Perpetual Limited · ASX:PPT
Perpetual — Corporate Update (March 2011)
33 slides from Perpetual's corporate update, Mar 29, 2011
Slide 1: Perpetual Diversified Income Fund Quarterly Teleconference
Perpetual Diversified Income Fund Quarterly Teleconference Presented by: Jonathan Crook Michael Korber Vivek Prabhu 29 March 2011
Slide 2: Agenda
Agenda ■ Product and performance update ■ ‘Lend like a bank – benefit like a bank’ ■ Credit market update – ‘Is this the beginning of the end of the world?’ ■ Investment process and portfolio positioning ■ Appendices – Investment team biographies 1
Slide 3: Agenda
Agenda ■ Product and performance update ■ ‘Lend like a bank – benefit like a bank’ ■ Credit market update – ‘Is this the beginning of the end of the world?’ ■ Investment process and portfolio positioning ■ Appendices – Investment team biographies 2
Slide 4: Funds under management in the Diversified Income Fund continue to grow strongly
3 ($) million - 50 100 150 200 250 300 350 400 450 Oct-05 25 26 Dec-05 26 27 Feb-06 27 30 Apr-06 36 39 Jun-06 41 43 Aug-06 46 52 Oct-06 57 62 Dec-06 69 82 Feb-07 86 93 Apr-07 97 109 Jun-07 112 117 Aug-07 124 128 Oct-07 133 123 Dec-07 121 117 Feb-08 115 112 Apr-08 111 113 Jun-08 113 111 Aug-08 111 10
Slide 5: Clients switching into less volatile income fund options
…partly due to clients switching into less volatile income fund options Volatility of Perpetual Diversified Income Fund vs peers as at 31 January 2011 35 Peer 1 Peer 2 Peer 3 30 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 25 Peer 9 Peer 10 Peer 11 Perpetual Wholesale Diversified Income Standard deviation (%)
Slide 6: Appetite is growing for true to label defensive funds
Appetite is growing for true to label defensive funds ■ Preference for: – Floating rate = less interest rate risk – Domestic bias = less currency hedging risk, consistent income – Short tenor = lower equity market correlation – Predominantly senior, investment grade paper = lower default risk, highe
Slide 7: Diversified Income Fund performance as at February 2011
Diversified Income Fund Performance as at 28 February 2011 (after fees) Inception date: October 2005 1 month 3 months 6 months 1 year 2 years 3 years 5 years Since % % % % % pa % pa % pa Inception Diversified Income Fund 0.70 2.20 4.08 8.40 10.91 4.80 4.33 4.46 UBSA Bank Bill Index 0.37 1.23 2.43 4.
Slide 8: Diversified Income Fund monthly performance
Diversified Income Fund Monthly performance as at 28 February 2011 Basis points 300 Portfolio Return Benchmark Return Stable credit market conditions Global credit crisis 200 100 0 -100 Global credit recovery -200 -300 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Nov-07 Jan-
Slide 9: Agenda
Agenda ■ Product and performance update ■ ‘Lend like a bank – benefit like a bank’ ■ Credit market update – ‘Is this the beginning of the end of the world?’ ■ Investment process and portfolio positioning ■ Appendices – Investment team biographies 8
Slide 10: Kicking off the 'Lend like a bank' campaign in March
We are kicking off the ‘Lend like a bank’ campaign in March to help advisers discuss fixed income ■ Campaign designed to help advisers discuss fixed income with their clients ■ Based on the principle of lending like a bank rather than to a bank ■ Seeks to simplify the fixed income discussion 9
Slide 11: Investors can diversify away from deposits and lend like a bank
Investors can diversify away from deposits and lend like a bank to potentially improve performance ■ Typically, banks aim to borrow cheaply and lend at the highest interest rate possible 14 19 Z 12 Average lending rates by major banks 10 Lending/Deposit rate (%) Average deposit rates with major 8 ba
Slide 12: Portfolio characteristics
Portfolio characteristics Highly diversified across borrowers and securities Sector allocation as at 28 February 2011 ABS MORTGAGES 7.7% CASH 1.4% 4.4% SUPRA 1.3% WRAPPED Who are we lending to? UTILITIES 1.1% Who are we lending to? 2.2% STRUCTURED* • Australian equipment RMBS NC 0.6% owners • Austra
Slide 13: Agenda
Agenda ■ Product and performance update ■ ‘Lend like a bank – benefit like a bank’ ■ Credit market update – ‘Is this the beginning of the end of the world?’ ■ Investment process and portfolio positioning ■ Appendices – Investment team biographies 12
Slide 14: Credit market update
Credit market update ■ Credit markets continue to perform reasonably well responding positively to encouraging corporate earnings results and positive data flow out of the US lessening the chance of a double dip. ■ Intra-month volatility remains due to concerns around the European peripherals and re
Slide 15: New issuance
New issuance ■ Australian prime RMBS credit spreads have begun to settle around +130 and remained stable in secondary markets. Source: Macquarie Debt Markets Research 14
Slide 16: Credit market cycles
Credit market cycles ■ Investment grade credit spreads over full credit market cycles. Investment grade credit spreads 1990 - now 700 Sub-Prime 600 500 B a s is points 400 High Grade Corporate EU 300 Debt Crisis Junk Bonds Emerging Markets 200 100 - Feb-90 Aug-91 Feb-93 Aug-94 Feb-96 Aug-97 Feb-99 A
Slide 17: Domestic corporate spreads
