Ausbil Active Dividend Income Fund - Active ETF · ASX:DIVI
Ausbil Active Dividend Income Fund - Active ETF — Ausbil Dexia — Non-Deal Roadshow (May 2009)
67 slides from Ausbil Active Dividend Income Fund - Active ETF's roadshow presentation, May 2009
Slide 1: Australian Equity Market Outlook 2009/10
AUSTRALIAN EQUITY MARKET OUTLOOK 2009/10 Glass half full or half empty?
Slide 2: 2008 Witnessed a Flood to Cash
2008 WITNESSED A FLOOD TO CASH Will this trend continue? FUND NAME CATEGORY ANNUAL WHOLESALE FLOW ($M) BT Institutional Managed Cash Australian Cash 1257.3 AMP Future Directions Inter Share Equity Region World Large Blend 703.5 C/W W/S Premium CMT Australian Cash 649.5 UBS Global Cash Fund Australia
Slide 3: Ausbil Funds Under Management
AUSBIL FUNDS UNDER MANAGEMENT $7.78 billion as at 30 April 2009 Diversified, $60.7 Global Equities, $201.2 Fixed Interest, $364.2 Emerging Leaders, $652.3 Australian Equity, $6,497.2 -3-
Slide 4: Ausbil Active Equity Composite Performance
AUSBIL ACTIVE EQUITY COMPOSITE PERFORMANCE Performance history (pre fees) versus benchmark AUSBIL PERFORMANCE S&P/ASX300 VALUE TRACKING INFORMATION ACTIVE RANK** TO April 2009 ACCUM INDEX ADDED ERROR RATIO EQUITY 1 Year -24.3% -29.0% 4.7% 37/96 4.3% 1.1 2 Years* -14.8% -18.2% 3.5% 26/84 4.2% 0.8 3 Y
Slide 5: Ausbil Emerging Leaders Performance
AUSBIL EMERGING LEADERS PERFORMANCE Performance history (pre fees) versus benchmark 70% MIDCAP PERFORMANCE EMERGING VALUE TRACKING INFORMATION 50 RANK** TO April 2009 LEADERS ADDED ERROR RATIO 30% SML ORDS 1 Year -29.4% -37.3% 7.9% 12/43 8.7% 0.9 2 Years* -18.9% -24.8% 5.9% 10/40 8.1% 0.7 3 Years* -
Slide 6: Research House Ratings
RESEARCH HOUSE RATINGS Further progress was made during the last year Ratings House AE Status EL Status GEF Status van Eyk A A - Lonsec Highly Recommended Highly Recommended Highly Recommended Standard & Poors ***** **** **** Zenith Highly Recommended Highly Recommended Highly Recommended Morningsta
Slide 7: Platform Listings
PLATFORM LISTINGS Broad shelf-space with the industry leaders Distributor Active Equities Emerging Leaders Geared Equities Colonial First Choice X X - BT Wrap X X X Macquarie Wrap X X X Asgard (Westpac) X X X MLC Masterkey Custom X X - Aviva Navigator X - X AXA Summit - X - IOOF Pursuit Select X - -
Slide 8: Positioning a Meaningful Brand in 2008
POSITIONING A MEANINGFUL BRAND IN 2008 Showing strength of conviction within a rigorous, disciplined business model -8-
Slide 9: Positioning a Meaningful Brand in 2009
POSITIONING A MEANINGFUL BRAND IN 2009 Showing strength of conviction within a rigorous, disciplined business model -9-
Slide 10: Targetted Advertising via the Trade and Financial Press
TARGETTED ADVERTISING VIA THE TRADE AND FINANCIAL PRESS Committed to the retail space - 10 -
Slide 11: The Ausbil Times – Regular Electronic Communication
“THE AUSBIL TIMES” – REGULAR ELECTRONIC COMMUNICATION Providing direct access to critical information and Ausbil’s insights Note ‘The Economic Observer’! Please let us know if you think we can improve this communication in any way! - 11 -
Slide 12: The Ausbil Website – Client Support and Tools
THE AUSBIL WEBSITE – CLIENT SUPPORT AND TOOLS We’re committed to first-class delivery of our progress and thinking New media centre! Regular video recording! - 12 -
Slide 13: Ausbil Investor Online – The Next Step
AUSBIL INVESTOR ONLINE – THE NEXT STEP A contemporary service putting you in touch with your clients investments Watch this space! - 13 -
Slide 14: Have we seen the bottom in credit markets yet?
