bias global navigator - quarter 4, 2013

Biotechnology uses living systems and or-ganisms to create new drugs. The termhas expanded to include new and diverse

sciences such as ge-nomics, gene thera-pies and thedevelopment of diag-nostic tests and newtreatments. It is thebiotech companiesthat develop morenew medicines thesedays than large drugcompanies.

By way of exam-ple, some newlyemerging productsfocus on “targeted”regimens that followa pathway importantin signaling specificcells in the immunesystem. These newapproaches arepoised to reshapetreatment for one ofthe most commonforms of leukemia,Chronic Lymphocytic Leukemia in adults, poten-tially eliminating chemotherapy and extendingpatients’ lives.

New presentations at the American Societyof Hematology meeting in New Orleans in earlyDecember suggest combination regimens mayremove the need for chemotherapy and the re-lated toxic side effects while also driving betterresults. This becomes extremely important toolder people, some of whom cannot tolerate the

toxic chemotherapies that are a part of currenttreatment. Collectively, the new treatments forthis disease alone are expected to generate as

much as $9 billion inannual revenues by2020.

It was five yearsago that the com-bined approvals atthe FDA (FederalDrug Agency) frombiotech companiesfirst surpassed ap-provals from bigpharmaceutical com-panies. And the list isgrowing. Rather thantry to pick individualbiotech names, wehave chosen to gainexposure to thisground breaking sec-tor through a biotech-nology ETF thatoffers diversified ex-posure as it holdsboth large and smallbiotech companies.

The Life Science Tools segment of the marketis another investable area which critically sup-ports the development of new, innovative treat-ments. First, some definitions:

• Life Sciences are the study of living organisms – plant, animal and human

• Life Science Tools are the instruments anddisposables used in research and diagnosis

This literature does not constitutean offer to sell or a solicitation ofan offer to purchase any securityand cannot disclose all risks andsignificant elements of such a pur-chase. BIAS’ services are only forsuitable investors who are able tobear a loss of their investment plusany undistributed profits. Examinethe information contained in theFund’s Information Memorandumcarefully before deciding to invest.Information has been obtainedfrom sources believed to be reli-able, but its accuracy and com-pleteness, and the opinions basedthereon, are not guaranteed andno responsibility is assumed forerrors and omissions.

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Healthcare to Suit

P O R T F O L I O M A N A G E R S S E C U R I T I E S A N A LY S T S JANUARY 2014

On November 24, the five members ofthe UN Security Council plus Germany(the so-called P5+1) reached an in-

terim agreement with Iran over the nation’s nu-clear program and economic sanctions. TheP5+1 held several meetings earlier in the yearbut things only moved ahead after HassanRouhani succeeded Mahmoud Ahmadinejad inthe presidential elections held in June 2013.

Urgency of the dealRouhani emphasized moderation in his electioncampaign and promised constructive engagementwith the international community over the nuclearprogram and US sanctions. Barclays’ senior strate-gist, Helima Croft, cites the charismatic leadershipand his very qualified and eloquent foreign policyteam as one of the key ingredients that made thedeal successful. Croft also highlighted the urgencyof the deal stating that Iran had enough 20 percentenriched stockpiles to create weapons grade ura-nium in a few weeks. Forcing Iran to dispose ofthose stockpiles and allowing daily supervision hastherefore stretched the process to several months.This has bought the West crucial time and enabledIran to bargain on the ‘3 red lines’ it said it wouldnot cross. These were 1) no halting of the enrich-ment program, 2) no export of stock piles, and 3)no shutting down of facilities.

Balancing the fine lineWhile there was optimism after the deal, the US

and its allies have to walk a fine line for longterm success in the region. Israel and SaudiArabia, who demanded a complete halt on Iran’snuclear program and further sanctions, are nothappy with the agreement. Analysts expect thatIsrael will now use diplomatic pressure on the USCongress to not only continue sanctions but alsopush for further tightening. Saudi Arabia, on theother hand, remains cautious of Iran’s continueduranium enrichment and may pursue the acqui-sition of its own nuclear assets or allow Pakistanto place nuclear assets in the Kingdom as a de-terrent to the threat from Iran. The P5+1 has tokeep all stakeholders in the region acquiescentwhile working out a long term deal with theIranians.

