Ausbil Active Dividend Income Fund - Active ETF · ASX:DIVI
Ausbil Active Dividend Income Fund - Active ETF — Ausbil Investment Management — Non-Deal Roadshow (April 2015)
65 slides from Ausbil Active Dividend Income Fund - Active ETF's roadshow presentation, April 2015
Slide 1: Investment Roadshow 2015: Beware the yield chase
Investment Roadshow 2015 “Beware the yield chase” April/May 2015
Slide 2: Investment Performance
Investment Performance Strong results over the long term March 2015 1 month (% pa) 1 year (% pa) 2 years (% pa) 3 years (% pa) Inception (% pa) Return Excess Return Excess Return Excess Return Excess Return Excess Active Equities +0.7 +0.8 +12.4 -1.5 +16.4 +3.0 +17.8 +2.4 +12.1 +3.3 Emerging Leaders
Slide 3: New York Life Investment Management: Our strategic partner
New York Life Investment Management Our strategic partner • Global asset management business with US $537bn* FUM • Wholly owned by NYL, a Fortune 100 company • Multi-boutique operating model * As at December 31, 2014 3
Slide 4: Our client focus in 2015
Our client focus in 2015 Making it easier to do business • Key Account Managers can assist with APL and Model construction • Ensuring alignment with the “march of technology” - ASX mFund settlement and IRESS Adviser Desktop Services - Separately Managed Account platforms - Regular video and webinar
Slide 5: New advertising campaign
New advertising campaign Creative concept - “animal spirits” 5
Slide 6: Your speakers
Beware the yield chase Your speakers • Paul Xiradis, CEO and Head of Equities – large cap perspective • John Grace, Director, Equities – small cap perspective • Jim Chronis, Chief Economist – a global macro perspective 6
Slide 7: Jim Chronis - Chief Economist
Investment Roadshow 2015 “Beware the yield chase” April/May 2015 Jim Chronis - Chief Economist
Slide 8: Global cash rates
Global cash rates Swiss negative, US last tightening cycle 11-years ago Nominal Cash Rate % 8 7 6 5 Australia 4 US 3 2 Euro 1 Japan 0 -1 Swiss -2 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 US Federal Funds Target Rate - Yield Eurozone Main Refinancing Operations Minimum Bid Rate - Y
Slide 9: Negative real cash rates after inflation
Negative real cash rates after inflation Unsustainable from a historical perspective Real Cash Rate % 6 5 US 4 3 Germany 2 Japan 1 0 -1 -2 -3 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Interest Rates, Real, Short Term, Deflator Gdp, United Sta
Slide 10: US – returning to normal: QE
US – returning to normal QE, unprecedented monetary stimulus USD Billions 4,500 4,000 QE3: $1,660bn Sep 12 to Oct 14 3,500 3,000 Operation Twist: $667bn Sep 11 to Dec 12 2,500 QE2: $600bn 2,000 Nov 10 to Jun 11 1,500 QE1: $1,700bn 1,000 Dec 08 to Mar 10 500 0 '59 '61 '63 '65 '67 '69 '71 '73 '75 '77
Slide 11: US – returning to normal: equities and bond yields
US – returning to normal Equities rebound, bond yields fall to historic lows Bond Yield % 10 yr S&P 500 Index 18 2,500 10 Year Bond Yield 16 2,000 14 S&P 500 12 1,500 10 8 1,000 6 4 500 2 0 0 '65 '66 '67 '68 '69 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91
Slide 12: US – leading indicators
US – returning to normal Leading indicators supporting 3% GDP growth Leading Index Real GDP (6-month annualised rate %) (6-month annualised rate %) 20 8 15 Leading index 6 10 Real GDP 4 5 2 0 -5 0 -10 -2 -15 -4 -20 -6 -25 -30 -8 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 (% 6M Ann)
Slide 13: US – full employment
US – returning to normal Fed’s goal of full employment on the horizon 4 week average thousands unemployment rate % 700 Jobless claims 11 650 10 600 550 9 Unemployment rate 500 8 450 7 400 6 350 5.50 300 5 250 4 200 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '
