alphacapita-news-letter-q1-2012
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http://www.alphacapita.com/wp-content/uploads/2012/04/AlphaCapita-News-letter-Q1-2012.pdfTRANSCRIPT
we think the market is ready to pause
for profit taking. We do however still
feel that the momentum we have
experienced lately will continue with
the support from the good key figures
from the U.S, especially the continued
positive development in the U.S labor
market. Since 2009 the U.S economy
has created more than 4million new
jobs. With a continued labor market
like this we will most likely see a
stronger GDP growth than forecasted
and very soon bring us back to the
level before 2008 crisis. For this to
come true, 8 million jobs must be
created in the coming years. Most new
jobs it seems are being generated in the
service sector. This is good news as
most of this income will generally be
spent on consumption. So if we see
continued strong development in the
U.S key figures we will find a strong
driver for the continued development
for 2012.
With the Greek bond swap done re-
cently, we hopefully will see a reduc-
tion in the risk scenario in Greece and
therefore the market in general. Look-
ing forward, we will as usual, keep a
close eye on developments in Europe.
We are at present, witnessing a much
higher oil price, but we feel comfort-
able as long as it trades below the 150
USD mark. We see this as a very bad
thing for the return of growth in the
world in general.
With regards to China, we have re-
cently seen signs of a slowdown in the
growth expectation. The Chinese gov-
ernment has been out with the latest
GDP figures for 2012 revising down to
7.50%. This is still very high and it is
The global stock markets have had a
very strong performance off the back of
the wise move by the ECB in late De-
cember 2011 of offering 3 year loan
facilities to banks. This move took out
a lot of the uncertainty within the
financial markets. This has made room
for a rally in the stock market, not seen
for many years.
Banks have taken advantage of this
opportunity twice now, using a part of
their assets to buy bonds in peripheral
Europe, pushing down the yields and
thereby again bringing hope and sup-
port for a long term possibility for
peripheral Europe to survive the big
challenges in front of them.
At the same time the EU has agreed to
put in force new regulations regarding
budget discipline. This will enable the
EU to punish countries that are not
living up to these new standards. This
of course does not fix the short term
problem, but will in our minds, create
measures to prevent the recent situa-
tion happening again .
The EU has also agreed to work hard to
find a solution for reducing the high
unemployment rate. This will be done
with reforms, which of course, is of
significant importance especially in
Spain, Italy and Greece, where there
has been a very old regulation for the
labor market in general. However,
these reforms need to be implemented
across the board so that they can at-
tract new business without losing it to
the Emerging markets. Governmental
cuts and saving measures are not nec-
essarily the problem solver in the long
run, but supporting and stimulating
the growth story by helping smaller
businesses. Employing more workers
will bring in much needed revenue to
the local governments. At the end of
March another summit with the EU
leaders will be held, the subject here
will in our opinion, be to build the
firewalls to secure stability in the EU
zone. Germany has for a long time
been against this, however a bigger
firewall in the EU will most likely be a
market driver, and it is our expectation
some agree-
ment will be
struck to
secure the
stability.
With this we
could easily
be positive
on a higher
equity mar-
ket and
higher
yields.
As we write
this article,
2012 - THE BEGINNING?
Inside this issue:
OUTLOOK Continued 2
STRATEGY 2
STRATEGY—CURRENCY 3
STRATEGY—STOCKS 3
STRATEGY—STOCKS
Continued
4
STRATEGY— BONDS 4
ALPHACAPITA LAUNCHES
NEW SERVICES 5
APRIL 2012 NEWS LETTER
“Latin market and a new player in the
AlphaCapita Oil sector ”
Outlook
important to remember
that the Chinese government has not yet succeeded in
getting their figures correct. We have until now,
always ended seeing a revision to higher levels. With
this in mind and in the knowledge that in 2011 the
government came up with new measures to reduce
growth, the Chinese government it seems, has a lot of
tools to instigate growth if needed. As the world’s
second largest economy, it is important that China
continues to grow at these high levels, but in a con-
trolled manner. We still feel at ease with the outlook
for China, noting that growth in India lately has also
been very impressive, so China is not alone in sup-
porting the worlds growth scenario.
Q1 has resulted in a quarterly return off 4.35% on our
balanced strategy, 4.7% on the conservative strategy
and 15.78% on our Equity strategy. The portfolio has
been up and running for three years now and has
delivered an average of 6.48% Per annum net of all
costs. Our target from the beginning has been to
generate a return between 5 % - 8% p.a. with the
emphasis on maintaining low volatility whilst gener-
ating steady and constant returns over the long term.
Therefore we are very pleased with the results, as this
just underlines that our strategy of always being invested and keeping our discipline in our asset allocation is correct. This
strategy has paid off for us, as we are now seeing others that sold out of equities who have not yet recovered their last year's
figures.