Money does not perform. People do. Have we seen the bottom in credit markets yet ? Koen Van de Maele, CFA, Global Head of Fixed Income Ausbil Investment Roadshow, May 2009
Slide 15: Contents
Have we seen the bottom in credit markets yet? Contents From a subprime mortgage meltdown to a full-blown financial crisis A leading role for excessive leverage and deteriorating credit quality Worldwide action creates careful optimism Attractive investment opportunities in the credit markets 15
Slide 16: From a Subprime Meltdown to a Full-Blown Financial Crisis
From a subprime mortgage meltdown to a full-blown financial crisis The credit crisis, from 2007 to … Debacle of subordinated financial debt 520 Spread To Government in bp Closing of 480 interbank market, risk aversion, 440 illiquidity Fiscal & monetary 400 premium, severe package. Some 360 recession
Slide 17: Impact on All Markets
From a subprime mortgage meltdown to a full-blown financial crisis Impact on all markets Euro Credit Market USD Credit Market AUD Credit Market Merrill ER00 Merrill C0A0 Merrill AUC0 10.00 10.00 10.00 5.73 5.00 2.37 5.00 3.70 1.38 5.00 0.52 0.95 1.54 1.50 -0.02 0.63 1.34 0.76 1.53 0.66 0.86 0.97 0.7
Slide 18: Impact on All Asset Classes
From a subprime mortgage meltdown to a full-blown financial crisis Impact on all asset classes IG Credit Stock markets Euro Stoxx 50 Merrill ER00 100 1000 80 800 60 600 Index Index 40 400 20 200 0 0 -10 0 10 20 30 40 0 10 20 30 40 Months Relative To Index Peak Months Relative To Index Peak Crisis 19
Slide 19: Lehman Brothers' Bankruptcy: A Major Financial Shock
From a subprime mortgage meltdown to a full-blown financial crisis Lehman Brothers’ bankruptcy: a major financial shock Explosion of the risk premium The financials at the heart of the storm Spread To Government in bp € Investment Grade Spread To Government in bp 525 1050 450 375 850 300 650 225 450
Slide 20: Bank Capital Instruments into Question
From a subprime mortgage meltdown to a full-blown financial crisis Bank capital instruments into question Subordinated debt in turmoil due to the repricing of: 4500 the extension risk after non-call of Lower Tier II debt by Deutsche Bank 4000 nationalisation fears after the quasi nationalisation ( c
Slide 21: Reduction of Excess Debt
A leading role for excessive leverage and deteriorating credit quality Reduction the excess of debt 180 12 160 +37.5% 141.57 10 140 9 120 8 100 102.86 +43% Leverage Leverage 6.3 80 6 5.30 5.3 60 +18.5% 4.47 4 40 23 +17% 27.07 20 2 0 -201998 2000 2002 2004 2006 2008 20100 Banks Consumers Investors [R
Slide 22: Back to Less Complex Financial Products
A leading role for excessive leverage and deteriorating credit quality Back to less complex financial products Decreasing Asset Backed Commercial Paper Liquidations of CDO’s 450,000 Outstanding 1200 400,000 350,000 1000 300,000 $ Billions $ Millions 250,000 800 200,000 600 150,000 100,000 400 50,000
Slide 23: Significantly Lower Banks' Profitability
A leading role for excessive leverage and deteriorating credit quality Significantly lower banks’ profitability 3500 Financial engineering boosted profits Single digit profitability 3000 18 2500 16 2000 14 Index 12 1500 RoE 10 1000 8 500 6 4 0 2 Q1 1970 Q1 1972 Q1 1974 Q1 1976 Q1 1978 Q1 1980 Q1 198
