Intended for professional clients only
Product octoBer flash 2009 Natixis Actions Europe Conviction : an anniversary marked by success The institutional share of Natixis Actions Europe Conviction was launched in June 2006 and recently marked its third anniversary. With its aim of outperforming the MSCI Europe NDR index over a recommended five-year period, Natixis Actions Europe Conviction (I share) has markedly outperformed its benchmark by more than 6% over the last three years and has a Lipper Leader rating*. The distinctive features of its investment process are the concentration of stocks in the portfolio – between 20 and 40 – and a tracking error which can reach 8 % (on an indicative basis). The stock-picking is based on the best ideas generated by around 30 analysts/managers in Natixis Asset Management’s European equities team.
A context that is now favorable for European equities and more particularly for Natixis Actions Europe Conviction After an extremely unfavorable period for risky assets in 2008 and the first quarter of 2009, the strong measures taken by governments and central banks to deal with the crisis are now bearing tangible fruit. The earnings-reporting season for the first half of 2009 demonstrated very tight cost control by European companies, and hopes of a macroeconomic improvement spreading widely from the United States are now being realized. A positive turnaround in revenues may consequently have a multiplier effect on profit. In this context, European equities still have upside potential, even after the spectacular rebound from the lows seen in March. The investment process applied by Natixis Actions Europe Conviction, based on stock-picking, could prove particularly appropriate in this market environment, since the context of very high volatility has led operators in the market to focus on risk rather than on companies’ individual performances. Consequently, valuations have been squeezed, with quality companies trading at no significant premium to their less convincing sector peers. This situation provides a pool of alpha that can be harnessed by a strong sector expertise, which is the case of the Natixis Asset Management's European Equities team one. Natixis Asset Management's European Equities team therefore expects positive performances from European equities – albeit with less spectacular percentage rises than in the last few months – and the rebuilding of performance differentials between players in the same sector, as a function of their specific characteristics.
The advantages of Natixis Actions Europe Conviction n Privileged access to a broad team of specialists in European equities Since it is difficult for a single manager to cover the full extent and complexity of the European equity universe, Natixis Actions Europe Conviction relies on all of the equity teams within Natixis Asset Management, comprising 35 analysts/managers* with a total of €29.5 billion of assets under management**. Each investment idea is consequently generated by a team specializing in a specific macroeconomic sector, geographic region or style.
Source of idea generation in the European equity universe Sector ideas (large caps) Defensives
TMT*
Cyclicals
Financials
* Technology, Media, Telecom.
*data as of 30/09/2009. **source: Natixis Asset Management.
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Thematic ideas Small and mid-caps Special Situations (mergers & acquisitions etc)
Emerging Europe Quantitative
Product Flash n Active, flexible management Natixis Actions Europe Conviction aims to outperform the MSCI Europe NDR (net dividends reinvested) index over a recommended horizon of at least five years. Its investment process has two major features: n Its portfolio is concentrated on 20-40 stocks (compared to between 40 and 80 in a conventional portfolio). The manager concentrates on companies in which Natixis Asset Management’s thematic or sector specialists expect the greatest upside potential. This feature should prove an important advantage for the fund in 2009-2010. Such concentration does nevertheless imply a high tracking error, which can reach 8 % (on an indicative basis). n Its equity exposure is variable, at between 75 % and 110 %. That enables the investment team to hold up to 20 % of liquidity products if it does not identify any new opportunities or wishes to pursue a defensive strategy. This second feature was particularly beneficial at the end of 2007 and in 2008, as it enabled the fund to cushion the violent fall in the markets.
The performances of Natixis Actions Europe Conviction As of 30/09/2009, Natixis Actions Europe Conviction (I share) achieved a year-on-year performance of 2.13 %, compared to -23.9 % in the case of the MSCI Europe index with net dividends reinvested. The fund has a Lipper Leader* rating in the three-year "Consistent Return" category. Table of net performances of Natixis Actions Europe Conviction (I share) as at 30/09/2009 Periods
1 year
3 years
YTD
Natixis Actions Europe Conviction
2.13
-15.77
24.20
Benchmark
-2.39
-22.47
25.11
Difference
4.52
6.70
-0.91
Source: Natixis Asset Management. The quoted performance data relate to past years. Past performance is not a reliable indicator of future performance. * The Lipper Consistent Return rating reflects the performance of a fund over a three-year period, adjusted to take account of short-term and long-term risk, relative to all the funds in the same Lipper category. If a fund has a "Leader" rating, it is among the best 20% of funds in its category and has the maximum rating of 5. By contrast, the least good funds will have a rating of 1. Quartile classification: each fund is classified by quartile in a universe of funds marketed in France and belonging to the same Lipper category.
