FULLY INVESTED

6 October 2020

Investment lessons from history

BCI Global Investment Conference 2020

Patrice Rassou | Chief Investment Officer

2

3

1314

1340

1366

1392

1418

1444

1470

1496

1522

1548

1574

1600

1626

1652

1678

1704

1730

1756

1782

1008

1834

1860

1886

1912

1938

1964

1990

2018

World nominal rate, GDP-weighted (%)World nominal rate, arithmetically-weighted (%)

Linear (World nominal rate, GDP-weighted (%))Linear (World nominal rate, arithmetically-weighted (%))

20

18

16

14

12

10

8

6

4

2

0

STAGNATION

Source: FirstRand Investment Office

4

THE ZERO BOUND

Source: FirstRand Investment Office

5

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%

16,00%

18,00%

Jan

1, 1

871

Jul 1

, 187

3Ja

n 1,

187

6Ju

l 1, 1

878

Jan

1, 1

881

Jul 1

, 188

3Ja

n 1,

188

6Ju

l 1, 1

888

Jan

1, 1

891

Jul 1

, 189

3Ja

n 1,

189

6Ju

l 1, 1

898

Jan

1, 1

901

Jul 1

, 190

3Ja

n 1,

190

6Ju

l 1, 1

908

Jan

1, 1

911

Jul 1

, 191

3Ja

n 1,

191

6Ju

l 1, 1

918

Jan

1, 1

921

Jul 1

, 192

3Ja

n 1,

192

6Ju

l 1, 1

928

Jan

1, 1

931

Jul 1

, 193

3Ja

n 1,

193

6Ju

l 1, 1

938

Jan

1, 1

941

Jul 1

, 194

3Ja

n 1,

194

6Ju

l 1, 1

948

Jan

1, 1

951

Jul 1

, 195

3Ja

n 1,

195

6Ju

l 1, 1

958

Jan

1, 1

961

Jul 1

, 196

3Ja

n 1,

196

6Ju

l 1, 1

968

Jan

1, 1

971

Jul 1

, 197

3Ja

n 1,

197

6Ju

l 1, 1

978

Jan

1, 1

981

Jul 1

, 198

3Ja

n 1,

198

6Ju

l 1, 1

988

Jan

1, 1

991

Jul 1

, 199

3Ja

n 1,

199

6Ju

l 1, 1

998

Jan

1, 2

001

Jul 1

, 200

3Ja

n 1,

200

6Ju

l 1, 2

008

Jan

1, 2

011

Jul 1

, 201

3Ja

n 1,

201

6Ju

l 1, 2

018

US 10 Year Treasury Rate

RETURN free RISK

Source: FirstRand Investment Office

6

656055454035302520151050

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

30

Valuation : S&P PE

Source: FirstRand Investment Office

7

8

Crisis frequency

The S&P experienced ~ high fragility event per decade from the 1920s through to the 2008 GFC; in the last 10 years it experienced 5x as many

45

40

35

30

25

20

15

10

5

0

-5

‘28

‘32

‘36

‘40

’44

‘48

‘52

‘56

‘60

‘64

‘68

‘72

‘76

‘80

‘84

‘88

‘92

’96

‘00

‘04

‘08

‘12

‘16

‘20

Crisis frequency

Source: FirstRand Investment Office

9

Closing SPX and VIX on each date when SPX hit a new all-time high

Record level RISK

Source: FirstRand Investment Office

10

30

27

24

21

18

15

12

9

6

32007 2009 2011 2013 2015 2017 2019 2021E

G4 Central Bank balance sheet (USD tn)

-1

-3

-5

-7

-9

-11

-13

-15

-172008 2010 2012 2014 2016 2018 2020

G4+ China General Government headline fiscal balance

Global: Massive policy response

Source: FirstRand Investment Office

11

The FED induced momentum

Source: FirstRand Investment Office , Bloomberg

12

Adaptation

Scientists widely believe that polar bears evolved from a group of brown bears that became isolated by glaciers in an area near Siberia. The standard bears underwent a rapid series of evolutionary changes in order to survive on the ice. Today’s Polar Bear is superbly adapted to life in the Arctic.