Slide 24: Cash Flow Generation Remains a Challenge
A leading role for excessive leverage and deteriorating credit quality Cash flow generation remains a challenge The recession will translate into lower profits Operating income under pressure 60% 70 80% 50% 65 40% 60% 60 30% 20% Profits YoY 40% YoY Growth 55 10% ISM 50 20% 0% 45 -10% 1980 1984 1988
Slide 25: Extraordinary Government Interventions
Worldwide action creates careful optimism Extraordinary government interventions stress the key role of banks Structure of the bail-out packages Governments’ guarantees 500 Funding 180 450 160 400 Types Government CDS 5Y 140 350 of interventions Banks CDS 5 Y 300 120 250 100 200 80 150 60 100 Bad Ba
Slide 26: Central Banks Ensure Liquidity and Stimulate the Economy
Worldwide action creates careful optimism Central banks ensure liquidity and take action to stimulate the economy Liquidity injections Monetary Stimulus 800 Fed 16 Central banks 700 14 600 12 500 10 $ Bn 400 Rates 300 8 200 6 100 4 0 2 01-Dec 15-Dec 29-Dec 03-Nov 17-Nov 08-Sep 22-Sep 09-Feb 23-Feb 1
Slide 27: Focus on Better Core Capital
Worldwide action creates careful optimism Focus on better core capital and more conservative strategic policy Assets size of European banks Core Capital injections improve Tier 1 ratio 16% 34000 9.50 30 largest banks Bank’s balance sheet are growing at a slower 32000 9.30 14% pace due to tighter 300
Slide 28: Liquidity: More Important Than Ever
Worldwide action creates careful optimism Liquidity: more important than ever Leverage profile is manageable Cash is in a better position than in the past 5.0 10 25.0 Debt to Operating Income Cash / Current Liabilities 4.5 9 Interest Coverage 23.0 4.0 8 21.0 3.5 7 19.0 3.0 6 2.5 5 17.0 2.0 4 15.0 19
Slide 29: Financial, Downgrade and Default Risks Are Remunerated
Attractive investment opportunities in the credit markets The financial, downgrade and default risks are largely remunerated Remuneration per indebtness unit Are we enough remunerated for default? Non Financials Rock bottom spread 6.0 100 5.5 90 80 Spread per risk unit 5.0 Debt To Profits 70 4.5 60
Slide 30: Expected Total Return of 9.5% on Euro Market
Attractive investment opportunities in the credit markets Expected total return of 9.5% on € market Breakeven on 1 year Attractive Spread vs Equity Risk Premium 120 6 600 Equity Risk Premium on Spread 5 100 500 4 Break-even on one year Spread To Govt 3 400 80 represents a buffer for 1 Y Breakeven 2
Slide 31: US Expected Total Return of 9.9%
Attractive investment opportunities in the credit markets And for the US, the expected total return is 9.9% Breakeven on 1 year Attractive Spread vs Equity Risk Premium 180 3 7 Equity Risk Premium on Spread 160 6 2 140 Break-even on one year 5 Spread To Govt 120 1 1 Y Breakeven represents a buffer 4
Slide 32: Long Term Investors Don't Need Perfect Timing
Attractive investment opportunities in the credit markets Long term investors don’t need perfect market timing skills Risk premium evolution During the last 40 years Historical yield on Investment Grade 18 500 600 16 450 400 500 14 Option Adjusted Spread 350 12 400 300 10 Spread Yield 250 300 8 200
Slide 33: Don't Play with Diversification
