Download Global Investment Roadshow

Global
Investment
Roadshow
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Who is Anchor Capital?
 JSE-listed (ACG)
 >R13bn AUM
 Local and offshore
investment
 >60 staff
 20-strong investment
team
 Research driven
 Top performing asset
manager
 Attracting institutional
assets
* Using disclosed R9.7bn AUM at end Feb plus RCI transaction
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Anchor BCI equity fund – stellar performance since
inception
Since inception
Year to date
No 1 out of +/-200 general equity funds
over 3 months, 6 months, 1 and 2 years
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The
Anchor
Team
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New inward-listed share on JSE in +/-3 months
100% offshore
Similar, in principle, to Rockcastle (property)
Opportunity for SA investors to buy company with exposure to
offshore listed shares
 Conservative investment philosophy
 Quality well-known companies
 Top performing asset managers
 Alternative to buying SA listed companies with offshore
exposure
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The Anchor Offshore Team – key members
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Peter Armitage, CA (SA) CEO, ex-Investec Wealth CIO
Sean Ashton, CFA, CIO, ex-Investec
Nick Dennis*, CA (SA), CFA ex-Pictet London portfolio manager
Peter Little*, B Comm (Acc), CFA, ex-Credit Suisse NY head PM
Blake Allen*, CA (SA), M Phil, ex-Investec, London-based
David Gibb*, CFA, CA (SA), ex-Stanlib Head of Equities
FJ Veldman*, B Comm Hons (Investment)
Bryan Rudd*, B Comm Hons (Investment), Cannon offshore
team
• Assisted by another 8 analysts (local and offshore)
• * = dedicated solely to offshore investment
Current asset allocation
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Developed world PE below average
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Profit margins high
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Global Investment Roadshow agenda
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Peter Armitage - introduction
Sean Ashton – High Street Equity (segregated)
Blake Allen - London-based Global Strategist
Nick Dennis – Global Equity Fund
Peter Little - Global Capital Plus
David Gibb – Anchor BCI Worldwide Flexible Fund
Peter Armitage – closing and questions
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Sean Ashton
 Chief Investment Officer of Anchor Capital & fund manager of
Anchor BCI equity fund
 Top performing General Equity fund over 3, 6, 12, 24 months
 B.Com (Hons) degree & CFA charter-holder
 12 years financial markets experience
 Joined Anchor February 2013
 Started career as a sell-side analyst at Nedcor Securities in
December 2003
 #1 rated analyst in FM awards in first year (Hotels & Leisure)
 Investec IEB Absolute Return fund top fund award in Symmetry
Hedge fund awards 2007
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Sean Ashton
High Street Equity
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High Street Equity segregated portfolio
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Portfolio Manager:
For funds:
Invested in:
Fees:
Benchmark:
Platform:
Suitable for:
Investment style:
Sean Ashton (Age: 34)
Situated offshore
Offshore equities
1.25% per annum
MSCI World
Saxobank (Anglorand white label)
Long term investors
Growth at a reasonable price
Quality companies in developed markets
High proportion of known, big companies
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What are we trying to achieve in High
Street Equity?
 Own a diversified portfolio of predominantly franchise quality
companies
 High ROCE
 Recognisable brands
 Scale / scalable business models
 Pricing power
 Easy to understand business models
 Not aiming to take high risk bets, but will own an element of “off
the radar” stocks which can add alpha
 eg. Pandora A/S – up 230% on our purchase price over 2 ½ years
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Significantly better quality businesses, at a
similar earnings multiple
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Performance track record (US$) – High Street
Equity Model Portfolio (to end May 2015)
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Inception = June 2012
Performance shown gross of brokerage and management fees
Benchmark = MSCI World Index (total return, USD)
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We have liked Starbucks for over two
 > high teens
years now…
EPS growth
 Exceptional
ROCE
 Optionality in
certain lowprofit regions
 Reasonable
valuation
considering
the growth
rate
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Starbucks has handsomely outperformed
the S&P500 – where to from here?
