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Argon Asset Management

Challenges in the current environment and how to deal with them 19 May 2015

Kyle Hulett, CFA

Head of Multi Asset Class

"An investor initiative in partnership with UNEP FI and the UN Global Compact".

FAIS Accreditation: Kyle Hulett (RE1, RE3 & RE5) is FAIS accredited

Compliance Officer : Ms Bontle Matlou FSB approved number CO 3407, [email protected], Tel 021 670 6570

An African investment firm with global standards

mailto:[email protected]


Argon Asset Management (Pty) Ltd is

a registered financial services provider

Debt


a registered financial services provider 4

Challenges in the current market

environment

Source: McKinsey



Demographics




environment

Source: BCA



Productivity




environment

Source: BCA

-2.0 -1.5 -1.0 -0.5 0.0 0.5 1 .0

40 000

50 000

30 000

20 000

60 000

70 000

80 000

10 000

GD

P p

er

cap

ita

(P

PP

20

14

)

40 000

50 000

30 000

20 000

60 000

70 000

80 000

10 000

GD

P p

er

cap

ita

(P

PP

20

14

)

South Africa China (Shanghai)

US$ US$

Student test scores in math and science



Quantitative Easing




environment

Source: BCA

2010 2011 2012 2013 2014 2015

-0.4

0

-0.8

0.4

0.8

1.2

Euro area Switzerland Denmark Sweden

-0.4

0

-0.8

0.4

0.8

1.2



Valuation




environment

Source: Goldman Sachs

Model estimation (in-sample)

2006 2007 2008 2009 2010 2011 2012 2013 2014

JGB 10-Year yield (actual) Shadow rate

1.2

1.4

1.0

0.8

1.6

1.8

2.0

0.6

0.4

1.2

1.4

1.0

0.8

1.6

1.8

2.0

0.6

0.4

% %

BOJ QQE

starts



Pick your benchmark wisely



How to deal with them?

Source: Clare, Motson 2013

$4.000 $5.000 $6.000 $7.000 $8.000 $9.000 $10.000 $11.000 $12.000

Frequency

4%

5%

3%

2%

6%

7%

8%

1%

Cumulative %

0%

40%

50%

30%

20%

60%

70%

80%

10%

0%

Fre

qu

en

cy

9%

10%

90%

100%

Cu

mu

lati

ve f

req

ue

ncy

Market cap weighted Equal weighted (2.1)

Diversity weighting (2.3) Equal risk contribution (2.2) Risk clustering (2.4)

Inverse volatility (2.5) MVP weighted (3.1) Maximum diversification weights (3.2)

Risk efficient (3.3)



Understand factor exposure




Source: Bloomberg

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

0.5

1.0

2.0

4.0

8.0

Value Cyclical value Defensive value

0.5

1.0

2.0

4.0

8.0

Cash-flow value Deep-risky value



Be tactical




Source: Bloomberg

2007 2008 2009 2010 2011 2012 2013 2014

600

800

400

200

1 000

1 200

1 400

0

600

800

400

200

1 000

1 200

1 400

0

TALF QE1

QE2

QE3

ECB

QE

QE3

ends

End

QE1

Twist LTRO1

Whatever it

takes



Biography

Kyle Hulett, CFA (Head of Multi Asset Class)

B Bus Sc (Actuarial Science) UCT, Fellow of the Faculty of Actuaries FFA (UK)

Kyle has over 14 years of multi organizational investment experience and is an accomplished money

manager. He brings experience from established industry players such as Cadiz Asset Management,

Prescient Securities and Symmetry where he occupied portfolio management roles in the absolute

return space.

19



FAIS disclosures

1) The intermediary

Argon Asset Management (Pty) Ltd (“ARGON”) is an authorised Financial Services Provider;

FSP no. 835

Physical Address:

1st floor, Colinton House Tel: +27 21 670 6570

The Oval, 1 Oakdale Road, Fax: +27 21 671 8252

Newlands 7700

2) Representative(s)

Name Qualification Experience

Kyle Hulett CFA, B Bus Sc (Actuarial Science) UCT 14 years

Fellow of the Faculty of Actuaries FFA (UK)

ARGON has mandated the representative(s) in terms of contract(s) of employment to render

the following services on its behalf:

Kyle Hulett, Category 1&2

Securities and Instruments: Shares

Securities and Instruments: Money market instruments

Securities and Instruments: Bonds

Securities and Instruments: Debentures and securitised debt

Securities and Instruments: Derivative instruments

Participatory interests in Collective Investment Schemes

Foreign currency denominated investment instruments

Deposit define in the banks Act exceeding 12 months

Deposit defines in banks act 12 months or less

Fit and proper requirements

The Representative(s) comply with the fit and proper requirements per FAIS Act.

