A unique pure-play approach to Frontier...

s

A unique pure-play approach to

Frontier Markets

31/10/2019

2

Contents

Executive Summary p. 3

About Us p. 4

Frontier Markets p. 5

Philosophy p. 13

Investment Process – Active Alpha Strategy p. 15

Investment Process – Investment Cases p. 18

Investment Process – Dynamic Beta Model p. 23

Investment Process – Value Generation p. 26

Aristea New Frontier Equity Fund p. 27

Contacts p. 41

Appendix p. 42

3

Executive Summary

Independent specialised boutique

Pure-play on equity investments in Frontier Markets

Unique approach based on behavioural finance studies

Over 30 years of collective experience

Interests of Kallisto’s managers and owners fully aligned with investors

Kallisto Partners

Dynamic and fast growing economies supported by a rising middle class

Attractive high long-term returns

A compelling source of income

Economies driven by local factors

Financial markets show low correlation with both developed and emerging markets

The optimal way to diversify

Frontier Markets

Unique repeatable approach based on behavioural finance studies

Focus on capital flows

Diversified portfolio across sectors and shares from 20+ countries with low intra-correlation

Unique active risk management through flexible exposure

Pure exposure to Frontier Markets

Agnostic and unbiased

Fully customisable e.g.: geographic focus, target risk-adjusted returns

Investment Strategy

Aristea New Frontiers Equity Fund was launched in June 2016

Strategic partnership with London-based asset manager Banor Capital Ltd

Daily liquidity

Target Return: 5% p.a. over reference markets over a full market cycle (3-5 years)

Target Information Ratio: ~1

Pension fund amongst the anchor investors

Dedicated Luxembourg UCITS Fund

4

About Us

Kallisto Partners is an independent boutique which only focuses on equity investment in Frontier Markets

and is fully owned by the managing partners. The firm was established in 2012 with a mandate to invest

capital in early stage financial markets globally.

The investment team have worked together since 2007 advising institutional investors in Emerging and

Frontier markets, with investment strategies based on behavioural finance.

The managing partners have over 30 years of collective investment experience and are motivated by a

dynamic and innovative entrepreneurial mindset.

Total Assets Under Influence of over USD 100 mln.

The dedicated Aristea New Frontiers Equity Fund was launched in June 2016 (Luxembourg daily UCITS).

Innovative approach: the strategy focuses on behavioural finance, by identifying capital flows of

institutional investors which strongly influences market prices.

The interests of Kallisto’s managers are fully aligned with investors. The team have invested their own

capital directly in the strategy and are also the shareholders of the company.

Luca Clementoni

Andrea Federici

Massimo Dinia Kallisto Partners

2008 2009 2010 2011 2012 20162013 2014 2019

Kallisto Partners

Kallisto Partners

201820172015

ABI Galileo Finance

Gruppo GRP Galileo Finance

2001

Galileo Finance

2006 2007

5

Frontier Markets – The Next Growth Story

The term “Frontier Markets” is commonly used to describe the markets of the smaller and less accessible,

but still "investable", countries of the developing world. Such countries are at an earlier stage of economic

and financial development compared to traditional emerging ones and are characterised by dynamic

and fast growing economies.

0.0%

0.5%

1.0%

1.5%

2019 2020 2021 2022 2023 2024

Population growth forecast (p.a.)

Frontier Emerging Developed

Source: IMF, FTSE

Source: UN, FTSE, WorldBankFrontier Markets Rest of the World

0.0%

1.5%

3.0%

4.5%

2019 2020 2021 2022 2023 2024

GDP growth forecast (p.a.)


10%

World Population

6%

World GDP

1%

World Market Cap

11%

World Land Mass

6

Frontier Markets – Attractive Long-Term Returns

Frontier Markets are set to attract investors seeking higher long-term returns as they offer a range of

exciting growth opportunities.

Being at an early stage of development, Frontier economies are expected to grow faster than emerging

and developed economies. This is relevant from an investor’s perspective since capital market

liberalisation and the economic expansion act as key drivers to long-term market returns.

Thanks to their favourable demographic and socio-political environment, strong and sustainable growth

will be supported by a rising middle class consisting of productive workers and significant consumers.

Young population

Urbanisation

Rising education levels

Democratisation

Market-friendly reforms

Improving productivity

Increasing consumption

Economy liberalisation

Low cost labour

Foreign investments inflows

Source: IMF, FTSE

0%

5%

10%

15%

20%

25%

30%

2019 2020 2021 2022 2023 2024

5 years cumulative GDP growth forecast


7

Frontier Markets – A Rising Reality

A strong middle class is the real source of economic growth, since it provides a stable consumer base that

drives productive investments (Brueckner, 2018; Kharas, 2017; Uner and Gungordu, 2016; Kravets and

Sandikci, 2014). Moreover, it stimulates social interactions and reduces transaction costs through increasing

volumes of business. Frontier Markets have long since become Middle Income countries (early 2000s), and

are now on the verge to reach the Upper Middle/High end 1.