Slide 14: US – wages will rise
US – returning to normal Wages will rise as unemployment falls Wage Intentions Wages Paid (6-month annualised rate %) (6-month annualised rate %) 25 4 3.5 20 Small business compensation plans 3 15 2.5 10 2 5 1.5 Employment cost index 0 1 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 (M
Slide 15: Europe - recovering: QE
Europe - recovering Aggressive QE will lift activity and inflationary expectations Euro Millions 3,500,000 Target Euro 3.4 trn 3,000,000 2,500,000 2,000,000 Buying Euro 1,500,000 60bn per month 1,000,000 500,000 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Consolidated Central
Slide 16: Europe - bond yields at lows
Europe - recovering QE drives 10 year bond yields to generational lows Bond Yield % 10 Year 14 12 10 8 Spain Italy 6 4 2 1 0 Germany Swiss -2 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 IT Treasury - 10Y ES Treasury - 10Y DE Treasury - 10Y CH Treasury - 10Y So
Slide 17: Europe - German business confidence
Europe - recovering German business confidence rebounds German German Real GDP Business Index (quarterly rate %) 80 3 ZEW Economic 60 expectations 2 40 1 20 0 0 -1 -20 -2 -40 Real GDP -3 -60 -4 -80 -5 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Business Survey, ZEW, Economic Expectations, Germany, ZEW,
Slide 18: Europe - euro depreciation
Europe - recovering Euro depreciation a tailwind for activity Euro Effective Rate Real GDP Index reversed (quarter annualised rate %) 85 6 4 90 GDP 2 95 0 100 -2 105 -4 Effective 110 exchange rate -6 115 -8 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 BIS real broad effective exchange rate index - Eurozo
Slide 19: China - transitioning
China - transitioning Second largest economy to the US USD Real GDP Billions Annual Rate % 5,500 15 Economy in USD 5,000 14 4,500 Drove the Australian 13 4,000 resources boom 12 3,500 GDP growth 11 3,000 rate % 10 2,500 9 2,000 8 1,500 1,000 7 500 6 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '0
Slide 20: Japan – growing
Japan – growing Tankan business survey supporting activity 30 Services 20 10 Manufacturing 0 -10 Real GDP -20 -30 -40 -50 -60 -70 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Tankan Business Conditions Diffusion Index, Large Enterprises, Manufacturing, Actual Result, Percent - Japan Tankan Business Condi
Slide 21: Australia – commodity prices and AUD
Australia – below trend Commodity price pressures driving AUD lower Terms of Trade RBA Commodity Index AUD per USD 160 1.2 AUD/USD 140 1.1 RBA Commodity Index 1 120 0.9 100 0.8 80 Terms 0.7 of Trade 60 0.6 40 0.5 20 0.4 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Slide 22: Australia – business confidence
Australia – below trend Business confidence responding to AUD tailwind NAB Survey Business Conditions Index AUD per USD 30 1.2 Business 20 1.1 Conditions 1 10 0.9 0 0.8 -10 AUD/USD 0.7 -20 0.6 -30 0.5 -40 0.4 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Business Survey, Nab, Business
Slide 23: Australia – consumer confidence
Australia – below trend Consumer confidence improving relative to poor 2014 WBC Survey Consumer Sentiment Index 125 120 115 3 month moving average 110 105 100 95 90 85 80 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 (MOV 3M) Consumer Surveys, Westpac Melbourne Institute, Consumer Sentiment Index, Sa, Ind
Slide 24: Australia – housing pipeline
Australia – below trend Housing pipeline to sustain activity 12-month sum thousands 220,000 Approvals 200,000 180,000 160,000 Starts 140,000 120,000 100,000 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 (MSUM 12M) Building
Slide 25: Australia – business investment transition
