COMPANY INTRODUCTION June 2020 DD MM YYYY COMPANY SNAPSHOT 33 - - PowerPoint PPT Presentation
VUNANI FUND MANAGERS Presentation Title COMPANY INTRODUCTION June 2020 DD MM YYYY COMPANY SNAPSHOT 33 staff R40.9 bn Assets under management Experienced team large investment team with diverse skills Level 1 20 years BEE rating
Presentation Title
DD MM YYYY
VUNANI FUND MANAGERS COMPANY INTRODUCTION
June 2020
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large investment team with diverse skills
BEE rating
in investment management
with a successful track record
Assets under management
staff share scheme
COMPANY SNAPSHOT
Best (SA-Domiciled) Global Multi-Asset Flexible Fund on a Risk-Adjusted Basis for 2018 – Global Equity
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GROWTH IN AUM
as at 31 May 2020
14,613 12,612 14,362 14,597 20,191 26,600 40,000 40,935
Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 May 2020
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INSTITUTIONAL CAPABILITIES
diversified across asset class and within each asset class
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PEER SURVEY
as at 30 April 2020
Source: Alexander Forbes
Presentation Title
DD MM YYYY
VUNANI BCI GLOBAL MACRO FUND
June 2020
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AGENDA
▪ Performance update ▪ Our approach to generating excess return ▪ Making sense of the world in 2020 ▪ Portfolio positioning implications ▪ currently positioning ▪ future positioning
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VUNANI GLOBAL MACRO COMPOSITE
BENCHMARK APPROACH
▪ 80% MSCI; 15% US$ Cash; 5% STeFI ▪ Multi Asset flexible fund ▪ Actively manage exposure to global equity opportunities ▪ Mitigate downside risk that undermines long term growth ▪ Invest in between 30 to 40 stocks that have potential to deliver long term sustainable growth
OBJECTIVE
▪ Add value over time through investing in a portfolio of long term growth oriented stock ▪ Mitigate downside risk during times of extreme stress in both macro and financial environments
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PERFORMANCE – 1Yr
excess return of 8.6%
FUND SECTOR AVERAGE
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PERFORMANCE – 3Yr
excess return of 9.3% p.a*
* calculated arithmetically FUND SECTOR AVERAGE data source: VFM GIPS composite compared to Global Multi Asset Flexible sector return Profile Data
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PERFORMANCE – SINCE INCEPTION
excess return of 10.7% p.a*
* calculated arithmetically
FUND SECTOR AVERAGE
data source: VFM GIPS composite compared to Global Multi Asset Flexible sector return Profile Data data source: VFM GIPS composite compared to Global Multi Asset Flexible sector return Profile Data
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RISK - RETURN PROFILE
3 yrs
source : GraySwan
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RISK - RETURN PROFILE
5 yrs
source : GraySwan
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WHERE DO EXCESS RETURNS COME FROM?
three sources
When equity markets de-risk (value & price differ) 1987 : 1992 : 1994 : 1998 : 2002 : 2008 : 2020 Being invested in those companies where the rate of change in earnings is positive AND increasing Avoid companies where the price is declining
1 2 3
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THE WORLD IS CHANGING
very quickly
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COMPANY MAPPING
is often complex
Source: Fast Company, Feb 2017 (https://www.fastcompany.com/3068474/the-real-difference-between-google-and-apple)
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WHAT HAPPENS WHEN MARKET DE-RISK?
