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Amundi Funds Equity Europe Minimum
Variance Citywire Montreux
May 22-24, 2013
Melchior Dechelette
Head of Equity Thematic
This material is solely for the attention of "professional” investors (see more details and definitions at the end of the document).
FOR EXCLUSIVE USE OF PROFESSIONAL CLIENTS
Citywire – April 2013 - page 2
Citywire – April 2013 - page 2
Amundi, one of the world largest asset managers
Mutual fund management
open-ended funds
Asset management for
institutional clients in terms of AUM
€727.4 Bn AUM1
No.13 No.2 4
No.2 2
No.2 5
No.9
2
No.5
6
1.Amundi Group figures as at 31 December 2012. 2. Total net assets - Source : IPE «Top 400 global asset managers active in the European marketplace » published in June 2012, data as at December 2011. Ranking established from a questionnaire fulfilled by fund management companies total AUM as at December 2011 (open-end funds, dedicated funds, mandates). Ranking modified to account for a double counting of assets. 3. Source Europerformance NMO – December 2012– French domiciled funds. 4.Source Lipper FMI –December 2012 - funds domiciled in Europe and in related offshore territories. 5. in Europe- Open-ended funds, dedicated funds, mandates- Source Top 120 IPE European Institutional Managers published in June 2012, data as at December 2011. 6. Open-ended funds, dedicated funds, mandates- Source Top 120 IPE European Institutional Managers published in June 2012, data as at December 2011.
FOR EXCLUSIVE USE OF PROFESSIONAL CLIENTS
Citywire – April 2013 - page 3
Citywire – April 2013 - page 3
Located in some 30 countries across 5 continents, Amundi covers the main
markets and investment regions throughout the world.
With a strong local presence, Amundi is committed to offering its clients a
relationship defined by both proximity and a long term view.
Amundi, a broad international presence
Citywire May 2013 - page 3
FOR EXCLUSIVE USE OF PROFESSIONAL CLIENTS
Citywire – April 2013 - page 4 Citywire – April 2013 - page 4
Minimum Variance strategy key points
Obtain a higher Sharpe ratio by outperforming the market while reducing
volatility
Protect the portfolio against drawdowns by limiting risk concentrations
and therefore bubbles
Invest high quality stocks with strong fundamentals
Use internally developed advanced risk tools to avoid traps of purely
systematic procedures
Offer a portfolio resilient in bear markets but performing in bull markets
“ Diversification is the only free lunch” Markowitz June 1952
Citywire May 2013 - page 4 Citywire May 2013 - page 4
Citywire – April 2013 - page 5
Why risk efficient solutions?
Sector Weight
Energy 9.8%
Materials 7.4%
Industrials 9.2%
Consumer Discretionary 9.6%
Consumer Staples 9.1%
Health Care 8.1%
Financials 30.5%
Information Technology 3.8%
Telecommunication Services 6.5%
Utilities 6.1%
Source : Amundi, MSCI Datastream - Weights of GICS1 sectors - december 2006
Market data are no reliable indicators for future market behaviours.
Sector weightings of the world market cap index - MSCI World
Market cap weighted index is not diversified in terms of risks
Citywire May 2013 - page 5
Citywire – April 2013 - page 6
A low yield context calling for new strategies
Impact of low interest rates
Our proposal:
Make equities relatively more attractive
Fixed Income diversification seems to be skewed towards negative outcome
Make classical diversification (bond/equity) framework ineffective
Interest rates at 2%:
how low can they go ?
how high can they go ?
• reduce risk1 in the portfolio
• diversify within the equity market
Market data are no reliable indicators for future market behaviours.
1- No capital guarantee.
Citywire May 2013 - page 6
Citywire – April 2013 - page 7
Market capitalization indexes
Source: MSCI, Datastream. Data as of end December 2012.
Market data are no reliable indicators for future market behaviours.