Attractive investment opportunities in the credit markets Don’t play with diversification Contribution to excess return in 2008 Basis Points Basis Points -300 -200 -100 0 100 200 300 -550 -450 -350 -250 -150 -50 50 150 250 350 450 -25 110 Fortis -112 500 Fortis -25 128 Morgan Stanley -100 500 Morgan
Slide 34: Investing in the Entire Capital Structure
Attractive investment opportunities in the credit markets Investing in the entire capital structure holds potential of long term value Price evolution of subordinated Debt 105 Exaggerated nationalisation fears. Impact on Tier 1 95 debt limited in a case of going-concern nationalisation, 85 hence it
Slide 35: Rigorous Issuer Selection: Banks
Attractive investment opportunities in the credit markets Applying a rigorous issuer selection Banks Société Générale: 3rd French retail bank (deposits 45%), proactive risk management, very good positioning on product mix & geographically, Tier I ratio 9.3% Intesa San Paolo: First Italian retail ban
Slide 36: Rigorous Issuer Selection: Telecoms and Utilities
Attractive investment opportunities in the credit markets Applying a rigorous issuer selection Telecoms Telefonica: One of the strongest Ebitda margin in the sector (39% versus 34.5% in average) – Good track record of the management, well diversified geographically and strong position in most market
Slide 37: Conclusion
Attractive investment opportunities in the credit markets Conclusion Fundamentally and historically attractive valuations Worst-case scenario already priced in current yields Steady approach to gradually build an overweight in investment grade credit Favour debt from supported large banks and cash f
Slide 38: Australian Equity Market Outlook 2009/10
AUSTRALIAN EQUITY MARKET OUTLOOK 2009/10 Glass half full or half empty? Presenter: Paul Xiradis, CEO & Head of Equities
Slide 39: Equity Investors Have Borne the Brunt
EQUITY INVESTORS HAVE BORNE THE BRUNT Market retraced to 2001 levels US S&P500 has recorded 6 consecutive S&P/ASX 300 Index 7,000 quarters of negative returns – even the 1929-1933 and 1973-1974 6,000 bear markets avoided this 5,000 – not experienced since June 1970 4,000 – market subsequently rose
Slide 40: The Global Financial Crisis: Policy Initiatives
THE GLOBAL FINANCIAL CRISIS Aggressive, globally co-ordinated policy initiatives Conventional – traditional fiscal and monetary measures Unconventional – quantitative easings and once off stimuli – easing in mark-to-market rules for illiquid assets Signs that policy is having an effect – US ho
Slide 41: US Residential Fixed Rate Mortgage Rates
US RESIDENTIAL FIXED RATE MORTGAGE RATES Recent policy measures have had an impact on US mortgage rates Source: MBAA, Datastream - 41 -
Slide 42: Economic Data: Manufacturing Surveys
ECONOMIC DATA: MANUFACTURING SURVEYS US ISM new orders improving Source: UBS - 42 -
Slide 43: Domestic Overview
DOMESTIC OVERVIEW Domestic economy likely to recover in late 2009 Domestic growth has held up better than global due to: – A functioning financial system – Stronger growth leading into slowdown – A strong fiscal position allowing for more rapid and immediate response – Aggressive monetary easing w
Slide 44: Slowing GDP Growth But…