Responsibility for the Representative(s)

ARGON takes full responsibility for the actions of the Representative(s) carried out in terms

of the agreement concluded and has suitable guarantees in place, including professional

indemnity cover, amongst others.

3) Compliance Officer

Bontle Matlou – CO 3407

Tel: +27 76 358 2693

Fax: 086 214 7356

E-mail: [email protected]

4) Key Individuals (responsible for the representatives):

Mr Mothobi Seseli Chief Executive Officer

Dr Manas Bapela Chief Investment Officer

Mr Luyanda Joxo Head of Institutional Business

Mr Sello Setai Head of Finance & Operations

5) Complaints handling procedure

Should you have complaints regarding advice given by the representative(s) or their

conduct, or any complaint relating to the services rendered by ARGON please contact

the Compliance Officer in writing at the addresses supplied in section 1 or 3 above.

Upon receipt of a written complaint we will provide you with an acknowledgement of

receipt, within 48 hours and endeavour to resolve your complaint as soon as possible.

Should there be any delays in resolving your complaint, we will advise you timeously.

If your complaint is not resolved to your satisfaction you may direct it, in writing, to the

Office of the Ombud for Financial Services Providers whose details are set out below.

FAIS Ombud

PO Box 74571

Lynwood Ridge, 0040

Telephone: +27 12 470 9080

Facsimile: +27 12 348 3447; E-mail Address: [email protected]



Argon Asset Management (Pty) Ltd is an independent investment management company registered in South Africa, company registration number

2002/016801/07 and an authorised financial services provider under the Financial Services Board (FSB) registration number 835 as well as FSB section 13B

pension funds administrator registration number 24/434. The main business of Argon Asset Management is the provision of investment management services

to institutional clients. Argon Asset Management manages South African specialist equity portfolios, SA fixed income portfolios and multi-asset class absolute

return portfolios.

Argon Asset Management (Pty) Ltd has been verified by an independent verifier. Copies of the verification reports are available on request.

The composites include all portfolios that are managed according to the best investment view of Argon Asset Management, follow the same investment

philosophy and process, have the same benchmark and Argon has total discretion.

Performance figures are calculated and presented gross of management fees, custodial fees, trustee fees, audit fees but net of all transaction costs.

Returns are calculated net of withholding taxes, any reclaimable portion is accounted for on receipt.

The minimum portfolio size for inclusion in the composite is R10 million. No changes have taken place to this minimum asset level.

A complete list and description of all composites is available on request by contacting Mr Luyanda Joxo on +27 21 670 6576, email

[email protected].

Portfolio valuations are computed and performance results are reported in South African Rands (ZAR).

No leverage is allowed in the implementation of the investment strategy. Multi asset class investment strategies include the use of derivatives.

Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request.

No representation is made that the performance of these investment accounts are indicative of future investment performance. The composite results are

asset weighted on a monthly basis. Quarterly and annual composite performance figures are computed by linking monthly returns, resulting in a time weighted

rate of return.

The firm’s annual fee schedule for the Argon product is available on request.

GIPS performance disclosures

21



Contact details

Luyanda Joxo, CFA Jeremy Jutzen

Head of Institutional Business Client Relationship Officer

Tel +27 21 670 6576 Tel +27 21 670 6592

Fax +27 86 674 1100 Fax +27 86 242 9958

Cell +27 84 701 1271 Cell +27 83 703 8523

Email: [email protected] Email: [email protected]

Cape Town Office Johannesburg Office

1st Floor, Colinton House, The Oval 7th Floor, Fredman Towers

1 Oakdale Road, Newlands, 7700 13 Fredman Drive ,Sandton, 2146

General Tel +27 21 670 6570

www.argonassetmanagement.co.za

Insurance notification

We have Professional indemnity and fidelity guarantee cover in place to indemnify us against negligence, theft, fraud, errors and

omissions.



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