Source: Kallisto Partners

1. “Frontier Markets – A Rising Reality”, Kallisto Partners, Jun 2019

100

1,000

10,000

100,000

1995 2000 2005 2010 2015

Av

era

ge

GN

I P

er

Ca

pita

(C

urr

en

t $

)


Low/Lower Middle

Upper Middle/High

Lower Middle/Upper Middle

http://kallistopartners.com/eng/index.php/2019/06/27/frontier-markets-a-rising-reality/

8

Frontier Markets – A Compelling Source of Income

Over the last 15 years Frontier Markets companies have provided investors with Higher Dividend Yield than

Emerging and Developed Markets, proving them to be a better Source of Income than their “big

brothers”.

Source: Bloomberg, MSCI

0

2

4

6

8

1995 2000 2005 2010 2015 2020

Dividend Yield (%)

Developed Emerging Frontier

9

Frontier Markets – Attractive Low Correlations

Frontier Markets offer significant diversification benefits because of their lower level of integration with more

developed markets and because local factors tend to be more influential than the global economy.

In terms of portfolio-optimisation, long-term investors can benefit from introducing Frontier Markets in their

portfolios exploiting their low level of correlation with both developed and Emerging Markets.

Investing in this new asset class is the optimal way to diversify. Investors will start to consider a certain

degree of exposure to it as they did with Emerging Markets 15 years ago.

Low level of integration with more developed markets and locally driven economies

Low correlation with both developed and Emerging Markets

Portfolio diversification opportunity

Note: Data based on 5 years rolling monthly returns

Source: FTSE

0.00

0.25

0.50

0.75

1.00

1995 2000 2005 2010 2015 2020

Corr. Frontier vs Developed

Corr. Frontier vs Emerging

Corr. Emerging vs Developed

10

Frontier Markets – A Diversified Universe

Frontier Markets can be seen as a very volatile asset class, but the volatility of a diversified portfolio of

frontier countries is actually in line with other equity asset classes.

Even though individual frontier countries tend to have high idiosyncratic risks, global Frontier Markets

portfolios tend to be less volatile than global Emerging Markets portfolios.

Due to their locally driven economies, Frontier Markets present low intra-country correlations (and

sometimes even negative).


Source: FTSE

0

5

10

15

20

25

30

35

1995 2000 2005 2010 2015 2020

Ann. Volatility (%)

Developed Emerging Frontier Vietn

am

Bang

ladesh

Moro

cco

Nig

eria

Arg

entin

a

Rom

ania

Keny

a

Om

an

Slove

nia

Sri L

anka

Vietnam -

Bangladesh 0.10 -

Morocco 0.24 0.21 -

Nigeria 0.19 -0.07 0.18 -

Argentina 0.27 0.00 0.17 0.15 -

Romania 0.01 -0.08 0.05 0.04 -0.09 -

Kenya 0.27 -0.10 0.13 0.25 0.11 0.11 -

Oman 0.32 0.04 0.24 0.07 0.10 0.09 -0.07 -

Slovenia 0.20 0.03 0.31 0.32 0.21 0.11 0.20 0.04 -

Sri Lanka 0.19 -0.07 0.22 0.10 0.17 0.04 0.16 0.13 0.20 -

11

Frontier Markets – A Source of Diversification

The difference in correlation between markets at different levels of development suggests that investors in

both Developed and Emerging Markets can obtain diversification benefits by investing part of their

portfolios in Frontier Markets.

Simulations based on data from May 2002 to December 2018, showed that when adding a Frontier

Markets component to a portfolio invested in only Developed and Emerging Markets, the efficient frontier

moves in a positive direction (upwards to the left: EF1->EF2), improving the overall risk-return profile of the

original portfolio 1.


1. “Frontier Markets – A Source of Diversification”, Kallisto Partners, Jan 2019

100%

Developed

S1

75% Developed

+ 25% Emerging

S2 50% Developed

+ 50% Emerging

S3

25 %

Developed +

75 % Emerging

S4

100% EmergingS5

100% Frontier

5

6

7

8

9

10

14 16 18 20 22

An

n.

Re

turn

(%

)

Ann. Standard Deviation (%)

100%

Developed

EF1

100% Emerging

EF2

100% Frontier

5

6

7

8

9

10

14 16 18 20 22

An

n.

Re

turn

(%

)

Ann. Standard Deviation (%)

http://kallistopartners.com/eng/index.php/2019/02/05/frontier-markets-a-source-of-diversification/

12

Frontier Markets – The Countries

The aim of our analysis is to identify inefficiencies in markets characterised by particular microstructures

and the presence of large and concentrated investment flows.

The hunt for new potential markets and the continuous monitoring of factors which generate inefficiency

are the basis of our investment strategies.

Financial markets are multi-dimensional and the identification of their level of development/efficiency is

characterised by three main aspects, which are measured by several indicators.