Current strategy of Natixis Actions Europe Conviction and management outlook Level of exposure Natixis Actions Europe Conviction currently has an equity market exposure of close to 100 %. This exposure reflects the return of risk appetite and an improvement in the macroeconomic situation, as well as possible positive revisions of earnings expectations. Investment flows are favorable for equities, and the prevailing uncertainties, while real, will not be resolved until the first few months of 2010. Sector strategy The portfolio’s allocation among the major sectors is now consistent with the positive view of the Macroeconomic Research Team concerning the market trends in the months ahead. The European Equities team favors financials, particularly banks, which offer significant potential based on valuations encompassing balance sheets and earnings outlooks. They also favor cyclical sectors, due to their operational leverage, and have a similarly favorable view of energy. But the team is accordingly more cautious towards defensives (particularly healthcare) and neutral on TMT stocks. The investment team currently favors large-cap stocks, considering them to be more attractive than mid-cap stocks in the medium term. This configuration also explains the fund’s relatively unspectacular performance since the beginning of 2009 (mid-caps having outperformed considerably). Stock-picking The portfolio has remained relatively unchanged for a number of months, following a period of intense rotation between September 2008 and June 2009 associated with the discipline of profit-taking in extremely volatile markets. In terms of stocks, the main active positions (strong overweightings compared to the index or large outright positions) are ELF, BP and CRH. Three convictions held by the team: ELF, a subsidiary owned more than 98% by Total, trades at a discount to its parent company. This particular situation therefore results in an exposure. The stock suffers from low liquidity, which explains its discount. BP, the UK oil major, has an attractive valuation for the sector, having regard to the rise in crude prices. The new management’s policy shows a particular preoccupation with the dividend. Finally, sterling, BP’s listing currency, may show upside valuation potential. CRH, an Irish-listed cement producer, is one of the main European beneficiaries of the US stimulus package, according to Natixis Asset Management’s equity managers/analysts. The stock has been and remains highly volatile, particularly due to its balance sheet and cyclical character. They nevertheless believe it has very significant upside valuation potential.
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Product Flash Investment Team
Natixis Actions Europe Conviction is co-managed by Maurice Gravier and Wilfrid Pham
Maurice Gravier Director at Natixis AM’s Equity Department (and Senior Portfolio Manager) Maurice Gravier began his career in the institutional and private management field for Banque Paribas and joined Banque Populaire Group in 1996 as a corporate banker. In 1998 he joined Banque Populaire Asset Management (Natexis Asset Management) as a marketing executive, before joining the Equity Department in 1999 as a buy-side analyst. He started managing PanEuropean portfolios in late 2000, and was named a Senior PM in 2002. He was appointed Head of European Equity Team in 2004. He became a Director within Natixis AM Equity Team in july, 2007. He manages European Equity portfolios since 2000. He is “AA” rated by Citywire as of September 2009 (cf. Focus on the Citywire rating below). Maurice Gravier is graduated from ESCP-EAP (Knowledge in corporate finance and legal and fiscal management). He has been working for our group for 12 years. Wilfrid PHAM Head of Equity Management Department Wilfrid Pham began his carrier in 1994 as Asian Japan Equity Manager within Banque Populaire AM. He joined Henderson Investors / AMP AM in 1997, and the HSBC AM in 1998 in London as Japanese equity specialised manager. He spent 6 years in Tokyo for HSBC AM as senior manager and Head of Sector Research. He joined Natixis Asset Management in 2004 as a Japanese equity manager. He was Head of modelled and insurance European equity management and Head of Japan Equity Management. He is managing Fructifonds Valeurs du Japon and BP Valeurs du Japon Couvert, which has been awarded as the best 3-years performances fund by Lipper Fund Awards in 2007. Wilfrid Pham has also been rewarded by Citywire (www.citywireselector.com, as end of December 2007) as the 5th best manager out of 66 Japanese equity specialized manager in Europe, for its 3-years performance. He has been co-head of the Equity Department since july 2008. He’s now heading the Equity Department. Wilfrid Pham graduated from ESCP (MSP) and HEC Montréal (International finance). He has 15 years of experience and 7 years within Natixis Asset Management. Written on 10 October 2009
Focus on the Citywire rating Citywire analyzes the performances of over 5,000 active managers across Europe. In each of the monitored countries (Austria, France, Germany, Italy, Spain, Sweden and Switzerland), the agency assesses the managers responsible for funds authorized for sale in the country concerned. The Citywire ratings are based on the Citywire Manager Ratio (equivalent to the Information Ratio). This takes into account career moves and career breaks in order to monitor the performance of a manager when he switches between funds. The Manager Ratio reflects how much added value the fund manager delivers in terms of outperformance against the benchmark for each unit of risk assumed (where risk is defined as not mirroring the index’s return). To be awarded a rating, managers must achieve or exceed certain performance thresholds based on their 36-month Citywire Manager Ratio across all sectors. Managers are ranked in order of the ratio they obtain, from highest to lowest. This ranking is then used to calculate a threshold. Only those with a Citywire Manager Ratio exceeding 0.25 are considered for a rating. The managers who clear this first hurdle then have their ratios averaged again and are separated into two groups. This procedure is repeated for the best group to produce three classes of managers with a Citywire Manager Ratio of at least 0.25. Only managers within these three classes will receive a Citywire rating (‘AAA’, ‘AA’ or ‘A’).
Disclaimer
FOR FURTHER INFORMATION n See the detailed information sheet for Natixis Actions Europe Conviction in the "Our Products" section on www.am.natixis.com
This document is intended for professional clients. It may not be used for any purpose other than that for which it was intended and may not be reproduced, distributed or disclosed to third parties, in whole or in part, without the prior written authorization of Natixis Asset Management. No information contained in this document may be interpreted as being contractual in any way. This document is produced purely for information purposes. It is a presentation created and prepared by Natixis Asset Management based on sources which it deems to be reliable. Natixis Asset Management reserves the right to amend the information in this document at any time without notice, particularly with regard to the description of the investment processes, which under no circumstances constitutes a commitment on the part of Natixis Asset Management. Natixis Asset Management will not be held liable for any decision taken or not taken on the basis of information in this document, nor for any use that a third party might make of such information. The Fund is authorized for sale in France and possibly in other countries where such sale is not contrary to local legislation. Prior to any investment, investors must check that they are legally authorized to invest in a fund. The risks and fees associated with investment in a fund are described in the relevant prospectus. The prospectus and periodic documents are available from Natixis Asset Management on request. The prospectus must be supplied to the investor prior to subscription.
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