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Generating

Alpha from Change


FEBRUARY 2016

Priya Kodeeswaran, Portfolio Manager


RWC Global Innovation Absolute Alpha Fund

RWC
Overview
1)

A global equity fund focused on where companies earnings are mispriced by the market
Focus on sectors that show higher analysts estimates dispersion due to change:
-

Consumer discretionary
Technology
Telecoms
Industrials

Diligent bottom-up investment process with c.70 positions, typically 25 core long and 35 core short positions.
Short book is predominantly single stocks.
Futures and ETFs used only to temporarily manage factor exposure or in markets where single stock shorts are not
available.

2)

No negative calendar year since inception with strong downside management during periods of
market turbulence

Proven ability to generate alpha from the short book

Capital protection in falling markets

3)

Alpha generation achieved with low market correlation, versus:

MSCI World Index:

0.26

HFRX Equity Hedge Fund Index: 0.31

*R2 versus MXWD index and HFRXEH Index, 16 February 2010 to 31 December 2015.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

RWC | 1

RWC
Generating Alpha from Change

Investment focus is on companies


undergoing rapid change or innovation

or

sectors

Optimum Opportunity Set

Change & Innovation both create and fade


supernormal profits

Change & Innovation also create a dislocation between a


companys share price and its prospects

High dispersion of future earnings estimates is one


of the key indicators of an alpha opportunity

High dispersion of predicted future earnings will lead


to both overvaluation (shorts) and undervaluation
(longs)

Companies/sectors
facing
innovation/change

High EPS
dispersion

Global long short provides the optimum opportunity set

Global remit allows cross border comparisons of


valuation and opportunity on an objective basis

Global
Equities

RWC | 2

RWC
Where are the Opportunities?
Focus Sectors

Non-Core Sectors

Sector

Technology

Consumer
Discretionary

Telecoms

Industrials

Earnings
Estimate
Dispersion

Permanently
High

Permanently
High

Medium

Medium

Technology - short product and business cycles creates


substantial earnings dispersion. Rapid product/service
innovation can disrupt existing industry practice.

Consumer Discretionary (media, leisure, retail) Reason for


Dispersion

increasingly transformed by technology and distribution


changes.

Telecom - disrupted by the fixed to mobile conversion


and convergence with media industry.

Industrials - impacted by the high secular growth in


Asia/EM.

High - dedicated global Long-Short capital focused on


Opportunities
for Capital
Allocation

these high EPS dispersion sectors is lower than has


historically been the case.

Global focus allows us to follow the value transfer across


regions and make money from both the long and short
side.

Consumer
Staple

Healthcare

Materials

High BRIC High in some Permanently


Low - West
areas
High

Non-Focus Sectors

Energy

Financials

Utilities

Permanently
High

Currently
High

Low

Materials & Energy sectors - cyclicals driven by global


supply and demand.

Alternative Energy/Clean technology - substantial


earnings dispersion due to regulatory environment,
technology innovation, and global competitive shifts.

Financials - earnings
dispersion is currently
high due to the sub-prime
meltdown and credit
cycle.

Medical technology - shares similar attributes to


technology sector.

Consumer staples low earnings dispersion but


occasional opportunities will arise in rapidly developing
Asia.

Low - there is significant global Long-Short capital


focused on the broader Materials and Energy sectors.

High - the subsectors of Clean Tech/Alternative Energy/


Medical Technology are considered key areas for capital
allocation.

Low - our process holds


no advantage in
generating alpha in
Financials and Utilities.

RWC | 3

RWC
S&P 500 Intra Sector Correlation Confirms our Focus Bias

FY10 Average FY11 Average FY12 Average FY13 Average FY14 Average

FY10-FY14
Average

Consumer Staples

37 %

38 %

32%

33%

27%

33%

Consumer
Discretionary

50 %

40 %

35%

27%

27%

36%

Telecoms

44 %

39 %

33%

28%

42%

37%

Healthcare

43 %

44 %

41%

29%

30%

37%

Information
Technology

49 %

43 %

47%

29%

31%

40%

Materials

60 %

57 %

56%

38%

34%

49%

Industrials

62 %

58 %

53%

42%

43%

52%

Energy

69 %

63 %

56%

46%

37%

54%

Financials

62 %

59 %

62%

47%

44%

55%

Utilities

65 %

64 %

59%

61%

59%

61%

Focus Sectors

Non-Core Sectors

Increasing
Correlations

Non-Focus Sectors

Source: RWC and Credit Suisse Holt.

