Abc Arbitrage Sa · EURONEXT:ABCA
Abc Arbitrage Sa — FY2018 Earnings Presentation
129 slides from Abc Arbitrage Sa's earnings presentation, March 2019
Slide 1: Groupe ABC arbitrage Présentation SFAF - Comptes annuels 2018
Groupe ABC arbitrage Présentation SFAF - Comptes annuels 2018 “ça s’en va et ça revient” ABC arbitrage 1
Slide 2: Avertissement
AVERTISSEMENT Ce slideshow est un support de communication remis aux participants de la présentation SFAF du 26 mars 2018 et publié sur le site abc-arbitrage.com Ces éléments d’information sont donnés à des fins d’illustration et ne sauraient se substituer aux documents officiels relatifs à l’année
Slide 3: S&P 500 vs. CAC 40
S&P 500 vs. CAC 40 100 Year Record (2nd) 120 months of “easy return” End of Growth Cycle of almost 10y ? ABC arbitrage
Slide 4: February 2018
February 2018 SP500 & CAC40 February 18 = Volmageddon Month -9.6% Groupe ABC arbitrage 4
Slide 5: Q4 2018 Almost a bear market figure!
Q4 2018 Almost a bear market figure ! -19% ABC arbitrage
Slide 6: Historical VIX since 01/2014 x Main Events
Historical VIX since 01/2014 x Main Events After the 2017 “dead zone”... ... 2018 is a typical “central banks era” year! ABC arbitrage
Slide 7: 2018 = 7 months of low volatility
2018 = 7 months of “low” volatility Average realized volatility 1995-2017 = 16% Groupe ABC arbitrage 7
Slide 8: Intraday volatility 2018
Intraday volatility 2018 From 1982, 64 days < 4%: 1 day in 2016, 57 days in 2018 less of a “dead market” 2017 and 6 days in than the 2018 (all record year of 2017! in January) 2017 2019 ABC arbitrage
Slide 9: Existing Deals Market Cap. Trump Paradigm
Existing Deals Market Cap. Trump Paradigm America First Policy Shut down 2019 Average Market Cap = 411,000M€ ABC arbitrage
Slide 10: Strong Decrease of Corporate Actions
-20% vs. 2017 S2 -60% vs. 2015 S2 Strong Decrease of Corporate Actions Private Equity domination Low Rate Financing Groupe ABC arbitrage 10
Slide 11: S&P 500 Volumes $ & Number of Shares
S&P 500 Volumes $ & Number of Shares Still low Equity Volumes in quantity of Shares Groupe ABC arbitrage 11
Slide 12: ROE
ABC arbitrage - Consolidated Net Profits 31/12/2018 31/12/2017 In EUR million Change IFRS IFRS Investment Services Fees 16.8 16.0 5.0% Net gains at fair value through profit or loss 23.3 22.5 3.6% Net revenues 40.1 38.5 4.2% Payroll costs -13.1 -13.8 -4.7% Occupancy costs Other expense ROE -1.6 -5.8
Slide 13: 2018 = Consistent Financial Results
Know-how ABC Markets Parameters 2018 = Consistent Financial Results ABC arbitrage
Slide 14: SP500 20 days Volatility and ABC Business Level
SP500 20 days Volatility and ABC Business Level Still strong volatility correlation for Net Revenues ABC arbitrage
Slide 15: Business Level & VIX
Business Level & ViX Net Revenues @ Know-how ABC in ViX Level @ Year Vix / ABC know-how ViX 80 150% 11-2-7,%) 60 100% 40 50% 20 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Groupe ABC arbitrage 15
Slide 16: Low M&A and Corporate Action Revenue Drivers
Low M&A and Corporate Action Revenue Drivers Trump Paradigm and Negative Rate Financement inhouse analytics figures ABC arbitrage
Slide 17: Indicator of the Employment of Capital
Indicator of the Employment of Capital TODAY In line with 2016 decisions / Step Up 2019 Negative Rate = Costs estimation of 600K€ on Net Revenues ABC arbitrage
Slide 18: Draw Downs and Business Level
Draw Downs and Business Level Revenue Decrease Not a DD problem Steady Risk exposure ABC arbitrage
Slide 19: ABCG monthly returns
ABCG monthly returns Loi du “100% mois positifs” ABC Positive Month Corner Stone still there ABC arbitrage
Slide 20: Asset Management Business
Asset Management Business Groupe ABC arbitrage 20
