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First In Actively Managed Global ETF Strategies
September 2013
People and Philosophy
2
HAHN Investment Strategy Committee
Seasoned, global macro team
Wilfred J. Hahn, Chairman and co-Chief Investment Officer Over three decades of international investment industry experience as global strategist, portfolio manager, business head. Former Head of Royal Bank Global Investment Group, managing pension, mutual and private client portfolios with global assets > $13 Billion (CAD).
Mark Arthur, CFA, Chief Executive Officer and Director Mark Arthur is the President of IA Private Wealth Management. Prior to this, Mr. Arthur was the President of predecessor company Jovian Capital Corporation. Up until 2002, Mark was President, CIO and Director of RBC Global Investment Management Inc., Vice President Investments and Director of Royal Mutual Funds and Chairman of RBC Investments Global Investment Strategy Committee. Tyler Mordy, CFA, President and co-Chief Investment Officer Recognized innovator in the design and application of “global macro” managed ETF portfolios, and widely quoted and interviewed by the financial media for his global investment strategy views as well as ETF trends. Recently, IndexUniverse profiled Tyler Mordy as one of the “best and brightest” working in the ETF industry. CNBC has also called him one of the “best independent ETF experts”. Formerly with Deutsche Asset Management in London, UK.
HAHN Philosophy
Why Global? Portfolio risk and return are increasingly globally connected and driven by macro-economic themes. A global perspective is essential in all investment decisions and provides the broadest opportunity for return potential and risk reduction.
Why Active? HAHN actively shifts and tacks portfolio asset-type exposure to take advantage of well-priced opportunities and avoid pronounced risk. The result is consistent performance and low downside risk.
Why ETFs? HAHN uses ETFs to gain diversified access to the broadest possible range of asset types globally. ETFs’ liquidity, cost-effectiveness and transparency make them ideal portfolio management building blocks and facilitate HAHN’s active asset mix approach.
Thematic, Opportunistic, Pragmatic
Portfolio Construction
5
HAHN ETF Managed Portfolios Eleven distinct mandates with different risk profiles
6
HAHN ETF Managed Portfolios Detailed investment guidelines available
7
1 4 53 102 249 347 397 402 451 501 648 746 751 761 909 939
Global Asset Class Universe ETFs have colonized virtually every global asset class
8
Cash Fixed Income Equity Opportunity
Short Term T-Bills
Credit
Foreign
Duration
Credit
Sector
Specialty
Sector
Size
Style
Specialty
Commodity
Real Estate
Thematic
HAHN Global Asset Mix Decisions =
Country Country
* The composite benchmark for this portfolio is comprised of the following indices and weights: CAD 90-day Treasury Bill index (5%), MSCI EAFE Index in $Cdn (14%), S&P 500 Index in $CDN (11%), S&P/TSX 60 Index (25%), Citigroup World BIG Non-USD Bonds in $Cdn (13%), Barclays Capital U.S. Aggregate Bonds in $Cdn (9.5%), DEX Universe Bonds (22.5%).
Opportunity Overlay Traditional Asset Mix
HAHN ETF Managed Portfolios: Strategic and Tactical
Global, all-asset, hybrid:* - HAHN International Balanced policy ranges
CashEquivalents
Total Equity CanadianEquity
US Equity InternationalEquity
Total Bonds CanadianBonds
US Bonds InternationalBonds
Strategy Range Benchmark Current Strategy
0
10
20
30
40
50
60
70
80
90
100
OpportunityInvestments
TraditionalInvestments
* The composite benchmark for this portfolio is comprised of the following indices and weights: CAD 90-day Treasury Bill index (5%), MSCI EAFE Index in $Cdn (14%), S&P 500 Index in $CDN (11%), S&P/TSX 60 Index (25%), Citigroup World BIG Non-USD Bonds in $Cdn (13%), Barclays Capital U.S. Aggregate Bonds in $Cdn (9.5%), DEX Universe Bonds (22.5%).
HAHN ETF Managed Portfolios: Global, All-Asset
Current asset mix – HAHN International Balanced as at September, 2013
22.5%
3.9%
16.0%
10.5% 10.2%
15.1%
11.6%
10.2% Opportunity Investments (Yield: 5.00%)
Cash Equivalents (Yield: 0.5%)
Bonds: Canada (Yield: 3.39%)
Bonds: US (Yield: 2.89%)
Bonds: International (Yield: 2.38%)
Equities: Canada (Yield: 3.49%)
Equities: US (Yield: 2.45%)
Equities: International (Yield: 2.46%)
Total Weighted Portfolio Yield: 3.27%4
Quarterly Strategy Updates Fact sheets/Portfolio update
11
Process
12
HAHN Investment Architecture Overview: secular and tactical views
13
Currencies: The Forgotten Asset Class
Active currency management diversifies portfolio risk factors
14
* Chart is illustrative only and does not reflect any current strategy or policy.
