Abc Arbitrage Sa · EURONEXT:ABCA
Abc Arbitrage Sa — Investor Presentation (March 2023)
52 slides from Abc Arbitrage Sa's investor presentation, March 2023
Slide 1: Investor Presentation - March 2023
Investor Presentation - March 2023 Don’t look up! - The world is not ready for the coming economic planet killer! ABC arbitrage FY 2022 - Investor Presentation 1
Slide 2: Key topics of the presentation
ABC arbitrage Key topics of the presentation 1. What we do 2. 2022 Market Parameters 3. 2022 Financial Results 4. Review of the ABC 2022 strategic plan 5. How we do it 6. From 2023 to 2025. Don’t look up! 7. Springboard 2025 - For today and for tomorrow! 8. ABC Shares & distributions ABC arbitrage F
Slide 3: Who we are
ABC arbitrage Who we are Who we are ❏ One Business: Quantitative Asset Management. ❏ One Team: Enthusiastic technologists, building innovative trading systems and asset management strategies. ❏ One Trading Principle: Quantitative arbitrage on all kinds of assets. ❏ One Conviction: Investing our own
Slide 4: 1. What we do
ABC arbitrage 1. What we do ABC arbitrage FY 2022 - Investor Presentation 4
Slide 5: Our business: Trading Arbitrage
What we do Our business: Trading Arbitrage Arbitrage: Providing liquidity to the market with systematic mechanical or statistical hedging position ❑ Sophisticated trading techniques using scientific & data driven approach to generate alpha. ❑ Statistical and Event Driven strategies - focus on niche,
Slide 6: 2. 2022 Market Parameters
ABC arbitrage 2. 2022 Market Parameters ABC arbitrage FY 2022 - Investor Presentation 6
Slide 7: Markets parameters Volatility - 2 years
Markets parameters Volatility - 2 years 2022 - [almost] The end of Central Banks Paradigm under inflation pressure & UA/RUS War ❑ Average VIX over 30 years is around 20% ❑ “No life zone” is a Vix < 15% (2017 & 2019 for example) ❑ Realized volatility @24% (US) & 23%(EU) > average realized volat. (res
Slide 8: Markets parameters M&A and Corporate Action activity
Markets parameters M&A and Corporate Action activity Monthly existing M&A announced offers(B€) Corporate actions opportunities Higher than in 2020 but less than 2021 Divided by 3 since 2014 - Divided by 1.5 since 2018 V-Shaped 2021/22 Coherent with negative rates & QE Poor Q4 2022 Too soon to have a
Slide 9: Markets parameters Traded markets Volume
Markets parameters Traded markets Volume 2022 vs 2021 - Stability of traded market volume on Euronext (EU-wide). ABC arbitrage FY 2022 - Investor Presentation 9
Slide 10: Markets parameters Specific market situation
Markets parameters Specific market situation Temporary geographic (EU/US) decorelation! FTX Collapse A significant but temporary impact on the crypto. industry ● Significant increase in regulatory requirements. ● No impact on ABC PnL. ABC arbitrage FY 2022 - Investor Presentation 10
Slide 11: 3. 2022 Financial Results
ABC arbitrage 3. 2022 Financial Results ABC arbitrage FY 2022 - Investor Presentation 11
Slide 12: 2022 ABC Results Profit & Loss account
2022 ABC Results Profit & Loss account Change 2021 In Euro millions - IFRS S1 2020 2020 2021 Pro forma*** 2022 Change 2022/2021 2022/2021 Pro forma Investment Services Fees* ~14% from external third party 14,9 22,5 59,9 25,3 27,4 -54,2% 8,5% Net gains at fair value through profit or loss** 16,6 46,3
Slide 13: HR Costs Breakdown
2022 ABC Results HR Costs Breakdown ABC Team = ABC first priority = ABC first expense Total of 22.9M€ ❑ Base cost increase = partial adaptation to HR market + new R&D people. ❑ Strong correlation between Variable and ABC arbitrage performance. ❑ Targeted Equity Incentives on a long term basis. ABC a
Slide 14: Other expenses: mainly IT expenses
2022 ABC Results Other expenses : mainly IT expenses ABC arbitrage is a “French Tech” Company ! IT Costs ~ 70% of the “other costs”. ABC 2022 +13% vs Step Up 2019 ABC arbitrage FY 2022 - Investor Presentation 14
Slide 15: Split of revenues between equity and third party AuM
2022 ABC Results Split of revenues between equity and third party AuM ➔ Revenue from third party capital is historically in the 5%-20% range. ➔ Relative decrease during ABC 2022…because of an increased ABC Gross Profit… ➔ …and a relative failure in increasing the third party AUM. ABC arbitrage FY 20
Slide 16: 4. Review of ABC 2022 strategic plan
ABC arbitrage 4. Review of ABC 2022 strategic plan. ABC arbitrage FY 2022 - Investor Presentation 16
Slide 17: Historical Results & ROE - a success!
