market views & investment strategies focus on h2o...

Market Views & Investment StrategiesFocus on H2O MultiStrategies

Marc Maudhuit

Morningstar Summit

Brussels 9th March 2016

2

H2O’s ID

• 37 employees inc. 15 investment professionals working together for morethan 11 years on average

• AUM was EUR 10.2 bn. as of February 29, 2016

Source: H2O AM, as at 31/12/2015

H2O manages 4 lines of products… … for an international client base

3

H2O’s DNA

Uniqueness

SpecialtyA global, active, top-down, mostly relative value, andunconstrained approachA global, active, top-down, mostly relative value, andunconstrained approach

Process

• Fully discretionary, no black box• Strong convictions fed by macro/valuation/liquidity

inputs• Strategies mainly financed using derivatives , inc.

futures & forex forwards

• Fully discretionary, no black box• Strong convictions fed by macro/valuation/liquidity

inputs• Strategies mainly financed using derivatives , inc.

futures & forex forwards

• Strong alpha generator for more than 20 years• Maintain low correlation with major asset classes• Daily liquidity

• Strong alpha generator for more than 20 years• Maintain low correlation with major asset classes• Daily liquidity

Source: H2O AM

4

CarlosDaurignac

ThomasDelabre

ChristopheChappuis

JuliettePianko

NatashaClendinnen

CEOBruno

Crastes

CIOVincentChailley

LoïcCadiouMACRO

GonzagueLegoff

TECHNICALS

StéphaneGaillard

JeremyTouboul

PascalDubreuil

PhilippineWatteaux

MICRO VOLATILITY

FLOWSVALUATION PhilippeBernardQUANTITATIVE

ANALYSTS

NatashaClendinnen

The key to delivering risk-adjusted outperformance:An investment team organised by market factors

Source: H2O AM

5

The key to delivering risk-adjusted outperformance:A well-organized investment universe

Source: H2O AM

SpecificRelative

Value

Trading (bond & equity futures, forex, volatility)Trading (bond & equity futures, forex, volatility)Overlays

SystemicRelative

Value

Country &sector allocations

G4 country&

yield curveallocations

Inter-bloc &Intra-blocallocations

SectorAllocation

(IG, HY,ABS/MBS,

EMs)

Directional G4DurationUSD

EquityBeta

CreditExposure

6

¥¥

€CHF

CAD SEK

USD

ZAR

NOK

NZDAUD

KRW

PLN

TWD

SGD

MXNIDR

TRY

BRL

INR

GBP

1

2

3 3

341. Directional exposure: USD vs.€, ¥ & CAD2. Inter-bloc positions : arbitraging the €, ¥ &

CAD blocs3. Intra-bloc positions : arbitrages within the

four blocs4. Emerging currencies

Source: H2O AM

H2O’s currency world

7

UCITS absolute performance product rangeInvestment horizon, targeted ex-post volatility bracket,performance fee & hurdle rate (*)

H2O Adagio H2O Allegro (**)

Investment Horizon 1 - 2 years 3 - 4 years

8 - 15%

4- 5 years

H2O Moderato (**)

25% > EONIA + 1% p.a. 20% > EONIA

25% > EONIA + 2% p.a.

H2O Vivace (**)

20% > EONIA

2 - 4% 4 - 8%1 - 2%Targeted volatility bracket

Bonds &Currencies

Bonds & Currencies & Equities

(*) Institutional share classes

(**) Not distributed in Belgium

Source: H2O AM

Ab

so

lute

Re

turn

2 - 3 years

8

UCITS absolute performance product range (1)Investment horizon, indicative ex-ante tracking error,performance fee & hurdle rate (*)

Investment Horizon 4 years

Maximum indicative ex-ante tracking error8%

Mu

lti-A

sse

t-C

lass

Be

nch

mar

ks

H2O MultiStrategies

25% > (50% JPM GBI B + 50% MSCI W DM) + 3% p.a.

Global Balanced (Bonds & Equities &Currencies)

H2O MultiBonds (**)

25% > JPM GBI Broad + 2% p.a.

Global Fixed Income (Bonds & Currencies)

(*) Institutional share classes

(**) Not distributed in Belgium

Source: H2O AM

3 years 5 years

H2O MultiEquities

25% > MSCI World DM + 4% p.a.

Global Equities (Equities & Currencies)

Macro scenario & market themes

NB: The analyses and opinions referenced herein represent the subjective views of the author(s) as referenced, are as of date shown and are subject tochange without prior notice. There can be no assurance that developments will transpire as may be forecasted in this material.

