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Approaching Global Financials
Guy de Blonay
November 2007
Agenda

Introduction

Important and diverse sector

Opportunities

Case studies

Summary

Appendix
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Sector important and diverse
Sub-sectors:

Regional Banks

Investment Banks

Thrifts and Mortgage Banks

Broker Dealers

Asset Managers

Life Insurance

The financial sector is an important
part of global markets:
Index
Financial Services
as % of Index
S&P 500 (US)
22.2%
CAC 40 (France)
23.3%
DAX (Germany)
27.6%
FTSE 100 (UK)
30.4%
Non-Life Insurance (Including
Reinsurance)
Topix 100 (Japan)
27.2%

Speciality Finance (Credit Cards,
Leasing, Financial Guarantors)
S&P/TSX Comp (Canada)
31.9%
All Ordinaries (Australia)
42.4%

Exchanges
MSCI World
26.6%

Property
Source: Datastream at 31.01.2007.
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Approaching global financials
Strategy

Fundamentally-based long term capital growth through investment in the
Financials sector; guided by combination top driven/bottom up stock analysis
Objective

Identify sub-sector fundamental themes and exploit them through investments in
companies with prices that do not reflect longer-term trends

Be opportunistic and effective with capital by dynamically allocating it across
multiple sub-sectors, capitalisations, growth/value categories and geographies

Liquid strategy with active management
Goal

Generate meaningful returns in any market conditions

Avoid “disasters”
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Filtering and Portfolio Construction
Universe
“All of our ideas start with a view that a significant industry or company
change, not yet being fully recognised by the market,
is imminent or in progress”
Europe
UK
US
Japan
Asia
Emerging markets
Best 15 – 20 themes chosen
Potential stock opportunities
(within 15- 20 themes)
Detailed fundamental company analysis
Risk Management
Portfolio
Active Management
(15-20 themes/70-100 names)
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Opportunities – credit growth
Household debt/GDP versus GDP per capita;
underleveraged countries in terms of consumer debt are circled
120%
Denmark
Netherlands
Canada
100%
UK
Households debt/GDP (%)
US
80%
Portugal
Spain
Korea
Taiwan
60%
Malaysia
40%
Japan
Hong Kong
S. Africa
Sweden
Singapore Germany
Italy
Finland
France
Belgium
Ireland
Greece
20%
Indonesia
Hungary
Poland
Czech Republic
0%
0
10000
20000
30000
40000
50000
GDP per capita (US$)
Household leverage is low in many countries
Source: IMF, OECD, Datastream, Credit Suisse research.
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Opportunities – insurance penetration
Life insurance product penetration and GDP per capita
12%
S. Africa
Taiwan
Life premiums, % of GDP
10%
Hong Kong
UK
Belgium
Japan
8%
Finland
France
S. Korea
Portugal
6%
Switzerland
Singapore
Sweden
Denmark
Netherlands
Italy
US
4%
Australia
Canada
Germany
Austria
Spain
2%
Norway
Czech Rep.
Hungary Greece
Poland
New Zealand
Russia
0%
0
10
20
30
40
50
60
70
80
GDP per capita, US$ '000s
Life company penetration is low in many countries
Source: IMF, OECD, Datastream, Credit Suisse research.
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Exploiting the growing global savings pool
Global private wealth
Number of high net worth individuals and value of their wealth
HNWI
(millions)
Value of wealth
($ trillion)
Value of wealth
(% change y-o-y)
1997
5.2
19.1
-------
1998
5.9
21.6
13.1
1999
7.0
25.5
18.1
2000
7.2
27.0
5.9
2001
7.1
26.2
-3.0
2002
7.3
26.7
1.9
2003
7.7
28.5
6.7
2004
8.2
30.7
7.7
2005
8.7
33.3
8.5
Source: IFSL, based on data from Merrill Lynch Capgemini
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0
Cons. Prods.
& Svcs.
Consumer
Staples
Retail
2005
High
Technology
Industrials
Healthcare
Telecomms
Media and
Entertainment
Real Estate
Materials
Financials
Energy and
Power
Value US$ millions
Mergers and acquisitions
Global announced M&A deals – financials consistently active
700,000
600,000
500,000
2006
400,000
300,000
200,000
100,000
Source: Thomson Financial.
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Tech Hardw & Equip
Pharmac & Biotech
Retailing
Food & Stapl Ret
Software & Serv
Div Financ
Energy
Commer Serv & Sup
Consumer Serv
Food Bev & Tobacco
Metals & Mining
Autos & Compon
Consum Dur & Appar
Chemicals
Constr & Engin
Insurance
Utilities
Telecoms
Transport
Media
Health Care
Real Estate
Machinery
Banks
Materials
Cap Goods
Sector consolidation
Europe ex UK sector concentration:
top 5 companies as % of total sector market cap
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: Credit Suisse.
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Playing sub-sector themes
Trend
2002
2003
2004
2005
2006
2007
Market outlook uncertain
Market consolidation
Long
Avoid
Money brokers
US market sensitive stocks
Lloyds of London
Asset managers
European property
Investment banks
Investment banks
Insurance
Low interest rates
Asset managers
Online brokers
High liquidity
Irish and UK property
Insurance brokers
Stronger equity markets
Investment banks
US insurance
Surge property valuation outside G7
Private banking
US asset managers
Low interest rates
Eastern European property
UK domestic banks
Market sentiment positive
Asset managers
UK domestic banks
M&A activity increasing
Emerging markets
Insurance brokers
Low inflation
Japanese Brokers
Large Cap US regional banks
Market sentiment positive
Investment banks
Canadian regional banks
M&A activity
Asset managers
US regional banks
Liquidity
Emerging markets
Insurance brokerage
Global growth
Diversified financials
US regional banks
Re-pricing of risk
Asset managers
Spanish domestic
Low inflation
Emerging markets
UK banks
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Case studies
National Bank of Greece

