L&g website version

This is not a consumer advertisement. It is intended for UK professional financial advisers and should not be relied upon by private customers or any other persons

Legal & General European Absolute Fund

Citywire Absolute Return Forum

Gavin Launder – Senior Portfolio Manager

2

Gavin Launder, manager of the Legal & General European Absolute Fund, discusses

the opportunities available in European equities, the methodology behind the strategy and discusses the diversification benefits of Absolute Return strategies in a balanced investment portfolio.

3

A Formula for Success in Absolute Return

Opportunity Set

LGIM Resources

ProcessMacro themes

Regulation

Supply & demand balance

Country & sector

Stocks

Management

Operational gearing

Cash flow returns

Screening

Stocks Macro themes

Regulation


Country & sector

Stocks

Macro themes

Regulation


Country & sector

Stocks

Management

Operational gearing

Cash flow returns

Screening

Stocks

Management

Operational gearing

Cash flow returns

Screening

Stocks

Performance42.5

44.5

46.5

48.5

50.5

52.5

54.5

56.5

Feb-2010 Apr-2010 May-2010 J ul-2010 Sep-2010 Oct-2010 Dec-2010 Feb-2011-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

Fund NAV (LHS) FTSE World Europe ex UK (RHS)

Skills

4

1. Who we are

Gavin Launder Ian King

Working together since May, 2007

1 2 3 4 5

5

1. Our Skills

An aggregate of fifteen years managing absolute return strategies

Experience of:

– shorting successfully

–managing net exposure

–managing gross exposure

– using derivatives, long and short

We’ve done this before

1 2 3 4 5

6

2. The Opportunity Set

• Europe is a fertile hunting ground for Absolute Return strategies

• Fifteen countries, fifteen governments, five currencies

• A range of regulatory and fiscal regimes

A broad range of long and short opportunities

1 2 3 4 5

7

3. LGIM Resources - an Integrated Platform

Central DealingExecution

CashManageme

ntEnhanced Returns

ProductSpecialist

Dedicated Communication

RiskManageme

ntIndependent

Oversight

MacroDesk

Countries Sectors

StockPicks

Gavin LaunderIan King

David Shaw

Portfolio

1 2 3 4 5

8

4. Process - Bottom-up and Top-down

Top down research

Driving the net

Macro themes

Regulation


Country & sector

Stocks

Bottom up research

Driving the gross

Management

Operational gearing

Cash flow returns

Screening

Stocks

Active management of the net and gross exposure

1 2 3 4 5

9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 J an-11 Feb-11 Mar-11

SKY DEUTSCHLAND

Bought

Sold

Bought

4. A Long - Sky Deutschland1 2 3 4 5

€

Source: Datastream 03/03/2011

10

50

60

70

80

90

100

110

120

130

140

J ul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 J an-11 Feb-11 Mar-11

VOLKSWAGEN PREF.

SoldBought

Bought

Bought

Sold

4. Another Long - Volkswagen1 2 3 4 5

€


11

3.5

4.0

4.5

5.0

5.5

6.0

Apr-10 J un-10 Aug-10 Oct-10 Dec-10 Feb-11

Banco Popular

Bought back

Bought back

Sold short

Sold shortSold short

Bought back

4. A Short - Banco Popular1 2 3 4 5

€


12

4. Process – The Golden Rules of Shorting What we have learnt managing Absolute Return

• It is not just the opposite of a long

• Do not short purely on valuation

• Avoid take-over candidates

• Shorts don’t stay short forever

1 2 3 4 5

13

42.5

44.5

46.5

48.5

50.5

52.5

54.5

56.5

Feb-2010 Apr-2010 May-2010 J ul-2010 Sep-2010 Oct-2010 Dec-2010 Feb-2011

-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%


5. Performance since inception Relative to the reference market

1 2 3 4 5

Source: Bloomberg, Legal & General, 22/10/2010 – 08/03/2011.

Please remember that past performance is not a guide to future performance.

14

5. Performance since inception Relative to the IMA sector

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

Feb-10 Apr-10 J un-10 Aug-10 Oct-10 Dec-10 Feb-11

IMA Absolute Return Sector L&G European Absolute Fund

1 2 3 4 5

Source: Financial Express, 19/02/2010 – 07/03/2011.

Please remember that past performance is not a guide to future performance.

15

5. Performance since inception Risk/return relative to peers

Gartmore

BlackrockIgnis

Liontrust

L&G European Absolute

FundEuroStoxx

0%

3%

6%

9%

12%

0% 5% 10% 15% 20% 25%

Annualised Daily Volatility

Retu

rn (N

et o

f Fee

s)

European Equity Absolute Return Peers

Source: Lipper, 19/02/2010 – 28/02/2011.

European Equity Absolute Return Peers defined as IMA Absolute Return Sector constituents investing primarily in European equities. Past performance is not a guide to future performance.

1 2 3 4 5

16

Why

An investment in an absolute return

fund is an investment in a manager

not an asset class

17

Absolute return funds a ‘fundamental change’ for Europe’s asset management industry*

*Source: Lipper, Financial Times, March 2011.

The performance of absolute return funds should not be correlated with any other asset class – bonds, equities or cash

Diversification

Currency risk should be hedged, to provide absolute returns in sterling, irrespective of foreign exchange moves

Currency

The volatility taken to achieve the return should be significantly lower than that of the underlying asset class

Volatility

18

A Formula for Success in Absolute Return

Opportunity Set

LGIM Resources

ProcessMacro themes

Regulation


Country & sector

Stocks

Management

Operational gearing

Cash flow returns

Screening

Stocks Macro themes

Regulation


Country & sector

Stocks

Macro themes

Regulation


Country & sector

Stocks

Management

Operational gearing

Cash flow returns

Screening

Stocks

Management

Operational gearing

Cash flow returns

Screening

Stocks

Performance42.5

44.5

46.5

48.5

50.5

52.5

54.5

56.5

Feb-2010 Apr-2010 May-2010 J ul-2010 Sep-2010 Oct-2010 Dec-2010 Feb-2011-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%


Skills

L&g website version

Economy & Finance

Transcript of L&g website version