Slide 21: ABCA Opportunities Fund
ABCA Opportunities Fund 2018 Performance Chart Simulated Data until september 2011. Extrapolated Data from Oct 2011 to Sept 2015 (ie ABCA Multi real performance since its launch enhanced with the effect of the dynamic and optimized allocation of capital and the new fee structure). Strong 2018 finish
Slide 22: ABCA Reversion Fund
ABCA Reversion Fund (> 11 2012 2013 2014 2015 2016 2017 2018 Launch 2010 20° Net Performance / Annualized ($) 18.2% 21.6% 2.6% 2.0% 8.8% 9.1% 1.6% 2.1% 7.5% 8.1% Net Performance / Annualized (€) 18.2% 21.6% 2.5% 1.9% 8.8% 8.6% 0.8% 0.6% 5.3% 7.4% Positive Months 83% 83% 42% 67% 02% 75% 58% 58% 67% 9
Slide 23: Profitable Business... Gross Revenues
Profitable Business... Gross Net Revenues Revenues Groupe ABC arbitrage 23
Slide 24: Return on AUM
Return on AUM ...but under our 4% Target (Perf. problem) Groupe ABC arbitrage 24
Slide 25: Seed Capital (M€)
“Seed Capital” (M€) AUM slightly below Target 2015-2018 of 400M€ Groupe ABC arbitrage 25
Slide 26: Client Revenue
Client Revenue Perf Fees Business Model More AUM for Low Vol. Markets Groupe ABC arbitrage 26
Slide 27: Costs
Costs Groupe ABC arbitrage 27
Slide 28: Wage inflation R&D +10% / year
Wage inflation R&D +10% / year 2014-2018 = Increasing R&D Team Shareholding prg 2018 - Decrease Groupe ABC arbitrage 28
Slide 29: Strong IT Cost Management
Strong IT Cost Management Groupe ABC arbitrage 29
Slide 30: Strong ROE but absolute € value under ABC ambitions
Strong ROE but absolute € value under ABC ambitions Groupe ABC arbitrage 30
Slide 31: Robust Business Model
From creation (1995) 24 consecutive years of positive results Robust Business Model Groupe ABC arbitrage 31
Slide 32: ça s'en va...ou ça revient ??
2019 “ça s’en va...ou ça revient ??* * from a french song of Claude François “ça s’en va et ça revient” (it does go away and comes back) - https://youtu.be/nBSY4mNznzk Groupe ABC arbitrage 32
Slide 33: Q4 2018 followed by an euphoric Q1 2019
Q4 2018 followed by an euphoric Q1 2019 Hooked on Central Banks ABC arbitrage
Slide 34: 2018/2019 - More reasonable ratios??!!
2018/2019 - More “reasonable” ratios ??!! PER Price to Book ratio Schiller Ratio http://www.multpl.com/ ABC arbitrage
Slide 35: Long-Term Average Volatility = 19%
Long-Term Average Volatility = 19% ABC arbitrage
Slide 36: Volatility of Volatility
Volatility of Volatility Still huge and brutal shifts in investor sentiments US-China trade war, US China economic inflation fears Central Banks Era downturn fears Strong and brutal changes on Volatility Groupe ABC arbitrage 36
Slide 37: ABC inhouse ratio (From June 2008)
ABC inhouse ratio (From June 2008) Central Banks Era Huge spreads between realized and implicit Volatility ABC arbitrage
Slide 38: Back to the 40's!
Back to the 40’s! ABC arbitrage
Slide 39: Historical VIX since 07/2017
Historical VIX since 07/2017 Main Events Central Banks Era = “Je vais bien, tout va bien...” “I’m fine, everything is fine” ABC arbitrage
Slide 40: Central Banks paradigm still here
Central Banks paradigm still here… ...probably for months! ABC arbitrage
Slide 41: Major Central Banks: Total Assets
MAJOR CENTRAL BANKS: TOTAL ASSETS (inition dollars, nsa) —— Fed (Feb=3.9) —— ECB (Feb=5.3) — BOJ (Feb=5.1) yardeni com oor! aoc | xcep | roto FP aore | aor © 2013 Foote | aors | aor § 2017 | ars ! aor | 2020 ABC arbitrage
Slide 42: Almost 200,000 Billions € debt
Almost 200,000 Billions € debt… …What else? ABC arbitrage
Slide 43: FED Patient = new magic word
30/9/2016 01/10/2018 FED “Patient” = new magic word To be patient = to be able to get negative yield debt 30/6/2014 ABC arbitrage
Slide 44: Central Banks Paradigm: Don't worry, be Happy World?