Australia – below trend Business investment in structural transition Mining Capex (% GDP) 9% 6% 3% Long term average 1.6% +/- 1 std dev 0.6% 0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Non-mining Capex (% GDP) 20% 16% Long term average 12.7% +/- 1 std dev 1.5% 12% 8% Source: Credi
Slide 26: Global growth
Global growth Improving profile for the G3 Real GDP Actual 2014 Consensus 2015 (f) Consensus 2016 (f) % yoy % % % US 2.4 3.0 2.9 Japan -0.1 1.1 1.2 Eurozone 0.9 1.3 1.7 China 7.4 6.9 6.6 Australian 2.5 2.6 3.0 Advanced Economies 1.8 2.3 2.4 Developing Economies 4.5 4.6 4.7 Global 3.4 3.5 3.8 Source:
Slide 27: Paul Xiradis - CEO, Head of Equities
Investment Roadshow 2015 “Beware the yield chase” April/May 2015 Paul Xiradis - CEO, Head of Equities
Slide 28: Global economic summary
Global economic summary The G3 continues to improve • Sustainable US recovery, rates to edge higher • Eurozone rebounding strongly, QE to keep rates lower • Japan QE supporting recovery • China in long term structural adjustment phase, still growing 28
Slide 29: Australian economic summary
Australian economic summary Below trend growth expected at 2.5% • Interest rates remain low with an easing bias • Housing sector is a key beneficiary • Mining capex falling significantly, cushioned by non-mining • AUD weakness to be a tailwind 29
Slide 30: Equity market valuations: PE + Inflation
PE + Inflation 10 12 16 18 22 24 28 14 20 26 Source: Goldman Sachs Apr 92 Aug 93 Dec 94 Apr 96 Aug 97 Dec 98 Apr 00 Aug 01 Equity market valuations Dec 02 Apr 04 Aug 05 Dec 06 Apr 08 Aug 09 Rule of 20 suggests market can remain elevated Dec 10 Apr 12 Aug 13 Dec 14 30
Slide 31: Consensus expectations for EPS growth and P/Es
Equity market valuations Consensus expectations for EPS growth and P/Es PE PE EPS Growth EPS Growth FY 2016 (f) FY 2017 (f) FY 2016 (f) FY 2017 (f) x x % % Market 15.8 14.4 7.8 10.0 Industrials 17.7 16.2 11.5 9.3 Resources 16.8 12.5 8.0 34.2 Financials 14.3 13.7 5.2 4.3 REITS 16.1 15.2 5.4 5.4 Sourc
Slide 32: Australian dividend yields higher than most peers
Equity market valuations Australian dividend yields higher than most peers % 12m forward dividend yield 5 4.8 4.6 4 3.7 3.6 3.6 3.4 3.4 3.3 3.2 3.0 3.0 3 2.7 2.6 2.5 2.1 2.0 1.9 2 1.6 1.6 1 0 China New Zealand EM EMEA Taiwan EM LatAm Hong Kong Europe Asia ex Japan Japan Malaysia US Philippines India
Slide 33: Portfolio construction: Key thematics
Portfolio construction Key thematics • Favour international earnings streams • Commodity prices remain under pressure • Favour housing related sectors • Favour high yielding sectors with earnings growth 33
Slide 34: Favour international earnings streams: AUD
Favour international earnings streams Expect AUD to weaken further 1.20 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Factset, Ausbil 34
Slide 35: Beneficiaries of global growth and strong USD
Favour international earnings streams Beneficiaries of global growth and strong USD 35
Slide 36: Key Portfolio holding: Beneficiary of rising US rates
Key Portfolio holding Beneficiary of rising US rates • New management team $40.00 $35.00 • Rebasing and re-positioning business $30.00 $25.00 • Significant beneficiary of recovering US economy and $20.00 higher US interest rates $15.00 • Strong balance sheet $10.00 $5.00 • Current yield 3.9% $0.00 2
Slide 37: Commodity prices: oil price
Commodity prices remain under pressure Beware late entrant, high cost producers Oil Price 160 140 120 100 80 60 40 20 0 2015 1990 1995 2000 2005 2010 2020 Crude Oil US$/bbl (WTI) Ausbil Broker Consensus Forecast Source: Factset, Ausbil 37
Slide 38: Commodity prices: supply is adjusting
