LEVENDI THORNBRIDGE DEFINED RETURN FUND€¦ · LEVENDI-IM 4/24/2019 PROFESSIONAL INVESTORS ONLY....

A Blueprint for Returns

LEVENDI THORNBRIDGE DEFINED RETURN FUND

FOR PROFESSIONAL INVESTORS AND ADVISERS ONLY. NOT FOR DISTRIBUTION TO RETAIL INVESTORS.

DISCLAIMER

The contents of this document are communicated by, and the property of, Levendi Investment ManagementLimited (LIML). LIML is an appointed representative of Thornbridge Investment Management LLP, which isauthorised and regulated by the Financial Conduct Authority (“FCA”).

The information and opinions contained in this document are subject to updating and verification and may besubject to amendment. No representation, warranty, or undertaking, express or limited, is given as to the accuracyor completeness of the information or opinions contained in this document by Levendi Investment ManagementLtd or its directors. No liability is accepted by such persons for the accuracy or completeness of any information oropinions. As such, no reliance may be placed for any purpose on the information and opinions contained in thisdocument.

The information contained in this document is strictly confidential.

The value of investments and any income generated may go down as well as up and is not guaranteed. Pastperformance is not necessarily a guide to future performance.

SOURCE DATA: all data is sourced from Bloomberg

4/24/2019 2PROFESSIONAL INVESTORS ONLY. Levendi Investment Management Limited is an appointed representative of Thornbridge Investment

Management LLP which is authorised and regulated by the Financial Conduct Authority.

LEVENDI-IM



DAVID STUFF, MANAGING PARTNERDavid has been involved in equity derivatives, equity structuring and the structured product market for over 25 years. Before launching Levendi Investment Management David worked at J.P. Morgan, Barclays and RBS. David has worked with and for retail product providers, discretionary managers and institutional investors.

ART NOBLE, RESEARCH AND ANALYSISArt is responsible for the product analysis. Art started to develop the model that the Fund uses to evaluate risk and return immediately after the March 2012 paper from the FCA. Prior to working on this Art was developing statistical arbitrage strategies and portfolio optimisation tools at Noble and Co. At J.P. Morgan Art was responsible for marketing derivative products and had a particular focus on hedge fund derivative solutions and asset and liability modelling. He was also responsible for building pricing models, risk management tools and value-at-risk techniques that became RiskMetrics.

FRANK COPPLESTONE, MANAGING PARTNERFrank has 25 years experience in structured products and derivatives, having started his career at Credit Suisse Financial Products. He spent a decade working as an equity-derivatives trader at Bankers Trust and Commerzbank before moving to Deutsche Bank to build and manage the Quantitative Products Engineering businesses. In 2008 he joined Morgan Stanley to run Financial Engineering in EMEA and Americas and later became Global Head of the Retail Structured Products platform at Morgan Stanley. Prior to launching Levendi Investment Management, Frank was the Global Head of Equities (Structured Products) at Jefferies. Frank holds a Doctorate from Oxford University.

LEVENDI INVESTMENT MANAGEMENT (LIML)An investment advisory firm that advises on the use of structured investments and derivatives, particularly when incorporated into funds and portfolios. Based in the UK, with more than £600M of assets under advice, we offer a combination of investment expertise,quantitative assessment of risk and return and independent asset and portfolio valuations.

LIML’s investment management team have extensive experience in Defined Return Investments:



ARCHITECTS OF VALUE

Analysis of investments using a proprietary consensus-based model of estimates of capital market returns. Results are analysed to answer the following:

▪What returns can be reasonably expected?

▪What are the sensitivities and risks?

Accurate and robust pricing capabilities means that we can assess the competitiveness of Issuer offerings and calculate risk exposures to underlying assets, interest rates, volatilities, correlations and Issuer credit.

The portfolio management process aims to maximise the chance of achieving the target return and minimise the risks of drawdown

The risk management overlay is used to control volatility on a day-to-day basis.

We develop investments for the Fund based on our analysis of expected returns for each market and incorporating the prevalent market pricing environment.

We combine our abilities to originate and evaluate products with our proprietary analysis of risk and return when we identify investments for the Fund.

ANALYSIS PRICING STRUCTURINGMANAGEMENT



4/24/2019 6

REALISED FUND PERFORMANCE

PROFESSIONAL INVESTORS ONLY. Levendi Investment Management Limited is an appointed representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority.

Source; Levendi, Bloomberg

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

102%

104%

106%

108%

Ret

urn

Month

Levendi Thornbridge UK Total Return Europe Total Return

COMPARISON WITH OTHER BENCHMARK ASSETS

4/24/2019 7PROFESSIONAL INVESTORS ONLY. Levendi Investment Management Limited is an appointed representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority.

