MERIAN GLOBAL EQUITY FUND www.merian.com FOR PROFESSIONAL INVESTORS ONLY The art and science of investing TM
PRODUCT MERIAN GLOBAL EQUITY FUND
02_18_0017 REASONS TO BE DIFFERENT ‘A style for all seasons’ – flexible approach with no style bias Great diversifier – genuinely uncorrelated with peers Large opportunity set – underscored by a demonstrably repeatable, dispassionate process Excellent track record Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. 2
08_18_0017 MARKETS RISE AND FALL AGAINST DIFFERENT DRIVERS MSCI WORLD EQUITY INDEX (USD) 2500 2000 DOMESTIC RECOVERY EMERGING MARKETS 1500 TECHNOLOGY FINANCIALS 1000 500 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. Source: Bloomberg, as at 31/07/2018 . 3
08_18_0018 CORRELATION MERIAN GLOBAL EQUITY FUND (R GBP ACC) Fund 1 Fund 2 Fund 3 Fund 4 Fund 5 Merian Global Equity -0.12 0.05 -0.25 0.34 -0.19 Fund The figures show the absolute correlation of alpha (excess returns over the peer group) generated by the Merian Global Equity Fund and the five highest AUM active funds (with a base currency of US$ and a three year track record) in its sector. The returns were measured month by month between July 2015 and July 2018. Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. Source: Morningstar via Factset. MGI as at 31/07/2018. 4
01_17_0047 INVESTMENT PARAMETERS MAJOR PORTFOLIO CONSTRAINTS Active Risk 3 - 4% Sector +/- 5% relative to benchmark Industry +/- 5% relative to benchmark Stock +/- 0.5% relative to benchmark Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. 5
TEAM MERIAN GLOBAL EQUITY FUND
09_18_0177 MGI’S GLOBAL EQUITIES TEAM Managing over US$20 billion of hedge Fund managers have worked together for over 13 years and long only global equity funds* DR IAN HESLOP DR AMADEO ALENTORN, CFA MIKE SERVENT HEAD OF GLOBAL EQUITIES FUND MANAGER & FUND MANAGER & HEAD OF RESEARCH HEAD OF SYSTEMS Ian joined the company in 2000 and is head of global Amadeo joined the business in 2005. Prior to joining the Mike joined the company in 2004. He joined from Barra equities. Ian boasts more than 20 years of investment company, he developed simulation models for systemic International where he was a senior consultant specialising experience. He holds an MA in chemistry from the University and liquidity risk for the Financial Stability Group at the Bank in the implementation of multi asset-class risk systems. Prior of Oxford and a PhD in medicinal chemistry, University of of England. He holds a BEng in robotics from the University to this he spent five years with COR Risk Solutions. Mike has Edinburgh. He is an associate of the Society of Investment of Plymouth, an MSc in computer science, and a PhD in an MA in physics from the University of Oxford. Professionals. computational finance from the University of Essex. He is a CFA charterholder. SUPPORTED BY A DEDICATED TEAM JUSTIN WELLS DR YUANGAO LIU, CFA MATUS MRAZIK SEAN STOREY STRATEGIST SENIOR ANALYST SENIOR ANALYST SENIOR QUANTITATIVE DEVELOPER Over 13 years of Over 8 years of Over 9 years of Over 18 years of industry experience industry experience industry experience industry experience Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. Source: MGI as at 31/07/2018. 7
09_17_0102 EXTERNAL RESEARCH STRONG LINKS WITH LEADING ACADEMICS ENHANCE OUR RESEARCH CAPABILITIES ADVISORY BOARD DR IAN MARSH DR STEVE SATCHELL External team of leading academic experts, PROFESSOR OF FINANCE FELLOW OF TRINITY COLLEGE CASS BUSINESS SCHOOL, CITY UNIVERSITY UNIVERSITY OF CAMBRIDGE with in-depth specialist knowledge in fields including finance, investing, accounting, macroeconomics and statistics. They Areas of expertise include exchange rate Focuses on both empirical and theoretical enhance our internal research capabilities aspects of econometrics, finance, risk by: modelling and forecasting, credit risk modelling measurement and utility theory. and applied financial econometrics. Conducting bespoke research projects Updates on the latest academic advances DR MARK SALMON DR PETER POPE Contributing ideas on new insight and PROFESSOR OF FINANCE PROFESSOR OF ACCOUNTING analysis UNIVERSITY OF CAMBRIDGE LONDON SCHOOL OF ECONOMICS Being part of the change control process Current research interests lie in financial Has researched and published extensively in econometrics, behavioural finance and the areas of capital markets, financial aspects of international macroeconomics. reporting and international equity valuation. VIRTUAL LABORATORY External team of postgraduate researchers sponsored by us to work on short term projects of mutual interest. The key contribution is research that is more ‘blue sky’ and cutting edge. 8