Commodity prices remain under pressure Supply is adjusting US Oil Rigs and US Oil Output 1,800 10 mb/d 1,500 9 mb/d 1,200 8 mb/d 900 7 mb/d 600 6 mb/d 300 5 mb/d 0 4 mb/d Jan 10 Jan 13 Jan 09 Jan 11 Jan 12 Jan 14 Jan 15 Jul 09 Jul 10 Jul 11 Jul 12 Jul 13 Jul 14 US oil rigs US oil output (rhs) Source
Slide 39: Iron Ore Market – Rio Tinto quotes
Commodity prices remain under pressure Iron Ore Market – Rio Tinto quotes Rio Tinto described the current environment as “a time of significant distress for late-entrant and high-cost producers.” “…we can expect continued bumps, before the market settles at a new level.” Sam Walsh, CEO, Rio Tinto 39
Slide 40: Commodity prices: iron ore price
Commodity prices remain under pressure Beware late entrant, high cost producers $ 200 Iron Ore Price 175 150 125 100 f’cast 75 50 1983-2004 average 25 0 1983 1988 1993 1998 2003 2008 2013 2018 Source: Goldman Sachs 40
Slide 41: Commodity prices: adjustment continues
Commodity prices remain under pressure Beware, adjustment continues Copper Price Alumina 4.0 370 360 3.5 350 340 3.0 330 2.5 320 310 2.0 300 Jan 13 Jan 14 Jan 15 Jan 16 Jan-13 Jan-14 Jan-15 Jan-16 Actual Actual Cons 10-Apr Cons 10-Apr Metallurgical Coal Nickel 160 10.0 9.5 150 9.0 140 8.5 130 8.0 12
Slide 42: Are the dividends sustainable for BHP and RIO?
Commodity prices remain under pressure Are the dividends sustainable for BHP and RIO? 45 40 35 BHP forward PE @ spot commodity prices 30 RIO forward PE @ spot commodity prices 25 20 15 10 5 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 BHP RIO Source: Goldman Sachs, Ausbil
Slide 43: Favour housing related sectors: pipeline
Favour housing related sectors Pipeline of new dwelling and renovations to sustain activity Source: Factset, Ausbil 43
Slide 44: Beneficiaries of housing recovery
Favour housing related sectors Beneficiaries of housing recovery 44
Slide 45: Banks attractive versus high yield industrials
Favour high yield sectors with earnings growth Banks attractive versus high yield industrials PER 1.4 1.3 1.2 1.1 1 historical 0.9 average 0.8 0.7 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Commonwealth Securities 45
Slide 46: Bank earnings supports valuations and dividends
Favour high yield sectors with earnings growth Bank earnings supports valuations and dividends Bank sector earnings and performance $30bn 120,000 $28bn 110,000 $26bn 100,000 $24bn 90,000 $22bn 80,000 $20bn 70,000 $18bn 60,000 $16bn 50,000 $14bn 40,000 $12bn 30,000 $10bn 20,000 Sep 04 Sep 05 Sep 06 S
Slide 47: Utilities earnings at risk, dividend yields unsustainable
Favour high yield sectors with earnings growth Utilities earnings at risk, dividend yields unsustainable • Regulatory earnings are at risk 180 • Lower bond rates mean lower 160 earnings 140 • Lower earnings mean lower 120 dividend yields 100 • Sector to underperform as rates rise 80 60 Jan 08 May 08
Slide 48: REITs significant premium to NTA
Favour high yield sectors with earnings growth REITs significant premium to NTA, at risk from rising rates 50% 40% 30% 20% 10% Price/NTA 0% -10% -20% -30% -40% -50% 2008 2010 2012 2014 Source: JP Morgan 48
Slide 49: Telstra earnings to support dividends
Favour high yield sectors with earnings growth Telstra earnings to support dividends, scope for “specials” 60 50.1 50 46.9 39.2 40 34.9 32.5 33.5 30.5 31.5 30 20 10 0 FY15 FY16 FY17 FY18 EPS DPS Source: Ausbil 49
Slide 50: Ausbil Australian Active Equity Fund: Key portfolio holdings
Ausbil Australian Active Equity Fund Key portfolio holdings International Earnings Streams Housing Related Sectors High Yield with earnings growth 50
Slide 51: John Grace - Director, Equities
Investment Roadshow 2015 “Beware the yield chase” April/May 2015 John Grace - Director, Equities