SBUX:
+85%
S&P:
+35%
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Valuation: Starbucks trailing P/E multiple –
approaching high levels again
We previously
switched into
CAKE here
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Starbucks P/E relative to MSCI World – this
has always been a premium rated stock
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1) Same-store sales economics are
exceptional
 Sticky customer base – 9 million rewards card members; 33% of
transactions on a Starbucks card
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2) Starbucks has the opportunity to broaden
its appeal into additional mealtimes in the
US
Source: Starbucks
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3) Starbucks still has a strong pipeline of
store growth
 1,650 net new stores in FY15 (+8%); half in China/Asia Pac
 30k+ stores over next 5 years (+7% CAGR)
Source: Starbucks
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4) New categories – Tea(vana)
Source: Starbucks
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5) Evolving revenue mix is positive for margins
 Franchise margins >30%; 15-20% of earnings. Franchise =
23% of revenue in China / Asia Pac
 McDonalds: franchise = 34% of revenue; group EBIT margin:
29%
 Big cost lever to pull - $1bn of COGS saving; 33% of profit
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What if Starbucks was as penetrated in China
as it is in the United States?
 4,000 stores
 An extra $1.3bn of group revenue;
$350m profit
 15% boost to current group profit –
without any growth from rest of the
group
 5 year group targets: double store
base, treble operating income =>
adds 5% points to group EBIT
growth annually
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6) Starbucks should sustainably grow much faster
than the market, unwinding its premium rating
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7) QSR is a highly-valued sector, but Starbucks is
one of the better businesses
Starbucks trades at a 20% premium
to average of sector…
…while the group’s ROE is almost
double the average
Source: Bloomberg, Anchor Capital calculations
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Nick Dennis – Anchor Global Equity Fund
 Nick was a Senior Investment Manager at Pictet Asset
Management in London, between 2008 and 2014
 Pictet is a leading European private bank and asset manager,
with $440bn in assets under management/custody
 Nick worked within the Global Emerging Market Equities team,
with responsibility for the Consumer Sector
 Nick’s travels took him from the beaches of Brazil to the factories
of Japan, from the casinos of Macau to the slums of Mumbai
 Nick is a CFA charterholder and a chartered accountant
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Source:
NASA
Source: Jakob Montrasio
Peter Little
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B.Com Accounting degree & CFA charter holder
18 years financial markets experience
Joined Anchor towards the end of 2013
Started career in financial markets in London in 1997
Worked for a number for Global Investment banks in London (incl
JPM, Barclays Capital, RBS & Credit Suisse) predominantly in
structuring and derivatives roles
 Transferred to New York in 2005 with Credit Suisse Asset
Management to manage various hedge fund products
 Most recent role before returning to SA was Head of Fund
Management for Liquid Systematic Hedge Funds for Credit Suisse
in NY
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Peter Little
Global Capital Plus
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Global Capital Plus Fund
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Portfolio Manager:
For funds:
Invested in:
Fees:
Peter Little (Age: 42)
Situated offshore
Offshore multi-assets
1.25% per annum
10% above benchmark
Benchmark:
50% 3M US Libor
+ 50% 3M EU Libor + 2.5%
Platform:
Sanlam Irish Fund Platform
Suitable for:
Medium to long term investors
Investment style:
Active Asset Allocation
Capital preservation with moderate growth
Avoiding themes that SA investors are exposed to locally
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China
• Gone from 5% of Global GDP in
2004 to 13% of Global GDP in 2014
• Population = 1.3bln
• 10 of the top 30 biggest cities in the
world are in China
• China has 13 urban areas with > 10
mil people (NY & Lon ~ 8.5 mil)
• Chongqing has about 30 mil people,
> half the South African population
• Stock Market 2004: $ 390 bil (HK:
$1.1 trl); currently ~ $ 10 tril (HK:
4.2 trl)
Source: Bloomberg
Chinese Consumer
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8-10% of retail spending is online (US is about 5-6%)
36% of GDP is Consumption (~ $ 3.6 tril)
Top 20 retailers have 12% market share (US = 40%)
Chinese retail has largely skipped the transition from
offline to online consumerism
Chinese Healthcare
• China Healthcare Spend = 5% of
GDP (US Healthcare = 12%)*
• From a product adoption
perspective China is about 15%
of where Japan & Korea were at
a similar stage of development
• Ministry of health has new 5 year plan
• $ 450 bil spent on Healthcare in China: 30% paid by govt;
36% paid by social insurance; 34% paid by patients)
• 3.6% of population has private healthcare cover (US > 60%) –
only 5 commercial health insurance companies in China
* as of 2012
Chinese Travel
• Leisure travel is growing fast
• Many countries have relaxed visa
requirements to attract Chinese
travellers
• Only 7% of Chinese population have
passports (30% for US, 25% for
Japan)
• 30 – 40% of flights and hotels booked
online (10% of package tours)
• Most Chinese outbound travel
includes some form of organised
shopping
Source: World Tourism Cities Federation
China Investment Opportunities
• Chinese online retail (e.g, Alibaba & JD.com)
• Chinese Online Travel Agencies (e.g. Ctrip, Tuniu, Qunar &
Elong)
• Global Duty Free Shopping Assets
• Chinese Health Insurance Co’s, Hospital Operators & Medical
Equipment Co.’s
Global Securities Markets
Global Debt Securities
Over the last 10 years:
$ 82 tril
• Bond markets have grown 55%
Germany
5%
United States
44%
Japan
14%
United
Kingdom
8%
(from $53 tril)
Source: Bloomberg
• Equity markets have grown 80%
(from 35 tril)
• GDP has grown 90% ($ 37 tril to
$ 70 tril)
Other
7%
Global Equity Securities
$ 65 tril
OTHER
10%
UNITED
STATES
38%
GERMANY
3%
CHINA
8%
United
Kingdom
6%
Source: Bloomberg
HONG KONG
6%
JAPAN
7%
Bond Markets
Household Savings Rates
China
45
40
35
30
25
20
15
10
5
0
-5
European Union
France
Germany
Italy
Japan
United Kingdom
United States
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
In the last 10 years:
• Bond markets have grown $ 28
trl ($ 17 trl govt debt)
• QE ($ 6 trl), Chinese savings
($4trl) & Petro dollars have been
the main source of demand
Source: Bloomberg
Bond Liquidity
• Banks own less (regulations)
• Valuations are high
• Volume is low, Volatility is
high
• New set of liquidity providers
Fixed Income Investment Opportunities
• Look for opportunities to act as a liquidity provider
• Use derivatives for risk management
• Be cognizant of correlations
Greece
CHINA
US
EU
GREECE
SA
$ 9.3 tril
$ 16.8 trl
$ 18.5 trl
$ 240 bln
$ 360 bln
13%
24%
27%
0.3%
0.5%
Population
1.3 bil
320 mil
500 mil
11 mil
54 mil
% Global Population
18.6%
4.6%
7.1%
0.2%
0.8%
Debt/GDP
282%
269%
317%
133%
Government Debt/GDP
55%
89%
94%
183%
47%
Unemployment
4.1%
5.5%
11.1%
25.8%
26.4%
GDP ($)
% Global GDP
• Referendum on 5 Jul to decide whether to accept creditor terms
• Emergency bailout expired on 30 Jun
Grexit
• In 2010 European banks had $ 200 bln of direct exposure to
Greek debt – now they have $ 35 bln
• Periphery funding spreads are the main transmission mechanism
Germany
France
Italy
Spain
Government Debt/GDP
80%
96%
139%
132%
Debt/GDP
188%
280%
259%
