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Introduction to Harmony funds

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1 Introduction to Harmony funds
James Klempster, CFA October 2012

2 1. Introduction to Harmony funds 2
1. Introduction to Harmony funds 2. Momentum Global Investment Management 3. Fund focus 4. Market update

3 1. Introduction to Harmony funds

4 Introduction Risk profiled core solutions: Balanced and Growth
Multi-asset, multi-manager, multi-currency Diversified between local and global investments, asset class, currency, manager and style Dynamic tactical asset allocation Available in five currency / regional bases: USD, GBP, EUR, AUD and Asian The Harmony range does not invest in derivatives, structured products or CDOs Managed by Momentum Global Investment Management in London

5 The Harmony fund range Harmony Asian Balanced Harmony Asian Growth
Harmony US Dollar Balanced Harmony US Dollar Growth Harmony Euro Balanced Harmony AUD Growth Harmony Sterling Balanced Harmony Sterling Growth

6 Harmony funds structure
Momentum Global Funds SICAV (Luxembourg) Harmony fund range Asian Balanced Fund Asian Growth Fund Euro Balanced Fund GBP Balanced Fund GBP Growth Fund USD Balanced Fund USD Growth Fund AUD Growth Fund Promoter Momentum Global Investment Management Investment manager & global distributor Momentum Global Investment Management Management company RBS Luxembourg Depositary & administrator JP Morgan Luxembourg Auditors PricewaterhouseCoopers Sub-distributor Armytage Asset Management Regulator CSSF Luxembourg

7 Investment manager feedback
House view Weekly review Monthly factsheets Monthly viewpoint Detailed quarterly reports Harmony AUD Growth Website:

8 2. Momentum Global Investment Management

9 Who we are and why we are different
Business & heritage Boutique focus and mindset Strong corporate backing: top 40 JSE listed company Group AuM: USD41 billion, London AuM: USD4.3 billion* Investment process Highly experienced and stable team Disciplined valuation driven investment process Capital preservation mindset Investment manager partnerships Genuinely bespoke solutions – highly attuned to client needs True dynamic asset allocation Use of external specialists Diversification across a wide range of asset classes Deal exclusively with institutions and intermediaries January * Includes post consolidation assets.

10 Investment philosophy – core beliefs
Markets are inefficient Inefficiencies create valuation extremes and offer opportunities Dynamic asset allocation will add value over time Increasing the investable universe will increase the opportunity set Effective use of broad range of asset classes generates better risk:return profile Blending uncorrelated assets enables true diversification Valuation is paramount Reversion to the mean works in the long run Wait for the ‘fat pitch’ No single manager / investment house is good at everything Dynamic manager selection is essential Focus on employing specialists to maximise opportunities

11 Risk management Asset class selection True risk is the possibility of permanent loss of capital Best defence is buying a diverse portfolio of undervalued a sets Valuation is key: Scenario testing used to stress test our valuations Manager selection Extensive operational due diligence process Onsite visits by our DD team as necessary Transparency required to guard against style drift Position sizing Target benchmark volatility Risk analysed at individual contribution and total portfolio level Position sizes adjusted to keep within target and ensure a prudent level of diversification Liquidity stress testing

12 Investment process

13 Investment process: roles and responsibilities
Asset Allocation Glyn Owen, Investment Director James Klempster, Multi-Asset PM Peter van der Ross, Head of Strategy Lynn van Coller, Head of Core Strategies Mike Allen, Chief Investment Officer Alex Harvey, Head of Fixed Income Andries Kotzee, Multi-Asset PM Global asset allocation committee Capital markets forecast group Multi-asset committee Portfolio implementation Harmony fund range Manager Research Mike Allen, Chief Investment Officer John Caulfield, Head of Alternative Strategies Andrew Smith, Head of Equities Andries Kotzee, Multi-Asset PM Andrew Hardy, Senior Analyst Jernej Bukovec, Senior Analyst Alex Harvey, Head of Fixed Income Operations Robert Rhodes, Chief Operating Officer Risk Management Rishi Patel, Head of Risk and Due Diligence 13 13

