Institutional Presentation Galloway Capital
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Transcript of Institutional Presentation Galloway Capital
CAPITAL
INVESTMENT CASE
Identify the best investment opportunities in the Emerging
and Frontier Markets, providing clients non-leveraged
equity-like returns with fixed income seniority within a
company’s capital structure
OPPORTUNITY
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Current Scenario
●High growth expectation for the Emerging Markets
●Tendency for the developed economies to maintain its low fixed income rates
●Constantly growing overseas interest in Emerging Markets assets
●Well-managed Emerging Market companies solidified their balance sheets and are gaining access to capital
MARKET PROFILE
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OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD
Emerging Markets and Advanced Economies GDP Growth
Source: Bloomberg / Jan 2012
0%
100%
200%
300%
400%
500%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
GDP Current USD Emerging Markets
GDP Current USD Developed Economies
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OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD
EM High Yield, US High Yield and US Equities accumulated return over the last 10 years
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Source: Bloomberg / May 2012
-50%
-25%
0%
25%
50%
75%
100%
125%
150%
dez-
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dez-
02
dez-
03
dez-
04
dez-
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dez-
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Accumulated returns over the last 10 years
S&P 500 Index
CS EM Corp Bonds Index
iBoxx USD Liquid HY Index
16% 11% 8%
22%
88%
131%
0%
20%
40%
60%
80%
100%
120%
140%
SPX IBOXHY CEMBTOTR
Vol (Std. Dev.) Acum. Return
OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD
Ever since 2002, the major selloffs in Emerging Markets Debt (EMD) occurred after credit crises that emanated from the developed world, not the emerging world. The Lehman bankruptcy and global credit crisis created a huge buying opportunity in EMD in 2008/2009. If this pattern holds, the selloff induced by the European crisis could be creating another big buying opportunity.
Source: J.P. Morgan. As of December 31, 2011.
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OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD
Emerging Markets (EM) have accounted for a large and increasing share of global economic growth. Not only do EM generate most of the world’s economic growth, they contain most of the world’s population, hold most of its foreign exchange reserves and produce about half of its GDP. It is benefiting from powerful tailwinds that don’t figure to dissipate anytime soon. Also, the trend toward improving credit quality in EM is structural and secular in nature. The deleveraging process is extremely clear.
Sources: UBS and J.P. Morgan. All data annualized. Emerging market corporate debt is denominated in USD. As of December 31, 2011
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OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD
Emerging Markets High Yield carries less leverage, lower default rates and pays over 200bps more yield vis a vis US High Yield. Furthermore, if compared to B rated Bonds this number is significantly higher. All of this for the same expected recovery value on its unsecured debt should a company default.
Source: J.P. Morgan. As of December 31, 2011. Note: Emerging Markets Corporate Debt is denominated in USD.
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●Emerging Markets countries in general have higher expected growth rates with often lower leverage when compared to Developed Markets
●Selective Emerging Markets countries still show gaps between its current ratings and their macroeconomic reality providing opportunities to obtain higher returns when upgrades occur
INVESTING IN EMERGING MARKETS SOVEREIGN
OPPORTUNITY
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INVESTING IN EMERGING MARKET BONDS
OPPORTUNITY
● The Emerging Markets Debt market is dominated by Large Institutional Funds and Private Banks
● Large institutional funds also tend to focus on Emerging Markets High Grade credits due to issue size and liquidity
● Private Banks will mostly offer clients obvious Emerging Markets High Grade names which the bank supports and that the client feels comfortable with
Lack of reach from the larger players often forces the Emerging Markets High Yield asset class to provide investors higher yields, even beyond its implicit risks
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PRODUCTS
• Galloway Global Emerging Markets High Yield Fund
• Galloway Latin America High Yield Fund
• Galloway Brazil Biased Investment Grade Fund
• Fixed Income Long-only Funds
• Corporate and Sovereign Credit Bonds
• Galloway’s Multi-approach Due Diligence
• Well Diversified Portfolios
• Consistent Risk-Adjusted Returns
• No Leverage and no use of Derivatives
• Fully Invested
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INVESTMENT FUNDS GALLOWAY’S FIXED INCOME ALTERNATIVES
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INVESTMENT PROCESS GENERATION OF INVESTMENT IDEAS
● Experienced investment team focused on Emerging Markets: over 50 years of EM experience combined
● Proprietary Research: In depth analysis of opportunities through company visits, calls and meetings with companies’ top management
● Sell Side & Buy Side Research: Wide network of relationships with counterparties around the world (Investment Funds, Family Offices, Brokers, Banks, etc.) providing a deeper level of information and access to local expertise
INVESTMENT PROCESS
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● Committee’s based investment decisions:
• Monthly: Strategy and Risk Management Committees
• Weekly: Investment Committee
● Daily Meetings to discuss investment opportunities
● Dynamic process of monitoring the portfolio and opportunities through the constant reassessment of the positions
● Replacing good ideas with better ideas. We change a position when we find a bond with:
• The same risk and a higher yield
• The same yield and a lower risk
PORTFOLIO CONSTRUCTION
There is always a reason why a given company is paying an above average market return.
