley issue: 7.25% 10/17/2026
Price
18
OPPORTUNITY 1: EVERY TIME IS DIFFERENT
Aviva Investors Strategic Bond
Deposits
Covered
Senior
Subordinated
Equity
Deposits
Covered
Senior
Subordinated
Equity
BEFORE… …AFTER
Respecting the capital hierarchy
19
OPPORTUNITY 2: CORPORATE HYBRIDS EDF 6% 2026-2049
Aviva Investors Strategic Bond
Source: Bloomberg as at April 2013.Any opinions expressed are Aviva Investors and are subject to change. They should not be relied upon as indicating any guarantee of return from an investment.
Better than equity return for a lower level of risk
Ticker
Currency
Coupon
Rating
F
T
V
R
EDF
GBP
6%
A3 / BBB+
4
3
3
+2
– Subordinated capital with 50% equity credit
– Strong likelihood of call
– Largest energy company in the world with a strong credit profile
4.9
5.2
5.5
5.8
6.1
Jan-13 Feb-13 Mar-13 Apr-13
Yield To Next Call
20
OPPORTUNITY 3: BANK CONTINGENT CAPITAL (COCO) BARCLAYS 7.625% 2022
Aviva Investors Strategic Bond
Source: Bloomberg as at April 2013.Any opinions expressed are Aviva Investors and are subject to change. They should not be relied upon as indicating any guarantee of return from an investment.
Almost equity return for similar level of risk
Ticker
Currency
Coupon
Rating
F
T
V
R
BACR
USD
7.625%
BBB-
4
1
1
-1
– 100% write-down at PRA determined Tier 1 ratio of 7%
– Optional coupon deferral
– High yield coupon with final maturity
6.9
7.2
7.5
7.8
8.1
Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
Yield To Maturity
21
OPPORTUNITY 4: PAYMENT IN KIND NOTES (PIK TOGGLE) SUNRISE COMMUNICATIONS 8.75% 2019
Aviva Investors Strategic Bond
Source: Bloomberg as at April 2013.Any opinions expressed are Aviva Investors and are subject to change. They should not be relied upon as indicating any guarantee of return from an investment.
Equity like return for a lower level of risk
Ticker
Currency
Coupon
Rating
F
T
V
R
SUNCOM
EUR
8.75%
B-
4
3
3
+1
– Second largest Swiss mobile company with fundamentally solid business
– Issuer rationale to pay dividends to private equity owners
– Weak structure but significant value below bondholders
8.1
8.4
8.7
19-Mar-13 26-Mar-13 02-Apr-13 09-Apr-13 16-Apr-13
Mid Yield To Maturity
THE FUND
22
FIXED INCOME AND THE ECONOMIC CYCLE
Aviva Investors Strategic Bond
Ability to asset allocate through the investment cycle
23
FIXED INCOME ASSET CLASS CORRELATION
Aviva Investors Strategic Bond
Fund flexibility allows for greater diversification
Source: BofA Merrill Lynch indices - correlation is based on 10 year weekly data to end December 2012. Past performance is not a guide to the future.24
UK Gilts UK IL Gilts £ Non Gilt Euro Corp US Corp EUR HY US HY EMD
UK Gilts 1 0.7605 0.8445 0.476 0.5053 -0.2072 -0.1757 0.0213
UK IL Gilts 1 0.6812 0.4335 0.526 0.006 0.05 0.0665
£ Non Gilt 1 0.7528 0.6797 0.1345 0.109 0.1818
Euro Corp 1 0.7482 0.3948 0.3163 0.3047
US Corp 1 0.4166 0.4252 0.4358
EUR HY 1 0.9007 0.6058
US HY 1 0.6369
EMD 1
FUND CHARACTERISTICS
Aviva Investors Strategic Bond
25
Aviva Investors Strategic Bond Fund
Investment policy / objective Aim to provide a high return through a combination of capital growth and income by
investing in global bonds issued by companies, governments and large international
organisations. The manager can invest across the fixed income spectrum and will aim to
position the fund to take advantage of market conditions.
