Close Brothers Group plc · LSE:CBG
Close Brothers — Investor Presentation (April 2009)
38 slides from Close Brothers's investor presentation, Apr 22, 2009
Slide 1: Close Brothers Group Asset Management Division
Close Brothers Group Asset Management Division Presentation to Investors and Analysts 22 April 2009
Slide 2: Cautionary statement
Cautionary statement Regarding information in this presentation Certain statements included in this presentation may constitute "forward-looking statements" in respect of the Group’s operations, performance, prospects and/or financial condition. By their nature, forward looking statements involve a
Slide 3: Agenda
Agenda 1. Introduction – Jonathan Howell, Group Finance Director 2. Presentation on Asset Management Division – Martin Andrew, Chief Executive Asset Management • Overview • Private Clients and Funds • Banking and Administration • Operational Efficiency • Summary 3. Q&A Page 3
Slide 4: Agenda
Agenda 1. Introduction – Jonathan Howell, Group Finance Director 2. Presentation on Asset Management Division – Martin Andrew, Chief Executive Asset Management • Overview • Private Clients and Funds • Banking and Administration • Operational Efficiency • Summary 3. Q&A Page 4
Slide 5: Introduction
Introduction • The Asset Management Division developed via acquisitions over 20+ years • Encompassed a diverse range of autonomous businesses and capabilities • Generated significant profit growth to 2007 • Restructuring to improve focus and deliver improved results Page 5
Slide 6: Development history
Asset Management Division Development history Start up Scale and scope Initial integration Focus 1985 - 1998 1998 - 2003 2003 - 2007 2008 - • Private Equity • Rea Brothers • Fortune • Private Clients • Property • OLIM • Multi-manager • Funds • Derivatives • Jersey Trust • Private client • Offshore t
Slide 7: Summary
Asset Management Division Summary Asset Management Division • Retain business diversification • Increase focus on 3 core areas • Restructure and integrate internally to improve efficiency and growth Private Clients Funds Banking and Administration Wealth and discretionary Range of specialist Range o
Slide 8: Key figures – as at January 2009
Asset Management Division Key figures – as at 31 January 2009 Asset Management Division Funds under Management (FuM) £6.9 bn Assets under Administration (AuA) c. £24 bn(1) Headcount 803 Operating income(2) 2008 £133.5 m Operating income(2) H1 2009 £49.9 m Private Clients Funds Banking and Administra
Slide 9: Income analysis
Asset Management Division Income analysis 200 10 (1) 177.5 180 9 160 8 140.0 56.1 133.5 Operating income, £ million 140 7 Closing FuM, £ billion 119.0 12.2 30.3 120 6 28.3 100 41.0 41.8 5 36.6 80 4 31.1 49.9 60 (0.2) 3 80.4 79.5 40 73.1 20.7 2 59.6 (93 bps) (92 bps) (96 bps) (95 bps) 20 29.4 1 (78 b
Slide 10: Operating income, operating expenses and operating profit
Asset Management Division – financials Operating income, operating expenses and operating profit 200 177.5 180 160 140.0 140 133.5 119.0 120.9 120 £ million 101.8 100.9 100 87.4 80 56.6 60 49.9 43.3 38.2 40 31.6 32.6 20 6.6 0 FY 2005 FY 2006 FY 2007 FY 2008 H1 2009 Operating income Operating expense
Slide 11: Movement in FuM July 2004 to January 2009
Movement in FuM 31 July 2004 to 31 January 2009 10 9 8 0.8 0.0 1.2 7 1.8 6 £ billion 5 4 6.9 3 5.5 2 1 0 FuM Acquisitions Private Clients Funds net new Discontinued/ FuM 31 July 2004 net new funds funds Deconsolidated 31 January 2009 Note: Net impact of market movement and performance across the per
Slide 12: FuM by Private Clients and Funds
FuM by Private Clients and Funds 6 5.5 5.6 4.9 5 4.6 4 3.7 3.6 3.3 3.3 3.1 £ billion 3 2.7 2.5 2.3 2 1 0 31 July 2004 31 July 2005 31 July 2006 31 July 2007 31 July 2008 31 January 2009 31 July 2004 31 July 2005 31 July 2006 31 July 2007 31 July 2008 31 January 200 Private Clients Funds Page 12
Slide 13: FuM by asset class
FuM by asset class H1 2008 to H1 2009 100% 1% 9% 9% 7% 11% 80% 9% 15% 15% Private Equity 60% Structured Hedge Funds 21% 28% Property 40% Fixed Income Equities 20% 39% 36% 0% 31 January 2008 2008 31 January 2009 2009 Page 13