RWC | 4

RWC
Strategy Outperformance vs Market Indices
Performance of Strategy since Inception
$240
$220

Note: area relates to the period when


the portfolio manager was in
transition and was not managing a
strategy

$200

Cumulative Return

$180
$160
$140
$120
$100
$80

$40
Jan-04

Note: performance for this


period is shown net of all fees

Note: performance for this


period is shown gross of all fees

$60

Nov-04

Oct-05

Sep-06

Aug-07

Cumulative Strategy

Strategy Outperformance

Jul-08

Jan-10

MSCI World

Dec-10

Nov-11

Oct-12

Sep-13

Aug-14

Jul-15

HFRX Equity Hedge Index

Market

Hedge Fund

MSCI World (USD)

HFRX Equity Hedge Index (USD)

+79.0%

+138.0%

Source: data shown is for the period 29 January 2004 31 December 2015. 29 January 2004 30 April 2009, Cheyne Capital. Returns shown for the period reflect the profit and loss earned on the gross market value
of that book on a monthly basis generated by the capital book managed by Priya during that time. The data, which was supplied by the Executive Committee of Cheyne Capital, does not make provision for any
performance fees nor implied leverage, i.e. gross of 100%. Data is not included for the period May 2009 January 2010 as Priya was not running the strategy during this transition period. 16 February 2010 31
December 2015, RWC. Total fund returns are calculated on a NAV-NAV basis net income reinvested and are shown net of all fees. MSCI World Index net of dividends. Source RWC/Bloomberg. Past performance is
not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

RWC | 5

RWC
Outperformance driven by Alpha Generation
Gross Performance and cumulative alpha of Strategy
170%
160%
150%

Note: area relates to the period when


the portfolio manager was in transition
and was not managing a strategy

140%
130%
120%
110%
100%
90%
80%
70%
60%
50%
40%

Cumulative Alpha:
Cumulative Residual Return
after adjusting for the monthly
net exposure of the Strategy
and monthly performance of
MSCI World

30%
20%
10%
0%
Jan-04

Nov-04

Oct-05

Sep-06

Aug-07

Jul-08

Gross Performance

Jan-10

Dec-10

Nov-11

Oct-12

Sep-13

Aug-14

Jul-15

Cumulative Alpha

Source: data shown is for the period 29 January 2004 31 December 2015. 29 January 2004 30 April 2009, Cheyne Capital. Returns shown for the period reflect the profit and loss earned on the gross market value
of that book on a monthly basis generated by the capital book managed by Priya during that time. The data, which was supplied by the Executive Committee of Cheyne Capital, does not make provision for any
performance fees nor implied leverage, i.e. gross of 100%. Data is not included for the period May 2009 January 2010 as Priya was not running the strategy during this transition period. 16 February 2010 31
December 2015, RWC. Total fund returns are shown gross of all fees and are used so proper Alpha contribution can be calculated. MSCI World Index net of dividends. Source RWC/Bloomberg. Past performance is not
a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

RWC | 6

RWC
Alpha driven by Stock Picking - Average Monthly Returns for the Fund vs Average
Monthly Returns for the Market

Jan 2004 to Dec 2015 Average Monthly Returns


(ex. May 2009 to Jan 2010)

1.5%

Average Monthly returns (135 periods)

1.39%

Strategy

0.62%

1.2%

0.96%
0.9%

Reporting

1.39%

Non-Reporting

0.24%

0.6%

0.3%

0.24%

0.0%

MSCI World

0.30%

Reporting

0.96%

Non-Reporting

-0.07%

-0.07%
-0.3%
Strategy
Reporting Seasons

MSCI World (MXWD)


Non-Reporting Seasons

Our process is very much oriented around stock picking - reporting season represents a period when our various stock theses are either
validated or invalidated by results/guidance

The consistent performance differential in monthly returns for reporting months vs. the market is a validation of process accuracy
Portfolio turnover remains relatively low with longs having a longer duration than shorts

Reporting months: January, April, July, October


Source: data shown is for the period 29 January 2004 31 December 2015. 29 January 2004 30 April 2009, Cheyne Capital. Returns shown for the period reflect the profit and loss earned on the gross market value
of that book on a monthly basis generated by the capital book managed by Priya during that time. The data, which was supplied by the Executive Committee of Cheyne Capital, does not make provision for any
performance fees nor implied leverage, i.e. gross of 100%. Data is not included for the period May 2009 January 2010 as Priya was not running the strategy during this transition period. 16 February 2010 31
RWC
December 2015, RWC. Total fund returns are calculated on a NAV-NAV basis net income reinvested and are shown net of all fees. MSCI World Index net of dividends. Source RWC/Bloomberg.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

| 7

RWC
Performance of Fund During Down Market Months

The Fund has exhibited strong risk control/ resiliency


during months when the market (MSCI World) had
negative returns.

The market had drawdowns of -9% or greater on a


monthly basis on at least three separate occasions. In
comparison the maximum monthly decline for the fund on
any of these occasions was -3.6%. Most of the Funds
larger drawdowns happen during spikes in correlation.

Of the 32 negative return months for the market, the fund


was able to generate positive returns 50% of the time.
This is despite a fairly steady net exposure of
approximately 30-31%.

During the 16 months when the market had negative


returns and the Fund had positive returns, the Fund
generated a +0.9% average monthly return. The market
generated -2.6% average monthly return over the exact
same months.

Compounded Return for Months when The Market Had Negative Returns
RWC Global Innovation Absolute Alpha Fund1

-10.7%

MSCI World

-62.3%

Monthly Returns When the Market Returns were Negative


4%

2%
0%
-2%
-4%
-6%

-8%
-10%
-12%
04/10

11/10

07/11

02/13

Fund

The above statistics show the Funds ability to generate


significant alpha during periods when the market has
negative returns.