Source: Levendi, Bloomberg

88%

90%

92%

94%

96%

98%

100%

102%

104%

106%

108%

Ret

urn

Month

Levendi Thornbridge Vanguard Life 40% Equity CBOE Put Index Peer Group Average EX Levendi

• Levendi Fund aims to offer a degree of protection when markets fall.

• Fund has offered significant downside protection through both large market corrections since launch

• Defensive return when markets fall is a result of

• Investment selection

• Choice of very defensive investments

• Risk management overlay

4/24/2019 8

DOWNSIDE PROTECTION


-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

May 22 - June 25 August 9 - September 7 October 1 - December 24

Max

Dra

wd

ow

n

Date

Levendi Thornbridge UK Total Return Europe Total Return

4/24/2019 9

RISK RATING SCALE


IMPORTANT NOTE; The Fund has not been risk rated by either Dynamic Planner or Defaqto. The nature of the fund means that neither risk rating agency can provide a risk rating. The analysis below is based on publicly available information about the volatility ranges that each firm uses to rate funds. However, we do not know how either firm calculates the volatility of a fund.

Fund volatility is calculated using process defined by regulators for the KIID and KID. This volatility can be used to illustrate the fund risk ranking using the Dynamic Planner and Defaqto risk scales.

TARGET MARKET• Lower risk investors

• Looking for steady returns under a wide range of market conditions

• Prepared to accept some risk to capital

• Prepared to accept some volatility of returns

• Medium to long term investment horizon

PORTFOLIO ALLOCATION

• High Correlation

• Low exposure to equity markets

Defensive Equity

• Target LIBOR +6% returns

Absolute Return

• 10% maximum volatility

Target Volatility

• High annual returns

• Low volatility

Bond Substitute

4/24/2019 10

TARGET MARKET / PORTFOLIO ALLOCATION


PERFORMANCE RELATIVE TO SECTORS


Source; performance for 1 year to 18th April 2019, www.trustnet.com

-2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

IA Targeted Absolute Return

IA Europe Excluding UK

IA UK All Companies

IA Mixed Investment 20-60% Shares

IA Sterling Corporate Bonds

Levendi Thornbridge

IA Flexible Investment

THE ASSETS



UNDERLYINGWorst of FTSE 100 and Eurostoxx 50 Index

TERM 8 years

PRODUCT SHAPEAutocall. The product may mature early at each anniversary

AUTOCALL LEVELSYears 1 to 7; 100%Year 8; 60%

PAYOFF8% each year if both underlying assets are above the Autocall Levels

CAPITAL

If the product has not matured early and neither indices is less than 50% of the initial Index level, then 100% capital is repaid plus the defined payoff. If the maturity value of the worst performing asset is below 50%, the maturity value will be reduced by 4x the fall below 50%

0

20

40

60

80

100

120

140

160

180

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

AU

TOC

ALL

LEV

ELS

/ P

AYO

FF

Autocall Levels

Payoff

Capital

4/24/2019 13

EXAMPLE PRODUCT


4/24/2019 14

PAYOFF SUMMARY


Time

End of year 1 Are both indices above 100% of initial level? Yes; Investment matures and pays back 108%No; Investment continues another year








End of year 8 Are both indices above 50% Yes; Investment matures and pays back 100%No; Investment matures, maturity value is 100% minus 4x the percentage fall of the worst performing index below 50% of the initial index level