Domestic corporate spreads As at 11 March 2011 Basis point s Basis point s 500 700 600 400 500 300 400 M errill Lynch Australian A rated Corporates 300 200 200 100 100 Australian iTraxx (LHS) 0 0 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Source
Slide 18: Agenda
Agenda ■ Product and performance update ■ ‘Lend like a bank – benefit like a bank’ ■ Credit market update – ‘Is this the beginning of the end of the world?’ ■ Investment process and portfolio positioning ■ Appendices – Investment team biographies 17
Slide 19: Our active and risk aware investment process
Our active and risk aware investment process Step Inputs Process Outputs Investment grade Market opportunities Domestic bias Value Outlook Risk appetite 1 Demand and supply (How much credit risk to take?) Credit score Technicals Industry rankings Relative value Sectorial heat 2 Ratin
Slide 20: Credit score – in detail
Credit score – in detail As at 22 March 2011 22-Feb-11 8-Mar-11 22-Mar-11 Value Neutral Neutral Neutral Outlook ++ ++ + Demand and supply + + + Technicals + + + Total score ++++ ++++ +++ Our fortnightly credit scoring process identifies and quantifies the environment that is influencing the absolute
Slide 21: Credit market outlook
Credit market outlook ■ Credit markets had a positive start to 2011, responding to encouraging corporate earnings results and positive data flow out of US despite some intra-month volatility. ■ Our view on the credit markets remains positive. Credit spreads have continued to grind tighter remaining
Slide 22: Credit score and market spreads
Credit score and market spreads Attribution conducted on this process in isolation proves value add over time Australian iTraxx vs Perpetual credit score as at 28 February 2011 Credit Score (+/-4) LHS iTraxx Australia 4 450 3 350 250 2 150 iTraxx Australia (bps) 1 Credit score (+/-4) 50 0 -50 -1 -15
Slide 23: Relative value / where to take credit risk
Relative value / where to take credit risk Industry ranking as at 22 February 2011 Industry ranking score Positive Negative 1 2 3 4 ABS RMBS prime Bank guaranteed Telcos Banks O/S banks Agencies CMBS Bank sub Corporates Supras Property trusts Utilities RMBS other Wrapped RMBS sub RMBS low doc Financ
Slide 24: Where are we seeing value?
Where are we seeing value? Examples of some recent transactions Issuer Buy/sell Issuer Issue Maturity/ Spread to BBSW category rating call date Trading CBA Buy Local bank AA 14-Jul-14 + 92bps Sell Local bank AA 14-Jul-14 + 87bps Rabobank Buy Local Bank AAA 03-Jul-14 +100bps Sell Local Bank AAA 03-Ju
Slide 25: Where are we seeing value? – continued
Where are we seeing value? Examples of some recent transactions - continued Issuer Buy/sell Issuer Issue Maturity/ Spread to BBSW category rating call date Origin Energy Buy Utilities BBB+ 06-Oct-11 + 130bps Mirvac Sell Property BBB 16-Sep-16 +248bps Aust Govt CDS Sell Supra AAA 20-Mar-16 +54bps (Lo
Slide 26: Quality and diversification
Quality and diversification Portfolio characteristics as at 28 February 2011 Credit rating Sector C MORTGAGES CASH ABS CCC CC WRAPPED NR 1.4% 7.7% 0.0% 0.0% 1.1% 4.4% SUPRA B 0.0% 1.9% Cash 1.3% 0.6% 4.4% STRUCTURE UTILITIES BB D* AAA 2.2% 0.7% 0.6% 30.6% RMBS NC BBB 5.0% 11.4% BANK 16.4% RMBS CMBS
Slide 27: Contribution by sector
26 Basis Points 0 20 40 60 80 100 -20 ABS BANK CMBS CORPORATE FINANCE Contribution by sector OS BANK PROPERTY RMBS RMBS NC STRUCTURED Net Contribution 12 months to February 2011 UTILITIES WRAPPED CASH FUTURES CDS HEDGES
Slide 28: Agenda
Agenda Product and performance update ‘Lend like a bank – benefit like a bank’ Credit market update – ‘Is this the beginning of the end of the world?’ Investment process and portfolio positioning Appendices – Investment team biographies 27
Slide 29: Investment team portfolio responsibilities
Investment team portfolio responsibilities Portfolio Years in industry/ Name Title Research responsibility Perpetual Head of Fixed Income & Michael Korber Overall 29/7 Credit Active Fixed Interest Portfolio Manager / Credit pack, banks, Greg Stock Fund, Dynamic Fixed 18/7 Analyst infrastructure, cor
Slide 30: Support team
Support team Name Title Team Years in Industry Years at Perpetual Richard Brandweiner, CFA Group Executive – IMS 15 10 Jon Crook General Manager, IMS Sales Retail distribution 14 11 Adam Curtis Portfolio Specialist Retail distribution 13 3 BT Toh, CFA Portfolio Specialist Retail distribution 14 0 Ma
Slide 31: Investment team
Investment team Michael Korber BEc – Head of Credit Michael has been involved in credit markets since their inception in Australia. Unlike most credit portfolio managers in this market, Michael has a background in lending and banking, understanding credit in its purest form. His reputation and mor
Slide 32: Investment team
Investment team Kirsten Hathaway BComm, FFIA, MAppFin – Portfolio Manager / Credit Analyst Kirsten has approximately 11 years experience and has been a member of Perpetual’s Cash and Fixed Interest Team since 1999 working as Portfolio Manager and previously as Assistant Portfolio Manager. Kirste
Slide 33: Important note
Important note This presentation has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426 for financial advisers only. It is general information only and is not intended to provide you with financial advice. To the extent permitted by law, no liability is a