SLOWING GDP GROWTH BUT… …market had been discounting a very poor GDP outcome Australia GDP and All Ords 10 yoy% 100 yoy% GDP (lhs) All Ords (rhs) 8 80 6 60 4 40 2 20 0 0 -2 -20 -4 -40 Recessions shaded -6 -60 71 74 77 80 83 86 89 92 95 98 01 04 07 10 Source: ABS, Deutsche Bank - 44 -
Slide 45: Cash Rates at Record Low Levels
CASH RATES AT RECORD LOW LEVELS Significant liquidity is supportive for GDP growth Source: Ausbil - 45 -
Slide 46: Downgrade Cycle Appears to Be Slowing
DOWNGRADE CYCLE APPEARS TO BE SLOWING History indicates an equity market inflection point - 46 - Source: IRESS, company data, Macquarie Research, April 2009
Slide 47: Earnings Expectations
EARNINGS EXPECTATIONS FY09 growth expectations have been significantly lowered EPS GROWTH AS AT 13 OCTOBER 2008 AS AT 11 MAY 2009 EXPECTATIONS FY09 FY10 FY09 FY10 MARKET +17.8% +15.9% -21.4% +2.6% Financials +3.5% +8.4% -10.8% +4.4% - REITS -4.9% +2.3% -34.8% -9.7% - Banks +5.5% +6.7% -14.5% +2.2% I
Slide 48: Historical Equity Market Performances
HISTORICAL EQUITY MARKET PERFORMANCES Market performs earlier than the economy Source: IRESS, ABS, Deutsche Bank - 48 -
Slide 49: Australian Equity/GDP Cycles
AUSTRALIAN EQUITY/GDP CYCLES Equities a consistent lead indicator of economic recoveries Australian Bear Markets Number of Months Equity Market Equity Earnings Period GDP Trough Trough Trough Early 60s -15 (Dec 60) -6 (Sep 61) Mar 62 Early 70s -15 (Nov 71) -11 (Mar 72) Feb 73 Early 80s -22 (Apr 82)
Slide 50: Domestic Equity Valuations
DOMESTIC EQUITY VALUATIONS Valuations had been polarised 30 X 30 Industrial stocks PE ratios near end March 2009 (on FY08 earnings) 25 25 Defensive Defensives median Cyclicals 20 20 Cyclical median 15 15 10 10 5 5 0 0 AMC PRY AGK BXB JHX MTS CMJ FXJ HVN Median ALL ANN Median WAN TAH QAN WOW BBG LEI
Slide 51: Sectoral Valuation: Retailing
SECTORAL VALUATION: RETAILING PE well below historical average and at trough cycle earnings Long Term 1 Year Fwd PE Charts Retailing 30 25 20 15 10 5 0 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Retailing PE Retailing PE - Averarge
Slide 52: Sectoral Valuation: Media
SECTORAL VALUATION: MEDIA PE well below historical average and at trough cycle earnings Long Term 1 Year Fwd PE Charts Media 60 50 40 PE 30 20 10 0 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Media PE Media PE - Averarge Source: Ausbil - 52 -
Slide 53: Sectoral Valuation: Steel
SECTORAL VALUATION: STEEL PE below historical average and at trough cycle earnings Long Term 1 Year Fwd PE Charts Steel 25 20 15 10 5 0 May-98 May-99 May-00 May-01 May-02 May-03 May-04 May-05 May-06 May-07 May-08 Steel PE Source: Ausbil - 53 -
Slide 54: Comparable P/E Ratios Over Time
COMPARABLE P/E RATIOS OVER TIME A longer term perspective X Price to Earnings Ratio 40 40 Cyclical industrials Defensive industrials 30 30 20 20 10 10 Recessions shaded 0 0 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 Excludes media, telecoms and diversified industrial sectors Source: Da
Slide 55: Resources Are Cum Upgrade
RESOURCES ARE CUM UPGRADE Consensus below current spot rates for many commodities CONSENSUS CONSENSUS SPOT Jun 09 Dec 09 11th May 2009 Aluminium 69 US$ c/lb 69 US$ c/lb US$69 c/lb Copper 152 146 212 Nickel 468 500 590 Lead 51 51 65 Zinc 53 57 69 Oil $48.1 $55.7 58.6 AUDUSD .67 .68 .77 Source: Ausbil
Slide 56: Commodities Structural Price Step-Change