12/11

02/14

01/15

08/15

Market

*Only months where the market returns are negative are shown. Market: defined as MSCI World Index.
Period of Analysis: at month end February 2010 December 2015.
Market Negative,
Fund Positive

Market Negative,
Fund Negative

Total Months in
Sample

Total Months

16

16

32

Average Net

30.4%

30.3%

31.2%

Average Fund Monthly Return

0.9%

-1.5%

-0.3%

Average Market Monthly Return

-2.6%

-3.3%

-3.0%

1 Fund previously known as RWC Global Growth Absolute Alpha. Change of name effective as at 30 April 2015.
Source: underlying index data from Bloomberg, All other data and calculations from RWC. Fund performance shown is for the B USD share class, net of fees (1% management and 20% performance where applicable)
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE

RWC | 8

RWC
The Investment Process

Idea generation

Risk - Reward

Bottom-up estimate dispersion screening

Valuation intrinsic, relative, historic

Top-down screening

Price levels established entry, exit, risk

Themes

Risk Reward ratio

Management access

Short interest analytics

Idea check

Fundamental analysis

Sentiment check

Implementation

Sizing of position conviction, liquidity,


diligence, event risk

Holders review marginal buyer/seller

Timing and catalysts

Industry expertise

Soft stop automatically calculated

RWC | 9

RWC
Long Book High Quality

Short Book Low Quality

Long book attributes; Quality bias, high ROIC, high or sustainable

Short book attributes; low quality, low ROIC, low or declining GMs,

GMs, strong historical or potential CF, high operational leverage,


clear KPIs and visibility, Long duration

weak CF, poor operational leverage, poor KPIs and visibility, Short
duration

Look for long positions where:

Look for short positions where:

Sustainable competitive advantages due to: brand, IP, irreplaceable


fixed assets, network effects

Businesses are in declining industries or in markets with low barriers


to entry

Natural monopolies / oligopolies and / or pricing power

Recurring revenues and / or strong customer lock-in

Businesses are dependant upon cheap capital to sustain growth, i.e.


non-self-financing

Stable-to-increasing returns on incremental investment

Management team alignment with LT shareholders

The market is overpaying for historical CF; where there are


diminishing returns on incremental investment

Accounting profit growth outpaces cash flow growth

Management team typified by heavy insider selling and turnover

Types of changes:

Types of changes:

Undergoing a period of investment or transition, where we


understand the payback on investment or duration of transition

New entrants, product substitution, technology disruption

Changes in the cost of financing or the ability to retain talent

Cyclical change or a product / market transition where market


expectations over-emphasise the ST

Cyclical change, competitive market change

Any long-duration change or catalysts that are not currently


apparent in market earnings expectations

Aggressive accounting

Earnings season is the proof point for our stock theses and is often the catalyst for estimate revisions
The process efficiently identifies:
Upwards earnings revisions in the long book
Downwards revisions in the short book

RWC | 10

RWC
Portfolio Construction & Risk Management

Geographic Exposure

Typically 50-70% of gross exposure held


within US markets, 20-40% within
European markets

10-20% to come directly from Asian listed


securities

Opportunistically exposure to Asian


securities will come from US/Euro listed
companies that are exposed to Asian
growth

Event and Liquidity Management

100% of the portfolio could be liquidated in


less than one day (conservatively assuming
15% participation of observed trading
volumes over the past 3 months).

Gross and Net Exposure

Gross Exposure reduced at time of


performance stress and correlation spikes

Overall Market Risk will be minimised


through a lower net exposure

Returns will be enhanced from subsector


allocation

Portfolio Construction

Position sizing is a function of


conviction, diligence, liquidity and
event timing

Portfolio will be tilted towards the


stocks with the best risk-reward ratio

Short Book Management

Single Stock Shorts will be absolute in


nature and will not be used as a market risk
tool
ETFs and Futures will be used to manage
optimal net exposure in the absence of
single short stock ideas
ETFs limited to 10% and ETFs and Futures
combined will be limited to 15% in
aggregate
Stop losses will be soft and identified as 1/3
of targeted return or 15% whichever is more
conservative

RWC | 11

RWC
Portfolio Construction & Risk Management

Click to edit title

UCITS Permitted / Maximum Range

Typical Fund Exposure

Long / short ratio

n/a

1.5:1

Gross Range

n/a

Av. 125%

Net Range

n/a

-30% to +50% (Av. 30%)

No of Long Positions

n/a

No of Short Positions

n/a

Core: 25
Total: Average 40
Core: 35
Total: Average 35

Largest Long

Max 10% (at market)

Average 3.5%

Largest Short

Max 10% (at market)

Average 1.5%

There will be sufficient liquidity to meet


redemptions at all times

90% of the portfolio invested in stocks


with Mkt cap greater than $ 1 billion

Illiquids
VaR(99% / 1 month)

20% Maximum
9% Internal Maximum

Counterparty Exposure
Concentration Limits

n/a

10% of NAV to any single counterparty

n/a

Sum of position >5% cannot exceed 40% of NAV

n/a

Fund here refers to the RWC Global Innovation Absolute Alpha Fund

RWC | 12

RWC
Summary

Aim to offer strong risk adjusted returns through the cycle with a lower correlation to equity markets

A strong and demonstrable track record - the Strategy offers returns throughout the market cycle with strong downside protection
Emphasis on sectors and investment areas that offer proper long and short opportunities through the cycle

Returns generated from stock picking alpha and effective risk management - market direction does not dominate returns