10Y Yield
0.8%
1.2%
GDP ($ trl)
3.7
GDP Growth
1%
Portugal
Ireland
Greece
131%
115%
183%
313%
358%
390%
317%
2.3%
2.3%
2.9%
1.6%
14%
2.8
2.1
1.4
0.23
0.23
0.24
0.8%
0.8%
2.7%
1.5%
4.1%
-6.1%
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David Gibb
 BSc Med (UCT), CA (SA), CFA
 Liberty Asset Management (later Stanlib) 1994 to 2008
 Head of equity research at Stanlib
 Track record as unit trust manager at Stanlib
 Winner 2008
 Micropal Award – 5 year performance Domestic EQ Industrial
 Winner 2005
 Raging Bull Awards - 3 year performance Global Technology
 S&P Fund Award - 3 year performance Global Technology
 Winner 2003
 S&P Fund Award – 1 year performance Global Technology
 Joined Anchor Capital in July 2012 to manage global unit trust
 In spare time, he runs the GoodSchools Fund
 supporter of Spark Schools and Launchpad Learning
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David Gibb
Anchor BCI Worldwide Flexible
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Anchor BCI Worldwide Flexible Fund
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Portfolio Manager:
For funds:
Invested in:
Fees:
Benchmark:
Platform:
Suitable for:
Investment style:
David Gibb (Age: 49)
in Rands
Global equities, bonds, cash
1.14% per annum
SA consumer price index +4%
BCI
Long term investors
Invest in companies with a durable
competitive advantage;
Invest for the long term;
Aim to outperform through the full
economic cycle
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Notable equity investments
USA
Europe
Asia
US Bancorp
5.4%
Unilever
3.5%
JP Morgan
5.1%
GSK
3.1%
General Electric
4.5%
Admiral
2.5%
Google
4.3%
Yum Brands
4.0%
Walmart
3.6%
Wells Fargo
3.5%
Verizon
2.2%
Africa
American Express 1.7%
TOTAL
40%
10%
as at 25 June 2015, % of Fund
0.3%
3%
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Notable equity investments
USA
Europe
Asia
US Bancorp
5.4%
Unilever
3.5%
JP Morgan
5.1%
GSK
3.1%
General Electric
4.5%
Admiral
2.5%
Google
4.3%
Yum Brands
4.0%
Walmart
3.6%
Wells Fargo
3.5%
Verizon
2.2%
Africa
American Express 1.7%
TOTAL
40%
10%
0.3%
3%
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US banks - Price to book values have
been hit hard
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4,5
4
3,5
3
P/tBV
2,5
2
1,5
1
0,5
0
1998
2000
2002
2004
2006
2008
2010
2012
Source: Bloomberg – S&P Bank Index S5BankX Price to Tangible
book value
2014
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US banking net interest margin % (NIM)
at multi-decade lows
5,00
4,50
4,00
%
3,50
3,00
2,50
1985
1995
2005
Source: Federal Reserve
2015
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US banking net interest margin % (NIM)
at multi-decade lows
5,00
4,50
4,00
%
3,50
3,00
2,50
1985
1995
2005
Source: Federal Reserve
2015
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Large banks continue to gain market
share in the US...
Share of
Assets by
Bank Type
Source: FDIC Statistics; The State and Fate of Community Banking, Lux & Greene
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How expensive are US stock markets?
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US corporate earnings well above trend
S&P 500 real earnings versus trend ($ per share, logarithmic scale)
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Cyclically adjusted PE (CAPE) is very
high versus history
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Not the time to be aggressive in equities
Asset allocation
Fixed income,
46%
Equities, 54%
as at 25 June 2015
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Fund Performance
since inception 13 May 2013 to 31 May 2015
45.00%
40.00%
38.3%
35.00%
30.00%
25.00%
20.4%
20.00%
17.6%
16.0%
15.00%
10.00%
9.7%
8.6%
5.00%
0.00%
12-month
Unit trust ranking
Since inception
12/28 – 1 yr
Since inception (Annualised)
15/22 – 2 yrs
Fund
Benchmark
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