COMMODITIES STRUCTURAL PRICE ‘STEP-CHANGE’ Recent commodity price falls remain above previous levels - 56 -
Slide 57: Financial Sector Comment
FINANCIAL SECTOR COMMENT Already marked down considerably Median P/E well below defensive industrials – Historically is typically higher, but may be partly answered by de-rating of REITS Structural and cyclical factors suggest Australian financial system relatively insulated – Solid profits, sou
Slide 58: Cyclicals v Defensives v Financials
CYCLICALS v DEFENSIVES v FINANCIALS Changes over the course of the market decline – still a large gap Industrials stocks PE ratios 25 X 25 (on most recent full-year earnings*) Financials median Cyclicals median 20 Defensives median 20 15 15 10 10 5 5 0 0 Oct 05 Oct 06 Oct 07 Jan 08 Apr 08 Jul 08 Oct
Slide 59: Australian Bank BDD Charges
AUSTRALIAN BANK BDD CHARGES BDD estimates still pushing higher Source: UBS - 59 -
Slide 60: Corporate Australia Recapitalises
CORPORATE AUSTRALIA RECAPITALISES A$78bn of secondary issuance since July 2008 Source: ASX, UBS estimates - 60 -
Slide 61: Cash Holdings at Record Highs
CASH HOLDINGS AT RECORD HIGHS Recent moves suggest this cash is starting to be put to work Superannuation Funds Cash Holdings 20 % of total 20 assets Mar 15 qtr est 15 10 10 5 5 89 91 93 95 97 99 01 03 05 07 09 Source: ABS, Ausbil - 61 -
Slide 62: Current Portfolio Tilts - Active Equities
CURRENT PORTFOLIO TILTS - ACTIVE EQUITIES Recent sector changes 3.7% Media 1.5% 3.0% Retailing 1.7% Diversified 2.9% Financials 2.0% 2.1% Gold 5.9% 2.0% Steel 1.2% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% May-09 Dec-08 Source: Ausbil - 62 -
Slide 63: Current Portfolio Tilts - Emerging Leaders
CURRENT PORTFOLIO TILTS - EMERGING LEADERS Recent sector changes Diversified Metals & 13.8% Mining 0.0% 13.8% Retailing 6.6% 3.3% Gold 1.5% 3.1% Construction Materials 2.5% 0.0% 5.0% 10.0% 15.0% May-09 Dec-08 Source: Ausbil - 63 -
Slide 64: Ausbil Active Equity Portfolio
AUSBIL ACTIVE EQUITY PORTFOLIO Largest 10 active holdings at May 2009 Active Equities Ausbil Index Active Tilt Westpac 12.1% 6.7% 5.3% National Australia Bank 7.7% 4.8% 2.8% Wesfarmers 5.7% 3.1% 2.6% Toll Holdings 2.9% 0.5% 2.3% Rio Tinto 4.6% 2.3% 2.3% News Corporation 2.5% 0.6% 2.0% Crown 2.2% 0.4
Slide 65: Ausbil Emerging Leaders Portfolio
AUSBIL EMERGING LEADERS PORTFOLIO Largest 10 active holdings at May 2009 Emerging Leaders Ausbil Index Active Tilt Mirabela Nickel 3.4% 0.1% 3.3% David Jones 4.3% 1.3% 3.0% JB Hi-Fi 3.8% 1.0% 2.8% Wotif.Com Holdings 2.9% 0.2% 2.7% Resmed 2.8% 0.4% 2.5% CSR 3.9% 1.5% 2.4% Bank of Queensland 3.2% 1.0%
Slide 66: Summary: The Glass is Half Full
SUMMARY Weak near term earnings outlook but market recovery likely to continue Australian equity market experienced a rare 6 consecutive quarterly decline Destabilised global equity / credit markets meet with globally co-ordinated policy initiatives Now signs that policy is having an effect
Slide 67: Disclaimer
DISCLAIMER Important Information for Presentation Recipients The information contained in this presentation has been prepared for general use only and does not take into account your personal investment objectives, financial situation or particular needs. Before you make any decision about whether t