Performance target Top Quartile IMA £ Strategic Bond Sector
Interest frequency Quarterly
Max in governments 100%
Max in investment grade 100%
Max in high yield 100%
Max in emerging markets 50%
Max currency exposure 20% non £
Max cash position 10%
Max exposure to single issuer 5% for corporate issuer
Max exposure to any issue 3%
Source: Aviva Investors as at 31 March 2013
26
AVIVA INVESTORS STRATEGIC BOND FUNDFUND CHARACTERISTICS
Aviva Investors Strategic Bond
Characteristics
Portfolio Market Value £128 million
Duration 5.05 years
Gross Redemption Yield 4.38%
Holdings 106
Benchmark Total Return vs. Peer Group
Sector Allocation
Rating Allocation No. of Holdings Fund Weight
AAA 1 1.35%
AA 11 23.35%
A 14 9.01%
BBB 30 26.80%
BB 25 18.47%
12%
13%
20%
11%2%
21%
5%
10%5% ABS
Consumer
Financials
Industrials
Non-Sovereigns
Property
Sovereigns
Telecoms
Utilities
Other inc. Cash
Rating Allocation No. of Holdings Fund Weight
B 15 10.73%
CCC 5 3.29%
<CCC 0 0.00%
Unrated 5 1.80%
Cash & Other - 5.20%
Source: Aviva Investors as at 31 March 2013
CREDIT TEAM
Aviva Investors Strategic Bond
27
Chris Higham, CFAPortfolio Manager
Quin Casey, CFAHY InvestmentAnalyst
James Vokins, CFAPortfolio Manager
Paul SimmonsPortfolio Analyst
Nancy Utterback, CFACredit Analyst -TMT, Retail
London
Equity investment (9)
Alessandro RovelliCredit Analyst –Industrials, Utilities
Gaurav Koolwal, CFACredit Analyst –Consumer, Telecoms
Reto BachmannCredit Analyst - ABS
Oliver JuddCredit Analyst - Financials
Paarus ShahCredit Analyst –Financials
Mumbai (8), Chicago (12), Paris (4), Singapore (3)
Emerging MarketDebt(6)
Quantitative research(4)
Rates (12)Strategy(23)
Skilled and experienced team
Source: Aviva Investors as at 31 March 2013.
AVIVA INVESTORS STRATEGIC BOND FUNDASSET ALLOCATION EVOLUTION
Aviva Investors Strategic Bond
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
IG HY Government Unrated Cash
Active asset allocation decision is made using FTV
Source: Aviva Investors as at 31 March 201328
PERFORMANCE OVERVIEWCONSISTENT RETURNS DEMONSTRATED
-20
0
20
40
60
80
100
Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13-20
-10
0
10
20
30
40
50
60
70
80
Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13
-20
-10
0
10
20
30
40
50
Mar 08Sep 08 Mar 09 Sep 09 Mar 10Sep 10 Mar 11 Sep 11Mar 12 Sep 12 Mar 13-30
-20
-10
0
10
20
30
40
50
Mar 08 Sep 08 Mar 09 Sep 09Mar 10 Sep 10 Mar 11 Sep 11Mar 12 Sep 12 Mar 13
Aviva Investors High Yield Bond74.30% Fund vs. 48.27% Peer Group (since inception*)
Aviva Investors Strategic Bond Fund66.52% Fund vs. 38.89% Peer Group (since inception*)
Aviva Investors Distribution Fund44.23% fund vs. 24.26% Peer Group (5 years)
Aviva Investors Corporate Bond Fund42.7% Fund vs. 34.95% Peer Group (5 years)
Quartile Ranking since inception* 1st
Quartile Ranking over 5 years 2nd Quartile Ranking over 5 years 1st
Quartile Ranking since inception* 1st
Aviva Investors Strategic Bond
*Since Inception: 22nd September 2008. Source: Date as of End March 2013: Total Return, net income reinvested, net of management fees. Past performance is not a guide to the future.
29
Solid track record across all IMA sectors
30
IMPORTANT NOTES
Aviva Investors Strategic Bond
This document is intended for investment professionals and experienced advisors only. It is not to be viewed by or used with retail clients. Private investors and scheme members should seek professional advice before making an investment decision.
Except where stated as otherwise, the source of all information is Aviva Investors as at 31 March 2013.
Any opinions expressed are based on the internal forecasts of Aviva Investors and are subject to change. They should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors. Any underlying research or analysis has been procured by Aviva Investors for its own purposes and may have been acted on by Aviva Investors or an associate for its or their own purposes. No part of this document is intended to constitute advice or recommendations of any nature.
Performance figures sourced from Lipper and illustrated on a bid to bid, gross income reinvested basis in the currency shown. Other information sourced from Aviva Investors. The value of an investment in the fund can go down as well as up and can fluctuate in response to changes in exchange rates. Past performance is not a guide to the future.
The distribution and offering of shares may be restricted by law in certain jurisdictions. This document should not be taken as a recommendation or offer 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. Full terms and conditions of the Aviva Investors products and services are available on request.
Aviva Investors UK Funds Limited, the ISA Manager and Aviva Investors UK Fund Services Limited, the Authorised Fund Manager. Registered in England Nos. 2503054 and 1973412 respectively. Authorised and regulated by the Financial Services Authority. Registered addresses: No.1 Poultry, London EC2R 8EJ. Both are Aviva companies. www.avivainvestors.co.uk
CI062624 04/2013