Annual Investor Presentation November 2017 NE NEXU XUS S UP - - PowerPoint PPT Presentation
Portfolio Management & Financial Counsel Annual Investor Presentation November 2017 NE NEXU XUS S UP UPDATE ATE Portfolio Management & Financial Counsel Team am Growth th From incept ption ion, , Nexus us has been n
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Two additions to the Nexus Team in 2017 Team will continue to grow
Terence Tse Nancy Cruz
From incept ption ion, , Nexus us has been n committe ted to superior ior clie ient t servic ice Team am Growth th
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8.5% 5.5% 8.1% 5.8% 6.3% 5.1% Nexus Balanced Fund (1) Nexus Equity Fund (1) Nexus Income Fund (1) Market Benchmark (2) Market Benchmark (3) Market Benchmark (4)
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Clients ts have enjoyed yed good long-te term rm portfolio
th Client t Portfoli
th
Average Annual Returns for Nexus Funds
January 1, 200 000 0 to October er 31, , 2017 17 (5)
(1) Nexus return is the compound average annual return shown prior to the deduction of management fees, but after deduction of all other expenses. Past performance is not indicative of future results. (2) Equity Fund market benchmark is 5% FTSE TMX Canada 91 Day TBill Index, 50% TSX, and 45% S&P 500 (in C$); rebalanced monthly. (3) Balanced Fund market benchmark is 5% FTSE TMX Canada 91 Day TBill Index, 30% FTSE TMX Canada Universe Bond Index, 40% TSX, and 25% S&P 500 (in C$); rebalanced monthly. (4) Income Fund market benchmark is the FTSE TMX Canada Universe Bond Index. Note that in addition to bonds, up to 20% of the Income Fund portfolio may be invested in equity securities. (5) Return data for the Income Fund is from its inception date of September 30, 2002.
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$250 $660 $1,800 2000 2010 Now
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Thanks nks to the support of our clie ients ts, Nexu xus contin inue ues to grow
Nexus Assets Under Management ($ millions)
Firm Growt wth
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We live in unsettled times…
North Korea High Consumer Debt Trade Protectionism Brexit Bubbly Markets
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…and businesses are experiencing major change RETAIL APOCALYPSE CONTINUES AT DEPARTMENT STORES
Fox Business, September 2017 The Independent, July 2017
FRANCE WILL ‘BAN ALL PETROL AND DIESEL VEHICLES BY 2040’
Tripadvisor.ca, September 2017
PRAGUE TAXI DRIVERS ROUGHING UP UBER DRIVERS AT AIRPORT BANKS MAY FACE KODAK-STYLE OBSOLESCENCE IN 5 YEARS
Bloomberg, July 2017
CABLE TV CORD-CUTTING IN CANADA EXPECTED TO ACCELERATE
CBC, April 2017
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Nobody y wants ts to b be a K Kodak ak
Dominant market share in film and photographic paper 140,000 employees 1999 profits peak at US$1.4 billion
Kodak developed the first digital camera in 1975!
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Newcomers have mushroomed… Uber is a good example
Taxi industry heavily regulated
Social norms
internet”
Uber launches in San Francisco
Uber is the #1 ride company globally
(1) In 2017, NYC licenses trade for under $250,000. (2) Uber drivers get less than an hour of training… on the internet.
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Many entire ire industrie ries are undergo going ing radica cal l change ge Overvie view
Newspapers Telecom Music Industry Travel Agents Cable Networks Retail Taxis Accommodation Power Generation Cars
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Why is this happenin ning? g? Overvie view
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11% 11% 15% 15% 59% 59% 118% 38% 38% 41% 41% Solar PV Batteries Digital Imaging Communication Data Storage Computer Processing
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Tech chno nolo logic gical l change ge is a m massive ve enabler ler
(1) Improvement measured as cost reduction per unit over time.
Source: RethinkX; Kleiner Perkins; CLSA.
Annualized Rate of Performance Improvement (1)
Continuo uous Improve vemen ment Adoption ion Invent ntion ion Overvie view
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Angry Birds Facebook Internet TV TV Radio Telephone
75 Years 38 Years 13 Years 4 Years 3.5 Years 35 Days
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The adoption
w products cts has acceler lerate ated
Source: Citi Digital Strategy Team.
Time to Reach 50 Million Users
Overvie view
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This is a r revolu
tion, n, not evolut lutio ion
1760 - 1840 Steam Engine Weaving Loom 1870 - 1920 Electricity Internal Combustion Engine Light Bulb 1970 - Today Semiconductor Personal Computer Internet Today 3D Printing Artificial Intelligence Autonomous Vehicles
st Industria
Mecha chaniz nizatio tion
nd Industria
Mass Product ction ion
Digital tal
th Industri
Automat ation ion Overvie view
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It’s tempting, but tough to predict the future Overvie view
Can’t predict markets Can’t predict the real world
“There is no reason anyone would want a computer in their home.” Ken Olsen, Digital Equipment Corp.,1977 “There will be 900,000 cell phone users in the U.S. by 2000.”(1) AT&T, 1980
But investors have to look ahead
Nexus November 2013 Presentation
(1) In fact, there were 110 million cell phone users in the U.S. by 2000. Source: World Bank.