4/24/2019 15

PROGRESSIVE RISK AT MATURITY


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%

Mat

uri

ty V

alu

e

Final Index Level

Barrier Shape Levendi Shape Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

EVENTHISTORIC

OCCURANCESTRESS TEST PROBABILITY

ANNUALISED RETURN

AUTOCALL YEAR 1 64% 50% 8.0%




AUTOCALL YEAR 5 2% 3% 7%




MATURITY AT 100% 1% 3% 0.0%

CAPITAL LOSS 2% 2%Hist: -1.6%

Stress: -6.5%

RETURN HISTORIC STRESS TEST

BEST RETURN 8% 8%

CHANCE OF GAIN 97% 95%

CONDITIONAL GAIN 7.6% 7.5%

AVERAGE RETURN 6.9% 5.9%

EXPECTED TERM 2.5y 2.9y

4/24/2019 16

PRODUCT ANALYSIS

RISKS HISTORIC STRESS TEST

VOLATILITY OF RETURNS 2.5% 6.9%

CHANCE OF LOSS 2% 2%

CONDITIONAL LOSS -1.6% -6.5%

AVERAGE WORST 5% LOSSES +1% -28%


4/24/2019 17

DOWNSIDE ESTIMATION – INVESTOR VIEW VS RISK NEUTRAL VIEW


0%

20%

40%

60%

80%

100%

120%

140%

160%

0 1 2 3 4 5 6 7 8 9 10

Ind

ex le

vel a

s %

of

curr

ent

ind

ex le

vel

Years

5%

10%

25%

Mean

75%

90%

95%

Put Strike

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

0 1 2 3 4 5 6 7 8 9 10

Ind

ex le

vel a

s %

of

curr

ent

ind

ex le

vel

Years

5%

10%

25%

Mean

75%

90%

95%

Put Strike

4/24/2019 18

CALENDAR AUTOCALL DATES


0

1

2

3

4

5

6

7

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Pro

du

cts

wit

h A

uto

call

dat

es

Month

Autocalls per month

PORTFOLIO MANAGEMENT



PRODUCT

▪ Simple products.

▪ Linked to major market Indices.

▪ Low hurdle for positive return, so high probability of positive returns.

▪ Long term to maturity (typically 8 years).

▪ Significant capital protection, so low chance and scale of loss.

▪ The Fund only holds products that we can value ourselves.

▪ The Fund buys products where there are several banks that can issue the product.

PORTFOLIO

▪ Bespoke products.

▪ Swaps or notes.

▪ Notes have 2-way market.

▪ Investment-grade issuers.

▪ Maximise issuer funding.

▪ Issuer diversification.

▪ Market selection and diversification.

▪ Strike diversification.

4/24/2019 20

WHAT INVESTMENTS DO WE LIKE TO HOLD IN THE FUND?


WHAT DOES THE FUND HOLD?

MARKET EXPOSURE ISSUER EXPOSURE PRODUCT EXPOSURE

UK Equity

EuropeanEquity

US Equity

Other

Autocall

DefensiveAutocall

Participation

Synthetic Zero

Cash

A+

A

A-

BBB+

Gilts

▪ Exposure is limited to major market equity indices

▪ Very little exposure to Index variants and other indices.

▪ 100% Investment grade

▪ Maximum 10% exposure each to 4 issuers

▪ 5% maximum exposure to other issuers

▪ Mostly defensive Autocalls

▪ Single or Dual Index

▪ All products offer capital returns, no income

The graphs below show typical and current levels. Inner rings are typical and outer rings are updated at the release of each monthly factsheet.


RISK MANAGEMENT



• Fund is exposed to four main risks

• These risks can compound on each other• Volatility tends to increase as markets fall

• Fund exposure increases as markets fall

• Credit spreads widen as markets fall

• Risk management strategy is designed to mitigate the effect of these risks

• Reduce market exposure when the product of market volatility and exposure means that fund volatility is too high

30/01/2019 23

RISKS TO FUND VALUE


Falling Markets

Increasing Volatility

Increasing exposure

Exposure to markets will

increase when markets fall

Volatility tends to increase when markets fall

Controlled volatility

Reduced drawdown

RISK MANAGEMENT OVERLAYRisk management overlay helps to protect the

fund against increased volatility and high exposure in falling markets

RISK

Market Volatility

ExposureFund

Volatility

30/01/2019 24

RISK MANAGEMENT OVERLAY CAPS FUND VOLATILITY


Fund volatility can be approximated as Market Volatility x Exposure

15% 30% 4.5%In normal market conditions exposure is expected to be between 4% and 6%

30% 50% 15%When markets fall, volatility tends to increase and exposure will rise so the volatility of the fund will rise to be too high

Core Volatility;

30%

Core Exposure;

50%

Hedge Exposure;

-25%

Fund Volatility;

7.5%

The risk management overlay reduces market exposure and so caps the volatility of the fund

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Jan

-18

IND

EX L

EVEL

REB

ASE

D

FTSE 100

Eurostoxx 50

S&P 500

Capital Protection Level

4/24/2019 25

BARRIER VERSUS HISTORIC INDEX LEVELS


Worst 8-year period

BENEFITS OF RISK MANAGEMENT OVERLAY

▪ Risk profile of Fund remains suitable for target market

▪ Process reduces and stabilises Fund volatility

▪ Reduced drawdown in significant and protected market correction

▪ Reduced turnover in underlying investments

▪ Fund can retain 100% exposure to defined return investments at all times

▪ Capture attractive product terms during periods of elevated volatility without increasing market risk


0

2000

4000

6000

8000

10000

12000

Dec

90

Dec

92

Dec

94

Dec

96

Dec

98

Dec

00

Dec

02

Dec

04

Dec

06

Dec

08

Dec

10

Dec

12

Dec

14

Dec

16

Mar

ket

leve

l

YearFTSE Total Return Blended Put Write Index plus Risk Management Overlay

TECHNICAL INFORMATION



4/24/2019 28

INTERNATIONAL PLATFORMS


Canada LifeOld Mutual InternationalFriends Provident International

• Notes are issued as senior unsubordinated debt

• The Fund has counterparty exposure if the issuer defaults, but earns additional returns

• Terms of the note describe the returns that the owner will receive.