Slide 52: Market Performance
Market Performance Larger caps have had yield support 180 160 140 120 100 80 60 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jul 2012 Jul 2013 Jul 2014 S&P/ASX 50 Acc S&P/ASX Mid Cap 50 Acc S&P/ASX Small Ords Acc 52
Slide 53: Market capitalisation bands
Market capitalisation bands Similar PE’s – better growth rates in smaller caps 18 30% 16 16 16 15 25% 12 19% 20% 15% PEx 9 15% 6 10% 3 5% 3% 0 0% Top 50 Mid Cap Small 50 Ords PE Rolling 12 Mths EPS Growth Rolling 12 Mths Source: IRESS, Ausbil 53
Slide 54: Small Ordinaries: sector returns
Small Ordinaries Significant dispersion in sector returns 160 140 120 100 80 60 40 20 0 2012 2013 2014 2015 Small Resources Small Industrials Small Ords 54
Slide 55: Small Ordinaries: market composition
Small Ordinaries Significant change in market composition April 2012 April 2015 Resources, 19% Resources, 43% Industrials, 48% Financials, 19% Industrials, 63% Financials, 9% 55
Slide 56: Major current portfolio thematics
Major current portfolio thematics Across the smaller cap spectrum • Favour international earnings streams • Favour domestic cyclicals with housing sector exposure • Yield less of an issue, focus on earnings growth • The online services sector will continue to grow • Strong balance sheets – expect mo
Slide 57: Resmed Inc
Resmed Inc Global healthcare supplier $12.00 • Leverage to aging demographics and related healthcare issues $10.00 • Strong growing business, market $8.00 leader $6.00 • Underpenetrated global markets offers long term growth $4.00 opportunities • Strong balance sheet >$US400m $2.00 cash $0.00 • Ongo
Slide 58: Aristocrat Leisure
Aristocrat Leisure Global slot manufacturer • Significant exposure to US and $18.00 Asian economies $16.00 $14.00 • Regaining dominant market share in Australia $12.00 $10.00 • Strategic opportunities – US VGT acquisition $8.00 $6.00 • Online gaming opportunity $4.00 • Strong balance sheet, solid $2
Slide 59: Fairfax Media
Fairfax Media Domestic turnaround $6.00 • Leverage to domestic economy $5.00 • Quality management team • Re-positioning business $4.00 • Ongoing cost cutting $3.00 • Strong balance sheet $2.00 • DOMAIN a key asset – spinout ? $1.00 • Current yield 4.2% $0.00 2005 2007 2009 2011 2013 2015 Source: IRE
Slide 60: Altium
Altium Global software supplier $6.00 • Provides electronic designed software $5.00 • Annuity style earnings, relatively fixed cost base, provide strong operational leverage potential $4.00 • Earnings growth 15-20% p.a. $3.00 • Net cash balance sheet $2.00 • Nominal broker coverage and is $1.00 unde
Slide 61: SurfStitch
SurfStitch Emerging online retailer $1.70 • Attractive business model – unique $1.60 brand proposition $1.50 • Global expansion potential $1.40 $1.30 • Excellent management team $1.20 $1.10 • High returns on equity $1.00 • Net cash balance sheet $0.90 $0.80 • Strongly growing revenue Dec 14 Mar 15 J
Slide 62: Emerging Leaders opportunities
Emerging Leaders opportunities Leverage to domestic/global recovery & lower AUD International Earnings Domestic Cyclical Housing Recovery High ROE 62
Slide 63: Conclusion
Investment Roadshow 2015 “Beware the yield chase” Conclusion
Slide 64: Beware the yield chase: Conclusion
Beware the yield chase Conclusion • The G3 continues to improve • Negative real cash rates are unsustainable – volatility ahead • Below trend growth in Australia, interest rates to remain low • Avoid high yield, low EPS stocks • Favour international earnings and housing related sectors • Also favour
Slide 65: 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
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