1987 : 1992 : 1994 : 1998 : 2002 : 2008 : 2020
JSE SWIX ALPHA
Source: Vunani Fund Managers
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BE INVESTED
in those companies where the rate of change in earnings is positive AND increasing
0% 50% 100% 150% 200%
0% 50% 100% 150% 200% 250%
EPS GROWTH BUY THESE
AVOID THESE
SHARE RETURNS ANNUALISED Source: Vunani Fund Managers
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EARNINGS VECTOR – AMAZON
understating that it’s a rate of change function…..not a statistic time dependant forecast
200 400 600 800 1000 1200 Aug 2013 Feb 2014 Aug 2014 Feb 2015 Aug 2015 Feb 2016 Aug 2016 Feb 2017 Aug 2017 Feb 2018 Aug 2018 Amazon - EPS
Earnings increase by 231% Earnings increase by 41%
Source: Vunani Fund Managers
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AMAZON – EARNINGS vs PRICE
earnings up by 59%.......share price up 51%
45 170 295 420 545 670 795 920 1045 1170 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 Aug 2013 Feb 2014 Aug 2014 Feb 2015 Aug 2015 Feb 2016 Aug 2016 Feb 2017 Aug 2017 Feb 2018 Aug 2018 Amazon - Price Amazon - EPS
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CONSENSUS EARNINGS – AMAZON
nearly a 40% difference between high and low estimates 1 yr out
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ALPHA GENERATION
“surprisingly”, its NOT always about valuations
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CAN EARNINGS BE FORECAST?
yes…..but it is very difficult
*Gleason, Johnson & Li (2006). The Earnings Forecast Accuracy, Valuation Model Use, and price target performance
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HOW DO EARNINGS LINK TO ALPHA GENERATION?
the rate of change in earnings growth is CRITICAL to alpha generation
sar = size adjusted abnormal return favoured stocks assigned to the highest TP/P in the highest EPS forecast accuracy group deliver 18% higher alpha than the bottom quintile
*Gleason, Johnson & Li (2006). The Earnings Forecast Accuracy, Valuation Model Use, and price target performance
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Power law:
position, product, price, people
UNDERSTANDING WHERE EARNINGS COME FROM
incorporating all the drivers of “G”
Proprietary technology:
10X better
Network effect:
distribution
2 4 Economies
leverage
6 Brand value:
monopoly, pricing power, secrets
3 5 Financial Impact:
ROE – G / COE - G
7 Macro / Industry drivers 1
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INFERRING THE EARNINGS GROWTH VECTOR
and the implied rate of change
24/02/2020 3w 1m 3m 6m 12m GLOBAL STOCKS AMAZON.COM INC AMZN US Equity Consumer Discretionary Stay Long + + + + + INTUITIVE SURGICAL INC ISRG US Equity Health Care Stay Long + + + + + ADVANCED MICRO DEVICES AMD UW Equity Information Technology Stay Long + + + + + MSCI INC MSCI US Equity Financials Stay Long + + + + + NVIDIA CORP NVDA US Equity Information Technology Stay Long + + + + + CHARTER COMMUNICATIONS INC-A CHTR US Equity Communication Services Stay Long + + + + + MASTERCARD INC - A MA US Equity Information Technology Stay Long + + + + + ADOBE INC ADBE US Equity Information Technology Stay Long + + + + + VISA INC-CLASS A SHARES V US Equity Information Technology Stay Long + + + + + ABBVIE INC ABBV US Equity Health Care Overweight + + + +
PYPL US Equity Information Technology Overweight + + +
CHURCH & DWIGHT CO INC CHD UN Equity Consumer Staples Overweight + + +
MCDONALD'S CORP MCD US Equity Consumer Discretionary Overweight + + +
WALMART INC WMT US Equity Consumer Staples Benchmark + +
+ UNILEVER NV UNA NA Equity Consumer Staples Stay underweight + +
DOLLAR TREE INC DLTR UW Equity Consumer Discretionary Stay underweight + +
BOEING CO/THE BA US Equity Industrials Stay underweight + +
FDX US Equity Industrials Stay underweight + +
NKE US Equity Consumer Discretionary Short term weakness +
+ + WALT DISNEY CO/THE DIS US Equity Communication Services Short term weakness +
+ + FACEBOOK INC-CLASS A FB US Equity Communication Services Short term weakness
+ + MEDTRONIC PLC MDT US Equity Health Care Short term weakness
+ + BOOKING HOLDINGS INC BKNG US Equity Consumer Discretionary Reduce position +
+ UNITED PARCEL SERVICE-CL B UPS US Equity Industrials Reduce position
+ VERIZON COMMUNICATIONS INC VZ US Equity Communication Services Reduce position
+ 3M CO MMM US Equity Industrials Avoid
WFC US Equity Financials Avoid +
XLNX UW Equity Information Technology Avoid
EXXON MOBIL CORP XOM US Equity Energy Avoid
CVX US Equity Energy Avoid
DD US Equity Materials Avoid
HSBA LN Equity Financials Avoid +
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MAPPING RISK
for each company
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TO INFINITY & BEYOND
▪ why did the world change so quickly ? ▪ is QE Infinity and the $ 3tn package enough to save growth in 2020? ▪ what has the equity market discounted ? ▪ are we at risk of a further major secular decline in equity prices ? ▪ indicators we are monitoring.
