Lazard US Corporate Income Portfolio R6 Shares · NASDAQ:RLCIX
Lazard US Corporate Income Portfolio R6 Shares — Lazard Asset Management — Investor Presentation (November 2018)
23 slides from Lazard US Corporate Income Portfolio R6 Shares's investor presentation, Nov 7, 2018
Slide 1: Under the Bonnet at Lazard: Why Convertibles Now?
“Under the Bonnet at Lazard” Why Convertibles Now? Wednesday 7 November 2018 Arnaud Brillois Fund Manager Global Convertibles For Professional Investors Only
Slide 2: Reminder: What is a Convertible Bond?
Reminder: What is a Convertible Bond? Normal Corporate Bond Convertible Bond (“CB”) Right (Option) to convert the bond into stock 1 Lazard Asset Management
Slide 3: An asymmetric asset
An asymmetric asset Yield instrument / Balanced instrument/ High Yield Hybrid with both equity Equity alternatives and bond characteristics Bond like Mixed Equity like Convexity Zone Option Bond floor Convertible bond pay-off Bond Equity price 2 Lazard Asset Management
Slide 4: Convertible Bonds performance drivers in the current market
A Convertible Bonds performance drivers in the current market
Slide 5: Performance drivers of Convertible bonds in the current context
Performance drivers of Convertible bonds in the current context Angle of Driver Our view analysis 1 Equity Rising equity markets/Still attractive valuations Macroeconomic 2 Credit Expected performance in line with the carry analysis 3 Interest rates Low point reached for long-term interest rates Imp
Slide 6: Convertible bonds and equities market
Driver Equity Credit 1 Convertible bonds and equities market Interest rate Volatility An attractive risk/return ratio: Globally and in Europe Primary Liquidity GLOBAL EUROPE 10-year performance and volatility 10-year performance and volatility 15.4% 21.4% 8.0% 8.0% 7.2% 6.7% 5.2% 5.8% PERFORMANCES V
Slide 7: Consequences for CB market in an increasing equity market
Driver Equity Credit 1 What are the consequences for CB market in an Interest rate increasing equity market environment? Volatility Primary Liquidity Increasing equity market Portfolio management: Strong primary market: Switch from equity-like to • Redemption of old issues (to balanced/mixed new iss
Slide 8: Convertible bonds and Credit market
Driver Equity Credit 2 Convertible bonds and Credit market Interest rate A remarkable cycle in corporate bond Volatility Primary Liquidity Yield and modified duration of the Bloomberg Barclays Global Aggregate Index 10 7.50 9 7.00 8 7 6.50 Modified duration 6 6.00 Yield (%) 5 5.50 4 3 5.00 2 4.50 1
Slide 9: Convertible bonds and Credit market: attractive carry
Driver Equity Credit 2 Convertible bonds and Credit market Interest rate Attractive carry on credit market Volatility Primary Liquidity Rating breakdown Level of subordination Structurally high level of non-rated issuers Most CB are senior unsecured Investment Grade High Yield NR Subordination # of
Slide 10: Convertible bonds and Interest rates
Driver Equity Credit 3 Convertible bonds and Interest rates Interest rate Behaviour of CB during rising interest rates Volatility Primary Liquidity Historically, when interest rate were rising in the US : • Convertible bonds tend to display positive performance, • Long-only global convertible bond
Slide 11: Convertible bonds and implied volatility
Driver Equity Credit 4 Convertible bonds and implied volatility Interest rate Volatility A promising market in terms of implied volatility Primary Liquidity CBs* IMPLIED VOLATILITY VS. HISTORICAL CBs* IMPLIED VOLATILITY VS. HISTORICAL AVERAGE AVERAGE (Global – 10 YEARS) (Europe – 10 YEARS) 50 40 50
Slide 12: Convertible bonds and primary market
Driver Equity Credit 5 Convertible bonds and primary market Interest rate A dynamic primary market Volatility Primary Liquidity EUROPE US 2017 was characterised by a strong sectorial bias towards In 2018, the market was particularly active with 105 new the real estate – mainly German issuers. is
Slide 13: Convertible bonds and liquidity
Driver Equity Credit Interest rate 6 Convertible bonds and liquidity Volatility Primary Liquidity Liquidity depends on: Size of issues Nature of the CB Repo rate of the underlying equity Impact of increasing/decreasing liquidity: liquidity: linked to active primary market: more CBs with co
Slide 14: Outlook: a potential of appreciation
Outlook: a potential of appreciation Angle of Driver Our scenario CB leverage effect Impact analysis Rising equity markets/Still attractive 1 Equity Convertible bonds’ valuations valuations Macroeconomic analysis 2 Credit Performance aligned to the carry 70% of High Yield issuances or not rated Low
Slide 15: B Positioning and Performances
B Positioning and Performances
Slide 16: Lazard Convertible Global: Current positioning
Lazard Convertible Global Current positioning EQUITY SENSITIVITY MODIFIED DURATION NUMBER OF HOLDINGS Fund Index Fund Index Fund Index 51.9% 44.4% 0.91 2.13 79 229 BREAKDOWN BY SECTOR (BY EQUITY SENSITIVITY) BREAKDOWN BY GEOGRAPHIC AREA BY EQUITY SENSITIVITY) 20% 18.9% 35% 30.7% 18% 30% 16% 14% 25%
Slide 17: Lazard Convertible Global I-share: Performance and risks
Lazard Convertible Global | I-share Performance and risks Lazard Convertible Global | I-share TR Global Focus Convertible Bond in Euro* Performance 17.8% 16.0% 11.8% 11.2% 11.2% 10.3% 9.7% 9.7% 9.7% 8.8% 7.8% 7.0% 6.6% 3.2% 2.5% 3.5% 2.3% -3.7% 2018 2017 2016 2015 2014 2013 1 year 3 years ann. 5 yea
Slide 18: C Appendix
C Appendix
Slide 19: Key facts of Lazard Convertible Global
Key facts of Lazard Convertible Global INVESTMENT STRATEGY SHARE CLASSES Long Only Global Convertible Bonds With or without currency risk Accumulation and distribution • Invest in convertible bonds globally • Multi-currency Available share classes: PERFORMANCES OF THE EUR- • No leverage HEDGED SHARE
Slide 20: Biographies
Biographies Arnaud Brillois, CFA Managing Director, Fund Manager/Analyst Lazard Asset Management LLC (New York) Arnaud Brillois, CFA is Managing Director and Fund Manager/Analyst on the Global Convertibles team. He began working in the investment industry in 2000. Arnaud joined Lazard Freres Gestion
Slide 21: Characteristics
Lazard Convertible Global Characteristics Countries of registration: Share I Share I USD Share IC H-EUR Share IC H-CHF Share R Share K Share R H-EUR Share ID Share ID H-EUR Share T Share T H-EUR Delegated management company Lazard Frères Gestion Sub-investment manager Lazard Asset Management Custodi
Slide 22: Glossary
Glossary Underlying asset: share in which the convertible bond can be Convexity: measures the sensitivity of convertible bond price to a converted change in interest rates. Depending a bond’s convexity its price will vary upwards or downwards more or less rapidly responding to Convexity of a c
Slide 23: Disclaimer
Disclaimer Certain information included herein is derived by Lazard in part from an MSCI index or indices (the “Index Data”). However, MSCI has not reviewed this product or report, and does not endorse or express any opinion regarding this product or report or any analysis or other information conta
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