08_18_0017 MGI’S GLOBAL EQUITIES TEAM AWARDS & RATINGS ASIA PACIFIC FUND GLOBAL EQUITY INCOME FUND WORLD EQUITY FUND GLOBAL EQUITY ABSOLUTE RETURN FUND NORTH AMERICAN EQUITY FUND GLOBAL EQUITY FUND NORTH AMERICAN EQUITY FUND (IRL) Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. Source: MGI as at 31/07/2018. Awards and ratings shown are for Merian’s global equities’ team and its funds. 9
PROCESS MERIAN GLOBAL EQUITY FUND
01_17_0047 INVESTMENT PROCESS STOCK SELECTION CRITERIA DYNAMIC ANALYST COMPANY MARKET SUSTAINABLE VALUATION GROWTH SENTIMENT MANAGEMENT DYNAMICS 11
01_17_0047 INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION PORTFOLIO CONSTRUCTION STOCK SELECTION MARKET ENVIRONMENT AND RISK MANAGEMENT CHARACTERISTICS IDENTIFICATION FRAMEWORK STOCK LEVEL MARKET LEVEL PORTFOLIO RISK MANAGEMENT Efficient, constrained, risk controlled Large opportunity set ~ 5,800 global Complementary stock selection criteria portfolio construction stocks provides diversified alpha sources In-built volatility control and downside Rigorous implementation of clear, Dynamic weighting of those criteria risk mitigation intuitive investment insights based on expected payoffs in prevailing market environment Correlation management to further Analysis using five tried and tested control risk stock selection criteria spanning multiple economic cycles Downside risk mitigated by controlling unwanted exposures 12
01_17_0047 STOCK SELECTION CRITERIA DYNAMIC VALUATION Attractive valuations considering both historic and forecast information Trade off between paying dividends or future growth Incorporating quality to reduce the downside risk of value investing Difference between mispricing and risk Impact of market risk appetite on returns to value 13
01_17_0047 DYNAMIC VALUATION CYCLICALITY OF VALUE RETURNS PROTECTION FROM VALUE DRAWDOWNS DURING PERIODS OF HIGH RISK AVERSION Dynamic valuation 20 Return Risk Sharpe Sortino p.a. p.a. Dynamic Cumulative log returns 8.6% 7.9% 1.1 2.4 8 valuation Price to 3.1% 15.0% 0.2 0.4 book Price to book 3 1 0.8 1981 1984 1987 1990 1993 1996 1999 2002 2004 2007 2010 2013 2016 Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. Source: MGI. Performance of market neutral quintile value portfolio in North America from August 1981 to December 2016. 14
01_17_0047 STOCK SELECTION CRITERIA SUSTAINABLE GROWTH Strong but stable growth characteristics Considering both historic and expected growth rates Expectations likely to be fulfilled Avoidance of ‘one hit wonders’ Protection from downturns in economic growth cycles 15
01_17_0047 STOCK SELECTION CRITERIA ANALYST SENTIMENT Changes in analyst forecasts contain price sensitive information Capture market under/over reaction to analyst revisions Incorporate asymmetric behaviour of analysts and markets Market reaction will vary according to company characteristics 16
03_18_0124 STOCK SELECTION CRITERIA COMPANY MANAGEMENT Evidence of strong company management teams making good capital investment decisions Efficient use of capital Signalling effect of dividends and share buybacks Impact of balance sheet bloat/empire building Implications of acquired vs organic growth 17
01_17_0047 STOCK SELECTION CRITERIA MARKET DYNAMICS Price driven information to identify trends Independent stock and industry information Looking for stable trends likely to persist Avoiding bubbles by looking for trends with fundamental support Accounting for unintended biases in trends 18
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