Central Banks Paradigm European gov. bonds yield evolution “Don’t worry, be Happy” World ? ABC arbitrage
Slide 45: Central Banks Paradigm: Not a Happy World for everyone
Central Banks Paradigm Not an “Happy World” for everyone ! ABC arbitrage
Slide 46: A (too?) simple conclusion
A (too?) simple conclusion Central Banks = Bull Markets ABC arbitrage
Slide 47: Thousands Billions of liquidity and still some negative signals
Thousands Billions of liquidity and still some negative signals...To be continued ! ABC arbitrage
Slide 48: ABC arbitrage 2019
ABC arbitrage 2019 Groupe ABC arbitrage 48
Slide 49: Financial Markets 2017/2018 Paradigm
Financial Markets 2017/2018 Paradigm Central Banks and Geopolitics Era ➢ Still very low Volatility for ⅔ of the 2018 year… ➢ ...probably the same on 2019. ➢ Consistent profits on 2018… ➢ ...especially on the 4th quarter volat. standardization ➢ Significant decrease on Corporate Action since 2015 ➢ S
Slide 50: ABC significantly above average with strong positive returns
ABC significatively above average with strong positive returns ABC arbitrage
Slide 51: Increase of capacity of +300M€ AUM
ABC increase of capacity of +300€ AUM... ...with same return target ABC arbitrage
Slide 52: Objective 1: Investing in our historical strategies
Objective 1 Investing in our historical strategies Groupe ABC arbitrage 52
Slide 53: Objective 2: Promoting development of mutualizing strategies
Objective 2 Promoting development of mutualizing strategies Groupe ABC arbitrage 53
Slide 54: Objective 3
+200M€ AUM = +4M€ Net Revenues in the same 2018 environment Objective 3 1. AUM of 600M€ on a short term basis... 2. ...and keeping our AUMs above 90% of our capacity. ABC arbitrage
Slide 55: Objective 4
Still building a “winter is here” business model... Objective 4 Mid/Long term development of high capacity funds (> Billion €) ABC arbitrage
Slide 56: Objective 5
Objective 5 External Expertise Integration - Speed up our evolution ABC arbitrage
Slide 57: ABC arbitrage Shareholding - Tailored European Development
ABC arbitrage Shareholding - “Tailored” European Development GBR/BEL/NLD/LUX/SPA 7% 52% Groupe ABC arbitrage 57
Slide 58: Distributions and Share Buyback Program
Distributions and Share Buyback Program New Quarter Distribution Program 0,43€ Distributions 0,23€ 1st week Jul. 2019* 0.10€ 1st week Oct. 2019* 0.10€ 1st week Dec. 2019* 0.10€ last week Mar. 2020* €€€ for 3M€ Buyback 2018 ABC Shares (around 500K if Average Price 6.1€) *submitted to General Meeting
Slide 59: Q&A Groupe ABC arbitrage
Q&A Groupe ABC arbitrage 59
Slide 60: Strong volatility correlation on pro Volat strategies
….but strong volatility correlation on “pro Volat strategies” ABC arbitrage
Slide 61: Évolution du risque ABCA par semestre
Évolution du risque ABCA par semestre (perte max en M€ et perte max utilisée en M€) Objective 5 Continue “Allocation Risk Piloting” ABC arbitrage
Slide 62: Business Levels & Costs
Business Levels & Costs @ Costs/Business Levels 80 ME @ Net Revenues = ABC Costs 60.00% Costs (% Activity) 2010 2011 2012 2013 2014 Years 2015 2016 2017 2018 Groupe ABC arbitrage
Slide 63: Not only a cost problem!