Slide 14: Agenda
Agenda 1. Introduction – Jonathan Howell, Group Finance Director 2. Presentation on Asset Management Division – Martin Andrew, Chief Executive Asset Management • Overview • Private Clients and Funds • Banking and Administration • Operational Efficiency • Summary 3. Q&A Page 14
Slide 15: Private Clients and Funds: Overall themes
Private Clients and Funds Overall themes • Integration for efficiency, scalability and growth • Primary focus on UK individual investors • Dual channel distribution • Secondary focus on institutions and international • Primary focus on multi-asset “Managed Solutions” • Secondary focus on specialist
Slide 16: Private Clients Overview
Private Clients Overview – as at 31 January 2009 Bespoke HNW Modelled mass affluent • Discretionary investment • Discretionary + wealth management • £1.8 bn FuM(1) • £1.3 bn FuM • c. 2,000 clients • c. 20,000 clients • c. 90 bps revenue margin(2) • c.140 bps revenue margin(2) • 34 PMs/RMs • 6 PMs +
Slide 17: Private Clients Assessment
Private Clients Assessment Bespoke HNW Modelled mass affluent • Good investment performance • Segmented business model • Good net sales growth • Scalable investment approach • New system • Proprietary IT system • High quality people • Financial planning • No scalable distribution as yet • Low cost b
Slide 18: Private Clients Strategy themes
Private Clients Strategy themes • Long term growth potential in mid-HNW market • Exploit industry trends – Retail Distribution Review – TCF(1) – IFA(2) consolidation • Demand for discretionary from IFAs • Dual channel distribution • Scope to exploit both our business models − Take discretionary (bes
Slide 19: Business model and Managed Solutions
Private Clients Business model and Managed Solutions Target market Private Individuals £0.3 m – £3 m Client acquisition and Direct Intermediated relationship management Provider of advice and Close IFA relationship manager Consistent range of Discretionary Investment Propositions Managed Solutions B
Slide 20: Funds Overview of specialist capabilities
Funds Overview of specialist capabilities – as at 31 January 2009 Multi-manager Fortune Property Structured OLIM • Long-only • Hedge fund • Residential and • Escalator open- • UK value and manager of advisory and commercial ended funds income equity, managers funds-of-funds funds, fund-of- UK commer
Slide 21: Funds Assessment and opportunities
Funds Assessment and opportunities Assessment Opportunities • Strong hedge fund research and • Optionality when cycles turn in advisory capability specialist areas • Scalable long-only multi-manager • Consolidation in hedge funds-of-funds space • Long standing derivatives expertise • Managed Account
Slide 22: Actions to date
Actions to date Private Clients and Funds • Integrated sales and marketing structure – October 2008 • New head of UK distribution – October 2008 • New sales leadership for each channel – Q4 2008 • New direct mail pilot – May 2009 • Integrated investment organisation with new leadership – March 2009
Slide 23: Agenda
Agenda 1. Introduction – Jonathan Howell, Group Finance Director 2. Presentation on Asset Management Division – Martin Andrew, Chief Executive Asset Management • Overview • Private Clients and Funds • Banking and Administration • Operational Efficiency • Summary 3. Q&A Page 23
Slide 24: Banking and Administration Overview
Banking and Administration Overview UK Offshore Islands Banking Trust Fund Admin • Deposit taking • Corporate (EBTs(1), • Accounting, pricing, pension, captive transfer agency • FX insurance) • Property, hedge funds- • Debit cards • Private client (trusts, of-funds, private equity • Links with Close
Slide 25: UK Offshore assessment and opportunities
Banking and Administration UK Offshore assessment and opportunities Assessment Opportunities • Links between businesses • “QROPS(1)” • Revenue diversity • “Manufacturing” in South Africa • Operational gearing in bank • Fund administration • Fund administration capability in consolidation South Afric