Equity indexes are usually prone to
Sectors’ concentration
Weights of sectors in global cap weighted index
0%
5%
10%
15%
20%
25%
30%
35%
73 78 83 88 93 98 03 08
Oil & Gas
Technology
Financial
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
79 84 89 94 99 04 09
Countries’ concentration
Weights of Japan in global cap weighted index
Citywire May 2013 - page 7
Citywire – April 2013 - page 8
Market capitalization indexes
Source: MSCI, Datastream. Data as of end December 2012.
Market data are no reliable indicators for future market behaviours.
Equity indexes are usually prone to
Stocks’ concentration
MSCI Europe - 436 stocks
10% of risk budget on 5 stocks
50% of risk budget on 47 stocks
Risk analysis – MSCI Europe
Company Name Contribution to
total risk HSBC 3.0%
BP 2.0%
Santander 1.7%
Total SA 1.7%
Rio Tinto 1.6%
Total 10.0%
Citywire May 2013 - page 8
Citywire – April 2013 - page 9
Amundi Funds Equity Europe Minimum Variance
Improve the efficiency of the equity exposure: lower risk and long term capital gains
A three-pillar investment process focused on the risk reduction of the portfolio
With Amundi, aim for return with a lower risk
1. Manage fundamental risk High quality stock selection
2. Reduce Volatility
3. Mitigate model risk
Source: Amundi
For illustrative purposes only. Citywire May 2013 - page 9
Citywire – April 2013 - page 10
Portfolio style exposures
-100
-80
-60
-40
-20
0
20
40
60
Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13
EU DivYld EU Growth
EU Leverage EU Momentum
EU Profit EU Size
EU Value EU Volatility
Source: Amundi, Bloomberg, data as at end of March 2013
Market data are no reliable indicators for future market behaviours.
Citywire May 2013 - page 10
Citywire – April 2013 - page 11
04/2009 - 04/2013 Cumulative
Return
Annualized
Return Volatility
Sharpe
ratio
Max
Drawdown
Up
participation
Down
participation
Amundi Funds Equity Europe
Minimum Variance - IE (net) 67.8% 14,2% 13.8% 1,00 -15.7% 67.6% 32.0%
MSCI Europe 65.4% 13,8% 18.6% 0.71 -24.3%
Attractive performances
Source: Amundi. Net performance in EUR as at end April 2013. Daily data. Net performance of Amundi Funds Equity Europe Minimum Variance
– IE (C). Past performance is no reliable indicator for future returns.
For further details regarding performance, please refer to the Key Investor Information Document (KIID) of the sub-fund.
Citywire May 2013 - page 11
90
100
110
120
130
140
150
160
170
180
Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13
Amundi Fds Eq Europe Minimum Variance IE
MSCI Europe
Citywire – April 2013 - page 12
80
90
100
110
120
130
140
150
160
Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12
Balanced I
Balanced II
Benefits of Minimum Variance and risk asset allocation
Source: Amundi. Buy and hold strategies with inception date April 29th 2009. Amundi Funds Equity Europe Minimum Variance was
activated on 13 April 2012 following the merger with Structura Minimum Variance Europe which results from the absorption of
Amundi Funds Minimum Variance Europe (created in April 2009) on 13 May 2011. ). Past performance is no reliable indicator for
future returns. Market data are no reliable indicators for future market behaviours.
With the same 10% risk budget you can invest in:
Portfolio Balanced I: 50% MSCI Europe + 50% Barclays Euro Corp
Portfolio Balanced II: 70% Amundi Fds Eq Eur Minimum Variance (net) + 30% Barclays Euro Corp
Balanced I: +43.3%
Balanced II : +54.2%
Citywire May 2013 - page 12
Citywire – April 2013 - page 13
Data Source - ©[2013] Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. 3 Lipper is not responsible for the accuracy, reliability or completeness of the information that you obtain. In addition, Lipper will not be liable for any loss or damage resulting from information obtained from Lipper or any of its affiliates. © Thomson Reuters 2013. All rights reserved. Source: Amundi, data, organisation and net performance of Amundi Funds Equity Europe Minimum Variance – IE (C) as at End April 2013. Past performances do not prejudge future performances.