14 Asset class research Where active management works
Percentage of fund managers who underperform various performance hurdles Index +1% +2% +4% 84 Efficient Domestic Bonds* 66 77 Global Bonds 67 77 UK Equities 65 71 75 US Equities Semi-efficient 69 75 81 Global Equities European Equities 53 66 75 59 67 73 EM Equity 48 57 65 Japanese Equity 75 Inefficient 49 54 59 Small Cap* 67 January (Illustrative purposes only)

15 Manager research process
Buy discipline Sell discipline Appoint Manager Sell Manager What we’re looking for: Sound philosophy Disciplined process Proven team/implementation Robust capacity management Alignment of interests Business stability Sell indicators Upgrade decision Key individual/ team leaves Poor capacity management Inconsistent behaviour Negative corporate change Operational issues Manager Re-evaluation Manager Evaluation Continuous monitoring Idea Generation Re-evaluate Universe

16 Using the best talent from around the world
Polar Morgan Stanley iShares Old Mutual Henderson M&G RWC Schroders Threadneedle Jupiter London Chicago: Driehaus Timpani Paris: Comgest Tokyo: Tiburon Connecticut: Lapides AXA IM BlackRock San Francisco: Artisan Wilmington: Marvin & Palmer New York: American Century Pzena Muzinich Cohen & Steers Arizona: ING Austin Yacktman Singapore: Firth Pictet Sydney: Aberdeen UBS

17 3. Fund focus

18 Harmony Balanced fund strategic allocation
October 2012

19 Harmony Growth fund strategic allocation
October 2012

20 Harmony US Dollar Balanced asset allocation
October 2012.

21 Harmony US Dollar Balanced currency allocation
October 2012.

22 Harmony US Dollar Balanced performance
Source: Lipper Hindsight, Momentum Global Investment Management, October Past performance is not indicative of future returns. *30/06/2005 to 30/12/ †Harmony fund average percentage rank over discrete years shown.

23 Harmony US Dollar Balanced manager performance
Source: Returns to 28/09/2012, Bloomberg October 2012

24 Harmony US Dollar Growth asset allocation
October 2012.

25 Harmony US Dollar Growth currency allocation
October 2012.

26 Harmony US Dollar Growth performance
Source: Lipper Hindsight, Momentum Global Investment Management, October Past performance is not indicative of future returns. *30/06/2005 to 30/12/ †Harmony fund average percentage rank over discrete years shown.

27 Harmony US Dollar Growth manager performance
Source: Returns to 28/09/2012, Bloomberg October 2012

28 Harmony Asian Growth asset allocation
October 2012.

29 Harmony Asian Growth currency allocation
October 2012.

30 Harmony Asian Growth performance
Source: Lipper Hindsight, Momentum Global Investment Management, October Past performance is not indicative of future returns. *30/11/2006 to 29/12/ †Harmony fund average percentage rank over discrete years shown.

31 Harmony Asian Growth manager performance
Source: Returns to 28/09/2012, Bloomberg October 2012

32 Harmony three year performance vs. peers
Source: Lipper Hindsight, October Past performance is not indicative of future returns

33 4. Market update

34 This century has been bad for equity investing……
+18.5% Source: Returns to 05/10/2012. Bloomberg, October 2012

35 ……but not for government bonds
Source: Bloomberg, October 2012

36 Asset class returns YTD 2012, Local currency terms
Source: Bloomberg, Returns to 28/09/2012, October 2012

37 MSCI World since January 2008
Source: Bloomberg, October 2012

38 10 year government bond yield since January 2008
Source: Bloomberg, October 2012