Slide 26: Cayman Overview
Cayman Overview Banking Trust Fund and Fiduciary • Deposit taking • Private client trust • Fund administration • FX • Corporate trust • Fiduciary services • Links with Close Trust, • Hedge fund and funds- Fund Administration and of-funds Asset Management Page 26
Slide 27: Cayman Assessment and opportunities
Cayman Assessment and opportunities Assessment Opportunities • Revenue diversity and low • Further growth in core correlation to markets areas • Acquisition record • Latin America • Uncertainty due to political rhetoric about offshore centres • Hedge fund exposure Page 27
Slide 28: Agenda
Agenda 1. Introduction – Jonathan Howell, Group Finance Director 2. Presentation on Asset Management Division – Martin Andrew, Chief Executive Asset Management • Overview • Private Clients and Funds • Banking and Administration • Operational Efficiency • Summary 3. Q&A Page 28
Slide 29: Operational Efficiency Overview
Operational Efficiency Overview • Objectives – Improve scalability – Improve quality and functionality – Reduce complexity • Wide-ranging, long-term initiative – Ongoing investment in project management – Strategic projects – Tactical wins • Examples – Headcount reductions FY 2008, FY 2009 – 80 head
Slide 30: Agenda
Agenda 1. Introduction – Jonathan Howell, Group Finance Director 2. Presentation on Asset Management Division – Martin Andrew, Chief Executive Asset Management • Overview • Private Clients and Funds • Banking and Administration • Operational Efficiency • Summary 3. Q&A Page 30
Slide 31: Summary
Asset Management Division Summary • 3 core areas representing blend of growth, stability and diversification • Private Clients – Strong business position – Alignment to key changes in the industry – Scope to grow organically and inorganically • Funds – Opportunistic development by acquisition – High
Slide 32: Agenda
Agenda 1. Introduction – Jonathan Howell, Group Finance Director 2. Presentation on Asset Management Division – Martin Andrew, Chief Executive Asset Management • Overview • Private Clients and Funds • Banking and Administration • Operational Efficiency • Summary 3. Q&A Page 32
Slide 33: Close Brothers Group Presentation to Investors and Analysts
Close Brothers Group Asset Management Division Presentation to Investors and Analysts 22 April 2009
Slide 34: Appendix
Appendix • Fund performance summary • Private client performance • Senior management biographies Page 34
Slide 35: Relative fund performance versus benchmark
Relative fund performance versus benchmark Open ended funds One year Three year 25% 23.2% 25% 22.1% 19.4% 20% 20% 17.5% 15% 12.9% 15% 13.0% 12.9% 10% 10% 6.2% 5.2% 5% 2.8% 5% 2.2% 1.5% 0.9% 1.0% 0.4% 0.4% 0% 0% UK European World Capital Reserve FTSE UK Freehold UK Freehold European World Reserve Cap
Slide 36: Closed ended structured investments – capital entitlement vs index movement
Closed ended structured investments – Final (1) capital entitlement vs index movement From launch to 31 January 2009 40% Final capital entitlement Index performance 24.3% 20.0% 20% 0.0% 0.0% 0.0% 0% (20%) % Return (20.8%) (30.5%) (32.6%) (31.2%) (40%) (32.3%) (49.9%) (60%) (80%) (81.0%) (100%) Japan
Slide 37: Close Asset Management Private Client relative performance
Close Asset Management Private Client (1) performance/market movement vs APCIMS To 31 January 2009 15% Close performance/market movement relative to: APCIMS Income Portfolio APCIMS Growth Portfolio APCIMS Balanced Portfolio 12.2% 10% 9.1% 8.3% Relative performance (2) 6.1% 5.7% 5% 4.1% 1.7% 0.1% 0%
Slide 38: Asset Management – senior management experience
Asset Management – senior management experience • Martin Andrew CEO – Asset Management - Joined from Merrill Lynch in 2005, originally as head of Private Clients business. Took over as Chief Executive of the division in 2008 • Andrew Henton – Head of UK Offshore - Joined Close Brothers in 2001 initi
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