A strong process driven focus on the best risk reward opportunities (the alpha sectors) in Global Markets

A focus on mispriced securities in areas of change and transition where research can often be inefficient
The process identifies and isolates securities where market consensus expectations often lag the change
Change constantly delivers winners and losers providing a plentiful supply of ideas for both sides of the portfolio
Global remit allows the strategy to maximise returns from objective analysis
Risk management philosophy that actively manages gross for periods when stock picking is likely to be rewarded

Priya Kodeeswaran is a highly experienced global long/short portfolio manager

15 year track record managing long / short equity strategies including 5 years at RWC and 6 years at Cheyne Capital
19 years experience in the financial markets mainly focussed on absolute return strategies, high growth areas and innovating sectors
(Morgan Grenfell Asset Management and Europa Capital Management/ Odyssey Partners)

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

RWC | 13

RWC
RWC Global Innovation Absolute Alpha Fund Term Sheet

Click to edit title

Launch Date

Launched February 2010

Liquidity

Daily subscriptions & redemptions / daily NAV

Fees

A Share Class (Retail):


2% AMC / 20% performance fee
B Share Class (Institutional): 1% AMC / 20% performance fee

Performance Fee HWM

Quarterly high water mark

Performance Fee Hurdle

US LIBOR (or share class currency equivalent)

Fund Structure

Luxembourg SICAV (UCITS IV) - sub-fund of the RWC Funds SICAV

Currency

USD base currency EUR/GBP hedged classes available

UCITS IV Designation

Sophisticated Fund VaR approach to exposure


20% VaR monthly with a 99% confidence level

Administrator

Brown Brothers Harriman (Luxembourg) S.C.A

Instruments used

Long positions cash equities / CFDs / ADRs / Options


Short positions CFDs, Futures, Swaps

Local Registrations

Luxembourg, UK, Sweden, Germany (EUR share classes only)

Tax

UK

RWC | 14

RWC Global Innovation


Absolute Alpha Fund
APPENDICES

RWC
RWC Global Innovation Absolute Alpha

Priya Kodeeswaran
Portfolio Manager

Chang Shuo Sun

Colin Moar

Hayes Varey

Robert Ritchie

Donogh McAlonan

Investment Analyst

Investment Analyst

Trade Execution and


Portfolio Monitoring

Risk Management

Operations and
Portfolio Analytics

RWC | 16

RWC
Priya Kodeeswaran Portfolio Manager, Head of Global Equity Team

Priya Kodeeswaran
Portfolio Manager

Joined RWC in November 2009 to set up a global equity long/short team and fund focused on rapidly
changing and innovating companies and has 21 years investment experience
Partner, Cheyne Capital LLP, London, 2004 2009

Portfolio Manager for a Global TMT oriented strategy from 2004 until early 2009 with an unlevered CAGR of 9.0%
Became a Partner in 2007

Co-Founder, Avocet Capital, London, 2001 2003

One of the original founders of the firm and helped co-launch a Cayman-based fund at Euro 85 million
Top alpha contributor for the fund

Portfolio Manager, Morgan Grenfell Asset Management, London, 1997 2000

Initially managed long-only emerging markets funds and then continental European funds (funds managed USD 1.4 billion) for institutional clients
Outperformance versus benchmark and House Average for every quarter and asset class

Associate, Europa Capital Management, Prague, 1995 - 1997

Undertook private and public equity investments in Eastern and Central Europe on behalf of Odyssey Partners and Templeton Direct Advisors of which

the fund returned 30% investing in private and public companies in Central and Eastern Europe

Bachelor of Commerce, McMaster University, 1990 1994


CFA Charterholder

RWC | 17

RWC
Investment Analyst Colin Moar

Colin Moar
Investment Analyst

17 years investment experience


Joined RWC in July 2015
Fund Manager - Technology, Polar Capital Partners, 2011 2014

Part of a team managing two global technology equity funds

Fund Manager Global & Emerging Markets, HSBC Asset Management, 2010 2011

Responsibilities included sector coverage of global technology and telecoms

Fund Manager Global Equities Aviva Investors, 1997 2009

Over time the role evolved from an Analyst on the UK Equity team until 2000; Pan-European Technology Analyst until 2002; Global Equity Analyst then Fund Manager
until 2009

Bachelor of Commerce, the University of Edinburgh, 1993-1997

RWC | 18

RWC
Investment Analyst Chang Sun

Chang Sun
Investment Analyst

Joined RWC as a graduate in July 2013


Analyst, CITIC Security, Beijing, 2011-2012

Analyst in Investment Banking division for IPO deal transactions

Master of Science, Imperial College London, London, 2012-2013


Bachelor of Commerce, McGill University, Montreal, 2007-2011
BCA Research, Research Assistant, 2010

Full-time summer internship

Jiuding Capital (Private Equity Investment Firm), 2009

Investment Assistant, full-time summer internship

RWC | 19

RWC
Execution Trader - Hayes Varey

Hayes Varey
Execution Trader and Execution Systems Manager

15 years industry experience


2006 - 2008

Cash Equity Trader - responsible for equity trade execution at Simmons & Co Ltd: London
1996 - 2006

Wide variety of trading roles, including proprietary and customer facilitated trading in equity and equity derivative products at JP Morgan London and JP Morgan Asia
Securities

RWC | 20

RWC

Investment Universe
Global equities with liquidity >$1m, Focus Sectors: Technology, Consumer Discretionary, Telecoms and Industrials
Non-Core Sectors: Consumer Staples, Healthcare, Materials, Energy

Idea Generation
Identifying secular change themes and high earnings dispersion opportunities where consensus expectations are
lagging real change

Stock Selection
Comprehensive fundamental and cashflow analysis, SWOT analysis, management and earnings quality
assessment, and bull/bear assumptions check

Watch List
Companies exhibiting currently high earnings dispersion. Monitored for valuation and event
risk

Portfolio
Best ideas with favourable risk/reward ratio, assessed on 3-vector valuation
framework.

