Schroder Asian Total Return Investment Company plc · LSE:ATR
Schroder Asian Total Return Investment — Henderson Global Investors — Debt Investor Presentation (2016)
27 slides from Schroder Asian Total Return Investment's debt investor presentation, Nov 11, 2016
Slide 1: Henderson Global Investors Fixed Income update Q1 2016
Henderson Global Investors Fixed Income update Q1 2016 This document is solely for the use of professionals and is not for general public distribution. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
Slide 2: Fixed Income market review: market returns
Fixed Income market review Market returns Market returns – 3 months Market returns – 12 months % % 6 5.7 6 4.9 4.9 4.1 3.8 4 3.4 4 3.2 3.0 3.3 3.0 2.4 2.4 2 2 1.7 1.5 1.3 1.0 0.5 0.5 0.1 0 0 -0.1 -0.1 -2 -2 -1.8 AA A Gilts Secured Loans AAA BBB Cash Index Linked Gilts High Yield Emerging Markets Cor
Slide 3: Key themes
Key themes Q1 2016 review • Global economy • Oil price rebounds from mid-quarter low • Brexit concerns in Europe • Inflation expectations off the lows • Central banks fire more bullets • ECB expands stimulus package • BOJ cuts rates negative • Fed pares back rate hike expectations • Financial assets
Slide 4: Market outlook
Market outlook • Subdued global growth US inflation moves away from zero % • Global recession not likely 3.0 Core PCE Index PCE Price Index 2.5 Consumer Price Index • Central banks to remain accommodative 2.0 1.5 1.0 • Pessimism on inflation well priced into 0.5 bond markets 0.0 • Expect steeper yie
Slide 5: Market outlook: negative yields becoming more widespread
Market outlook Negative yields becoming more widespread % of outstanding government debt with a yield below zero 100% 80% 60% 40% 20% 0% Netherlands Belgium Austria France Denmark Japan Sweden Slovenia Ireland Germany Slovakia Italy Luxembourg Lithuania Finland Switzerland Source: Bloomberg, BofA Me
Slide 6: Inflation pessimism reflected in bond markets
Market outlook Inflation “pessimism” reflected in bond markets Core inflation stable, headline shock to dissipate? Inflation expectations yet to rebound 3.5 G7 + E7 Headline 3.0 3.5 EU 5y5y inflation 3.3 G7 + E7 Core 5Y Inflation breakeven 5 yrs forward(%) US 5y5y inflation (RHS) 3.1 2.5 3.0 2.9 2.7
Slide 7: US rates fair value analysis
Market outlook US rates – 10 year fair value analysis Inputs FOMC member’s expectations for future Fed funds rate Conservative assumptions compared to history Source: Bloomberg, March 31, 2016 Notes: Dots represent individual Fed members expectation of Fed fund rate 10y ACM term premium % 4 3 2 • Ti
Slide 8: US credit market signaling a recession?
Market outlook US credit market signaling a recession? US high yield corporate bond spread 2,000 US HY credit spread 1,800 1,600 1,400 1,200 bps 1,000 800 600 LT average 400 200 0 Oct-86 Oct-97 Feb-05 Oct-08 Feb-16 Jul-89 May-91 Apr-92 Feb-94 Jul-00 May-02 Apr-03 Jul-11 May-13 Apr-14 Dec-84 Nov-85 D
Slide 9: Favor Europe over the US
Market outlook Favor Europe over the US The credit cycle Leverage Falling REPAIR RECOVERY • Balance sheet repair • Restructuring increases margins • Debt repayment and refinancing • FCF growing • Equity issuance • Leverage falling • Focus on cash generation • Focus on cost-cutting Low Growth Europe
Slide 10: Multi sector fixed income performance: Q1 2016
Fixed Income performance Multi sector fixed income performance: Q1 2016 % Q1 2016 1-year 3-years Since inception Strate BM Rel Strategy BM Rel Strategy BM Rel Strategy BM Rel gy Absolute Return -0.79 0.15 -0.93 -0.32 0.58 -0.90 0.46 0.55 -0.09 2.50 1.26 1.24 Bond Global 0.28 n/a n/a 0.68 n/a n/a 1.4
Slide 11: Single strategy fixed income performance: Q1 2016
Fixed Income performance Single strategy fixed income performance: Q1 2016 % Q1 2016 1-year 3-years Fund BM Rel Fund BM Rel Fund BM Rel European Corporate Bond 1.60 2.43 -0.83 -1.53 0.36 -1.89 3.90 3.84 0.06 European High Yield Bond 1.59 1.89 -0.30 2.23 -0.09 2.32 7.17 5.15 2.02 US High Yield 3.51 3
Slide 12: Interest rates
Interest rates What worked… What didn’t… • Duration • Inflation • Higher yields in Australia • Positioned for increased inflation expectations in the US vs UK • Duration • Expecting higher yields in Europe and the US • Yield Curve • Expecting steeper yield curves in Europe, the US and the UK Note: T
Slide 13: Sterling Credit
Sterling Credit What worked… What didn’t… • Underweight energy • Overweight subordinated insurers • Standard Life, Aviva and AXA • Overweight telecoms • Verizon ($), Deutsche Telecom • Overweight UK banks • New issues • Bias towards lower-rated bonds • Motability, Vicinity Centers (REIT), Yorkshire
