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August 2013. SANDBOURNE ASSET MANAGEMENT LTD. Authorised and regulated by the Financial Conduct Authority. Fund Overview. Long / Short UK Equity Fund established November 2003 Aim is to provide absolute capital appreciation - PowerPoint PPT PresentationTRANSCRIPT
Authorised and regulated by the Financial Conduct Authority
August 2013
SANDBOURNE ASSET MANAGEMENT LTD
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Fund Overview Long / Short UK Equity Fund established November 2003 Aim is to provide absolute capital appreciation Best performing European long/short fund 2008-2010
averaging 31.2% per annum (source: BarclayHedge) Compound returns over 10% for nearly 10 years Investment process tested and refined over 9 years
– Stock selection principally based on fundamentals with a focus on catalysts to crystallise value in positions
– Futures overlay used to actively control net exposure: now given more prominence after consistent positive contribution
Significant management commitment with over $40m own money invested
Strategy reflecting the managers’ philosophy on how to manage equity investment, not specifically “alternative investment”
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Fund Overview (continued) Fund only invests in liquid and listed securities Investors able to redeem shares monthly with no gates GBP, USD and EUR shares classes available Simple easy-to-understand strategy 100% transparency – all positions open to investor scrutiny Managers available and eager to discuss fund with investors
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Monthly ReturnsA Shares - GBP
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2013 12.01% 2.70% -4.18% -0.89% 9.06% -9.18% 12.74% 21.98%2012 24.04% 18.42% -10.72% -6.13% -22.33% 1.78% -3.10% 8.16% 9.07% 1.24% 2.33% 8.58% 25.13%2011 -0.64% -1.09% -3.84% 3.75% -6.68% -5.49% -2.67% -17.97% -13.76% 15.06% -1.56% 1.03% -31.87%2010 -3.08% -0.47% 10.63% -1.28% -6.12% -9.10% 15.44% -1.78% 16.99% -1.26% -1.09% 12.26% 30.75%2009 -10.57% -11.89% 8.71% 25.66% 3.41% -4.14% 13.36% 16.02% 5.98% -5.45% 0.01% 3.52% 45.58%2008 9.58% 1.67% 2.42% -2.45% 2.39% 8.86% 0.61% -3.42% 12.09% -6.55% -6.26% 0.20% 18.62%
2007 -0.18% -1.38% 4.20% -1.12% -1.08% 4.51% 4.74% 0.98% -5.29% -2.45% 2.72% 2.23% 7.58%
2006 3.31% 2.34% 1.46% 1.35% -2.76% -0.20% -2.73% 0.06% -2.22% 3.30% -1.36% 0.40% 2.73%
2005 0.76% -3.10% 2.63% 2.97% 0.02% -0.72% 5.04% 0.64% -1.26% -0.09% 0.91% -0.39% 7.41%
2004 0.98% 1.41% -0.12% 0.58% -1.48% 0.91% -7.79% -4.15% -0.61% 1.39% 1.08% 1.21% -6.81%
2003 2.13% 2.13%
Data is produced by Sandbourne Asset Management based on monthly NAV figures from Citco Fund Services (Ireland) Monthly returns for US Dollar and Euro share classes available on request.