At the end of the last quarter and in the beginning of 2012, we used some of our cash to allocate more into the equity market.
We have added a bit more into the financial positions and added "Nokia" to the portfolio . We also added two new corporate
bonds ,bringing us to an asset allocation of 40% equity and 29% on the corporate bond side. Leaving our cash holdings under
5%.
We do in general feel secure about the market. Yes, there are still issues to be sorted out, but it is our expectation that most of
the issues will duly be dealt with. Likewise we see that hedge funds and other players in the financial markets have missed out
on the rally at the beginning of the year. Closing in on the first quarter a part of this cash from hedge funds has to be invested
for them to show they have taken part in the
rally. We have seen some attempts to pull the
market back, but still on very low volumes which
just goes to show that the market is still in an
uptrend.
We still prefer stocks with a good dividend yield
and high cash flow, but with our move more into
financials and other growth stocks we demon-
strate our belief that this year will be growth
focused rather than defensive. The recent oil
price has been pushed up by the uncertainty
regarding Iran, development of which, will no
doubt put a short term pressure on the oil price.
As long as we keep prices under 120 USD mark
we feel okay in our opinion. To protect us against
a much higher oil price and a possible pull back
in the equity market we are considering allocat-
ing more oil stocks or entering into protection
through the derivatives market.
Page 2
“Chinese
government has
not yet succeeded
in getting their
figures correct”
“prefer stocks with
a good dividend
yield ”
Strategy
Outlook Continued
We have sat very much on
our hands in regards to an
active role within the "Spot"
currency market over this
last quarter. The USD has
traded within a defined
range against EUR, we do
however still expect a
stronger USD and feel this
view is well supported by
the very good key figures
from US. We therefore still
keep our weight with 25%
USD exposure.
Mid February we added a
small position Long
EURCHF. We did this at a
level 1.21 with the expecta-
tions that over the year 2012
the CHF will weaken as the
tension in the EU eases.
Likewise with the SNB floor
at 1.20 we feel secure to
hold this position for a
longer period of time. The
fundamentals behind this
thinking are the same as we
have said time and time
again, meaning the level in
which the CHF is trading
currently will not be able to
be sustained due to the
realistic undermining of the Swiss economy. We feel that this is a good long term investment case with a very attractive risk reward premium. Our 12 month target is to get
EURCHF back over the 1.25 level and here after back to 1.30.
Page 3
In Q1 we took profit once again in BMW, with a 3 month return of 20%. Our reasoning here, was not that we did not believe in the BMW growth case anymore ,but more a
question that the stock has had an impressive performance over a very short period of time. We have now been into BMW three times and have managed to exit every time
with a very attractive return. We still very much like the story and expectation for BMW in the future and will be looking for a new entry point for this stock in the next
month or so.
After following Nokia for a long time we
decided to allocate to them after their full
year earnings release. Nokia is one of the
biggest producer of mobile cell phones in the
world. Nokia has for a long time been living in
the shadow of Apple, Samsung, and HTC on
the smart phone market. They have focused
on the cheaper end of the communication
sector, therefore their earnings have been less
comparable with the high end.
At the end of last year, Nokia introduced their
new smart phone "Lumina", which has been
received with a lot of positive attention and
was praised as one of the best in the market
right now. At the latest mobile exhibition in
Barcelona beginning of March 2012 they pre-
sented the follower to "Lumina". Nokia is still
targeting the lower end of the smart phone
market with a price 190 USD in compassion to
Apple at 400-500 USD. We believe that by
ON STOCKS
ON CURRENCY
“Chart showing EURCHF with 200
day moving average”
“Chart showing BMW ”
As mentioned in our earlier newsletters we have been in-
vested in variable bonds and placed an allocation in an ETF
which tracks the 20 years US t-bond. This investment, as
mentioned in previous newsletters, has not yet played out in
a satisfactory way. We continue to hold this position as it is
our belief that the market will very soon start to react to the
good key figures, although the FED and other official have
stated that key interest rates will be kept low for an extended
period of time to support the growth, and there will be a
return to rate hikes over the long term.
As mentioned in our strategy write up, we have entered into
two new corporate bonds. We have bought 4.75% Exportfi-
Page 4
ON STOCKS CONTINUED
ON BONDS
focusing on the lower end of the
Smartphone market, Nokia is
well positioned to sell into the
emerging market sector. The
figures on Nokia shows us a
very good value company. One
of the key figures we are looking
at is price to sale ratio which in
this case is under 0.75. With a
new CEO focusing on disband-
ing none core business, a fur-
ther corporation with Microsoft,
and a new phone introduction
we believe Nokia has a strong
case to turn very profitable
again. We likewise will not be
surprised if Microsoft gave a bid
for Nokia as their cash balance
is very big and this could be an
interesting fit for Microsoft in
their battle again Apple. If
Nokia can continue to generate
a high free cash flow and good
operational turnaround, the
company has a possibility to be
a real winner in the sector. We
brought the first part of Nokia
at a price 3.86 EUR.
nans June 2013 and 4.878% Danske Bank perpetual with a call option
in 2017. Both bonds are EURO nominated. Since we entered the bonds
have earned a profit of 1% to 5% without accrued interest.