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Could the automot
ive industr try y be disrupte ted? d? Trans nspo port rtat ation ion-as as-a-Servic vice
Better Cheaper Wanted Not constrained by regulations New business model
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Cars are ubiquitous… Trans nspo port rtat ation ion-as as-a-Servic vice
1 billion cars 16 trillion km/year 400 billion driver hours
Note: Assumes an average of 16,000 km/year at 40 km/hour. Source: Morgan Stanley.
to the moon
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…and the industry is much more than just the car manufacturers Trans nspo port rtat ation ion-as as-a-Servic vice
Car manufacturers Parts suppliers Auto dealers Fuel network Service Auto insurance Car rental Parking Taxi/Ride sharing
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$0.60 Owned Shared $0.20 to $0.40
65%
C$ C$
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But car ownership is very inefficient… …so Taas as would d be econo nomic icall lly y compell lling ing
Used 1 hour a day 1.55 seats
What is the value of your time?
(1) Actual usage relative to maximum possible utilization.
Source: Morgan Stanley, RethinkX.
Utilization (1) Cost per Seat Kilometer
1.25%
Trans nspo port rtat ation ion-as as-a-Servic vice
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…and TaaS aS could solve other proble lems
Source: Morgan Stanley.
Trans nspo port rtat ation ion-as as-a-Servic vice
1.3 million deaths/year
45% of global oil demand Pollution and CO2
4 billion parking places
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The speed and path to TaaS aS is unknow
ble
Electric cars
Autonomous
Regulation
Change fuel network Safety Behavioural change Vested interests Cheap cars and gasoline slow conversion
Trans nspo port rtat ation ion-as as-a-Servic vice
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The disruption ion would ld be massive ve
Car manufacturers and parts suppliers New tech providers Auto dealers, repair, rental and insurance sectors TaaS fleet owners Existing fuel network New fuel network Real estate owners Leisure providers
Trans nspo port rtat ation ion-as as-a-Servic vice
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The risk of disruption ion breeds s hype and expe pect ctat ations ions Perce cept ption ion Expe pect ctat ation ions Respon ponse se Short-te term m Respon
Market Share & Profits Share Price
News Hope/Fear
Less Affected Winners Losers
Hype
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Over the longer term, , reali lity y interve venes nes
Trend changes
Obstacles occur
Competition
Short term
“Market is a voting machine”
Long term
“Market is a weighing machine”
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Real al Economy Reali aliti ties Mark rket t Reali ality ty
Over the longer term, four paths occur… (1)
(1) Excluding the “Less Affecteds”.
“Needle”
Winners Losers
“Dunce”
Winners Losers
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…as real companies illustrate
Amazon Facebook Pets.com Ballard Power Microsoft Walmart Kodak Blockbuster
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It’s hard to find the needle in the haystack
Hundreds of companies with trillions in total market cap Three survivors with US$650 billion total market cap
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Nexu xus believ ieves investment ment succe cess comes from managing ng risk
Quality companies at reasonable valuations
Losers
Out of favour
Less Affected
Unexciting
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Contrarian picks
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100% 15% 15%
5% 90% 90% Share Price Assets Today Near-Term Future Value Add Long-Term Future Value Add 100% 65% 65% 5% 5% 30% 30% Share Price Assets Today Near-Term Future Value Add Long-Term Future Value Add
We can’t predict the future, but we can understand the present and estimate the near-te term rm outlook
Company A: An Investment with Controlled Risk Company B: A Speculative Bet
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Nexus s Estima mate Implied ed by Market
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$50 $50 $100 $100 $150 $150 $200 $200 $250 $250 $300 $300 $350 $350 $400 $400 1999 1999 2001 2001 2003 2003 2005 2005 2007 2007 2009 2009 2011 2011 2013 2013 2015 2015 $412 103%
(49 quarters)
70% 70%
(22 quarters)
Up Up Quarters Down Quarters
Benchmark Benchmark
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Equity y Fund
Up- & Down-Market Capture Ratios (1,2,3) Value of $100 Invested since January 1, 2000
(1) Each quarter since January 1, 2000 is defined as an “up” or “down” quarter based on whether the benchmark return for the quarter was positive or negative. For up (down) quarters, the capture
ratio is the ratio of compound average rates of return for the Fund and its benchmark for such quarters.
(2) Nexus returns are presented prior to the deduction of investment management fees. Past performance is not indicative of future results. (3) Equity Fund benchmark is 5% FTSE TMX 91 Day TBill Index, 50% TSX, and 45% S&P 500 (in C$); rebalanced monthly.
Period Ending September er 30, , 201 017
Our approach ch has worked over r the long term, , with good downside ide protect ctio ion
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Disruption awaits There will be winners and losers You can’t predict the future You can control risk to achieve investment success