Not only a cost problem ! Groupe ABC arbitrage 63
Slide 64: Negative Cyclical Effect
Negative Cyclical Effect ABC arbitrage
Slide 65: Negative Cyclical Effect
Negative Cyclical Effect ABC arbitrage
Slide 66: Paradigme ABC 2019
Paradigme ABC 2019 ➢ 2nd consecutive under performing year… ➢ ...but much better than some competitors. ➢ End of Central Banks Era not so sure… ➢ ...but numerous “tail distribution” risks. ➢ Good non HR Costs Management ➢ HR costs + hiring process under GAFA and Brexit Pressure ➢ Too many failures o
Slide 67: ABC arbitrage
99 Comparer 9@ Actions ~ 97) Editer + Graphe (courbe) 5 Max Gouriy) (Tableau & Contenu du graphe * U.S. 1 212 318 2000 Copyright 2019 Bloomber Fini s WI91-3625-0 22-MEr~19 16:25:06 CET GMT#1:00 ABC arbitrage
Slide 68: Treasury yields tumble as Fed's U-turn fuels fixed income rally
Treasury yields tumble as Fed's U-turn fuels fixed income rally Ten-year US Treasury yield (%). 2.4 Mar 18 Jul 18 Oct 18 Jan19 Mar 19 Source: Bloomberg ©FT ABC arbitrage
Slide 69: US yield curve flattens as Fed lifts rates
US yield curve flattens as Fed lifts rates and economic optimism fades The spread between various Treasury yields (in basis points). = 2-10 year curve — 2-5 year curve — 2-30 year curve 200 2000 2005 2010 2015 2019 Source: Bloomberg OFT ABC arbitrage
Slide 70: Montant des fonds propres
Montant des fonds propres Evolution semestrielle (à compter du 01/01/2010) Conforme aux décisions 2016-Step Up 2019 ABC arbitrage
Slide 71: Asia Volatility vs US/EUR
Asia Volatility vs US/EUR Asia Markets Still a “follower”... ...but less than before crisis Groupe ABC arbitrage 71
Slide 72: La baisse du taux américain
La baisse du taux américain a 10 ans En% 3,3 3,2 31 3,0 2,9 28 27 26 25 Mars 2018 21 mars 2019 ABC arbitrage
Slide 73: 2018 EoY Stabilization
2018 EoY Stabilization Groupe ABC arbitrage 73
Slide 74: Significant increase € ABCG over 3 years
Signific increase € ABCG over 3 years Groupe ABC arbitrage 74
Slide 75: Capacity > 400/450 M€ from external AUM
Capacity > 400/450 M€ from external AUM Groupe ABC arbitrage 75
Slide 76: VIX (from 2008)
VIX (from 2008) ABC arbitrage
Slide 77: 2012/2017: Central Banks Era
2012/2017: Central Banks Era 2012-2017 Central Banks Era Before Central Banks ABC arbitrage
Slide 78: 2012-2017 - New Volatility Era!
2012-2017 - New Volatility Era ! Before Central Banks Central Banks Era Source Bloomberg ABC arbitrage
Slide 79: Intraday Volatility 2017
Intraday Volatility 2017 From 1982, 58 days < 4% 1 day in 2016 and 57 days in 2017 Min. @ 2.8% on 18-Oct-2017 Groupe ABC arbitrage 79
Slide 80: H2 Statistically < H1
These figures are not strictly audited H2 does not exist from an accounting point of view H2 Statiscally < H1 H2 2017 Decrease is coherent Groupe ABC arbitrage 80
Slide 81: Intraday Volatility < 4% Concentration on H2 2017
Intraday Volat. (days) < 4% Concentration on H2 2017 Groupe ABC arbitrage 81
Slide 82: Expected Situation...
Expected Situation... Corporate Action M&A Volatility Volumes ABC arbitrage
Slide 83: 2017 Situation
2017 Situation Corporate Action Volatility M&A Volumes 2017 ABC arbitrage
Slide 84: If correlation to volatility was the same as 2007-2012
If correlation to volatility was the same as 2007-2012, the results would be... Strong progression for ABC results (pari passu) +40% realised vs predictable Groupe ABC arbitrage 84
Slide 85: Correlation between VIX and Group Traded Volumes
Correlation between VIX and Group Traded Volumes Volumes ABC à Volat ABC arbitrage
Slide 86: Decomposition by assets and type of clients
Decomposition by assets and type of clients Increase of Client volumes Increase of “rates strategies” volumes ABC arbitrage
Slide 87: Correlation between volatility and P&L ABC
Correlation between volatility (20d) SP500 and P&L ABC From 2007 Still a very strong correlation ! ABC arbitrage
Slide 88: UHFT Players - Winter is coming?
