Presentation on theme: "ARE WE PRICED FOR PERFECTION?"— Presentation transcript:
1 ARE WE PRICED FOR PERFECTION? Richard Jenkins and Bill KankoBlack Creek Investment Management“UNIQUE INSIGHTS. PROPRIETARY IDEAS”TM
2 ARE WE PRICED FOR PERFECTION? Lehman Brothers crisis – 2008Eurozone crisis – 2011Tapering crisis – 2013???We have seen similar things before ...
3 10-YEAR RETURNS – PATTERN OF NORMALIZATION Returns average out over time … go where they have been lower and valuations are more attractiveCumulative Return from Aug 2003 to Aug 2013147.5%118.0%72.6%51.6%20.7%Source: Paltrak
4 Cumulative Return from Aug 2008 to Aug 2013 5-YEAR RETURNSCumulative Return from Aug 2008 to Aug 201341.4%11.0%9.1%6.7%5.7%Source: Paltrak
5 GLOBAL MARKET OUTPERFORMANCE LED BY U.S. Cumulative Return from Aug 2011 to Aug 201351.1%38.8%29.2%5.6%5.3%Source: Paltrak
6 Cumulative Return from Sep 2008 to Aug 2013 BLACK CREEK INTERNATIONAL EQUITY: SIGNIFICANT OUTPERFORMANCE SINCE INCEPTION OF THE FUNDCumulative Return from Sep 2008 to Aug 201380.5%28.7%24.8%19.9%Source: Paltrak
7 BLACK GLOBAL LEADERS FUND: OUTPERFORMANCE SINCE MANAGED BY BLACK CREEK Cumulative Return from Jun 2006 to Aug 201340.4%33.7%28.3%18.2%Source: Paltrak
8 Cumulative Return from Jan 2007 to Aug 2013 BLACK CREEK GLOBAL BALANCED: OUTPERFORMANCE SINCE INCEPTION OF THE FUNDCumulative Return from Jan 2007 to Aug 201329.1%17.4%8.4%Source: Paltrak
9 GLOBAL STOCK MARKET VALUATIONS Real estateBondsCashEquitiesCommodities – hard, softArt, collectibles, etc.
10 GLOBAL STOCK MARKET VALUATIONS Global equitieslong-term averagep/e (14x)Average P/ESource: Thomson Datastream and I/B/E/S
11 OUR MARKET VIEWSFlight to quality (defensive assets) similar toDon’t confuse yield with valueThere is a premium on “safety”European crisis – There is light at the end of the tunnelU.S. – has turned the corner—really!China – now the hard work begins!Africa/South America – If China catches a cold?Deleveraging = slower consumption-led growth – we still believe thisLow interest rates are creating overcapacity everywhere
12 RELATIVE P/E VALUATION: GLOBAL STAPLES VS. BROAD MARKET +1 standard deviation-1 standard deviationSource: Morgan Stanley
13 CURRENCY ACCORDING TO THE BIG MAC INDEX Source: The Economist, July 2013
14 CURRENCY SHOULD BE A TAILWIND CAD overvalued to:What is expensive?USD: 18%Mexico: 58%Euro: 11%Sterling: 11%China: 54%Korea: 39%Russia: 18%*Denmark: -28%Sweden: -25%Australia: -20%Switzerland: -27%Source: OECD statistics directorate, August 30, 2013
15 WHY BLACK CREEK? WHY NOW?FocusExperienceResultsFlexible sizeGlobal investing should see tailwindsCohesive, team-focused strategyThe need to think long term has never been greater
16 OUR GOALS FOR OUR CLIENTS Positive returnsCompetitive returns — beat competitors, indexes and ETFsBeat fixed income… So far, so good.