Minimum Variance expertise at Amundi
Seven years experience in risk efficient solutions
€ 1.5bn AUM in risk efficient solutions
Three-members team backed by three quant analysts
First fund launched in 2007
European, Global Developed, and Global Emerging investment universe
Competitive ranking and attractive performance
5-star rated by Morningstar
1st Lipper quartile over 3 years
+14,2 % since inception annual based performance
1,0 Sharpe ratio since inception
Citywire May 2013 - page 13
Citywire – April 2013 - page 14 Citywire – April 2013 - page 14
Appendices
Citywire May 2013 - page 14
Citywire – April 2013 - page 15
Minimum Variance team Melchior Dechelette: Co-Head of Thematic Equity management, Senior Portfolio manager • Joined Amundi (previously CAAM) in 2002 and served as European equity manager until 2004.
• Previously worked as a portfolio manager and buy-side analysis for CPR AM (1998-2002).
• Credit analysis, Defeasance Management, Project Finance Management for Archon Group 1993-1998
• Holds a MA in Finance from Paris IX Dauphine University.
Julien Bonnin, CIIA: Co-Portfolio manager • Joined Amundi (previously CAAM) in 2002 as a junior European Equity portfolio manager.
• Previous experience includes portfolio management at Indosuez Private Banking (1999-2000) & CPR AM (2000-2002).
• Holds a MA in Finance from Paris IX Dauphine and is a CIIA.
Olivier Avertin: Co-Portfolio manager • Joined Amundi (previously CAAM) in 2007 as a Global equity and Absolute return portfolio manager
• Was previously proprietary trader at Exane for eight years, managing absolute return quantitative stock-picking and discretionary
global macro strategies.
• Holds a Postgraduate degree in Finance from IEP (Institute of Political Science Paris) and a Postgraduate degree in Applied
Mathematics from the University of Paris Dauphine
Alessandro Russo, CFA: Head of Equity Quantitative Research • Head of the Equity and Volatility Arbitrage Quantitative research team (7 people) of Amundi since 2007.
• Previously held the position of head of quantitative research at Amundi in Milan, where he joined in 2005.
• Graduated from Bocconi University, and is a CFA Chartholder.
Frédéric Lepetit: Quantitative Analyst • Joined Amundi’s quantitative research department in July 2010 as a quantitative analyst.
• Previously worked for SGAM as a quantitative analyst.
• Graduated from La Sorbonne University with a degree in economy and asset management.
Thierry Morel: Quantitative Analyst • Joined Amundi’s Research department in 2007.
• Graduated from HEC and completed his studies with a MA in quantitative economics at Ecole Normale Supérieure.
Citywire May 2013 - page 15 Source: Amundi.
Citywire – April 2013 - page 16
Minimum variance Strategy performance since inception
123
110
93
40
50
60
70
80
90
100
110
120
130
10
/12
/20
07
31
/01
/20
08
20
/03
/20
08
16
/05
/20
08
04
/07
/20
08
26
/08
/20
08
14
/10
/20
08
04
/12
/20
08
30
/01
/20
09
20
/03
/20
09
05
/15
/20
09
07
/08
/20
09
08
/26
/20
09
10
/14
/20
09
12
/02
/20
09
01
/25
/20
10
03
/15
/20
10
05
/05
/20
10
06
/28
/20
10
08
/16
/20
10
10
/04
/20
10
11
/23
/20
10
01
/11
/20
11
03
/01
/20
11
04
/19
/20
11
06
/10
/20
11
08
/02
/20
11
09
/21
/20
11
11
/10
/20
11
12
/30
/20
11
02
/17
/20
12
04
/10
/20
12
06
/01
/20
12
07
/20
/20
12
09
/10
/20
12
10
/29
/20
12
12
/18
/20
12
02
/11
/20
13
20
12
Fundamental Minimum Variance Minimum Variance model MSCI Europe
Data Dec 2007 - March 2013
Citywire May 2013 - page 16
Source: Amundi.
Risk diversification: There is hope !