Impact on oil pricesThe agreement does not directly help Iran on theoil exports ban. It does, however, allow insurancecompanies to cover cargo. Until now, Iran had tooffer steep discounts to importing countries tocompensate for the absence of cargo insuranceand in most cases that led to underutilized ex-ports. As a result, analysts expect some supplyadditions to come online but not significantenough to move international oil prices. Analystsfurther added that the ‘military premium’ tocrude oil has been removed with investors feel-ing more confident that conflicts in the MiddleEast may now be resolvable by diplomaticmeans alone.

IRAN:Implications of the Interim Agreement

The P5+1 has to keep all stake-

holders in the region acquiescentwhile working out

a long term dealwith the Iranians.

2

The recent US Thanksgiving spending re-sults reinforced two of our favoured in-vestment themes: mobile computing and

consumer discretionary spending, in particulare-commerce.

Tech journals report that e-commerce is setto grow by 30% this year to become a $1.3 tril-lion industry by the end of 2013 with the US lead-ing largely as a result of their dominance of themeans of conducting e-commerce: the laptop,tablet and smartphone. As emerging marketscatch up in that respect so will the metrics of e-commerce. The facts speak for themselves:

• US online sales will grow from $365 billionin 2012 to $409 billion in 2013 (or +12%)

• Pan-Asia’s will grow from $332 billion in2012 to $433 billion in 2013 (or + 30%) –one-third of all internet commerce!

According to Adobe, online sales forThanksgiving 2013 came in over $1 billion forthe first time ever. The company analyzed 180

million visits tomore than 1,000US retail web-sites. Importantly,much of the ac-tivity was initi-ated from mobiledevices.

Interestingly,while buyers weresatisfied to searchfor items on theirS m a r t p h o n e s,they found buying

via Tablet more efficient. As the use of mobile de-vices becomes ever more dominant we expectsales growth to expand. Anecdotally, the authorpurchased all of his presents online via tablet thisseason!

You may remember that in 2001 the HumanGenome Project provided the initial draft of thehuman DNA sequence. This significant advancewas produced by 23 collaborating labs, taking 13years of work and costing $23 billion. Today, onelab using Next Generation Sequencing (NGS) cansequence the entire human genome within a fewdays of work for a cost of a few thousand dollars.This is important as today laboratories can:

• test probable responses to new treatmentsbased on genetics

• develop new treatments for human and an-imal diseases

• identify susceptibility to inherited diseasesbefore onset of symptoms

• diagnose abnormal cells such as cancers• identify unaffected people who both carry

a copy of a gene for certain diseases, suchas Huntington’s disease

• perform forensic testing used both beforeand after convictions

• determine the paternity of a child• determine genealogical ancestry based on

DNA testing • develop industrial and environmental

applications• develop new seeds and plants

The Life Science Tools market is currentlyvalued at $40 billion but expected to double by2016. Furthermore, cash rich big pharma is ac-tively seeking exposure to life sciences in gen-eral but in particular the genetic sequencingsub-sector so M&A activity is likely.

Our exposure to this overlooked (by in-vestors at large, not by other healthcare pred-ators) sector is through Thermo FisherScientific (TMO), a company that is diversifiedin the Life Science Tools category. TMO is inthe process of buying a company called LIFEwhich brings genetic sequencing expertise,one of the fastest growing segments of LifeScience Tools. The deal is due to close in May2014.

E-Commerce –Cyber Monday

The Life ScienceTools segment of the market is another investablearea which critically supportsthe development of new, innovativetreatments.

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Healthcare(Continued from Page 1)

Bermuda Investment Advisory Services LimitedWessex House, First Floor, 45 Reid Street, Hamilton HM12P.O. Box HM 988, Hamilton HM DX, BermudaTel: (441) 292-4292 • Fax: (441) 292-7292E-mail: [email protected] • Web Site: www.bias.bmLicensed to conduct Investment Business by the Bermuda Monetary Authority.

