Ignis Absolute Return Government Bond Fund Quarterly update Q4 2012 This presentation is intended for professional clients and investment professionals only and should not be relied upon by retail investors.
Ignis Absolute Return Government Bond Fund January 13
Agenda
Fund overview Q4 review Outlook/positioning
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Ignis Absolute Return Government Bond Fund January 13
Ignis Absolute Return Government Bond Fund An innovative fund: Designed to deliver: Performance in all market conditions Low volatility: 4-6% standard deviation* Low correlation with other asset classes
Alpha not beta
Investing in: Highest quality and most liquid debt instruments (long and short exposure) Foreign currency - max 25% of total risk budget (G10 only) *The fund’s target volatility is a standard deviation level of 4-6%, it is managed to deliver stable returns regardless of market moves.
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Q4 review
Ignis Absolute Return Government Bond Fund January 13
Market review The Fed expanded its ultra-easy monetary policy with QE4 and pledged to only raise interest rates if unemployment drops below 6.5%, inflation exceeds the 2% target and inflation expectations become elevated.
The ECB’s commitment to preserve the single currency eased crisis rates in Italian and Spanish government bonds. Peripheral markets were further boosted by the central bank’s promise to purchase short-dated government bonds of countries which sought support from the European Stability Mechanism. Spain continued to resist pressure to seek help.
Q3 UK GDP surprised on the upside with growth accelerating to 1.0%. Yet, the MPC remained cautious, noting weak underlying activity and forecasting a contraction in Q4 GDP. The central bank transferred £35bn of coupon payments on its gilt holdings to the Treasury in lieu of further QE.
Japanese elections in late December brought the Liberal Democrat Party back to power with a promise to expand fiscal policy and intensify pressure on the Bank of Japan to end deflation, resulting in a marked depreciation of the yen.
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Ignis Absolute Return Government Bond Fund January 13
Performance Relative performance of ARGBF versus benchmark (EONIA) 7
6.5 6.1
6.1
Quarter 4 2012 performance
6
Fund performance:
2.21%
4
Benchmark performance:
0.02%
%
5
3 2.2 2 1 0 3 months
YTD
12 months
Since launch (Annualised)
Source: Lipper, NAV to NAV, gross income reinvested to 31/12/2012, based on EUR I Hdgd share class. The fund launched on 31/03/2011. EONIA is the rate that large banks use to borrow from, and lend to, one another on the overnight market. The performance data does not take account of the commissions and costs incurred on the issue and redemption of shares (including the initial charge). Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
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Ignis Absolute Return Government Bond Fund January 13
Performance attribution Key contributors/detractors Contribution by strategy: Q4 12 80
75.6
Short short-dated forward rates, with
70 60
the view that UK and US growth would improve in the short-term
55.7 51.5
50 Bps
Volatility strategies
40
Sold volatility on longer-dated rates, as we expected premiums to fall
30
Short yen versus US dollar, anticipating
19.9
20
12.3 10
7.4
9.7
relaxation of policy in Japan
0 Rates 2y-
Rates 2- Rates 15y+ 15y
Asset Swap
Global FX - Active Volatility Inflation
Source: Ignis, internal trading systems, indicative only, base currency, data from 30/09/2012 to 31/12/2012. The fund generates performance by implementing different strategies. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.
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Ignis Absolute Return Government Bond Fund January 13
Theme: growth to improve short term UK 3y2y nominal swap
term improvement in growth
Risk bucket:
1.4
1.3 %
Strategy: short short-dated forwards Low rates fully priced into markets Further QE and ECB support to lead to short-
1.2
Short positions taken in US and UK forward rates
Tactically adjusted position size throughout the quarter
Source: ClearCurve at 31/12/2012
1.1 Sep 12
Oct 12
Nov 12
Dec 12
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Ignis Absolute Return Government Bond Fund January 13
Theme: US and UK growth to accelerate Strategy: sell volatility Uncertainty led to short-term peak in market
US 3m term 30yr tenor Swaption Volatility Index 100 95
volatility
We expected long-dated rates to remain
90
anchored, while short-dated yields rose 85
Risk bucket:
Volatility strategies
% 80 75
Sold volatility on long-dated rates swaptions, taking in premium
Volatility levels fell as markets stabilised
Source: Bloomberg at 31/12/2012
70 65 Sep 12
Oct 12
Nov 12
Dec 12
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Ignis Absolute Return Government Bond Fund January 13
Theme: political change in Japan Yen price versus US dollar
Strategy: short yen vs US dollar Growth continues to disappoint in Japan Political change will lead to relaxation of
88 86
policy
Short yen vs US dollar Continuing mandate for dovish political parties
Talk of increasing central bank inflation
84 Yen/US dollar
Risk bucket:
End Dec: short position closed
82
Mid Sept: short position entered
80 78 76 74 Aug 12
Sep 12
Oct 12
Nov 12
Dec 12
target post elections fuelled sharp sell-off
Source: Bloomberg at 31/12/2012
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Outlook/positioning
Ignis Absolute Return Government Bond Fund January 13
Macro economic outlook 2013 is fifth year of VILE decade; growth still below potential, but improving Modest tightening of US fiscal policy expected to increase competition for capital and lead to higher real yields - US to remain strongest major economy and closest to exit strategy - Fed expected to end QE4 by September
Bank of England to remain on hold for most of the year - UK activity expected to exceed forecasts in Q4 and for H1 2013 - Leading to higher growth expectations and higher short-dated forward gilt rates
Europe moves from acute to chronic crisis - Cycle of Crisis, Response, Anticipation, Improvement, Complacency continues: initial relief followed by disappointment
Aggressive expansion of Japanese monetary policy to reach expected 2% inflation target - Should lead to substantial depreciation of the yen against all major currencies.