13

Europe : Century Low vs S&PM

SC

I Eur

ope

vs S

&P

500

-R

elat

ive

pric

e pe

rfor

man

ce

140

120

100

80

60

40

201919 1929 1939 1949 1959 1969 1979 1989 1999 2009 2019

Europe: Century low vs S&P

Source: FirstRand Investment Office

14Source: FirstRand Investment Office

Europe: Reasons for underperformance

180

170

160

150

140

130

120

145

140

135

130

125

120

115

110

105

100

Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Ap-19 Aug-19

PharmaCap Code

Food & BevMaterials

BanksUtilities

InsuranceCons Dur

Household ProdEnergy

MSCI Europe – Top 10 Industry groups by weight0 2 4 6 8 10 12

American SugarNational LeadTenessee CoalUS LeatherAmerican cotton oilLaclede GasAmerican TobaccoChicago GasGeneral ElectricUS RubberNA Distilling & Cattle Feeding

American SugarNational LeadTenessee CoalUS LeatherAmerican cotton oilGeneral ElectricNA Distilling & Cattle FeedingUS SteelAmerican Smelting

American SugarNational LeadTenessee CoalUS LeatherGeneral ElectricUS SteelAmerican SmeltingGeneral MotorsTexacoWestinghouse ElectricAT&TAmerican Can

American SugarNational LeadGeneral ElectricUS SteelAmerican SmeltingGeneral MotorsTexacoWestinghouse ElectricAT&TAmerican CanDowSears RoebuckChevronWoolworth

American SugarGeneral ElectricUS SteelAmerican SmeltingGeneral MotorsTexacoWestinghouse ElectricAT&TAmerican CanDowSears RoebuckChevronWoolworthInternational HarvesterHoneywellGeneral FoodsInternational NickelExxon MobilChryslerBethlehem SteelUnion CarbideGoodyearEastman KodakProcter & GambleCoca ColaIBM

18901890 19001900 19101910 19201920 19301930 19401940 19501950

19601960 19701970 19801980 200019901990 20102000 2010 20202020General ElectricGeneral MotorsAT&TIntl PaperDowChevronHoneywellExxon MobilEastman KodakProcter & GambleCoca ColaIBMRaytheonAlcoa3MMerckAmerican ExpressPhillip MorrisMc DonaldsBoeingCatepillarJP MorganWalt Disney

Johnson & Johnshon

WalmartHome DepotIntelMicrosoftVerizonTravellersCisco

DowChevronExxon MobilProcter & GambleCoca ColaIBMRaytheon3MMerckAmerican ExpressMc DonaldsBoeingCatepillarJP MorganWalt Disney

Johnson & Johnshon

WalmartHome DepotIntelMicrosoftVerizonTravellersCiscoUnited HealthGoldman SacsNikeVisaAppleWalgreen BootsSalesforce.comAmgenPfizer

General ElectricUS SteelGeneral MotorsTexaco

Westinghouse Electric

AT&TAmerican CanIntl PaperDowSears RoebuckChevronWoolworthInternational HarvesterHoneywellGeneral FoodsInternational NickelExxon MobilBethlehem SteelUnion CarbideGoodyearEastman KodakProcter & GambleCoca ColaIBMRaytheonAlcoa3MMerckAmerican ExpressPhillip MorrisMc DonaldsBoeing

17

Source: FirstRand Investment Office

Survival Index- Dow 30

45,5%

55,6%

75,0%

85,7%

96,2% 96,2% 96,3% 96,3%89,3%

62,5%57,1%

77,4%

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Longest Tenure in Dow 30 ?

110 Years

92 Years

Name the company always quoted for resisting CHANGE

70 Years

Who replaced Kodak?

1.4 trillion photos were taken in 2019

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Disclaimer

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