Slide 14: Euro Credit
Euro Credit What worked… What didn’t… • Overweight AAAs and government • Underweight higher-rated bonds bonds • Underweight AAs and As • Long in Bunds, KfW and EIB contributed over January and February • Positioning in utilities • Overweight REITS • Underweight sector • Overweight CityCon, Kennedy W
Slide 15: Global Credit
Global Credit What worked… What didn’t… • Asset allocation • Asset allocation • Overweight BBB rated bonds • Curve positioning • Interest-rate duration • Overweight GBP credit • Sector selection • Sector selection • Overweight communications • Overweight insurance • Underweight energy • Positioning
Slide 16: Euro High Yield
Euro High Yield What worked… What didn’t… • Asset allocation • Underweight B rated securities • Asset allocation • Selective positioning in CCCs • Positioning in BBBs • Underweight to BB-rated bonds • Sector selection • Positioning in capital goods • Sector selection • Underweight telecommunications
Slide 17: US High Yield
US High Yield What worked… What didn’t… • Asset allocation • Asset allocation • Overweight B and CCC rated bonds • Underweight BB rated bonds • Sector selection • Sector selection • Positioning in telecommunications • Positioning in financial services, • Overweight capital goods (aerospace/ specific
Slide 18: Global High Yield
Global High Yield What worked… What didn’t… • Asset allocation • Asset allocation • Small overweight to North America • Underweight emerging markets/rest of the world • Sector selection • Underweight healthcare • Sector selection • Positioning in telecommunications • Underweight energy • Overweight
Slide 19: Global Absolute Return
Global Absolute Return What worked… What didn’t… • New Issues • Positioning in financials • Amgen • Long subordinated insurance • AB Inbev • Long subordinated bank debt • Issuer selection • Holdings in energy related issuers • Long Isolux • Long Digicel • Issuer selection • Long Tesco • Short Bopara
Slide 20: Emerging Market Credit
Emerging Market Credit What worked… What didn’t… • Asset allocation • Underestimated the rallying power of • Overweight commodities and oil illiquid, low-priced bonds • Elevated cash position • High beta versus the market due to duration • Overweight defensive sectors • Real estate • Utilities • Geo
Slide 21: Asset Backed Securities
Asset Backed Securities What worked… What didn’t… • Overweight senior UK buy-to-let • Limited exposure to peripheral RMBS European assets • Exposure to mezzanine tranches of higher beta assets: • UK Non-conforming RMBS • CLO • Overweight US single-family rental CMBS Note: The above covers Q1 2016 Su
Slide 22: Secured Loans
Secured Loans What worked… What didn’t… • Primary issuance market • Avoiding distressed / lower quality • Keurig Green Mountain loans • Solera • Underweight USD assets • Credit selection • Hanson • Credit selection • Deoleo • Loss avoidance • There were no defaults in the portfolio Note: The above c
Slide 23: Appendices
Appendices SHARED - KNOWLEDGE.
Slide 24: Henderson Global Fixed Income: diverse fixed income platform
Henderson Global Fixed Income Diverse fixed income platform • 74 fixed income investment professionals • $33.0bn* in AUM Strategy AUM Portfolio manager/s Absolute Return Bond Aims to generate positive returns throughout a market cycle by investing across the full range of $1,474.8m opportunities wit
Slide 25: Henderson Global Fixed Income: Team
Henderson Global Fixed Income Team Phillip Apel, Head of Fixed Income Multi-Sector Fixed Strategic Fixed Corporate credit Secured credit Interest rates Income Income $16.3bn $2.5bn* $2.8bn $5.6bn $4.6bn Stephen Thariyan Colin Fleury Mitul Patel Fixed Income Investment John Pattullo & Jenna Barnard G
Slide 26: Henderson Global Investors: Investment capabilities
Henderson Global Investors Investment capabilities • Focused, independent business $132.6bn AUM by capability Multi-Asset • Entrepreneurial culture 5% Global Alternatives Equities • Comprehensive risk management 15% 31% • Global investment expertise with regional specialists Global Fixed Income 27%
Slide 27: Important information
Important information This document is intended solely for the use of professionals, defined as Eligible Counterparties or Professional Clients, and is not for general public distribution. Issued in the US by Henderson Global Investors (North America) Inc. (HGINA), the US advisory affiliate of Hende
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