Portfolio total risk is reduced
Risk is better diversified among axes
From To
60% Market risk / commonly called “beta”
All other Risks represent low correlated
portfolios within the market
Other risk axes: for example US Consumer & Tech vs Piigs, Asia Natural resources vs Piigs, Low vol Europe ex-Euro Small Cap vs
Cyclicals, US Tech & Defensives vs Asia ex Japan
“Diversification is the only free lunch” – H. Markowitz
Citywire May 2013 - page 17
Generate performance by diversifying away from market axis
Source: Amundi
-10
-5
0
5
10
15
20
25
30
35
May-09 Nov-09 May-10 Nov-10
Market risk premium2nd risk axis3rd risk axis4th risk axis5th risk axis
80
100
120
140
160
180
200
May-09 Nov-09 May-10 Nov-10
Amundi MinVar
MSCI EM
80
90
100
110
120
130
140
Mar-11 Sep-11 Mar-12 Sep-12 Mar-13
Amundi MinVar
MSCI EM
-10
-5
0
5
10
15
20
25
Mar-11 Sep-11 Mar-12 Sep-12 Mar-13
Market risk premium2nd risk axis3rd risk axis4th risk axis5th risk axis
Risk On : May 2009-April 2011 Risk Off : April 2011-March 2013
Citywire May 2013 - page 18
Quality selection: performances and risk
12/2000-12/2012Cumulated
Return
Annualized
ReturnVolatility
Sharpe
Ratio
High quality stocks 221,4% 10,1% 17,0% 0,48
Low quality stocks 117,9% 6,7% 20,9% 0,22
MSCI World EQW 160,1% 8,2% 18,5% 0,33
Reducing volatility
and
enhancing expected
return
at the stock selection
stage
0
50
100
150
200
250
300
350
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
High quality stocks
Low quality stocks
MSCI World EQW
Source: Amundi – Quant Research. Simulated TR gross performances in USD.
Data from 31/12/2000 to 31/12/2012
* Refined version of the Piotroski score. Details provided in appendix Citywire May 2013 - page 19
Quality selection: selection metrics
Our stock selection has :
A higher quality and debt score
A higher FCF yield
Source: Amundi – February 2013
MSCI World
Our stock
selection
MSCI WORLD Stocks nber % Div Yield Pay-out FCF YQuality
score
Debt/ mkt
cap
Utilities 82 5% 4,3% 73% -1,5% 526 164%
Consumer Discretionary 238 15% 2,0% 30% 5,3% 594 16%
Consumer Staples 125 8% 2,5% 41% 4,9% 576 19%
Telecommunication Services 48 3% 5,1% 68% 9,6% 586 69%
Financials 331 21% 3,0% 53% NS 247 NS
Information Technology 147 9% 1,6% 25% 6,5% 547 -7%
Health Care 116 7% 1,6% 26% 6,6% 571 6%
Industrials 259 16% 2,3% 40% 5,1% 559 30%
Energy 118 7% 1,8% 74% 0,5% 584 35%
Materials 146 9% 2,1% 33% 3,4% 564 36%
1610 100% 2,4% 43% 3,6% 502 25%
Selection MVStocks
nber% Div Yield Pay-out FCF Y
Quality
score
Debt/ mkt
cap
Utilities 10 2% 3,8% 51% 5,1% 579 64%
Consumer Discretionary 89 21% 2,0% 29% 5,7% 674 1%
Consumer Staples 44 10% 2,6% 43% 5,1% 680 5%
Telecommunication Services 15 4% 4,6% 60% 8,2% 640 33%
Financials 51 12% 2,9% 35% NS 409 NS
Information Technology 59 14% 1,7% 24% 7,1% 634 -13%
Health Care 46 11% 1,6% 25% 6,6% 631 -1%
Industrials 70 17% 2,3% 33% 5,9% 641 3%
Energy 13 3% 2,5% 28% 5,6% 693 10%
Materials 25 6% 2,5% 38% 4,8% 684 5%
422 100% 2,3% 33% 5,3% 624 3%
Citywire May 2013 - page 20
Dealing with asymmetrical risk profile
“Symmetrical asset” has a five days max
drawdown of 4%
All assets do not have the same risk profile
“Asymmetrical asset” has a five days max
drawdown of 13%
Both assets exhibit the same historical volatility : 8%
Mean-variance optimisers do not see risk beyond variance
Portfolio manager needs to be aware of these differences
Citywire May 2013 - page 21
Dealing with asymmetries
Citywire May 2013 - page 22 Source: Amundi.