UHFT Players - Winter is coming ? -72% HY 2017/16 -50% HY 2017/16 -79% FY 2017/16 -57% FY 2017/16 Groupe ABC arbitrage 88
Slide 89: 2009-2016 - HFT Industry Revenues
2009-2016 - HFT Industry Revenues Groupe ABC arbitrage 89
Slide 90: Group: about 90 employees
2014-2017 -30 “support” +30 “R&D” Groupe : environ 90 collaborateurs 31-dec-2017 ABC arbitrage 90
Slide 91: Costs adjusted for IFRS 10
Costs are adjusted to take into account IFRS 10 - “Business Levels” are close to, but not equal to “Revenues” (audited accounts) Groupe ABC arbitrage 91
Slide 92: 2016-2017 vs LT average (1950)
2016-2017 vs LT average (1950) source: FIDELITY - for EM Equity vs LT average (1988) ABC arbitrage
Slide 93: 23 consecutive years of positive result
23 consecutive years of positive result Groupe ABC arbitrage 93
Slide 94: 2018 = New paradigm?
2018 = New paradigm ? source : Banque Mondiale Groupe ABC arbitrage 94
Slide 95: Volatility of volatility
Volatility of volatility 5-FEB-17 All Time High 180 ABC arbitrage
Slide 96: New products, old problems!
New products, old problems ! https://www.linkedin.com/pulse/lann%25C3%25A9e-2017-de-gordon-gekko-dominique-ceolin/ source : Banque Mondiale Groupe ABC arbitrage 96
Slide 97: 2017-2018 - Quant indexes
2017-2018 - Quant indexes Difficult Transition for most market actors! source : HFRi Groupe ABC arbitrage 97
Slide 98: Groupe ABC arbitrage
source : Banque Mondiale Groupe ABC arbitrage 98
Slide 99: 2018 - End of free lunch?
2018 - End of free lunch ? source : Banque Mondiale Groupe ABC arbitrage 99
Slide 100: Not yet for ECB
...Not yet for ECB... Groupe ABC arbitrage 100
Slide 101: Groupe ABC arbitrage
source : Banque Mondiale Groupe ABC arbitrage 101
Slide 102: Montant des fonds propres
Montant des fonds propres Evolution semestrielle (à compter du 01/01/2010) Conforme aux décisions 2016-Step Up 2019 ABC arbitrage
Slide 103: Shareholder's Equity Ratio
Shareholder’s Equity Ratio Compliant with Step Up 2019 TODAY ABC arbitrage
Slide 104: VaR ABC arbitrage Group 10 day - 99%
VaR ABC arbitrage Group 10 day - 99% Portfolio Risk 2017 vs 2015 Increase of almost 15% Groupe ABC arbitrage 104
Slide 105: ABC Group investments in ABCA Fund Plc
ABC Group investments in ABCA Fund Plc ABC Group one of the main clients Groupe ABC arbitrage 105
Slide 106: 290M€ in our funds / 214M€ External investors
1-Mar-2018 290M€ in our funds / 214M€ External investors Groupe ABC arbitrage 106
Slide 107: External Client Revenues (Funds Only)
External Client Revenues (Funds Only) Groupe ABC arbitrage 107
Slide 108: Return on AUM for ABCA Fund Plc
Return on AUM for ABCA Fund Plc below ambitions… ...Performance problem Groupe ABC arbitrage 108
Slide 109: Q1 2018 - Living Markets = Living Results!