RWC | 21

RWC
Spikes in global correlations lead to opportunities for stock picking
S&P 500 Long-Term Correlation Trends
100%
80%
60%

Europe Top 600 Long-Term Correlation Trends

40%
80%
20%
0%
Jan-03 Jun-04 Nov-05 Apr-07 Sep-08 Feb-10 Jul-11 Dec-12 May-14 Oct-15
6-Month

3-Month

1-Month

Non-Japan Asia Top 500 Long-Term Correlation Trends


60%

60%

40%

20%

0%
Jan-03 Jun-04 Nov-05 Apr-07 Sep-08 Feb-10 Jul-11 Dec-12 May-14 Oct-15
6-Month

40%

3-Month

1-Month

20%

0%
Jan-03 Jun-04 Nov-05 Apr-07 Sep-08 Feb-10 Jul-11 Dec-12 May-14 Oct-15
6-Month

3-Month

1-Month

Source: Credit Suisse Holt, 31 December 2015

RWC | 22

RWC
Fund performance under varying correlation environments

90%

Global Innovation* trough to peak performances during declining/low correlation environments;


(1) +12.4% (July 10 - July 11) on average gross of 118%
(2) +28.1% (Sept 11 - July 15) on average gross of 130%

155

80%
145
70%
135

125

50%
(2)
40%

115

30%

Performance (NAV)

Correlation

60%

105
20%
(1)
95
10%
0%
Feb-10

85
Aug-10

Feb-11

Aug-11

Feb-12

Aug-12

S&P 500 1-month correlation


Asia Ex-Japan Top 500 1-month correlation

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Europe Top 600 1-month correlation


RWC Performance

Period shown 16 February 2010 to 31 December 2015


Source: Correlation data from Credit Suisse Holt Global Market Correlation Watch, 31 December 2015. Fund performance (RWC Performance) shown is for the B USD share class, net of fees (1% management and 20%
performance where applicable), source RWC.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE
RWC

| 23

RWC
Global Innovation Absolute Alpha 1 average gross & net exposure

180%

155

160%

145

140%
135

100%

125

80%

115

60%

105

Performance (NAV)

Exposure

120%

40%
95

0%

Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15

20%

Monthly Average Net Exposure

Monthly Average Gross Exposure

85

RWC Performance

Period shown 16 February 2010 to 31 December 2015


Source:. RWC. Fund performance (RWC Performance) shown is for the B USD share class, net of fees (1% management and 20% performance where applicable). Gross and Net exposure is based on the long and short book
in the funds portfolio during this period, all options are delta adjusted.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE
RWC

| 24

RWC
Performance of Strategy - Returns
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