China’s winter bounce expected to fade in spring/summer with return to growth recession by Q4
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Ignis Absolute Return Government Bond Fund January 13
Current positioning: long growth/short inflation Theme: US and UK growth to accelerate
Volatility strategies
Theme: China in growth recession
Short US and UK front-dated forwards
Short AUD vs USD and GBP
Short volatility in long-dated rates Long volatility in short-dated rates
Long Australian 5y5y rates
Theme: Crisis, Response, Anticipation, Improvement, Complacency
Theme: Political and regulatory changes Long 15y15y gilts versus LIBOR
Short euro vs GBP
Theme: Forward rate valuation insights Short 5y5y US inflation as forward rates at 3% are too high
Political change in Japan favours looser monetary policy: Short yen vs USD and GBP
Short ultra-long dated UK bonds vs longs as forward curve remains steeply inverted 12
Ignis Absolute Return Government Bond Fund January 13
Contact us Your main contact France and Switzerland (French) Philip Goldsmith, Managing Director Europe Mob: +41 (0)79 753 35 74 / +44 (0)7836 243 999 Email:
[email protected] Iberia and Latin America Mauro Loran Garcia, Regional Director Mob: +34 (0)616 463 917 Email:
[email protected] Germany, Austria and Switzerland (German) André Haubensack, Regional Director Mob: +41 (0)79 373 79 13 Email:
[email protected]
Benelux Roger de Passe, Regional Director Mob: +32 (0) 470 99 16 68 Email:
[email protected] Italy and Ticino Arcangelo Barletta, Regional Director Mob: +39 (0)392 89 60 736 Email:
[email protected] Nordics Philip Goldsmith, Managing Director Europe Mob: +41 (0)79 753 35 74 / +44 (0)7836 243 999 Email:
[email protected]
Your regional support
Business Development Executive Johanna Pollet Tel: +44 (0)20 3003 3128 Email:
[email protected]
Sales Support Executive Christina Kniep Tel: +44 (0)20 3003 3124 Email:
[email protected]
Business Development Executive Riccardo Villa Mob: +39 (0)347 27 52 557 Email:
[email protected]
European Sales Support Manager Dee Clarkin Tel: +44 (0)20 3003 3127 Email:
[email protected]
Telephone calls may be monitored and/or recorded for the purpose of security, internal training, accurate account operation, internal customer monitoring and to improve the quality of service.
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Ignis Absolute Return Government Bond Fund January 13
Disclosure This information is intended for professional clients and investment professionals only and should not be relied upon by retail investors. The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice. Distribution of this document and the offering of shares in certain jurisdictions may be restricted by law and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. This document does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Further detailed information regarding the Fund, its Prospectus, its Key Investor Information Document (KIID), its latest annual reports and any subsequent half-yearly reports (including information on how to switch, buy and sell units of the Fund and other unit classes available), is available free of charge from Ignis Investment Services Ltd. You can also obtain these documents through our website www.ignisasset.com/international. Past performance is not a guide to future performance. The fund takes long and short positions based on the fund manager’s views of the market direction. This means the fund’s performance is unlikely to track the performance of broader bond and equity markets. While this creates the opportunity for the fund to deliver positive returns in falling markets, it also means that the fund could deliver negative returns in rising markets. The value of investments and any income from them can fall as well as rise and is not guaranteed. Exchange rate movements may cause the value of investments to fluctuate. The fund is a sub fund of Ignis Global Funds SICAV, an investment company organised under the laws of the Grand Duchy of Luxembourg as a Self Managed SICAV. The investment company has its registered office at Vertigo-Polaris, 2-4 Eugene Ruppert, L-2453 Luxembourg, and is authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. The sub fund is a Recognised Scheme in the UK under Section 264 of the Financial Services & Markets Act 2000 and is promoted in the UK accordingly. The sub fund is currently registered for public distribution in the following countries: Luxembourg, UK, Spain, Germany, Austria, France, Netherlands, Belgium, Sweden, Switzerland, Finland and Italy. Copies of all relevant scheme documentation can be obtained free of charge from the locally appointed paying agents. Austrian Paying Agent: Unicredit Bank Austria, 8398 Global Securities Sales & Services, P.O. Box 35, A-1011 Vienna; Belgium Paying Agent: Fastnet Belgium SA, B-1000 Brussels, Avenue de Port 86C, b320; French Paying Agent: Société Générale SA, 29 Boulevard Haussmann, F-75009 Paris; German Information Agent: Société Générale SA, Neue MainzerStraße 46-50, D-60311 Frankfurt / Main; Italian Paying Agent: RBC Dexia, via Vittor Pisano 26, 20124 Milan; Luxembourg Paying Agent: Société Générale, 11 Avenue Emile Reuter, L-2420 Luxembourg; Netherlands Paying Agent: ING Bank NV, Van Heenvlietlaan 220, Location Code BV.06.01, NL-1083 CN Amsterdam; Spanish Paying Agent: RBC Dexia Investor Services España SA, calle Fernando El Santo no20, Madrid 28010; Swedish Paying Agent: SEB Merchant Banking, Sergels Torg 2, SE-106 40 Stockholm; Swiss Paying Agent: NPB Neue Privat Bank AG, Limmatquai 1, P.O. Box, CH-8022 Zurich. This document has been issued by Ignis Investment Services on behalf of Ignis Global Funds SICAV. Ignis Investment Services is registered in Scotland Number SC101825. Registered Office: 50 Bothwell Street, Glasgow G2 6HR. Authorised and regulated by the Financial Services Authority. 14