ABC 2022 - Review ABC arbitrage Historical Results & ROE - a success! From creation (1995) 28 consecutive years of strong positive results ABC arbitrage FY 2022 - Investor Presentation 17
Slide 18: Moral contract fulfilled!
ABC 2022 - Review Moral contract fulfilled! Significant correlation between ABC gross profit & Realized volatility ABC arbitrage FY 2022 - Investor Presentation 18
Slide 19: Previous years - the big picture is quite good
ABC 2022 - Review 5 previous years - the big picture is quite good for ABC arbitrage! * ABC ABC ABC ABC +6.1% +12.6% Tot +54.4% +31.0% Annualized +31% ABC +19.1% 100% Monthly Gross Return >> 0 100% Monthly Net Return >> 0 A “no bet” philosophy (+/-) A little “pepite” *Source: Barclays. Figures are a
Slide 20: Historical Results & ROE - a successful plan
ABC 2022 - Review ABC arbitrage Historical Results & ROE ABC 2022 - a successful plan! ABC 2022 ∑CNI = 92M€ > ABC 2022 ambitions High dividend yield! ABC arbitrage FY 2022 - Investor Presentation 20
Slide 21: HR - Success in a competitive environment
ABC 2022 - Review HR - Success in a competitive environment! Significant increase of ABC Team ➔ +23% on average 2022 vs 2019 staff figures. ➔ +33% eoy staff figures vs Step Up 2019. ➔ A long term compensation system. ➔ A value sharing approach. ➔ 2022 = 44% for shareholders. ABC arbitrage FY 2022 -
Slide 22: External Third Party AuM under pressure
ABC 2022 - Review External Third Party (ETP) - Assets under Management under pressure. ABCA’s AuM ❑ Pre-2010: generated through trading of our own equity. ❑ Post-2010: opened to third party funds. Geographical breakdown ❑ Limited capacity strategies: via Managed Accounts. ❑ High Capacity strategies:
Slide 23: ABCA Funds - 2022 returns
ABC 2022 - Review ABCA Funds - 2022 returns. Annualized 28/02/2023 Volatility Performance ABCA Reversion 2022 Perf. Class USD Net => -1.3% (31/12) 2020 - BarclayHedge Recognition award for excellence - EMN Winner Reversion Net $ 6.1% 5.3% SG SHORT-TERM TRADERS 0.8% 5.3% INDEX (USA) Barclayhedge CTA
Slide 24: ETP AUM - ABC 2022 evaluation
ABC 2022 - Review ETP AUM - ABC 2022 evaluation North Successes To Europeimprove America Asia 1. Creation of a dedicated commercial team + 1. Deceptive return of ABCA Reversion in a CRM Implementation. volatile environment in March 2022… 2. New client base up from 500 to 1200 names. 2. …With tempora
Slide 25: Governance - Group Organisation Evolution
ABC 2022 - Review Governance - Group Organisation Evolution ABC Group - Implementation of a strong expertise COMEX ABC arbitrage Asset Management - New executive team Objectives Realisations ➔ Increase ABC agility. ➔ ABC Group - New COMEX team ➔ Increase number of new projects/products. ➔ ABC arbitr
Slide 26: 5. How we do it
ABC arbitrage 5. How we do it ABC arbitrage FY 2022 - Investor Presentation 26
Slide 27: ABC Equity as a strong development tool
How we do it ABC Equity ABC Equity as a strong development tool ❏ High reactivity for seed money decision. ❏ High reactivity for market allocation. ❏ Independent from ext. client situation ❏ Accumulation from ABC results (10K€ in 1995) ABC arbitrage FY 2022 - Investor Presentation 27
Slide 28: Dedicated Team for our core business
How we do it Dedicated Team for our core business 100+ people dedicated to ABC arbitrage Business ~70% - R&D + Front ~10% - Risk Management ~10% - Sales ❏ Quant Traders & Research ❏ Risk Control ❏ IT developers & IS ❏ Marketing ❏ Process Control ❏ Data analysis ❏ Investor Relations ❏ Risk Committee
Slide 29: Tech company!