HFRXEH
INDEX

2004

Strategy

5.7%

0.3%

-1.2%

-1.1%

-2.0%

-1.0%

0.9%

1.8%

5.6%

3.3%

-1.7%

2.5%

13.5%

2.2%

2005

Strategy

4.9%

-0.8%

-0.6%

0.4%

0.3%

4.3%

5.2%

1.7%

0.8%

-2.1%

1.1%

2.7%

19.1%

4.2%

2006

Strategy

1.7%

-0.6%

1.3%

2.8%

-3.7%

-3.5%

1.9%

1.5%

1.5%

-0.9%

3.9%

-1.1%

4.5%

9.2%

2007

Strategy

1.9%

0.3%

0.5%

1.1%

1.4%

1.4%

0.7%

-0.6%

1.0%

3.5%

-3.3%

1.6%

9.7%

3.2%

2008

Strategy

-3.5%

-0.7%

-0.3%

2.1%

1.0%

-0.6%

0.5%

0.6%

-3.3%

-1.9%

-1.1%

-0.4%

-7.4%

-25.5%

2009

Strategy

1.8%

-0.1%

2.0%

6.6%

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

10.5%

2.5%1

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

HFRXEH
INDEX

2010

RWC Global Innovation2

-0.4%

1.3%

-0.9%

-3.1%

-1.4%

1.4%

0.3%

0.8%

3.7%

1.0%

2.2%

4.9%

9.1%1

2011

RWC Global Innovation

-0.4%

0.4%

-0.6%

2.0%

-0.3%

0.3%

1.2%

-3.4%

0.2%

3.5%

-1.8%

-0.5%

0.5%

-19.1%

2012

RWC Global Innovation

0.4%

2.7%

2.0%

2.5%

-3.6%

-2.1%

4.1%

-0.5%

0.6%

0.7%

0.7%

-0.8%

6.6%

4.8%

2013

RWC Global Innovation

1.6%

-0.7%

0.5%

-2.4%

1.8%

1.3%

1.5%

0.5%

2.3%

1.7%

1.5%

3.0%

12.9%

11.1%

2014

RWC Global Innovation

-2.3%

3.6%

-4.7%

-1.9%

2.7%

0.2%

1.1%

1.2%

-2.1%

0.4%

2.1%

0.2%

0.3%

1.4%

2015

RWC Global Innovation

1.1%

3.8%

-0.5%

0.1%

0.5%

-2.4%

2.4%

0.9%

-0.1%

5.7%

-1.1%

0.4%

11.0%

-2.3%

RWC Global Innovation2

% of upmonths

% of downmonths

Total
Return

Average
Gross
exposure*

Average
Net
exposure

Sharpe
Ratio

Sortino
Ratio

Volatility

R2**

66%

34%

41.1%

123.2%

30.7%

0.9

1.3

6.5%

0.26

1.
Index returns for the years 2009 and 2010 shown for the dates in which the strategy was managed, from 01 January 2009 to 30 April 2009 and 16 February 2010 to 31 December 2010
2.
Fund previously known as RWC Global Growth Absolute Alpha. Change of name effective as at 30 April 2015.
*Average Gross exposure Fund launched with one Prime Broker (restricting gross exposure) - a second Prime Broker was added during March 2011.
**R2 versus MXWD index. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE
Source: Fund performance shown is for the B USD share class, net of fees (1% management and 20% performance where applicable). Gross and Net exposure is based on the long and short book in the funds portfolio during this period, all
options are delta adjusted.
RWC

| 25

RWC
3 Month Volatility of the Strategy vs. Market with low correlation (0.26)
Monthly Net & Gross Management
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15
Monthly Avg. Net Exposure

Monthly Avg. Gross Exposure

3 Month Rolling Volatility


35
30
25
% 20
15
10
5
0
Jun-10

Oct-10 Feb-11 Jun-11

Oct-11 Feb-12 Jun-12

Oct-12 Feb-13 Jun-13


Market (MXWD Index)

Oct-13 Feb-14 Jun-14

Oct-14 Feb-15 Jun-15

Oct-15

Fund

Source: Monthly Net & Gross Management RWC, Bloomberg, 1 March 2010 to 30 November 2015
3 Month Rolling Volatility - RWC, 17 February 2010 to 31 December 2015

RWC | 26

RWC
The TMT Subset Opportunity

Sector Market Cap as % of Total Market Cap

Tech, Media, and Telecom fluctuates between 10 - 30% of


developed markets and up to 60% of some Asian markets.

The cyclicality within TMT is pronounced versus the


overall market.

EU

In Asia, the growth of Telecom and Media are still in the


early phases of market growth. This represents a
substantial investment opportunity for the fund.

Japan
Hong Kong
India
US
Korea
Taiwan
0%

20%
Tech

40%
Telco

60%

80%

Media

Data: 31st July 2015


Indices: Euro Stoxx 300, S&P 500, Topix, HIS, MSCI Taiwan, Kospi, Sensex

RWC | 27

RWC
Exploiting TMT Inefficiencies Fertile Ground for Stock Picking
Social Media

Since the bubble, there has been a significant spread in single

50

stock returns within TMT on an annual basis.

40
30

Historically, there is a disconnect between investors with a sole


financial understanding and view of TMT companies vs. those
technologists who focus purely on the product/technology and

ignore the financials.

23

20
% return

43

10

0
-10
-20
-30

There is a high barrier to entry on understanding BOTH of the

-40

above factors simultaneously.

-50

-36
-44
Facebook

Twitter
H1 2014

Advertising Technology
30

Semiconductors

18

20
10

% return

% return

0
-10

-1

-20
-30
-40
-50
-49

-60
-70

-74
Rocket Fuel

-80
Criteo
H1 2014

FY 2014

FY 2014

80
70
60
50
40
30
20
10
0
-10
-20
-30
-40

66
44

-31
NXP Semi

AMD
H1 2014

FY 2014

Source: Bloomberg.

RWC | 28

RWC
2015 Current Themes
Theme

Industries Affected

Change Factors

Lux in flux

Luxury Goods

Chinas focus on anti-corruption; extreme currency volatility; pricing parity decisions;


technology substitution; China macro slowdown

Mobile Monetisation

Internet & eCommerce

Shift to smaller screens a challenge to some former winners & an opportunity for new
entrants

FinTech/Payments

Payment Networks,
Hardware,
Semiconductors

New business models enabling a closing of the loop; Required Picks and Shovels;
Encryption technologies; Death of Cash

Content is King &


Broadcast to OnDemand

Media, Software, IP

Not all content is created equal and quality differences become more apparent in the
Digital world. OTT viewing models accelerate the change. UIs change.

The New Media

Internet

Social media growing their share of time spent drives changing advertiser budgets
especially with better targeting and measurement

Sharing Economy

Industrials, Consumer
Services,

Technology developments allow much more efficient asset utilisation disrupting


incumbent business models

Big Data/Fast Data

Software, Hardware,
Semis, Internet,
Infrastructure

Significant disruption for traditional vendors; Opportunities for those with low cost,
next generation data centres and business intelligence.