17 BLACK CREEK PERFORMANCE As at August 31, 2013:YTD1YR3YR5YRSince inception*Black Creek Global Leaders Fund Class A20.2%35.3%12.9%7.8%3.5%MSCI World (C$)19.0%26.4%13.5%4.6%3.8%Black Creek International Equity Fund Class A18.4%41.8%15.2%12.5%12.7%MSCI EAFE (C$)27.3%9.3%1.9%5.0%Black Creek Global Balanced Fund Class A11.5%27.9%11.0%7.9%4.0%Global Balanced Index**11.4%15.4%8.5%8.0%2.2%** Black Creek Investment Management took over management of Global Leaders on June 15, 2006; inception date is February 2005.*February 2005*September 2008All of these competitive advantages have culminated in a very impressive track record.Their goal is to give your clients invested in Castlerock International Equity, Castlerock Global Balanced Fund and Castlerock Global Leaders, a better future return.And if you look at the performance, they have done just that.All Funds significantly beating their respective index, and by a LARGE margin.They have provided positive performance in difficult markets over all time periods.All of their funds have been 1st quartile for 2 and 3 years, basically since they began managing them.However, the main point I want to get across isthat these performance numbers are just a continuation of the track recordand reputation that they have built over 20 plus years of managing money.*January 2007Formerly known as Castlerock Global Leaders Fund, Castlerock International Equity Fund and Castlerock Global Balanced FundSource: RBC Dexia, August 31, ** 60% MSCI World Index CAD/40% JPM GBI C$17
18 IT’S NOT ABOUT COUNTRY ALLOCATION BUT OUR BEST 25 BUSINESS IDEAS Flexible all-cap go-anywhere mandatesAvoid areas of high valuation risk; the converse is also trueFewer companies to follow = depth of research/competitive analysis = conviction in our choicesHigh deviation from index results in outperformanceDisciplined BUY/SELL process – replace our least favourite idea with our newest ideaK.J. Martijn Cremers and Antti Petajisto of the Yale School of Management have conducted primary research into active management and defined active share. Cremers and Petajisto studied portfolios from 1980 through 2003, and discovered that those displaying the greatest active share tended to outperform their relevant indexesSimilarly, a 2008 study titled "Best Ideas" by Randolph Cohen at the Harvard Business School, Christopher Polk at the London School of Economics, and Bernhard Silli at Goldman Sachs defends high-conviction portfolios. The authors studied managers' favorite stocks and showed that, in fact, those stocks outperformed funds' appropriate indexes.Although Morningstar analysts don't rely heavily on active share when we debate and choose our Analyst Picks, our picks confirm the thesis that high active share is highly correlated with good performance.
19 BUSINESSES YOU DO NOT FIND AT HOME WienerbergerWuxi PharmatechCarnival Corp.GPO TelevisaGalp EnergiaRandstad HoldingPublicis GroupeAccorHeidelberg CementChristian DiorBricks and ceilingsPharmaceutical supplyCruise lineMedia and televisionOil & gasStaffing services providerCommunicationsHotel operatorCement & building materialsLuxury consumer items
20 SUMMARYWhile bonds and real estate are priced for perfection, equities are fairly valued – the equity market is the place to beBlack Creek is different, by focusing we deliver in the long termA world of opportunities exists. STOP reacting to the headlines, have a focused strategy to take advantage of themBuy the best opportunities you can find, anywhere!Stay flexible but disciplinedThank you for your support. We really mean it, we know it is hard out there for all equity investors
21 Thank you FOR ADVISOR USE ONLY 21 All charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results.®CI Investments, the CI Investments design are registered trademarks of CI Investments Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.21
22 WHY INVEST GLOBALLY? Equities are outperforming fixed income The Canadian dollar is overvalued by 10% - 30%We seek companies that are GLOBAL leaders(we consider Canada as well)
23 WHAT WE DELIVER Our diversified global portfolios provide exposure to: 25 global market share leading companiesLower than average long-term valuationsA proprietary view of the future of each companyFocus, focus, focus …Portfolios that do not track indexes — we are trying to BEAT the index
24 AREAS TO AVOID GIVEN PERFORMANCE OVER THE PAST 10 TO 15 YEARS Real estate and banks in commodity-centric countries“Safe” multinationals in “safe” industriesConsumer companies in emerging marketsBonds and bond proxies in safe countries“Dividend and income first” stories rather than those supported by a business case and valuationsWatch return of capital deception
25 OUR PRODUCTS Black Creek Global Leaders Fund Black Creek Global Leader Corporate Class (focused equity)Black Creek International Equity FundBlack Creek International Corporate Class (EAFE)Black Creek Global Balanced FundBlack Creek Global Balanced Corporate Class(dividend and income)
26 DIVIDENDS AND INCOMEBlack Creek Global Balanced Fund provides a mix of the twoFixed-income portfolio offers yield over 5%Equity portfolio near 3% yieldBUT we buy the businesses first, and receive dividends later
27 BLACK CREEK’S COMPETITIVE ADVANTAGES Structure: owned by the investment managersIntegrity: invest our own money in fundsExperience: award-winning managers (global, balanced, international, European)More than 50 years of combined experienceHave managed over $23 billion in assetsHave seen booms and busts all over the worldConviction: 25 globally leading companies – each a proprietary ideaSmall fund size: allows for flexibilityBlack Creek is very unique in the industry,And have competitive advantages I feel make them the ideal choice as global managersPrivately owned, no shareholders to worry about, they are strictly managing money.Own money invested in funds they manage. That means their interests are aligned to that of their investors. Benefit from strong performance, just like your investorsThey have over 40 years combined tenure and experience in managing over $20 billion in AUM.“Go anywhere” mandates maximize expertise, they search the entire world for the best opportunities.Conviction, they run concentrated portfolios with only their best ideas. And with concentrated portfolio’s the ideas truly has to be the best one to make it on to the portfolio.
28 THE CASE FOR EQUITIESEquity markets peaked in 2000 – not “normal” returnsEarnings yield attractive relative to bond yieldsFree cash flow yields are even higherDividend yields higher than bonds (very rare)Investor sentiment is terrible globally (buy low, sell higher)