39 Map of the markets YTD Source: Bloomberg, Returns from 30/12/ /10/2012, October 2012

40 Asset class returns 2012 YTD
Source: Lipper, Returns to 05/10/2012, October 2012

41 Asset class returns 2012 YTD
Source: Lipper, Returns to 05/10/2012, October 2012

42 Asset class returns 2012 YTD
Source: Lipper, Returns to 05/10/2012, October 2012

43 10 year government bond spreads vs. Germany
Source: Bloomberg, October 2012

44 German vs. Spanish 10 yr government bond yields
January 2000 to date Source: Bloomberg, October 2012

45 Performance of Chinese stock market vs. S&P500
Source: Bloomberg, October 2012

46 Performance of Gold, Copper and Oil
Source: Bloomberg, October 2012

47 Currencies vs. USD Source: Bloomberg, October 2012

48 Performance of currencies vs. USD YTD 2012
Source: Bloomberg, Returns to 05/10/2012, October 2012

49 2. Market outlook

50 Critical issues Sustainability of growth in the US
Structural slowdown in China – or hard landing? European imbalances Central bank pump pricing vs. global deleveraging

51 Clear slowdown in global growth
Source: JPMorgan, October 2012

52 Economy has slowed: US leading economic indicators
Source: Bloomberg, October 2012

53 US consumer confidence
Source: Bloomberg, October 2012

54 US economic momentum is reasonable – but unemployment remains high
US labour market Source: Figures to 28/09/2012, Bloomberg, October 2012

55 US construction: the only way is up?
Source: Bloomberg, October 2012

56 US housing starts over the last 12 months
Source: Bloomberg, October 2012

57 Fiscal cliff: will need to be tackled after November
US budget deficits Source: Bloomberg, October 2012

58 US fiscal deficit as % of GDP 1791 -2011
Source : Deutsche bank, GFD. October 2012.

59 Budget deficits larger in the US than in peripheral Europe
Budget deficit as a % of GDP % Greece, Ireland, Italy, Portugal and Spain: GDP- weighted fiscal balance US Source: Deutsche bank. October 2012.

60 China is landing GDP and industrial production
Source: Bloomberg, October 2012

61 Major macro indicators continue to disappoint
Chinese PMI: new orders Chinese money supply (% yoy) Level Source: Bloomberg, October 2012.

62 Export sector flatlining
Chinese global exports (Real $) Source: Bloomberg, October 2012

63 Imports slowing Chinese global imports (Real $) Imports % YOY
Source: SocGen October 2012

64 China’s slowing growth: structural or cyclical?
China Real GDP y/y % change % Source: Factset. October 2012.

65 The European crisis is not simply debt
1.0% -8.5% -1.7% -8.0% Current account balance 5.2% -0.8% Budget deficit to GDP -1.9% -4.6% -7.4% -7.2% -4.2% -4.5% -2.1% -6.0% -2.2% -2.4% Source: IMF, 2012 estimates.

66 Unit labour costs since the launch of the euro
Source: Bloomberg, October 2012

67 Currencies vs. the Deutschemark
Source: Bloomberg, October 2012

68 German Labour reform accelerated growth- can Italy?
Source: Bloomberg, October 2012

69 The European stress / intervention cycle
Don’t underestimate the political will to preserve the Eurozone Inflate, stagnate or default Austerity / growth European bail out of banks Issue of Eurobonds ECB – LTRO / OMT / rate cut Fiscal union

70 Central government debt burden 1900 to 2011 - advanced and emerging economies
% Source: Reinhart (2010), Reinhart and Rogoff (2009 and 2011), sources cited therein and the authors

71 Total debt to GDP for developed economies 1990 - 2012
Source: Deutsche Bank, Haver. October 2012.

72 Debt composition varies widely
Source: Bloomberg, October 2012.

73 Short term interest rates over past 10 years
US, UK, Japan and Europe % Source: MGIM, Bloomberg. October 2012

74 The world is not normal: UK base rate 1694 to today
Source: Deutsche Bank, GFD. October 2012.

75 The world is not normal: Swiss government bond yields
Source: Bloomberg, MGIM. October 2012.

76 The world is not normal: 10 year government bond yields
Source: Bloomberg, MGIM. October2012.

77 The world is not normal: US 10 year yield since 1790
Source: Deutsche Bank, GFD, Bloomberg Finance LLp. October 2012.

78 Quantitative easing: Bank of England balance sheet as a % of GDP
Source: Deutsche bank. October 2012.,

79 The UK recovery is weaker than in the great depression
% Source: Deutsche Bank. September 2012.

80 Tail risk of extreme events are not insignificant
US fiscal cliff Chinese ‘recession’ Eurozone disintegration Journey into the unknown – monetary easing