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Performance History
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Performance DataA Shares - GBP
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (YTD) Since launch
Return -6.81% 7.41% 2.73% 7.58% 18.62% 45.58% 30.75% -31.87% 25.13% 21.98% 10.62%
Volatility1 9.25% 7.09% 7.26% 10.34% 20.01% 36.91% 29.10% 27.55% 41.57% 27.08% 25.37%
Sharpe Ratio -1.22 0.38 -0.28 0.17 0.66 1.21 1.04 -1.18 0.59 1.48 0.30
1 Annualised volatility of monthly returns
Correlation (based on B Shares – USD)
Fund/Peers Fund/Market Peers/Market
Since Launch 0.41 0.56 0.83
Last 12 Months 0.73 0.66 0.84
Peers: HFRX Equity Hedge Index
Market: MSCI World Total Return Index
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Investment PhilosophyTop-Down: Market Characteristics Equity markets go through extended up- and down-swings which
many investors either ignore, misunderstand or fight against We seek to capture returns on both sides by understanding turning
points and respecting genuine trends We try to avoid temporary reversals and boost gains with top-down
stock plays
Bottom-Up: How to incorporate stock picking Many stock picks take time to play out Long-term stock picks are best separated from market view Look for stock-specific risks and internal prospects to diversify top-
down exposure Don’t restrict net exposure to being the sum of stock-picks
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Portfolio Construction – Top DownHorizon 1 to 3 monthsHighly liquid instruments/stocksLong and short positions
Futures Actively used to control net exposure Typically up to +/-100% of net assets
Top Down stock picks 50-80% of net assets Typical position size at initiation 3-4% (depending on liquidity) 20 to 30 positions
Analysis Current issues
– e.g. credit crisis Economic cycle Technical &
sentiment data Valuation
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Exposure History
Positive but insubstantial market-timing contribution
Change of strategy: More aggressive variation of net exposure, stronger returns
1 10
Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-090
100
200
300
400
500
600
Top Down: Example
SANDBOURNE ASSET MANAGEMENT LTD
Short: Wolseley
ShortedAug08: 444p
• Cyclical fall in demand, negative sentiment• Earnings expectations halved and P/E contracted further
Covered Mar09: 159p
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Portfolio Construction – Bottom UpCore Trades Companies with internally generated prospects Performance of shares not dependent on market Holding period 6 months or more Mainly long positions Will accept lower levels of liquidity for high conviction ideas 50-80% of net assets Typical position size at initiation 3% 20 to 30 positions Research process:
Internal Company Meetings Brokers
– Broker reports– Sell-side analysts
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Portfolio Construction – Bottom UpShort-term Trades Companies with imminent results or newsflow Low correlation to market expected Holding period less than 1 month Both long and short positions Need high levels of liquidity Less than 30% of net assets Typical position size at initiation 3-4% (depending on liquidity) 0 to 10 positions
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Summary Process refined and improved over 9 years
Uncorrelated over cycle; above average returns with current strategy
Strategy reflecting the managers’ philosophy on how to manage equity investment, not specifically “alternative investment”
Large management commitment (over $45m)
Process scalable to at least $500m
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Appendix
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Directors, Managers, Advisors and Fees Launch Date: 01/12/2003 Investment Manager: Sandbourne Asset Management Limited Prime Broker: Goldman Sachs International Lawyer UK: Stephenson Harwood Cayman Islands Lawyer: Maples and Calder Europe Accountant: BDO Administrator: Citco Fund Services (Ireland) Limited Directors: William Scott (Chairman), David Bruce,
Nick England Fees: - 2% per annum Management Fee
- 20% Performance Fee paid annually in arrears, with high watermark.
Capacity Limit: $500-750 million Domicile: Cayman Islands Listing: Irish Stock Exchange (A & B classes)
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Key Staff David Bruce – Chief Executive, Fund Manager is the founder of Sandbourne
Asset Management, having left Abbey Life Investment Services Ltd where he was the Managing Director. He spent 11 years in total with Abbey Life in a number of positions including heading up the Japanese desk until 1991 and the UK equity desk thereafter.
Paul Dixon-Box, CFA – Fund Manager graduated from Cambridge University with a degree in Mathematics in 2001 and joined the US desk of Sandbourne Asset Management in August of that year helping to run a US investment trust and subsequently a US long/short equity hedge fund. Paul transferred to the UK desk in April 2003 in preparation for the launch of Sandbourne Fund.
Alison Dean – Director - Operations worked for David Bruce as Operations Manager at Abbey Life before joining Sandbourne Asset Management. She plays a key role in the operation by ensuring that the fund managers have the maximum possible amount of time to spend on actually running the portfolios.
Barbara Minns– Investor Relations joined Sandbourne Asset Management in December 2010 following an 8 year career at J.P. Morgan Investment Bank.
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Dealing
Subscriptions: – Minimum subscription for new investors is £100,000 for A Shares,
US$100,000 for B Shares or €100,000 for C Shares– Applications for shares must be received by the Administrator
before 12.00 pm on the Valuation Day immediately preceding the relevant monthly Dealing Day.