To assert why, and reach conviction to invest, we first have to understand:
It is paramount for companies and/or sovereign issues to be in countries or regions that have a
positive growth outlook or are in a turning point
Companies have to be aligned with local
governments
Thoughtful analysis to understand the sector’s importance to the
country (subsidies, government support, etc); and its relative value
to global peers
1. COUNTRY MACRO
ECONOMIC OUTLOOK
2. GEOPOLITICS 3. SECTOR
INVESTMENT PROCESS MULTI-APPROACH DUE DILLIGENCE
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In-depth analysis of the Company/Country’s and Bond structure. (leverage, debt profile,
cash flow, ownership structure, etc.; Bond seniority, guarantees,
covenants, etc.)
Company and/or country have to be checked through
our local network of contacts (sell and buy side)
Careful analysis of entry and exit points, new issuance outlook and relative value
4. CREDIT METRICS 5. LOCAL NETWORK 6.TECHNICAL ANALYSIS
INVESTMENT PROCESS MULTI-APPROACH DUE DILLIGENCE
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7. GOLDEN RULE: It is fundamental that the cost of a company/country not paying its obligations be “higher” than if it pays.
RISK MANAGEMENT
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Galloway Global EM
High Yield Fixed Income Fund
Galloway Latin America
High Yield Fixed Income Fund
Galloway Brazil Biased
Investment Grade Fixed Income Fund
Country Risk
● Limit of 20% for single countries
● Limit of 40% for Brazil, Russia, India or China
● Limit of 20% for single countries
● Latam Countries Only
● Minimum of 70% for Brazil
● Up to 30% on Other Countries
Corporate Risk
● Limit of 5% per individual corporate credit at cost
● Limit of 20% per individual Sovereign Bond at cost
● Limit of 10% per individual corporate credit at cost
● Limit of 20% per individual Sovereign Bond at cost
● Limit of 10% per individual corporate credit at cost
● Limit of 20% per individual Sovereign Bond at cost
Credit Risk ● High Yield
● Average Credit Rating: B
● High Yield
● Average Credit Rating: BB
● Investment Grade
● Average Credit Rating: BBB
Currency Risk
● Limit of 30% for any other currency than USD
● Non USD Bonds must settle via Euroclear / Cedel
● Limit of 30% for any other currency than USD
● Non USD Bonds must settle via Euroclear / Cedel
● Limit of 30% for any other currency than USD
● Non USD Bonds must settle via Euroclear / Cedel
Liquidity Risk ● Limit of 20% in less liquid bonds
(Issues size below USD 200 MM) ● Limit of 20% in less liquid bonds
(Issues size below USD 200 MM) ● Limit of 10% in less liquid bonds
(Issues size below USD 200 MM)
* All Bonds must be Euroclearable/ DTC/ Clearstream
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Galloway Global EM
High Yield Fixed Income Fund
Galloway Latin America
High Yield Fixed Income Fund
Galloway Brazil Biased
Investment Grade Fixed Income Fund
NAV Liquidity Monthly Monthly Monthly
Minimum Initial Investment USD 100,000 USD 100,000 USD 100,000
Additional Investment USD 25,000 USD 25,000 USD 25,000
Redemption Monthly with 15 days notice Monthly with 15 days notice Monthly with 15 days notice
Management Fee 1.5 % per year 1.0 % per year 0.5 % per year
Performance Fee 15% quarterly on a HWM basis 10% quarterly on a HWM basis 10% quarterly on a HWM basis
ISIN Code VGG3723N1024 VGG3723N1362 VGG3723N1446
Administrator SFT Fund Admin. Services SFT Fund Admin. Services SFT Fund Admin. Services
Custodian Pershing Pershing Pershing
Auditor Ernst & Young Ernst & Young Ernst & Young
MAIN CHARACTERISTICS
Easy access to Portfolio Management team and current portfolio ideas
Portfolio positions and trading history disclosure upon client’s request
TRANSPARENCY FULL DISCLOSURE
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THE MANAGER
THE MANAGER
Galloway Capital is a global Emerging Markets asset management company focused on active Fixed Income High Yield strategies. Galloway counts today with 19 professionals, managing over USD 400 Million across a broad range of EM Fixed Income strategies.
With a solid and extensive research approach and a performance-driven investment style, our team aims to identify the most interesting opportunities around the world to provide equity-like returns with fixed income risk
The investment committee members combine 50 years of careers dedicated to Credit including: Trading, Sales, Origination, Due Diligence and Execution.