Size

• Country Market Cap/GDP ratio

• Turnover ratio

Access

• Top 10 companies Market Cap

• Top 10 companies Free Float

Activity

• Synchronised activity/co-movement

• Trading based on non-public info

• Liquidity/Transaction Costs

Frontier Markets Universe

Frontier Markets Universe includes: Argentina, Bahrain, Bangladesh, Benin, Bosnia Herzegovina, Botswana, Bulgaria, Burkina Faso, Cambodia, Croatia, Cyprus,Egypt, Estonia, Georgia, Ghana, Guinea-Bissau, Iceland, Ivory Coast, Jamaica, Jordan, Kazakhstan, Kenya, Kuwait, Latvia, Lebanon, Lithuania, Macedonia,Mali, Malta, Mauritius, Moldova, Morocco, Myanmar, Niger, Nigeria, Oman, Palestine, Pakistan, Panama, Romania, Senegal, Serbia, Slovakia, Slovenia, SriLanka, Tanzania, Togo, Trinidad & Tobago, Tunisia, UAE, Ukraine, Vietnam, Zimbabwe.

13

Frontier Markets

Limited liquidity

Limited derivatives instruments

Difficult access

Up/Downgrading of Countries to/from EM status

Behavioural Finance Theories

Based on Academic research

Herding behaviour

Status quo bias

Groupthink

Philosophy – A Unique Approach

Our behavioural finance studies (aiming to forecast the investment flows) allow us to exploit the structural

inefficiencies of Frontier Markets.

Structural inefficiencies Investment flows forecasting

Our belief: in Frontier Markets stock prices are largely driven by institutional investors flows

Therefore, forecasting those flows can successfully add alpha.

14

Philosophy – Competitive Edge

Due to structural characteristics, investing in Frontier Markets with our philosophy allows us to achieve some

competitive edges over a judgmental approach which would involve some extra risks.

• Institutional flows contribute to create liquidity on the stocks they focus on

Liquidity

• We buy a stock only after the market discovers it and therefore flows support the price

Avoid Value Trap

• Objective Systems that does not rely on companies’ executives or third party research

Objective

• Independent from research analysts’ opinions and subjective believes

Impartial

• No focuses on particular countries or sectors

Unbiased Research

• Our strategy is scalable, flexible with no fixed research-linked cost

Scalable and Repeatable

15

Objective: Outperforming the benchmark identifying the stocks mostly supported by long term flows

Investment Process – Active Alpha Strategy: Stock Selection

The investment process is based on regular assessment of interest and forecast of investment flows.

The Active Alpha Strategy identifies the securities where the presence of a large interest of specialised

investors creates a continuative buying pressure. These securities have a great potential to outperform the

reference market.

Monitoring of a great number of stocks in 50+ developing countries

Highly informatised system for an efficient data management and analysis

Key factors are size, liquidity, institutional presence and activity, analysts coverage, dividend policy

Macro overlay to manage specific risks or to capture unique opportunities

Universe

Securities of 50+

countries

(~5000 stocks)

Multi-ranking

model

Regular

quantitative

screening of

forecasted

investment flows

Fine Tuning

Discretionary

adjustments

supported by

quantitative

research

Portfolio

Stock selection

(40-60 names)

16

Investment Process – Active Alpha Strategy: Stock Selection

•Proprietary screening model

•Monitoring of 40+ specialised foreign Frontier Markets investment teams

•Selection of a subset of stocks with foreign interest (400-600 stocks)

•Look-through of investment portfolios

Universe Selection

•Analysis of selected behavioural indicators: # of institutional holders, buyers and sellers, analysts covering

•Analysis of stock characteristics: free-float, daily turnover

•ESG: controversial country and sector exclusionary approach

•Dividend policy: pay-out ratio indicator, dividend yield

•Continuous engagement with buy-side PMs/analysts

•Attending companies roadshows and conferences

Assessment of interest and

attractiveness among

institutional investors

•Consideration of specific macro risks or tactical opportunities (e.g. expected currencies depreciations, geopolitical risks, indexes providers inclusion/upgrade)

•Position sizing: tendentially equi-weighted depending on liquidity (max 5% median 2%)

•Trading strategy based on deep knowledge of market microstructure (bid/ask analysis, intraday volatility)

•No FX hedging: most currencies are pegged and on the long term they appreciate

Portfolio Construction

17

Investment Process – Active Alpha Strategy: Performance

The Active Alpha strategy was implemented in the Aristea New Frontiers Equity Fund since its launch in

June 2016. The fund was able to invest in all markets since July 2017.

Source: Kallisto Partners, FTSE

-20%

-10%

0%

10%

20%

30%

40%

50%

06/16 12/16 06/17 12/17 06/18 12/18 06/19

Active Alpha Strategy FTSE Frontier IndexActive

Alpha

FTSE

Frontier

Ann. Return 3.23% -3.12%

Ann. Volatility 10.35% 13.15%

Sharpe Ratio 0.14 <0

Ann. Alpha

Tracking Error

Information Ratio

Beta

Correlation 0.79

0.62

0.64

8.02%

5.12%

18

Investment Process – Active Alpha Strategy: Backtest

The backtest is estimated using USD total returns, including transaction costs and assuming AUM of 500 mln

USD on the period Mar 2008 - May 2016.