Redemptions: – Shares may be redeemed on each monthly Dealing Day at the
Redemption Price then ruling– 21 calendar days notice of redemption
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Risk Management Daily monitor
– Sector exposure– Composition of portfolio in terms of large cap, mid cap and
small caps – Liquidity of positions
Balance Sheet – maximum leverage of 150% Operations staff monitor portfolio to ensure that the fund does not
exceed its restrictions Automatic stop losses are NOT used. Adverse moves are
assessed on a daily basis to evaluate changes to risk/reward.
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Example Turning Point: 2007 high
88
90
92
94
96
98
100
102
104
S&P
Indi
ces
Reba
sed
0%
10%
20%
30%
40%
50%
60%
S&P 500 TRS&P Equalweighted TR AAII Bullish % (rhs)
Jul 07 Aug 07 Sep 07 Oct 07
Monitoring the indices versus sentiment and technicals:
Index makes higher high in October, well after first signs of the credit crisis
But investors are too bullish, complacent
And market internals do not confirm new high
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Example Futures Trades (FTSE 100)
81% net short at 31 Dec 2007
Covered half of short
on 18 Jan
Went to 44%short on 31 Jan
Covered to 8%short on 17 March
Returned to 43%short on 4 Apr
Increased to 100% short on 16 May
Covered remainingshort on 22 Jan
Covered to 8% long on
17 Sep
Went to 25% short between 19 Sep
and 23 Sep 2008
Chart: Bloomberg
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Performance Commentary 2004: Poor stock-selection from purchasing poor-quality, lagging names (having launched
many months into the new bull market). Resolution: Focus on quality stocks and improve selection process, including better analyst contact. Take more decisive action on failing positions.
2005: Both stock-selection and market-timing positive but not strong enough. Resolution: Continue to improve stock-selection, and manage/vary net exposure more aggressively.
2006: Strong market-timing including use of futures but largely offset by stock-selection, including too many shorts caught up in M&A bubble. Resolution: Reduce the number of positions held against market view (shorts in this case). Shrinking portfolio in this manner will likely increase volatility but we believe strong returns will more than compensate.
2007: With increased use of futures, market-timing produced a decent return (final short positioning was costly during the 2H07 but paid off in 1Q08). Stock-selection also satisfactory.
2008: Very strong market-timing returns, but a negative contribution from stock-selection. 2009: Early bullish call produced volatility, but very strong market-timing and stock selection
gains. 2010: Driven by market-timing; stock-selection significantly positive. 2011: Stock-selection poor, particularly cyclicals hurt by rise in risk-aversion. Believe
positioning is correct; added to positions and will hold into 2012 for a recovery. 2012: Strong market-timing gains; small contribution from stock-selection
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Contact Information For further information, please contact:
Barbara MinnsSandbourne Asset Management Ltd4 Acorn Business ParkLing RoadPooleBH12 4NZUnited Kingdom
Telephone: +44 1202 305904 Fax: +44 1202 305905 e-mail: [email protected] Website: www.sandbourne.com
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This document does not constitute or form any part of an offer to sell or an invitation to purchase or subscribe for shares or other securities, nor may it or any part of it, nor the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating thereto.
The information contained herein is for background purposes only, has not been verified and is subject to amendment, revision and updating. No representation or warranty, express or implied, is made as to the fairness, accuracy, or completeness of the information contained herein and no reliance should be placed upon it. Sandbourne Asset Management Limited do not accept any liability for any loss howsoever arising, directly or indirectly, from the issue of this document or its contents.
The information in this document is only available in the United Kingdom to investment professionals (as defined in Article 14 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions Order 2001)) (“the Order”) and accordingly to persons who have professional experience of participating in unregulated schemes or high net worth companies, unincorporated associations, etc, being persons of a kind described in Article 22 of that Order. Persons who do not fall within these categories should take no further action in respect of this document and should not rely on it in any way. This document has not been approved for the purposes of section 21 of the Financial Services and Markets Act 2000. Accordingly this document may only be issued or passed on in the United Kingdom to those persons referred to above and to whom this document may also be lawfully communicated pursuant to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001.
The attention of prospective investors is drawn to page 1 of the Continuing Offering Memorandum.
21 August 2013