Q1 2018 - Living Markets = Living Results ! Low volat. for 1 week = 2 months January 18 5th to 9th of Feb. Q1 2018 ABC = ⇶ almost 85% Q1 2017 ABC of Oct+Nov 2017 ABC arbitrage 109
Slide 110: Limiter la dilution au service du BNPA
Limiter la dilution au service du BNPA Dividende € et/ou ABC Paiement en ABC Programme de rachat “€ vs ABC” Selon autorisations AG et PER, programme de rachat 2018 sur 6M€ (environ 1MT) Groupe ABC arbitrage 110
Slide 111: ABC arbitrage
ABC arbitrage David HOEY ➢ Joined ABC arbitrage in 1996 ➢ Becomes Deputy CEO of ABC arbitrage AM ➢ Becomes Deputy CEO of ABC arbitrage Gaëtan FOURNIER ➢ Joined ABC arbitrage AM in 2012 ➢ Becomes Compliance Officer / RCCI of ABC arbitrage AM ABC arbitrage 111
Slide 112: ABC arbitrage AM
ABC arbitrage AM Alexandre OSPITAL Joined ABC arbitrage in 1999 Becomes COO of ABC arbitrage AM Yves-Oleg ZAJTELBACH Joined ABC arbitrage in 1999 Becomes Head of Trading of ABC arbitrage AM Franck BONNEAU Joined ABC arbitrage in 1999 Becomes CTO of ABC arbitrage AM Vincent GIGOT Joined ABC arbitrage
Slide 113: Winter is not over but ambitions are still there
Winter is not over but ambitions are still there… ...and still reasonable ! Groupe ABC arbitrage 113
Slide 114: Group Structure - september 2017
Group Structure - september 2017 Groupe ABC arbitrage 114
Slide 115: Corrélation VIX et Volumes traités part du Groupe
Corrélation VIX et Volumes traités part du Groupe Hausse des vol. traités par le groupe ne vient pas que des clients ext. (même si FP ) ABC arbitrage
Slide 116: Indicateur d'utilisation des fonds propres MAJ
Indicateur d'utilisation des fonds propres MAJ TODAY ABC arbitrage
Slide 117: Evolution des VaR parts ABC
Evolution des VaR parts ABC Groupe ABC arbitrage 117
Slide 118: ABC arbitrage Les charges
ABC arbitrage Les charges Groupe ABC arbitrage 118
Slide 119: Des charges en hausse sensible en %
Des charges en hausse sensible en % 2016 vs 2011 Egalité € 43% vs 32% Groupe ABC arbitrage 119
Slide 120: Charges IT en hausse sensible pour le Groupe ABC
Charges IT en hausse sensible pour le Groupe ABC Groupe ABC arbitrage 120
Slide 121: Charges HR en % du Rythme d'Activité
Charges HR en % du Rythme d’Activité Groupe ABC arbitrage 121
Slide 122: Ambition 2016
Ambition 2016 ➢ Innovations ➢ Recrutements ➢ Extensions Géographiques Marchés ➢ Extensions Géographiques “Régulations” ➢ Asset Management ABC arbitrage
Slide 123: ABC arbitrage Step up 2019
ABC arbitrage Step up 2019 Groupe ABC arbitrage 123
Slide 124: Evaluation - Paradigme Marchés au 01/01/2017
Evaluation - Paradigme Marchés au 01/01/2017 1. Volatilité structurellement entre 10/15 vs 15/20 2. Chocs marchés locaux et violents - “3j/3H/3mn” 3. Vie “autonome” du continent “Asie” 4. Volumes des produits listés en baisse sensible 5. Baisse des OST vs Hausse “récente” sur les M&A 6. “Déséquilibr
Slide 125: Evaluation - Paradigme ABC 2017
Evaluation - Paradigme ABC 2017 1. Corrélation à la volatilité 2. Sous utilisation “chronique” des FP 3. Hausse encadrée du risque ABC 4. Capacités des Fonds encore limitées 5. Marge unitaire “stable” 6. Hausse sensible des investissements IT 7. Structure de rémunération sous pression des UHFT & GAF
Slide 126: Préparer la prochaine décennie
SU 2019 Préparer la prochaine décennie A. Poursuite “Added Value” avec recrutements et évolution de l’organisation. B. Hausse sensible des investissements a. Au moins +2M€ en 2017 b. Au moins +4M€ en 2018 C. Installer les 90M€ cumulés sur 3 ans dans “presque” tous les contextes de marché. Groupe ABC
Slide 127: Quel avenir pour la gestion quantitative ?
Quel avenir pour la gestion quantitative ? Groupe ABC arbitrage 127
Slide 128: DD max of 2.8%, 2nd lowest from 1950
DD max of 2.8% 2nd lowest from 1950 Groupe ABC arbitrage 128
Slide 129: Groupe ABC arbitrage
source : Banque Mondiale Groupe ABC arbitrage 129