Source: Kallisto Partners, FTSE

-50%

0%

50%

100%

150%

200%

250%

300%

350%

12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15

Active Alpha Strategy FTSE Frontier Index

Active

Alpha

FTSE

Frontier

Ann. Return 19.75% 3.22%


Sharpe Ratio 1.15 0.16

Ann. Alpha

Tracking Error

Information Ratio

Beta

Correlation 0.81

0.84

5.46

2.89%

15.80%

19

Investment Process – Investment Case: Equity Group Holding

In October 2017, Equity Group Holding

Ltd, a large financial services company

headquartered in Nairobi, started

gaining an significant interest from

institutional investors. We built our

position in early February 2018.

The position was then closed in late

April 2019, following a significant

reduction in the interest of institutional

investors.

During the holding period the stock

strongly outperformed both the local

market – Nairobi Securities Exchange

Index (+26.8%) and the broad universe

of Frontier Markets – FTSE Frontier Index

(+34.8%).

Source: Bloomberg, FTSE

Built our

position

Closed our

position

Built our

position

Closed our

position

20

Investment Process – Investment Case: 2 IPOs in Vietnam

In May 2018 the initial equity offering of

Vinhomes JSC, a large residential

property developer, took place. In a

few months the company had

attracted a meaningful interest from

institutional investors.

In October 2018 we built our position

in the company (1.5%).

Sabeco, the largest brewer in Vietnam,

listed its shares in December 2016, but

had struggled to get interest among

institutional investors until August 2019.

Kept in the watch list until August

2019, when it was included in our

portfolio (1.3%).

Source: Bloomberg

riferimento a %

Built our

position

Built our

position

21

Investment Process – Investment Case: Pakistan upgrade

Following MSCI upgrade announcement in June 2016 of Pakistan from Frontier to Emerging Markets the

strategy overweighed Pakistani stocks to profit from the wave of euphoria among institutional investors

generated by the news.

When the upgrade was effective Pakistan became “a small fish in a big pond”, causing institutional

investors to lose interest. We then sold all our positions in June 2017, avoiding the following market decline.

Source: Bloomberg

Upgrade

Announcement

Upgrade

Closed our positions

in Pakistan

22

Investment Process – Investment Case: Argentina turmoil

Our behavioural finance models identified a significant decrease in the institutional investors interest in the

Argentinian market during May 2019. This made the market vulnerable to negative news and therefore too

risky.

We therefore started selling our Argentinian positions and liquidated all of them by the end of May 2019,

successfully avoiding the crash of the Argentinian market in August 2019 following political turmoil.

Source: Bloomberg

Behavioural model

starts identifying

decreasing interest

amongst institutional

investors

Closed our positions

in Argentina

23

Investment Process – Dynamic Beta Model: Risk Mitigation

In early stage markets institutional investors’ risk appetite influences the main market trend. This is due to

their size and to their behaviour. They tend to simultaneously position themselves on the same side, in

particular when they turn more risk-adverse. Furthermore, due to the specific micro-structure of the

markets, large institutions need to spread their orders over several days.

The Dynamic Beta model uses a system of 5+ behavioural equations aiming at identify in/out flows of

institutional investors.

Dynamic Exposure management

Highly informatised system for an efficient data management and analysis

Key factors analysed are flows, co-movements, change in prices and volumes

Behavioural equationsDetection of

Inflows/Outflows of institutional investors

Definition of the Exposure

Objective: Mitigate the risk forecasting short-medium term flows that generate high volatility

24

Each equation of the model gives the probability that institutional investors will generate significant

inflows/outflows.

For instance one behavioural equation analyses the co-movements of market data within Frontiers

Markets detecting institutional outflows which determine, in case of markets turmoil, an increase in

correlation among markets and higher volatility.

The output of the model is a continuous signal that forecasts institutional investors’ short-medium term

behaviour flows in Frontier Markets.

-8

-7

-6

-5

-4

-3

-2

-1

0

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

2012 2013 2014 2015 2016 2017 2018

Historical Output Signal Of Dynamic Beta Model

Dynamic Beta Risk-off indication Dynamic Beta Signal

Investment Process – Dynamic Beta Model: Risk Mitigation

Inception of Aristea New Frontiers Fund


25

-8

-7

-6

-5

-4

-3

-2

-1

0

0

5

10

15

20

25

2012 2013 2014 2015 2016 2017 2018

Dynamic Beta Risk-off indication Annualised 3-month centered volatility (weekly returns)


-8

-7

-6

-5

-4

-3

-2

-1

0

800

900

1,000

1,100

1,200

1,300

1,400

Historical Signal Of Dynamic Beta Model

FTSE Frontier Index

Investment Process – Dynamic Beta Model: Historical Track Record

The approach dates back to 2004, with an investment strategy dedicated exclusively to emerging

markets. Then the strategy has been progressively extended to markets showing exploitable inefficiencies.

The Dynamic Beta Model applied to Frontier Markets was implemented in investment vehicles and

managed accounts since January 2012 and in the Aristea New Frontiers Equity Fund since its launch in

June 2016.