• Notes can be listed

• Streaming price on most price vendors (Bloomberg, Reuters etc)

• Can be bought and sold at any time

• Additional notes created by “tapping” the original issue as required

• Issuer is the only market maker

• When notes bought back, the issuer nets off the note against the hedges they have and de-materialise the note. There is no need to find another buyer.

4/24/2019 29

NOTES


FUND

ISSUER

The Fund buys the notes and pays the issuer cash

The Fund receives the note.

• Swaps are derivative contracts with Investment Banks

• The Fund uses swaps to significantly reduce counterparty exposure

• Swaps are marked to market every day

• Swap positions can be easily increased or decreased at any time

• Any exposure is collateralised

4/24/2019 30

SWAPS


PERFORMANCE SWAP; The Fund pays GBP LIBOR and receives the product returns

ASSET SWAP; The Fund pays the returns from the Index Linked Gilts and receives LIBOR

Market

Co

llate

ral

Levendi Defined Return Fund

Bank Y

Bank X

Co

llate

ral

The Fund uses assets raised to buy Index Linked Gilts

Libo

r plu

sLib

or p

lus

Gilt

ret

urn

Inve

stm

ent

retu

rn

SHARE CLASSES

4/24/2019 31

INCOME

▪ 5% income each year which can be paid from capital

▪ Quarterly payment of 1.25% of the value of the Fund

▪ Available to Retail investors

APPLICATIONS

▪ Retirement Income

▪ Alternative to equity income funds

▪ Alternative to corporate bond funds

▪ Alternative to income generating structured products

▪ Trusts and charities that require regular income

ACCUMULATION

▪ All returns in the Fund are capital growth

▪ Fund does not pay any distributions/dividends

▪ Share class available for Institutional & Retail investors

APPLICATIONS

▪ Lump sum or regular savings

▪ Alternative to balanced / mixed asset funds

▪ Alternative to target / absolute return funds

▪ Alternative to direct holding of structured products


TERMSINVESTMENT ADVISER LEVENDI INVESTMENT MANAGEMENT LIMITED

INVESTMENT MANAGER THORNBRIDGE INVESTMENT MANAGEMENT LLP

INITIAL CHARGE RETAIL: 1%, INSTITUTIONAL: NONE

AMC/ TER / OCF I INSTITUTIONAL: 1% / 1.16%, I RETAIL: 1.5% / 1.66%

SHARE CLASSES I INSTITUTIONAL ACCUM, I RETAIL ACCUM & I RETAIL DISTRIB

DEALING/DEALING FEES DAILY / NONE

LIQUIDITY DAILY

STRUCTURE UCITS V

REGULATION CENTRAL BANK OF IRELAND

FUND PLATFORM DAVY SKYLINE UMBRELLA FUND ICAV

AVAILABLE VIA ISA? YES

AVAILABLE VIA SIPP? YES

PLATFORM AVAILABILITY THE FUND IS AVAILABLE THROUGH ALL MAIN INVESTMENT PLATFORMS

AVAILABLE VIA OFFSHORE BOND YES

REGISTRAR & TRANSFER AGENT NORTHERN TRUST INTERNATIONAL FUND ADMINISTRATOR

CUSTODIAN NORTHERN TRUST FIDUCIARY SERVICES (IRELAND) LIMITED

AUDITOR DELOITTE CHARTERED ACCOUNTANTS


CONTACT

For further information about Levendi Investment Management Limited or the Levendi Defined Return Fund, please contact us:

Levendi Investment Management Limited Cunard House 15 Regent Street St James London SW1Y 4LR

T: 0203 150 2847E: [email protected]: www.levendi-im.com


LEVENDI THORNBRIDGE DEFINED RETURN FUND€¦ · LEVENDI-IM 4/24/2019 PROFESSIONAL INVESTORS ONLY....

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Transcript of LEVENDI THORNBRIDGE DEFINED RETURN FUND€¦ · LEVENDI-IM 4/24/2019 PROFESSIONAL INVESTORS ONLY....