Unique Irreplaceable
Assets

Telecom , Media,
eCommerce

Cable footprints; Ecommerce Marketplaces; Unique digital inventory creating network


effects

Digital Distribution

Video Games &


Consumer Services

New, low cost distribution business models disrupt incumbents with higher cost bases
and profits to protect.

Software as a Service

Software, IT Services

Provision of most up-to-date solutions from the Cloud on a subscription basis disrupts
the traditional on-premise model from both a cost & innovation point of view.

RWC | 29

RWC
Introduction to RWC

RWC is an active investment manager

Focus on longevity and stability

Independent and owner managed since its foundation in 2000 and


centered on skill-based, active fund management.

ownership

generates

level

of

stability

and

professionalism essential to the ongoing strength of a fund


management business.

Experienced and trusted portfolio managers accomplish the best


results when they operate in an unconstrained environment. Our

Employee

Strong focus on performance and a solid risk management culture

portfolio managers take full accountability for investment decisions,

lies at the heart of our business which is built around highly-talented

having no house investment style.

portfolio managers.

Our clients we invest on behalf of both intermediaries and

An unconstrained approach to investing means that our portfolio

institutions that look to us to grow the real value of their assets without

managers can express their views without hindrance or artificial

exposing them to undue risks.

restrictions. We offer fund management expertise with a strong focus


on liquidity.

Matching fund capacity with the investment approach seeks to


ensure long-term success of our investment processes.

RWC | 30

RWC
Risk Management
Internal Risk Management & Oversight

Portfolio Risk Management

Portfolio risk focused at a stock level

Separation of compliance, risk monitoring and portfolio management

Portfolio analytics function gives output on a wide range of portfolio


level risks and attribution

Fund is highly liquid with position sizes matched to stock liquidity

Independent investment risk function reporting directly to CEO


Daily independent review of stock, market, sector, style/thematic and
macroeconomic exposures via risk dashboard
Exposures considered within the context of the strategy and
investment process
Bespoke risk analytics that are fully integrated with exposure analytics

Portfolio Risk Committee (PRC), comprising CEO, COO, Head of Investment


Risk, a senior investment professional and a member of the compliance team
formally reviews the risks (including liquidity analyses) monthly

Significant risks discussed directly with PM and highlighted to CEO and PRC
as and when they arise. CEO has regular review meetings with PM

Corporate Risk Management

Independent Fund Monitoring

RWC Asset Management LLP acts as the investment manager

Revenue is diversified across investment teams, products and clients

Brown Brothers Harriman (Luxembourg) are independent administrator and


custodian

Business is managed to be profitable before performance fees are

Counterparty exposure limited to 20% of NAV

An independent third party consultant reviews our compliance

Daily production and reconciliation of NAVs


Daily cash and stock of positions reconciliation
Independent board of directors speak with PM and CEO once a quarter

generated

infrastructure periodically

Front end order management system with trip wires and full audit trail
(Longview)

RWC | 31

RWC
Contact

Please contact us if you have any general questions


or would like to discuss any of our strategies.

RWC
60 Petty France, London, SW1H 9EU
Tel:

+44 20 7227 6000

Fax:

+44 20 7227 6003

Email: invest@rwcpartners.com
Web: www.rwcpartners.com

RWC | 32

RWC
Risk Warnings & Disclaimers

The term RWC may include any one or more RWC branded entities including RWC Partners Limited, RWC Asset Management LLP and RWC Focus Asset Management Limited, each of which is authorised and regulated by
the UK Financial Conduct Authority and, in the case of RWC Asset Management LLP, the US Securities and Exchange Commission; RWC Asset Advisors (US) LLC, which is registered with the US Securities and Exchange
Commission; and RWC Singapore (Pte) Limited, which is licensed as a Licensed Fund Management Company by the Monetary Authority of Singapore.
RWC may act as investment manager or adviser, or otherwise provide services, to more than one product pursuing a similar investment strategy or focus to the product detailed in this document. RWC seeks to minimise any
conflicts of interest, and endeavours to act at all times in accordance with its legal and regulatory obligations as well as its own policies and codes of conduct.
This document is directed only at professional, institutional, wholesale or qualified investors. The services provided by RWC are available only to such persons. It is not intended for distribution to and should not be relied on by any
person who would qualify as a retail or individual investor in any jurisdiction or for distribution to, or use by, any person or entity in any jurisdiction where such distribution or use would be contrary to local law or regulation.
This document has been prepared for general information purposes only and has not been delivered for registration in any jurisdiction nor has its content been reviewed or approved by any regulatory authority in any jurisdiction.
The information contained herein does not constitute: (i) a binding legal agreement; (ii) legal, regulatory, tax, accounting or other advice; (iii) an offer, recommendation or solicitation to buy or sell shares in any fund, security,
commodity, financial instrument or derivative linked to, or otherwise included in a portfolio managed or advised by RWC; or (iv) an offer to enter into any other transaction whatsoever (each a Transaction). No representations
and/or warranties are made that the information contained herein is either up to date and/or accurate and is not intended to be used or relied upon by any counterparty, investor or any other third party.
RWC uses information from third party vendors, such as statistical and other data, that it believes to be reliable. However, the accuracy of this data, which may be used to calculate results or otherwise compile data that finds its
way over time into RWC research data stored on its systems, is not guaranteed. If such information is not accurate, some of the conclusions reached or statements made may be adversely affected. RWC bears no responsibility
for your investment research and/or investment decisions and you should consult your own lawyer, accountant, tax adviser or other professional adviser before entering into any Transaction. Any opinion expressed herein, which
may be subjective in nature, may not be shared by all directors, officers, employees, or representatives of RWC and may be subject to change without notice. RWC is not liable for any decisions made or actions or inactions taken
by you or others based on the contents of this document and neither RWC nor any of its directors, officers, employees, or representatives (including affiliates) accepts any liability whatsoever for any errors and/or omissions or for
any direct, indirect, special, incidental, or consequential loss, damages, or expenses of any kind howsoever arising from the use of, or reliance on, any information contained herein.
Information contained in this document should not be viewed as indicative of future results. Past performance of any Transaction is not indicative of future results. The value of investments can go down as well as up. Certain
assumptions and forward looking statements may have been made either for modelling purposes, to simplify the presentation and/or calculation of any projections or estimates contained herein and RWC does not represent that
that any such assumptions or statements will reflect actual future events or that all assumptions have been considered or stated. Forward-looking statements are inherently uncertain, and changing factors such as those affecting
the markets generally, or those affecting particular industries or issuers, may cause results to differ from those discussed. Accordingly, there can be no assurance that estimated returns or projections will be realised or that actual
returns or performance results will not materially differ from those estimated herein. Some of the information contained in this document may be aggregated data of Transactions executed by RWC that has been compiled so as
not to identify the underlying Transactions of any particular customer.
The information transmitted is intended only for the person or entity to which it has been given and may contain confidential and/or privileged material. In accepting receipt of the information transmitted you agree that you and/or
your affiliates, partners, directors, officers and employees, as applicable, will keep all information strictly confidential. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this
information is prohibited. The information contained herein is confidential and is intended for the exclusive use of the intended recipient(s) to which this document has been provided. Any distribution or reproduction of this
document is not authorised and is prohibited without the express written consent of RWC or any of its affiliates.

RWC | 33

RWC
Risk Warnings & Disclaimers

The benchmark index is included to show the general trend of the securities markets in the period indicated. The portfolio is managed according to its investment strategy, which may differ significantly in terms of
security holdings, industry weightings, and asset allocation from those of the benchmark index. Portfolio performance, characteristics and volatility may differ from the benchmark index. No representation is made that
the portfolios strategy is or will be comparable, either in composition or regarding the element of risk involved, to the securities comprising the benchmark index. Unmanaged index returns assume reinvestment of
any and all distributions and do not reflect any fees, expenses or sales charges. Investors cannot invest directly in an index.

Representative holdings and portfolio characteristics are specific only to the portfolio shown at that point in time and is subject to change. The representative portfolio shown has been selected by RWC based on
account characteristics that RWC believes accurately represents the investment strategy as a whole.

Changes in rates of exchange may cause the value of such investments to fluctuate. An investor may not be able to get back the amount invested and the loss on realisation may be very high and could result in a
substantial or complete loss of the investment. In addition, an investor who realises their investment in a RWC-managed fund after a short period may not realise the amount originally invested as a result of charges
made on the issue and/or redemption of such investment. The value of such interests for the purposes of purchases may differ from their value for the purpose of redemptions. No representations or warranties of any
kind are intended or should be inferred with respect to the economic return from, or the tax consequences of, an investment in a RWC-managed fund. Current tax levels and reliefs may change. Depending on
individual circumstances, this may affect investment returns. Nothing in this document constitutes advice on the merits of buying or selling a particular investment. This document expresses no views as to the
suitability or appropriateness of the fund or any other investments described herein to the individual circumstances of any recipient.

AIFMD and Distribution in the European Economic Area (EEA)


The Alternative Fund Managers Directive (Directive 2011/61/EU) (AIFMD) is a regulatory regime which came into full effect in the EEA on 22 July 2014. RWC Asset Management LLP is an Alternative Investment
Fund Manager (an AIFM) to certain funds managed by it and by RWC Focus Asset Management Limited (each an AIF). The AIFM is required to make available to investors certain prescribed information prior to
their investment in an AIF. The majority of the prescribed information is contained in the latest Offering Document of the AIF. The remainder of the prescribed information is contained in the relevant AIFs annual
report and accounts. All of the information is provided in accordance with the AIFMD.

In relation to each member state of the EEA (each a Member State), this document may only be distributed and shares in a RWC fund (Shares) may only be offered and placed to the extent that (a) the relevant
RWC fund is permitted to be marketed to professional investors in accordance with the AIFMD (as implemented into the local law/regulation of the relevant Member State); or (b) this document may otherwise be
lawfully distributed and the Shares may lawfully offered or placed in that Member State (including at the initiative of the investor).

Information Required for Distribution of Foreign Collective Investment Schemes to Qualified Investors in Switzerland
The representative and paying agent of the RWC-managed funds in Switzerland (the Representative in Switzerland) is Socit Gnrale, Paris, Zurich Branch, Talacker 50, 8001 Zurich. In respect of the units of the
RWC-managed funds distributed in Switzerland, the place of performance and jurisdiction is at the registered office of the Representative in Switzerland.

RWC | 34