How we do it Proven expertise, technological know how Tech company! Robust internally-developed 24/7 trading systems* ❏ Billions of data elements processed each year ❏ Active in almost 100 markets across the world - 24/7 ❏ Not a High Frequency Trading player but Top Tier 2 + 2bn ticks** + 300 millio
Slide 30: Focus on risk mitigation
How we do it Focus on risk mitigation Risk Mitigation Process Strict Quality Control ❑ Compound of “every” possible risk even “opposite” risks. ❑ No significant increase in the risk budget over time. ❑ External incident* in Dec 2020 concerning 2016 to 2019. ❑ Failover technology and counterparties i
Slide 31: 6. From 2023 to 2025... Don't look up!
ABC arbitrage 6. From 2023 to 2025… …Don’t look up! ABC arbitrage FY 2022 - Investor Presentation 31
Slide 32: Global Debt situation vs Back to inflation world
2023-2025 Outlook Global Debt situation vs Back to inflation world! An economic world with contradictory pressures! Total debt amount Between 250T$-300T$ Thanks to “0% rate policy! But inflation is back…worldwide! ABC arbitrage FY 2022 - Investor Presentation 32
Slide 33: Reference rates level - back to reality!
2023-2025 Outlook Reference rates level - back to reality! FED rates evolution ECB rates evolution A steep increase in US & EU! ABC arbitrage FY 2022 - Investor Presentation 33
Slide 34: Expected consequences of the end of the rates 0 paradigm
2023-2025 Outlook Expected consequences of the end of the “rates 0” paradigm. Too long of a period with “negative” rates and a way too brutal rate hike => Look up!! From “The economist” - illustration: @kaltoons1 ABC arbitrage FY 2022 - Investor Presentation 34
Slide 35: Just the beginning?!
2023-2025 Outlook Just the beginning?! Some reasonably logical difficulties in bank sector...and it’s probably not over yet! Markets & Govt’s should have prepared the end of ¨negative rate paradigm” more carefully! Stop the Moral Hazard! (SVB - 100% deposit guarantee & CS - Shareholders>CoCo invest.
Slide 36: Central Banks Balance sheets
2023-2025 Outlook Central banks Balance sheets Central Banks Balance Sheets FED = almost -4% (15/04/2022 - 15/03/2023) ECB = almost -11% (24/06/2022 - 10/03/2023) Far away from the end of Central Banks support! ABC arbitrage FY 2022 - Investor Presentation 36
Slide 37: Some impressive historical statistics!
2023-2025 Outlook Some impressive historical statistics! The democratic world is not ready for the long grind to come!* *Source: Ruchir SHARMA - Chairman of Rockefeller International. ABC arbitrage FY 2022 - Investor Presentation 37
Slide 38: Shares Valuation...what is the next move?!