Source: FTSE

26

Investment Process – Value Generation

The Investment Strategy is a combination of two dynamic, interrelated components, thriving in different

phases of the economic cycle:

I. Active Alpha Strategy: the main stock picking investment strategy running constantly

II. Dynamic Beta Model: proprietary risk management tool forecasting periods of market volatility with

increased downside risk, when defensive measures are to be implemented

Dynamic Beta

Active Alpha

FTSE Frontier Markets

Investment Strategy

0%

5%

10%

15%

20%

5% 10% 15% 20%

Ex

pe

cte

dR

etu

rn

Expected Volatility

Alpha generation

Risk reduction

Thrives during

market turmoils

Thrives during

market rallies

27

Aristea New Frontiers Equity Fund – Overview

Aristea SICAV New Frontiers Equity Fund was launched in June 2016 to give investors the opportunity to

access dynamic and fast growing economies with low correlation with more developed markets under

the investor friendly terms of a UCITS fund with daily liquidity. Investing in this new asset class offers

significant diversification benefits because of their lower level of integration with more developed markets

and because local factors tend to be more influential than the global economy.

Luxemburg UCITS V umbrella fund regulated by CSSF, authorised for distribution in the major European

markets and listed on the Allfunds platform, with daily pricing and dealing.

Present size: 14.92 mln USD (as of 31/10/2019).

Number of positions Typically 40-60

Practical min

position size0.5%

Max position size 5.0%

Number of Countries Typically 15-20

Maximum country

exposure25%

Maximum

geographic area50%

Maximum industry

exposure45%

Portfolio Turnover Generally 75-125% p.a.

ExposureBetween 50% and 100% (75% on

average) due to risk mitigation tool

Currency Hedging No

Investment Return

target

5% p.a. over reference markets

over a full market cycle

Target Information

Ratio

~1 over a full market cycle (3-5

years)

Holding Periods3 to 24 months (average 12

months)

Liquidity constraint> 95% of the portfolio must be

liquidated within 5 trading days

28

Aristea New Frontiers Equity Fund – Structure

The Investment Manager – Banor Capital Ltd

Banor Capital Ltd is the London-based asset management company responsible for Aristea SICAV.

Established in 2010 by Massimiliano Cagliero (also CEO of Banor SIM Spa - Milano), and partners.

The investment management team has been working together for well over a decade.

The team is comprised of four investment managers, three traders & portfolio analysts, one risk manager, three

salespersons, and one administrator.

Banor is part of a group with assets under influence of over EUR 7.5 bln.

The Advisor – Kallisto Partners

Banor relies on Kallisto Partners for research, modelling and risk management of Frontier equities, implemented in

the New Frontiers Equity Fund.

Kallisto Partners is an independent financial boutique which focuses on equity investment in early-stage Markets,

specialising in behavioural finance studies to exploit the inefficiencies of Frontier markets.

More than 10 years’ experience in Emerging and Frontier markets, advising institutional investors since 2005.

The principals have more than 30 years of collective investment experience.

The Fund – Aristea SICAV New Frontiers Equity Fund

Aristea SICAV is a Luxemburg UCITS IV umbrella fund regulated by CSSF. The New Frontiers Equity Fund is one of the

five sub-funds currently under the SICAV.

Authorised for distribution in the major European markets and listed on the Allfunds platform.

29

Aristea New Frontiers Equity Fund – Information

Investment Strategy: Active Frontier Markets Equity

Investment Manager: Banor Capital Limited

Advisor to Investment Manager: Kallisto Partners

Brokers: Goldman Sachs, Renaissance Capital, EFG Hermes, Tradition

ISDA Counterparty: Goldman Sachs

Management Company: Casa4funds SA, Luxembourg

Custodian Bank and Listing Agent: BNP Paribas Securities Services (Lux)

Auditors: Deloitte S.A.

Administrator: BNP Paribas Securities Services (Lux)

Website: www.aristeasicav.com

Inception Date: 7 June 2016

NAV pricing frequency and Subscription/Redemption: Daily (ex Fridays)

Prior Notice for Subscription/Redemption: 0 days

Share ClassCurrency Hedged ISIN

Bloomberg Ticker

Management Fee

Performance Fee

Min. Initial Investment Initial NAV

I – USD N LU1313167980 ANFEICU LX 1.50% 10.00% (1) $ 100,000 100.00

I – EUR N LU1313168012 ANFEICE LX 1.50% 10.00% (2) € 100,000 100.00

R – USD N LU1313167634 ANFERCU LX 2.20% 15.00% (1) $ 5,000 10.00

R – EUR N LU1313167808 ANFERCE LX 2.20% 15.00% (2) € 5,000 10.00

S – USD N LU1313168103 ANFESCU LX 1.00% - $1,000,000 1,000.00

(1) calculated on the outperformance vs FTSE Frontier Index in USD with HWM - Ticker Bloomberg: FTSEFII Index

(2) calculated on the outperformance vs FTSE Frontier Index in EUR with HWM - Ticker Bloomberg: FTSEFII Index

30

Aristea New Frontiers Equity Fund – Performance

The investment strategy implemented in the Fund combines the Active Alpha and Dynamic Beta models,

combining their objectives over the long term.

The benchmark performance shown is derived from a combination of the MSCI Frontier Markets Index from the Fund's inception to 31

December 2017 and the FTSE Frontier Index from 1 January 2018 to current reporting period.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Bench.