Dealing with asymmetrical risk profile
• Reduce negative Value exposure
• Reduce Small Cap exposure
Avoiding asymmetrical assets to reduce drawdown risk
Analyse the exposure of the portfolio to risk factors: styles, sectors, countries
Analyse the behaviour of risk factors
Reduce large exposure to factors exhibiting significantly high asymmetrical behaviour
Sensitivity to risk factors Step 1 Final Portfolio
Total Risk 11,8 12,6
Global Yield 0,21 0,18
Global Momentum 0,18 0,23
Global Leverage -0,02 -0,12
Global Market Sensivity -0,15 0,17
Global Growth -0,2 -0,13
Global Foreign Exposure -0,19 -0,03
Global Value -0,4 -0,2
Global Size -0,51 -0,2
Global Volatility -0,58 -0,52
See below an example of style risk factor
adjustment on Barra factors
Citywire May 2013 - page 23 Source: Amundi.
Performance attribution model: Barra
Rationale for Using the Barra performance attribution model : Classical attribution models can split country/sector allocation, but the stock selection effect is not analysed
A stock’s performance also depends on its market risk, such as Value or Growth risk, etc…
It is coherent with our intensive use of the risk model
Citywire May 2013 - page 24 Source: Amundi.and Barra
Barra Performance Attribution vs MSCI Europe
Citywire May 2013 - page 25 Source: Amundi and Barra
Barra Performance Attribution vs Model
Citywire May 2013 - page 26
Source: Amundi.and Barra
Minimum Variance Fund profile
Citywire - April 2013 - page 27
Sector breakdown Country breakdown
Main holdings
Nb of stocks: 63
Equity exposure: 92.1%
Ptf Weight Bench Weight Spread
Equities 92,1% 100,0% -7,9%
Energy 2,6% 10,5% -7,9%
Materials 1,5% 9,7% -8,2%
Industrials 16,5% 11,2% 5,3%
Consumer Discretionary 8,7% 9,1% -0,3%
Consumer Staples 19,7% 14,5% 5,2%
Health Care 19,8% 11,9% 7,9%
Financial 2,7% 20,6% -17,9%
Information Technology 8,4% 3,0% 5,4%
Telecommunication Services 10,9% 5,4% 5,5%
Utilities 1,3% 4,2% -2,8%
Ptf Weight
Bench
Weight Spread
Equities 92,1% 100,0% -7,9%
AUSTRIA 0,5% -0,5%
BELGIUM 1,8% -1,8%
BERMUDA 0,2% -0,2%
DENMARK 7,2% 1,8% 5,4%
FINLAND 1,2% -1,2%
FRANCE 11,9% 13,9% -2,1%
GERMANY 9,0% 12,9% -3,9%
GREECE 0,1% -0,1%
GUERNSEY 0,1% -0,1%
IRELAND 2,4% 0,4% 2,0%
ITALY 3,0% 3,3% -0,3%
JERSEY 4,9% 1,4% 3,5%
LUXEMBOURG 0,7% -0,7%
NETHERLANDS 0,8% 4,7% -4,0%
NORWAY 2,8% 1,1% 1,6%
PORTUGAL 0,3% -0,3%
SPAIN 1,6% 4,6% -3,0%
SWEDEN 1,5% 4,7% -3,3%
SWITZERLAND 14,6% 13,3% 1,3%
UNITED KINGDOM 32,6% 33,0% -0,4%
Name Ptf Weight MSCI Sector Issuer Country
SAP AG 2,8% Information Technology GERMANY
VIVENDI SA 2,8% Telecommunication Services FRANCE
TELENOR ASA 2,8% Telecommunication Services NORWAY
COLOPLAST A/S 2,7% Health Care DENMARK
SWISSCOM AG 2,5% Telecommunication Services SWITZERLAND
PEARSON PLC 2,5% Consumer Discretionary UNITED KINGDOM
SHIRE PLC 2,5% Health Care JERSEY
DANONE (EX GROUPE DANONE) 2,5% Consumer Staples FRANCE
DASSAULT SYSTEMES SA 2,5% Information Technology FRANCE
SMITH & NEPHEW PLC 2,4% Health Care UNITED KINGDOM
Source: Amundi. 31/12/2012
Citywire May 2013 - page 27
Citywire – April 2013 - page 28 Citywire – April 2013 - page 28
F i n d o u t m o r e o n o u r d e d i c a t e d w e b s i t e s
Amundi Funds Equity Europe Minimum Variance
http://minvar.amundi.com
Citywire May 2013 - page 28
Citywire – April 2013 - page 29
Disclaimer
This document contains information about Amundi Funds Equity Europe Minimum Variance (the “Sub-Fund”), sub-fund of Amundi Funds (the “SICAV”), an undertaking