2022 Outlook Shares Valuation…what is the next move ?! PE ratio - Among the highest! Historical average = 16 Substantial probability of a new paradigm of normalized volatility. Shiller ratio - Among the highest! Historical average = 15 ABC arbitrage FY 2022 - Investor Presentation 38
Slide 39: 7. Springboard 2025
ABC arbitrage 7. Springboard 2025 For today and for tomorrow! ABC arbitrage FY 2022 - Investor Presentation 39
Slide 40: Springboard 2025 For today - Maintain high return level
Springboard 2025 For today - Maintain a day to day high return level. Springboard 2025 income targets. ➔ ROE Min > 10% => annual CNI of 16M€ based on ABC Equity as of 31/12/22. ➔ ROE Target >= 15% => annual CNI of 24M€ based on ABC Equity as of 31/12/22. ➔ Keeping predictive CNI correlated to ABC’s
Slide 41: Springboard 2025 For tomorrow - Maintain high investment
Springboard 2025 For tomorrow - Maintain a high level of investment! Cornerstones for Springboard 2025 ➔ Cornerstone 1 - ABC Equity invested in ABC strat. - For Return & Seed Money. ➔ Cornerstone 2 - Substantial group investment in HC but under PnL threshold. ➔ Cornerstone 3 - Substantial group inve
Slide 42: Springboard 2025 HR & IT investments
Springboard 2025 For tomorrow - HR & IT investments HC Costs Management IT Costs - Stay in the competition! ➔ Monitoring of the KPi - PnL/unit to challenge hiring plan An investment in agility and performance. ➔ +33% on ABC staff k€ 550/u k€ 525/u k€ 500/u ABC arbitrage FY 2022 - Investor Presentati
Slide 43: Asset Under Management ambitions
Springboard 2025 Asset Under Management ambitions Same ambition as ABC 2022… …but with stronger structure! Built during ABC 2022 ➔ 3 people dedicated to the sale side. ➔ Extension of ABC strategies catalogue (WiP). ➔ Tailor-made products for some clients. *ETP = External Third Party, i.e. excluded A
Slide 44: ETP Asset Under Management scenarios
Springboard 2025 ETP* Asset Under Management scenarios 2023 transition year for recovering ETP AUM! *ETP=External Third Party, i.e. excluded ABC arbitrage Equity. ABC arbitrage FY 2022 - Investor Presentation 44
Slide 45: ETP Asset Under Management P&L scenarios
Springboard 2025 ETP* Asset Under Management P&L scenarios ➔ Total Springboard 2025 ETP expected revenue = almost 32M€. ➔ x2 vs cumulated fees for ABC 2022 => significant increase of ABC revenues. ➔ % Max of Group’s Total Gross PnL < 20%. *ETP=External Third Party, i.e. excluded ABC arbitrage Equity
Slide 46: Springboard 2025 is a necessary lay up for BP2028
Springboard 2025 An investment plan! Springboard 2025 is a necessary lay up for the the next BP2028! ABC arbitrage FY 2022 - Investor Presentation 46
Slide 47: 8. Shares & Distributions
ABC arbitrage 8. Shares & Distributions ABC arbitrage FY 2022 - Investor Presentation 47
Slide 48: Shareholders breakdown
Shares & dividends Shareholders breakdown 22% owned by Executive Top management => Alignment of interests between Shareholders and Management Team * Holding company 50,01% held by Dominique Ceolin ** Management and independent non-executive directors excluding Dominique Ceolin and David Hoey Number
Slide 49: Historical share prices
Shares & dividends Historical share prices ABCA share price with reinvested dividends and CAC mid / small GR base 100 = January 4th 2016 Compound Average Gross Rate (CAGR) = +8.5% / year over 7 years. (From 12%, decrease due to a recent share price decrease) Invested value ~ x2 over 7 years. Mainly
Slide 50: Distribution & Share Buyback Program
Shares & dividends Distribution & Share Buyback Program FY2022 distribution = €0.41 ❏ €0.10 – Ex date 11 October 2022. ❏ €0.10 – Ex date 6 December 2022. ❏ €0.10 – Ex date 18 April 2023. ❏ €0.11 – Ex date July 2023 - 2022 final dividend* *: if approved by the AGM Buyback program ❏ €4m authorization
Slide 51: Disclaimer
ABC arbitrage Disclaimer This slideshow is a communication support for the investor presentation on FY 2022. This document includes some forward-looking statements as statements regarding ABC arbitrage business operations. Although ABC arbitrage believes its expectations are based on reasonable assu
Slide 52: Q&A
Comité Stratégique CONFIDENTIEL Q&A ABC arbitrage FY 2022 - Investor Presentation