2019 4.21% 1.36% -0.66% 0.04% -0.64% 0.14% -0.70% -2.28% 0.10% -1.64% -5.98%

2018 7.86% -1.62% 1.70% -2.43% -8.25% -1.88% 0.39% -2.37% -2.32% -4.10% 0.70% -3.45% -23.59%

2017 1.83% 0.97% 3.34% 1.77% 4.53% -0.60% 1.20% 0.84% 1.04% 1.29% 1.71% 2.63% 28.46%

2016 -2.56% 1.53% -1.19% 0.35% -1.83% -3.38% 2.33% -5.98%

-0.21%

-15.39%

22.50%

-4.79%

YTD

Aristea Bench.

Ann. Return -0.45% -3.49%


Sharpe Ratio <0 <0

Ann. Alpha

Tracking Error

Information Ratio

Beta

Correlation 0.79

1.47%

8.21%

0.18

0.56

80

90

100

110

120

130

140

150

06/16 12/16 06/17 12/17 06/18 12/18 06/19

Aristea New Frontier USD Benchmark

31

Aristea New Frontiers Equity Fund – Liquidity Profile

The portfolio must be very liquid in order to provide investors with a daily liquidity product.

Liquidity monitoring is embedded in the stock selection process: institutional flows contribute to create

liquidity on the stocks on which they focus.

Note: Based on 20% of the 30 days median traded volume

Source: Bloomberg

Constraint: At least 95% of the portfolio must be liquidated within a week.

0%

20%

40%

60%

80%

100%

1 2 3 4 5 10 15 20

% of liquidation of portfolio by day

Present Capacity (500 mln USD)

10,000

100,000

1,000,000

10,000,000

100,000,000

0 10 20 30 40 50

30

da

ys

me

dia

n t

rad

ed

Va

lue

(U

SD

)

Holdings (as of 31/10/2019)

32

Aristea New Frontiers Equity Fund – Market Cap Profile

0

1

2

3

4

5

6

7

8

9

10

100 1,000 10,000 100,000

We

igh

t %

(a

s o

f 31/1

0/2

019)

Current Market Cap (mln USD)

Active Alpha Portfolio XTRACKERS S&P Select Frontier UCITS ETF

Position sizing is not driven by market cap, (by ranking, liquidity, stock idiosyncratic risk), therefore portfolio

is more diversified among different dimensional classes compared to passive investments.

33

Aristea New Frontiers Equity Fund – Turnover and Trading Impact

Portfolio turnover ranges between 75% and 125%.

Trading costs (including execution commissions, taxes and duties) ranges between 0.25% and 0.35%.

0%

50%

100%

150%

200%

250%

06/16 12/16 06/17 12/17 06/18 12/18 06/19

1 year Portfolio Turnover

0.00%

0.25%

0.50%

0.75%

1.00%

06/16 12/16 06/17 12/17 06/18 12/18 06/19

1 year Trading cost 1 year Trading cost impact

Turnover is calculated as the

sum of the absolute value of

all purchases and the

absolute value of all sales

divided by the average net

assets of the fund.

The trading cost is calculated

as the sum of execution

commissions, taxes and duties

divided by the sum of the

absolute value of purchases

and sales.

The trading impact is

calculated as the sum of

execution commissions, taxes

and duties divided by the

sum of the average net

assets of the fund.

34

Aristea New Frontiers Equity Fund – Geo & Sector Breakdown

Country % Geographic Area %

Vietnam 24.50% Asia 31.51%

Kuwait 17.50% Middle East 24.22%

Nigeria 7.45% Africa 22.13%

Bangladesh 6.51% Eastern Europe 8.03%

Romania 6.21% Global Frontier 2.96%

Egypt 5.52%

Kenya 4.73% Industry Sector %

Morocco 3.80% Financials 28.78%

UAE 3.52% Consumer Staples 12.90%

Frontier 2.96% Communication Serv ices 12.80%

Bahrain 2.49% Real Estate 10.87%

Kazakhstan 1.12% Health Care 7.31%

SaudiArabia 0.71% Funds 4.92%

Tanzania 0.63% Industrials 4.38%

Pakistan 0.50% Materials 3.49%

Moldova 0.49% Consumer Discretionary 3.39%

Bulgaria 0.21%

35

Aristea New Frontiers Equity Fund – Main Holdings

Name Country Industry Sector %

Mobile Telecommunications Co KSC Kuwait Communication Services 4.68%

A geographically diversified mobile telecommunications company, operating in Middle East and Africa

Vietnam Dairy Products JSC Vietnam Consumer Staples 4.46%

Also known as Vinamilk, it is the Vietnam’s largest dairy producer with more than 50% market share

National Bank of Kuwait SAKP Kuwait Financials 4.33%

Commercial bank providing services through local branches, overseas branches and subsidiaries

Banca Transilvania SA Romania Financials 4.25%

Banking institution amongst the largest on Romania and the first Romanian bank to open a branch in Rome

Vincom Retail JSC Vietnam Real Estate 4.15%

Company owning and developing shopping malls, offering apparel and entertainment facilities

Safaricom PLC Kenya Communication Services 3.66%

The leading telecommunications provider in Kenya and one of the most profitable companies in the region