Q3 : 2020
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WHAT STARTED THE DECLINE IN EQUITIES
a freeze in the interbank market in the US
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FOLLOWED BY
a blow out in credit spreads in the BBB and other markets
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ECONOMIC SURPRISE INDEX
has clearly weakened
Source: Ned Davis Research
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S&P – SECTOR SPREADS
very concentrated in Health, Staples, Tech & select Discret
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S&P – TECHNICALS
net positive
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S&P – LIQUIDITY
net positive
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CURRENT MARKET DYNAMICS
investors shun weak balance sheet companies
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PORTFOLIO STRUCTURE
well diversified
MICROSOFT 4.71% AMAZON.COM INC 3.73% JNJ (JOHNSON & JOHNSON) 3.54% PROCTER AND GAMBLE 3.33% BARRICK GOLD CORP 3.32% ALPHABET INC - CL A 3.01% HOME DEPOT 2.97% VISA INC 2.90% THERMO FISHER SCIENTIFIC INC 2.56% MASTERCARD INC-CLASS A 2.55% NVIDIA CORP 2.53% S&P GLOBAL INC 2.52% WAL-MART STORES INC 2.49% JP MORGAN CHASE 2.48% ADOBE SYSTEMS INC 2.46% NIKE INC -CL B 2.41% APPLE INC 2.37%
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CURRENT MAPPING
comparing earnings over next two years to p:e multiple
EPS GROWTH OVER NEXT 2Yrs PE MULTIPLE 1Yr Fwd
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CONCLUDING REMARKS
▪ Equity markets started to feel the pressure from liquidity shortages in sept 2019 ▪ Central banks responded to this risk and the economic impact of covid 19 with unprecedented liquidity ▪ Risk assets have been redefined by price: ▪ bond yields in developed markets are artificially supressed ▪ bond yields in emerging markets may be overpricing risk ▪ the us equity market is highly differentiated ▪ what price the future value of the dollar ? ▪ what is a risk free asset ? ▪ Opportunities exist in the interplay between growth, liquidity & yield.
Q3 : 2020
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Vunani Fund Managers 6th Floor, Letterstedt House Newlands on Main Newlands, 7700 Telephone: (021) 670-4900 Email: info@vunanifm.co.za Website: www.vunanifm.co.za
Company Registration No: 1999/015894/07 Vunani Fund Managers (Pty) Ltd is an authorised financial services provider (license no. 608) approved by the regulatory authority (www.fsca.co.za) to provide intermediary services and advice in terms of the Financial Advisors and Intermediary services Act 37 of 2002. The value of investments, and the income from investments, may fluctuate and past performance is not necessarily a guide to future performance. The information and opinions contained in this document are provided in good faith and from sources believed to be reliable, but no representation or warranty, expressed or implied is made to their accuracy, completeness or correctness. Vunani Fund Managers accordingly accepts no liability whatsoever for any direct, indirect or consequential loss arising from this document or its contents. Certain directors may have direct or indirect interests in some of the shares or companies mentioned in this report. The information in this document may not be reproduced, copied or redistributed in whole or part without the prior written consent of Vunani Fund Managers (Pty) Ltd. Vunani Fund Managers (Pty) Ltd claims compliance with the Global Investment Performance Standards (GIPS) and has prepared and presented this report in compliance with the GIPS standards. Vunani Fund Managers (Pty) Ltd has been independently verified for the periods 1 January 2005 to 31 December 2019. The verification report is available on request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm- wide basis and (2) the firms’ policies and procedures are designed to calculate and present performance in compliance with the GIPS