Tactical Asset Mix Changes Global Balanced benchmark portfolio - June 2003 – September 2013
15
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13
Cash Opportunity Equity-Canada Equity-US Equity - International FI -Canada FI-US Fixed Income Int
Why are ETFs Used?
1.Cost effective, liquid access to:
• Geographic regions
• Alternative asset types
• Currency hedging
2.Facilitation of active strategies such as tactical asset allocation
= superior return and risk management opportunities previously available only to large institutions
ETFs have revolutionized the managed portfolio landscape
ETF Selection Criteria Rigorous and disciplined
17
Filters
Strategy Mapping
Index Construction
Diversification
Low Tracking Error
Liquidity
Expenses
Unique Factors
Performance
18
CITI World BIG Annual Return: 2.26% Standard Dev: 9.54%
MSCI Developed World Annual Return: 5.10%
Std. Dev: 11.39%
HAHN Benchmark* Annual Return: 4.70%
Std. Dev: 5.86%
HAHN Intl. Bal.**
Annual Return: 7.01% Std. Dev: 6.56%
*Benchmark performances do not include the impact of any fees. The composite benchmark for this portfolio is comprised of the following indices and weights: CAD 90-day Treasury Bill index (5%), MSCI EAFE Index in $Cdn (5%), S&P 500 Index in $CDN (7.5%), S&P/TSX 60 Index (12.5%), Citigroup World BIG Non-USD Bonds in $Cdn (19%), Barclays Capital U.S. Aggregate Bonds in $Cdn (16%), DEX Universe Bonds (35%). **Performance statistics for Managed ETF Portfolios are calculated from documented actual investment strategies as set by HAHN’s Investment Committee and applied to its portfolios mandates, and are intended to provide an approximation of composite results for client separately-managed accounts. Actual performance of individual separate accounts may vary with average gross “composite” performance statistics presented here due to client-specific portfolio differences with respect to size, inflow/outflow history and inception dates, as well as intra-day market volatilities versus daily closing prices. Performance figures provided are net of total ETF expense ratios and custody fees, but before transaction costs, witholding taxes, and other investment management and advisor fees. Past investment results provide no indication of future performance. Future returns are dependent on the general investment environment, the nature of the portfolio mandate and active investment strategies and risks. Word Equity Index - MSCI Developed World Index TR (CAD). World Bond Index - Citi Group World Bond Index TR (CAD). Volatility measured as standard deviation.
Consistent Performance and Low Downside Risk
HAHN International Balanced Portfolio
80
90
100
110
120
130
140
150
160
170
180
190
200
Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13
HAHN Int. Inc. Focus.** Annual Return: 7.52%
Std. Dev: 5.70%
HAHN Benchmark* Annual Return 2.89%
Std. Dev: 0.14%
MSCI Developed World Annual Return: 4.32%
Std. Dev: 12.82%
CITI World BIG Annual Return: 4.18%
Std. Dev: 9.98%
* HAHN Benchmark is defined as 2% in excess of 90-day Canadian T-bill rate. A long-term time horizon of 4 to 5 years is contemplated which is equivalent to a typical business/credit cycle. Please note that due to time lag in the publishing of monthly CPI statistics, the previous month’s value may be used for current performance reporting. **Performance statistics for Managed ETF Portfolios are calculated from documented actual investment strategies as set by HAHN’s Investment Committee and applied to its portfolios mandates, and are intended to provide an approximation of composite results for client separately-managed accounts. Actual performance of individual separate accounts may vary with average gross “composite” performance statistics presented here due to client-specific portfolio differences with respect to size, inflow/outflow history and inception dates, as well as intra-day market volatilities versus daily closing prices. Performance figures provided are net of total ETF expense ratios and custody fees, but before transaction costs, witholding taxes, and other investment management and advisor fees. Past investment results provide no indication of future performance. Future returns are dependent on the general investment environment, the nature of the portfolio mandate and active investment strategies and risks. Word Equity Index - MSCI Developed World Index TR (CAD). World Bond Index - Citi Group World Bond Index TR (CAD). Volatility measured as standard deviation.
Consistent Performance and Low Downside Risk
HAHN International Income Focus Portfolio
60
70
80
90
100
110
120
130
140
150
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13
Thematic. Opportunistic. Pragmatic.
www.hahninvest.com