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ASSET MANAGEMENT STRUCTURE
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INVESTMENT COMMITTEE
Nathan Shor Guillermo Bauder Ulisses de Oliveira
RESEARCH & PM
Nathan Shor Guillermo Bauder Ulisses de Oliveira
TRADING
João Paulo Vicente
RISK MANAGEMENT
João Ferrari
COMPLIANCE
Sergio Ravache
OPERATIONS
Rogerio Crus
SALES & PRODUCTS
André Simon
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INVESTMENT COMMITTEE Nathan Shor Nathan Shor holds a BSBA from Boston University (Boston, USA) and a Masters degree in Finance from IESA (Instituto Estudios Superiores de Administracion, Caracas, Venezuela). He began his professional carrier at The Nash Fund in 1998, being responsible for its Emerging Markets Fixed Income area. In 2003, he joined forces with Convenção, a Brazilian Broker Dealer to develop their Emerging Markets Fixed Income desk. Envisioning the future of the Emerging Markets Fixed Income market, Nathan decided to create Galloway Emerging Markets, providing Fixed Income investment solutions to institutional investors and high net worth individuals. The creation of Galloway Capital Management in 2006 came with the idea of an asset management company focused on their Emerging Markets Fixed Income expertise. Galloway Capital manages today a broad range of Emerging Markets Fixed Income funds.
Guillermo Bauder Guillermo studied business in the UNIMET (Universidad Metropolitana in Caracas-Venezuela). He began his career at Confimerca, the broker dealer of Grupo Confinanzas in 1993. Starting as a floor broker in the Caracas Stock Exchange, he was later transferred to the Local Fixed Income Area and finally ended at the International Fixed Income Area. In 1998 was a Foreign Associate in Peru for North American Institutional Brokers covering US Equity institutional clients. In 2000 joined FTC Securities as Foreign Associate for Latin America, in charge of developing Fixed Income and US Equity for institutional clients. In 2003, he joined forces with Convenção, a Brazilian Broker Dealer to develop their Emerging Markets Fixed Income desk. Envisioning the future of the Emerging Markets Fixed Income market, Guillermo decided to create Galloway Emerging Markets, providing Fixed Income investment solutions to institutional investors and high net worth individuals. The creation of Galloway Capital Management in 2006 came with the idea of an asset management company focused on their Emerging Markets Fixed Income expertise. Galloway Capital manages today a broad range of Emerging Markets Fixed Income funds.
Ulisses de Oliveira Ulisses holds a Bachelor degree in Science of Finance and International Business from New York University, certified Series 7 and 66 registered, FSA Rules an Regulations, Securities and Derivatives registered. He began his career in 1996 at then commodity house E D & F Man. Later he joined Safra Bank of NY as Assistant Treasurer until 2000 when he joined Citigroup NY as a Relationship Officer, later he was Vice President of Investments responsible for research, originating and marketing investment ideas directly to clients on a wide range of asset classes: emerging markets and G-7 fixed income, equities, options, and structured products. At the beginning of 2009 Ulisses joined Galloway Capital as a partner and senior portfolio manager responsible for its Emerging Markets Fixed Income funds.
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This presentation has been prepared by Galloway Capital. This presentation is provided for informational purposes only and does not constitute or should not be construed as an offer to buy or sell or solicitation of an offer to buy or sell any financial instrument or to participate in any particular trading strategy in any jurisdiction. The information herein is believed to be reliable as of the date in which this material was issued and has been obtained from public sources believed to be reliable. Galloway Capital does not make any representation or warranty, express or implied, as to the completeness, reliability or accuracy of such information, nor is this presentation intended to be a complete statement or summary of the securities, markets or developments referred to herein. Opinions, estimates, and projections expressed herein constitute the current judgment of the analyst responsible for the substance of this presentation as of the date in which it was issued and are therefore subject to change without notice. Prices and availability of financial instruments are indicative only and subject to change without notice. The financial instruments discussed in this presentation may not be suitable for all investors, and it does not take into account the investment objectives, financial situation or particular needs of any particular investor. Investors should obtain independent financial advice based on their own particular circumstances before making an investment decision on the basis of the information contained herein and it is strongly recommended that investors read carefully the disclosure document of the funds presented herein before making an investment decision. Foreign investments may involve greater risk than domestic investments. If a financial instrument is denominated in a currency other than an investor’s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from, the financial instrument, and the reader of this presentation assumes any currency risk. Income from financial instruments may vary and its price or value, either directly or indirectly, may rise or fall. Past performance is not necessarily indicative of future results, and no representation or warranty, express or implied, is made herein regarding future performances. Galloway Capital does not accept any liability whatsoever for any direct or consequential loss arising from any use of this presentation or its content. This presentation may not be reproduced or redistributed to any other person, in whole or in part, for any purpose, without the prior written consent of Galloway Capital. Additional information relative to the financial products discussed in this presentation
CONTACT & LEGAL INFORMATION
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+55 11 4082-2250
www.gallowaycapital.com