for collective investment in transferable securities existing under Part I of the Luxembourg law of 17 December 2010, organised as a société d’investissement à capital
variable and registered with the Luxembourg Trade and Companies Register under number B68.806. The SICAV has its registered office at 5, allée Scheffer, L-2520
Luxembourg.
Amundi Funds has been authorised for public sale by the Commission de Surveillance du Secteur Financier in Luxembourg.
Not all sub-funds of the SICAV will necessarily be registered or authorized for sale in all jurisdictions or be available to all investors.
Subscriptions in the Sub-Fund will only be accepted on the basis of the SICAV’s latest prospectus and the Key Investor Information Document (KIID) of its latest annual
and semi-annual reports and its articles of incorporation that may be obtained, free of charge, at the registered office of the SICAV or respectively at that of the
representative agent duly authorized and agreed by the relevant authority of each relevant concerned jurisdiction.
Consideration should be given to whether the risks attached to an investment in the Sub-Fund are suitable for prospective investors who should ensure that they fully
understand the contents of this document. A professional advisor should be consulted to determine whether an investment in the Sub-Fund is suitable.
The value of, and any income from, an investment in the Sub-Fund can decrease as well as increase. The Sub-Fund has no guaranteed performance.
Further, past performance is not a guarantee or a reliable indicator for current or future performance and returns. The performance data do not take account of the
commissions and costs incurred on the issue and redemption of units.
This document does not constitute an offer to buy nor a solicitation to sell in any country where it might be considered as unlawful, nor does it constitute public
advertising or investment advice.
The information contained in this document is deemed accurate as at End April 2013.
This material is solely for the attention of institutional, professional, qualified or sophisticated investors and distributors. It is not to be distributed to the general public, private customers or retail investors in any jurisdiction whatsoever nor to “US Persons”.
Moreover, any such investor should be, in the European Union, a “Professional” investor as defined in Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments (“MIFID”) or as the case may be in each local regulations and, as far as the offering in Switzerland is concerned , a “Qualified Investor” within the meaning of the provisions of the Swiss Collective Investment Schemes Act of 23 June 2006 (CISA), the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the FINMA’s Circular 08/8 on Public Advertising under the Collective Investment Schemes legislation of 20 November 2008. In no event may this material be distributed in the European Union to non “Professional” investors as defined in the MIFID or in each local regulation, or in Switzerland to investors who do not comply with the definition of “qualified investors” as defined in the applicable legislation and regulation.
Amundi, French joint stock company (“Société Anonyme”) with a registered capital of € 584 710 755 and approved by the French Securities Regulator (Autorité des Marchés Financiers-AMF) under number GP 04000036 as a portfolio management company, 90 boulevard Pasteur -75015 Paris-France - 437 574 452 RCS Paris.
www.amundi.com - www.amundi-funds.com
Citywire May 2013 - page 29