Vingroup JSC Vietnam Real Estate 3.58%

Vietnam's largest real estate company dealing in a wide range of properties, including shopping malls and hospitals

Vinhomes JSC Vietnam Real Estate 3.13%

The largest commercial real estate developer in Vietnam

Kuwait Finance House KSCP Kuwait Financials 3.02%

Financial institution providing a wide range of banking services

Hoa Phat Group JSC Vietnam Materials 3.02%

The largest producers of construction steel and steel pipe and galvanized steel sheet in Vietnam

Total Top 10 38.27%

36

Aristea New Frontiers Equity Fund – Valuations and Growth Rates

Aristea

New FrontiersPeers Average*

Price/Earnings (P/E) 9.56 10.43

Price/Book (P/B) 2.12 1.73

Price/Sales (P/S) 2.07 1.77

Price/Cash Flow (P/CF) 2.42 4.08

ROE (%) 27.77 20.91

Earnings Growth (%) 18.48 11.76

Sales Growth (%) 14.19 9.29

Cash-Flow Growth (%) 10.29 2.86

Dividend-Yield (%) 4.73 4.51

Source: Morningstar

* Peer group: Morningstar Global Frontier Markets Equity UCITS compliant funds

37

Aristea New Frontiers Equity Fund – Relative Performance Attribution

The combination of Active Alpha and Dynamic Beta has been implemented in the Aristea New Frontiers

Equity Fund since its launch in June 2016. The fund was able to invest in all markets since July 2017.

-5%

0%

5%

10%

15%

20%

25%

30%

3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Active Alpha vs FTSE Frontier Markets (Quarter) Active Alpha vs FTSE Frontier Markets (Cum.)

0%

5%

10%

15%

20%

60%

70%

80%

90%

100%

3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Fund Ann. Quarter Volatility (rhs) FTSE Frontier Markets Ann. Quarter Volatility (rhs) Dynamic Beta Exposure

38

Aristea New Frontiers Equity Fund – Peer Group Comparison*

Performance since the fund was able to invest in all markets (30/06/2017 – 31/10/2019)

Source: Morningstar, Bloomberg


39

Aristea New Frontiers

Peers Average

FTSE Frontier Index

-15

-10

-5

0

5

10

15

8 10 12 14 16 18 20

An

nu

alise

dR

etu

rn (

%)

Volatility (%)


Performance vs Risk since the fund was able to invest in all markets (30/06/2017 – 31/10/2019)

Source: Morningstar, Bloomberg


40


Aristea New Frontiers is among the few funds offering a high «Pure Frontier Markets» exposure.

Aristea New Frontiers

0

25

50

75

100

0 250 500 750 1,000

«Pu

re F

M»

Ex

po

sure

(%)

Fund Size (mln USD)

Soft-closed fund

Fund charging dealing fees

Source: Morningstar, Kallisto Partners


41

Italy: Via Flaminia, 21, 00196 Roma

Tel. +39 06 93574730

[email protected]

United Kingdom: 5th Floor, Eagle House, 108-110 Jermyn Street, London SW1Y 6HB

Tel: +44 (0) 203 287 1428

[email protected]

www.kallistopartners.com

Contacts

42

Appendix

43

Managing Partners Biographies

Luca Clementoni

Research

Quant Modelling

Risk Management

Luca has experience in management and financial research activities, with a focus

on development of behavioural financial models specialised in early stage financial

markets.

Prior to establishing Kallisto Partners, Luca was Executive Director of Galileo Finance

SIM S.p.A. where he oversaw investment advisory services for institutional clients.

Luca joined Galileo Finance in 2001 as an Investment Analyst, building behavioural

finance models for asset allocation across international equities and currency

markets with a focus on Emerging Asia and Eastern Europe.

Luca graduated with an honours degree in Management Engineering from the

University of Rome Tor Vergata.

Andrea Federici

Research

Trading

FCA Approved Person

(CF30)

Andrea has extensive experience in trading, analysis and asset allocation, with a

particular focus on frontier equity markets.

Prior to establishing Kallisto Partners, Andrea was Head of Trading at Galileo Finance

SIM S.p.A., joined in 2007, where he supported institutional investors with their

investment process in Middle Eastern and South East Asian equities. Andrea began

his career as a quantitative analyst for the Italian Banking Association (ABI), where

he developed impact studies of regulation in the banking system.

Andrea obtained a Master’s degree with honours in Finance from the University of

Roma Tre.

Andrea is a FCA Approved Person and Investment Manager at Banor Capital,

where he is primary responsible for the Aristea New Frontiers Equity Fund.

44

Managing Partners Biographies

Massimo Dinia

Client relations

Business

Administration

Massimo has experience in business administration, with a particular focus on Client

Relationship Management.

Prior to establishing Kallisto Partners, Massimo was Internal Auditor of Galileo Finance

SIM S.p.A. and member of the AIIA (Italian Internal Auditors Association). Massimo

started his career in real estate industry where he covered key roles in several REITs,

focusing on institutional auctions and sales activities.

Massimo earned his Master’s degree in Business Administration from the University of

Roma Tre.