For both positions we feel we have a very good investment case. Ex-
portfinans is a Norwegian company partly owned by the Norwegian
government which is arguably the healthiest economy in the world
today. We have a yield at 4.9% with a duration of 1.3 year. Danske
Bank is the largest bank in Denmark and one of the biggest in Scandi-
navia. Danske Bank has had problems with big losses both in Den-
mark, but mostly in Ireland. It is our clear expectation that with the
new CEO, Ejvind Kolling former chairman of the board and CEO of
Maersk line, Danske Bank is set for a more
profitable future with higher credit ratings
as a natural outcome. Danske Bank is giving
a yearly yield at 8% (calculated on the call
in 2017) and an duration of 5.3 years. To-
day’s credit rating for Exportfinans is BBB+
and Danske Bank is BBB-
For our total bond portfolio today our
clients are having a yearly yield at 4.7%
average and duration of 2.9 years. As we
believe there will be a higher yield in the
coming years we are focusing to have as low
a duration as possible but still maintaining
an average yield of around 5% per annum.
“For both positions
we feel we have a
very good
investment case”
“Chart showing Nokia ”
AlphaCapita SA has been working hard
to expand its broader advisory capabili-
ties and provide a broader platform for
its “trusted advisor” positioning with
clients and we are pleased to announce
that Simon Evans an English barrister
with over twenty five years experience
in the offshore world has joined the
team.
AlphaCapita SA can now advise clients
on the optimal holding structure for
existing and new acquisitions across all
asset classes and geographies. The
structures can be engineered to ensure
tax efficient; confidential and con-
trolled transfer of assets across multi-
generations of a family.
The age old adage of “rags to rags in
three generation” is one that still holds
Disclaimer
None of the information contained herein constitute an offer to purchase or sell a financial instrument, or to make any investments. AlphaCapita (Switzerland) SA does not take into account your personal invest-ment objectives or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information nor for any loss arising from any investment based on a recommen-dation, forecast or other information supplied from any employee of AlphaCapita (Switzerland) SA, third party, or otherwise. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of AlphaCapita (Switzerland) SA.
AlphaCapita (Switzerland) SA
Balsberg
CH-8058 Zurich-Airport
Switzerland
Phone: +41 43 813 3020
E-mail: [email protected]
web : www.alphacapita.com
AlphaCapita (Switzerland) SA
true today and the inability to pre-
serve wealth is generally not associ-
ated with bad investments or taxes
although both these factors can play a
significant role in wealth dissipation;
but more to do with poor governance
and poor asset protection.
The risks to wealth take many forms
and the most successful families seek
to identify, manage, price and plan
against these risks by ensuring that
asset protection is foremost in their
thinking.
The judicious selection of legal vehi-
cles and jurisdiction as well as an
advisor who is well versed in cross
border generational planning is as
important today as it ever was. SA's
newly enhanced capabilities to work
with our clients to achieve the optimal
asset holding and transfer strategy now
compliments our asset management
capabilities in a way that can provide a
one stop service that includes not only,
advice on how to design the architecture
of a strategy, but also its execution and
ongoing management through its own
trustee and corporate management
service.
Providing the legal framework that
accommodates all client assets also
facilitates a consolidated reporting and
management structure that is the key to
transparency, cost management and risk
sensitive performance attribution with-
out which investors cannot hope to
navigate the investment landscape
effectively.
AlphaCapita Launches new services
Simon Evans - After qualifying as a barrister,
Simon joined the HSBC group and worked as
a banker on their international division for six
years in Hamburg, Qatar, Bahrain, Egypt,
India and Hong Kong.In 1989 he focussed on
private client tax and trust work with Citi-
group where he was general manager of their
trust company in Zurich.
In 1991 Simon returned to Hong Kong when
he joined JP Morgan as head of Asian wealth
advisory where he remained until he joined
Goldman Sachs London to establish their
global wealth advisory practice. He was then
asked back to JP Morgan London where
Simon was head of wealth advisory for Asia,
the Middle East and UK onshore. During this
time developed and expanded the bank’s capa-
bilities by advising families in the field of family
office establishment and administration. Simon
left JP Morgan to found Nean Wealth Advi-
sors in 2002.
Nean Wealth Advisors is a boutique multi-
family office that provides a range of wealth
preservation and governance solutions to fami-
lies from Asia, the Indian sub-continent and the
Middle East who face generational, tax and
wealth transfer challenges across geographies
and all asset classes
ON SIMON