81 Equity market valuations
*current year estimate Source: Bloomberg, Statistics to 05/010/2012. October 2012

82 MSCI World P/E ratio since 1995
Source: Bloomberg, October 2012

83 MSCI World price to book since 1995
Source: Bloomberg, October 2012

84 Tail wind of EM re-valuation now behind us
MSCI World PB vs. MSCI GEM PB Source: Bloomberg, October 2012

85 Investment conclusion
‘New normal’ is now the consensus Deleveraging and rebalancing set to continue for years US – growth risk in China – structural slowdown underway Europe – stress / intervention cycle to continue Policy risks are high Further monetary loosening is certain Crisis presents an extraordinary valuation opportunity

86 Implications for portfolio construction
Subdued growth low return expectations Continued deleveraging and tight credit financial strength is critical High tail risks high volatility Cyclical move down in commodities has further to run Deflation protection in safe haven bonds Income generating assets important safe dividend equities corporate bonds emerging market bonds Focus on: Diversification by asset class Quality defensive equities Inflation not today’s problem – but might be the end game Exploit tactical opportunities

87 Disclaimer Momentum Global Investment Management is the trading name for Momentum Global Investment Management Limited. This document does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this document, and should be satisfied in doing so that there is no breach of local legislation or regulation. The information is intended solely for use by our clients or prospective clients, and should not be reproduced or distributed except via original recipients acting as professional intermediaries. This document is not for distribution in the United States. Prospective investors should inform themselves and if need be take appropriate advice regarding applicable legal, taxation and exchange control regulations in countries of their citizenship, residence or domicile which may be relevant to the acquisition, holding, transfer, redemption or disposal of any investments herein solicited. Any opinions expressed herein are those at the date this material is issued. Data, models and other statistics are sourced from our own records, unless otherwise stated herein. We believe that the information contained is from reliable sources, but we do not guarantee the relevance, accuracy or completeness thereof. Unless otherwise provided under UK law, Momentum Global Investment Management does not accept liability for irrelevant, inaccurate or incomplete information contained, or for the correctness of opinions expressed. We caution that the value of investments in discretionary accounts, and the income derived, may fluctuate and it is possible that an investor may incur losses, including a loss of the principal invested. Past performance is not generally indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Our investment mandates in alternative strategies and hedge funds permit us to invest in unregulated funds that may be highly volatile. Although alternative strategies funds will seek to follow a wide diversification policy, these funds may be subject to sudden and/or large falls in value. The illiquid nature of the underlying funds is such that alternative strategies funds deal infrequently and require longer notice periods for redemptions. These Investments are therefore not readily realisable. If an alternative strategies fund fails to perform, it may not be possible to realise the investment without further loss in value. These unregulated funds may engage in the short selling of securities or may use a greater degree of gearing than is permitted for regulated funds (including the ability to borrow for a leverage strategy). A relatively small price movement may result in a disproportionately large movement in the investment value. The purpose of gearing is to achieve higher returns associated with larger investment exposures, but has concomitant exposure to loss if positive performance is not achieved. Reliable information about the value of an investment in an alternative strategies fund may not be available (other than at the fund’s infrequent valuation points). Under our multi-management arrangements, we selectively appoint underlying sub-investment managers and funds to actively manage underlying asset holdings in the pursuit of achieving mandated performance objectives. Annual investment management fees are payable both to the multimanager and the manager of the underlying assets at rates contained in the offering documents of the relevant portfolios (and may involve performance fees where expressly indicated therein). Momentum Global Investment Management Limited (Company Registration No ) registered office at 20 Gracechurch Street, London EC3V 0BG. Momentum Global Investment Management Limited is authorised and regulated by the Financial Services Authority in the United Kingdom, and is an authorised Financial Services Provider pursuant to the Financial Advisory and Intermediary Services Act 37 of 2002 in South Africa. © Momentum Global Investment Management Limited 2012

88 Contact: Lucy Richardson Marketing Manager Momentum Global Investment Management T:

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