BIAS (Cayman) LimitedGovernors Square, 23 Lime Tree Bay Avenue, Suite 5-203,P.O. Box 30862, Grand Cayman, KY1-1204, Cayman IslandsTel: (345) 943-0003 • Fax: (345) 943-0004E-mail: [email protected] • Web Site: www.bias.kyLicensed by the Cayman Islands Monetary Authority to conduct investment business.

Past Performance is notindicative of future re-sults. Please note thatthe investment returnand principal value of aninvestment will fluctuateso that an investor'sshares, when redeemed, may be worth more orless than their originalcost; and that currentperformance may belower or higher thanthe performance dataquoted.

Performance Q4/13 1-Year 2-Year 3-Year Since Incept.(Annualized) (Annualized) (Annualized)

Equities Fund 7.71% 17.81% 11.04% 4.07% 0.48%

Benchmark 8.01% 26.01% 21.29% 11.70% 4.53%


Dividend Fund 2.76% 7.17% — — 4.18%

GDI Total Return 3.55% 10.15% — — 9.19%

Benchmark 8.01% 26.01% — — 29.70%

Global Equities Fund

Global Dividend Income Fund

Global Balanced Fund

Short Duration Income Fund

W W W . B I A S G L O B A L P O R T F O L I O S . C O M

Equities Q4 2013

Global equity markets advancedinto year end as investors exulted

in economic data showing growth inthe US and the eurozone was gainingmomentum. Broadly, US and eurozonemarkets moved higher in tandem withreturns roughly equal in US dollarterms. Standouts included Germany,Italy, and Spain, while laggards in-cluded Asia, emerging markets, andAustralia. Sector results were led byTechnology, Health Care, Industrialand Consumer Discretionary. For theyear, US equity markets led perform-ance globally with Germany and Japanclose behind while Australia and Chinalagged, all in US dollar terms.

Currencies Q4 2013

The US dollar weakened againstboth the euro and Sterling in the

Fourth Quarter backed by improvingeconomic performance. In fact, bothcurrencies reached two-year highsagainst the dollar at the end ofDecember. All commodity currenciesweakened against the dollar in thequarter as raw-materials prices fell.Additionally, slowing growth anddovish central banks in both Canadaand Australia weighed on their respec-tive currencies. ‘Abenomics’, i.e. policymeasures to resolve Japan’s macroeco-nomic problems, continued to weighon the Japanese yen.

Fixed Income Q4 2013

All but the very shortest Treasuryyields rose in the Fourth Quarter

on improving economic data and theFed’s announcement that it wouldstart reducing bond purchases (i.e. re-duce monetary stimulus) in January2014. While yields on longer-maturitybonds rose, yields on the very shortestbonds were firmly anchored by theFed’s commitment to keep interestrates low. Corporate bonds in generaldid better than Treasuries in the quar-ter as improving economic growthboosted prospects for companies andtheir better relative yields. However,low liquidity in the corporate bondmarket caused volatile prices through-out the quarter.


Balanced Fund 5.45% 11.42% 8.20% 3.73% 2.43%

Benchmark 4.69% 15.33% 13.33% 7.71% 4.28%


Short Duration Fund-0.21% -0.74% -0.24% -0.08% 1.54%

Benchmark 0.06% 0.37% 0.40% 0.75% 2.69%Benchmark:Citigroup 1-3yr Treas Index

Inception Date: December 29, 2006

Benchmark:* Blended Composite†


Benchmark:S&P Global 1200 Index

Inception Date: September 28, 2012

Benchmark:* S&P Global 1200 Index


*Prior to April 1, 2012 benchmark was FTSE World Equity Index. † 60% S&P Global 1200 Index/ 20% Citigroup 1-3Yr Treas. Index/ 20% Citigroup 3-7 Yr Treas. Index

low highRisk:

low highRisk:

low highRisk:

low highRisk:

Management Commentary

Performance (as at 31st December 2013)

bias global navigator - quarter 4, 2013

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