Ranked 27th amongst the strongest
banking groups in Europe (at 06.07.2007)

Core profit comes from South East Europe

Expectations for dynamic growth
National Bank of Greece – share price
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
Turkiye Garanti

Third largest private bank in Turkey

GE Capital owns 26% stake

Finances 16% of Turkey’s exports and
14% of its imports
Turkiye Garanti – share price
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
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Case studies
Shenzhen Investment – share price
Shenzhen Investment

A mid-market property developer in
southern China

45.7%-owned by Shenzhen's city
government

H1 2007 net profit rose sharply on property
revaluation gains
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
Citigroup – share price
Citigroup

The world’s largest company*

Global, diversified financial services
business model

Restructuring measures announced H1
2007
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
* Source: Forbes Global 2000, March 2007. Ranking is based on a mix of four metrics: sales, profit, assets and market value.
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Case studies
Northern Rock

5th largest UK mortgage lender

Business model depends on funding from
wholesale credit markets

September 2007 - sought emergency
funding from Bank of England
Northern Rock – share price
Source: Bloomberg, USD, 30/12/2002-21/09/2007.
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Summary
 Global - greater opportunities and diversification
 Global financial services are an attractive and diversified asset class
 Current environment is positive:
- Global growth, driven by BRIC countries (represented 26% of Global GDP in 2006
and this is expected to rise)
- Low inflation, low interest rate environment provides supportive conditions
- Global liquidity and strong M&A activity driving capital markets
- Significant private equity capital raised in 2006 alone
- Increasing consumer activity in both loans and savings
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Appendix
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Fund Manager Profile: Guy de Blonay

Director with 11 years’ investment experience

Manager of the CC&L Global Financials Fund since launch in May 2006

Manager of the New Star Financials Hedge Fund since launch in April 2002

Manager of the New Star Global Financials Fund (OEIC), top specialist financial
fund since inception*

Formerly at Jupiter Asset Management Ltd, 1995-2001
**
Team:


Nick Brind
Pan-European financials specialist
Emily Adderson
Financials Analyst


Mick Groves
Trader for Pan-European markets
Mark Hurley
Trader for US and Asia (incl. Japan)
Leverage off the New Star network for real-time information sharing and security analysis:
Stephen Whittaker
UK team of 9
Mark Beale
US team of 2
Richard Pease
European team of 10
Brian Coffey
Emerging markets team of 5
Chris Burling
Japan team of 3
Ian Beattie
Asia team of 3
“…more ideas are generated by a team but decisions are best left to the individual…”
* Source: Lipper Hindsight at 31.08.07 since launch (28.12.01), performance based on financial peer group comprising financial funds held within the IMA Specialist Sector.
** Source: Citywire at 31.08.07 Fund Manager ratings are based on assessing individual fund managers outperformance against appropriate benchmarks over a period of 36 months.
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Important information
Past performance is not necessarily a guide to future performance. The value of investments and any income from them may fall as well as
rise and investors may not get back the amount originally invested. The value of investments may also increase or decrease as a result of
changes in exchange rates between currencies. The opinions expressed here are solely those of the fund manager at the time of print and
should not be interpreted as investment advice.
The New Star Global Financials Fund (formerly the WorldInvest Management Fund) (the "Fund") opened to retail investment on 19 May
2003. Performance history for the Fund includes that of the WorldInvest Management Fund which was launched on 28 December 2001.The
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