45

Frontier Markets – A New Asset Class

In recent years Frontier Equity Markets became a separate and distinct asset class from their “big

brothers”, the Emerging Markets. Data regarding the evolution and level – in terms of managed assets and

number – of specialised European mutual funds, suggest that the development of this new asset class is

today where the Emerging Markets’ industry was 15 years ago, before the boom that followed their

identification as a separate asset class, which resulted in great inflows.

Despite the recent increase in interest and flows to Frontier Markets, total AUM are far from motivated levels

compared to Emerging Markets. A UCITS Frontier fund will provide European investors with innovative long-

term solutions for their portfolios.

Source: Morningstar Source: Morningstar

46

2334 37

18

32

65

203308

471590 635

1

10

100

1,000

1995 2000 2005 2010 2015 2020

Frontier Markets Equity Funds - Europe domiciled - number of funds

Emerging Markets Equity Funds - Europe domiciled - number of funds

10

100

1,000

10,000

100,000

1,000,000

1995 2000 2005 2010 2015 2020

Frontier Markets Equity Funds - Europe domiciled - AUM (USD mln)

Emerging Markets Equity Funds - Europe domiciled - AUM (USD mln)

46

Frontier Markets are commodity-driven: a False Myth

Since many frontier countries are exporters of raw

materials, many investors believe that frontier stock

markets are driven by commodity prices. An

analysis of stock market returns relative to

commodity prices show that Frontier Markets are

not commodity-driven markets.

Exporter of some commodities but importer of others

Importer of down-stream products as they lack of internal processing capacity

Major resource producers are typically not listed on local stock exchanges: they are nationally owned or global companies listed in US, Canada or UK


Sources: FTSE, Bloomberg

-0.25

0.00

0.25

0.50

0.75

1995 2000 2005 2010 2015 2020

Correlation with Oil


0.00

0.25

0.50

0.75

1995 2000 2005 2010 2015 2020

Correlation with Copper


47

Aristea New Frontiers Equity Fund – Historical Country Breakdown

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

06/16 12/16 06/17 12/17 06/18 12/18 06/19

Argentina

Moldova

Bulgaria

Georgia

Kazakhstan

Romania

Oman

Jordan

Bahrain

Kuwait

SaudiArabia

UAE

Tanzania

Senegal

Morocco

Kenya

Egypt

Nigeria

Myanmar

Cambodia

SriLanka

Pakistan

Philippines

Bangladesh

Vietnam

48

Aristea New Frontiers Equity Fund – Historical Sector Breakdown

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12/16 06/17 12/17 06/18 12/18 06/19

Utilities

Energy

Information

Technology

Consumer

Discretionary

Health Care

Funds

Industrials

Materials

Real Estate

Consumer

Staples

Communication

Services

Financials

49

Aristea New Frontiers Equity Fund – Investor Base

The fund’s investor base is well diversified, with a substantial share represented by anchor investors.

0

5

10

15

20

06/16 12/16 06/17 12/17 06/18 12/18 06/19

Anchor Investors Other Investors

Pension Fund1 (45.6%)

Wealth Manager1 (16.1%)

Asset Manager1 (12.1%)

Team (7.5%)



Private Bank1 (4.8%)





0 1 2 3 4 5 6 7 8

50

This document is being communicated by Kallisto Partners. This material is for information only and does not constitute an offer or

recommendation to buy or sell any investment, or subscribe to any investment management or advisory service. It is not, under any

circumstances, intended for distribution to the general public. The funds that may be referred to in this document are Unregulated Collective

Investment Schemes for the purposes of Section 238 of the Financial Services and Markets Act 2000. Accordingly, this document is only being

communicated to persons to whom it may lawfully be issued under The Financial Services and Markets Act 2000 (Promotion of Collective

Investment Schemes)(Exemptions) Order 2005 and COBS 4.12 of the FCA’s New Conduct of Business Sourcebook. No part of this document

may be reproduced in any manner without the written permission of Kallisto Partners. We do not represent that this information, including any

third party information, is accurate or complete and it should not be relied upon as such. Opinions expressed herein reflect the opinion of

Kallisto Partners and are subject to change without notice.

Kallisto Partners has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and no

assurance can be given that the stated investment objectives will be achieved. Kallisto Partners may, to the extent permitted by law, act upon

or use the information or opinions presented herein, or the research or analysis on which it is based, before the material is published. Kallisto

Partners and its personnel may have, or have had, investments in these securities The law may restrict distribution of this document in certain

jurisdictions, therefore, persons into whose possession this document comes should inform themselves about and observe any such restrictions.

Please subscribe after carefully reading the documents relating to the Sicav. Applications for shares in any Aristea SICAV Sub-Funds should not

be made without first consulting the current Prospectus, Annual Report and Semi Annual Report which are available free of charge at

www.aristeasicav.com.

This document neither constitutes an offer by Aristea SICAV of Shares or of any other investment products or investment service, nor an

invitation to the recipient to respond to the document by making an offer to purchase Shares or any other investment product or investment

service. Past performance is not a guide to future performance and may not be repeated.

Performance values are calculated without taking account of tax expenses due in the home country of the investors.

Disclaimer

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