10

Main macro themes for H1 2016

1. Further divergence between developed and emerging countries

2. Where is the recession in the US

3. EMU growth convergence towards G4

4. Wages & price pressure in US to speed up Fed normalization

5. Low commodity prices and weakening Chinese growth are

structural

Source: H2O AM

11

Divergence between DM & EM countries

It happened before, and world growth was fine

Source: H2O AM & Bloomberg.

12

US surveys: as in 1998

Source: Bloomberg, H2O AM

13

EMU growth catching up

Activity surveys point towards EMU growth of 2% in Q4 2015


14

Wage & price pressures in US to speed up theFed

If implemented, SME compensation plans should lead to a core CPInorth of 2.5% by June 2016


15

Wage & price pressures in US to speed up theFed (2)

Fed fund rate:the Market running behind the FOMC dots running behind the Taylor rule

“Houston, we have a problem”


16

If 2015 looked like 1997, will 2016 beresembling 1998

0

20

40

60

80

100

120

1 50 99 148 197 246 295 344 393 442 491 540 589 638 687 736 785

Opec basket rebased 100 in Jan 1985

Opec basket rebased 100 in Dec 1996

Opec basket rebased 100 in Jan 2014

75

100

125

150

175

200

1 50 99 148 197 246 295 344 393 442 491 540 589 638 687 736 785

SP500 rebased 100 in Jan 1985SP500 rebased 100 in Dec 1996SP500 rebased 100 in Jan 2014

Nb. of days Nb. of days

Source: H2O AM, data as of 29/02/16.M

17

Main 2016 strategic positions

Short G4 durationShort US-EMU 10-year spreadFlattening of US & EMU yield curvesLong GIPS (Italy first) against Bunds

USD-bloc Long MXNEuro-bloc Long NOK, short CHFCommodity-FX-bloc Long CADYen-bloc Short KRWEmerging currencies Short Asia (INR, SGD, TWD)

Long RUB

Bonds

Currencies

Long MSCI WorldLong EuroStoxx vs. S&P 500; long Nikkei vs. MSCI EMLong European financials,Long US home builders & automobilesShort defensives (European food & pharmaceuticals, US consumerstaples)

Short US small- and mid-caps vs. large caps

Equities

H2O MultiStrategies’ objectives &constraints

19

H2O MultiStrategies’ investment objective

Outperform a composite benchmark made up of 50% JP MorganGovernment Bond Index Broad + 50% MSCI World DM over aminimum 4-year investment horizon by:

a) targeting a tracking-error of max 8% per annum;

b) taking positions to either neutralise or emphasise the

positions imbedded in the benchmark;

c) taking exogenous positions outside of the benchmark

universe to generate additional alpha.

Source: H2O AM

20

H2O MultiStrategies’ composite benchmark


H2O MultiStrategies’ composite benchmark is made up of:

• 50% JP Morgan Government Bond Index Broad

• 50% MSCI World Developed Markets

Buying the fund’s composite benchmark in euro results in taking longpositions in

• G4 bonds (up to 46.5%),

• G4 stocks (up to 43.3%),

while bearing a currency risk mainly in USD, GBP and JPY.

USD 48.8%

EUR 19.3%

JPY 14.8%

GBP 7.0%

Others 10.2%

FX weights

21

H2O MultiStrategies’ calendar year performance

Source: H2O AM, as at 29/02/16Please note that performance data shown represents past performance and is not a guarantee of future results.

YearH2O

MultiStrategies(*) Net

CompositeBenchmark (*)

Net Spread

2010 (23/08) 3.01% 0.18% 2.83%

2011 -29.41% 6.44% -33.68%

2012 40.19% 4.70% 33.90%

2013 32.40% 0.91% 31.21%

2014 21.38% 17.21% 3.55%

2015 33.70% 9.60% 21.99%

2016 (29/02) -14.76% -1.35% -13.59%

ITD(annualized)

11.97% 6.66% 4.98%

* From 23/08/10 thru. 30/10/13, the fund was named H2O Patrimoine and was benchmarked against 70% JPM GBI Broad+ 30% MSCI World DM. On 30/10/13, it was renamed H2O MultiStrategies and its benchmark switched to 50% JPM GBIBroad + 50% MSCI World DM.

22

H2O MultiStrategies’ past & present performanceattributions

Source: H2O AM, as at 29/02/16Please note that performance data shown represents past performance and is not a guarantee of future results.

H2O MultiStrategies I EUR 30/11/2015

FR0010930446 29/02/2016

Short G4 sovereigns (incl. 5Y UST) -3.0%

Long GIPS vs. Bunds & OATs -6.9%

Long Dollar Index -1.7%

G10 currencies positions -0.5%

Short EM currencies against USD -0.3%

Long Eurostoxx against S&P 500

Long Nikkei against EM MSCI

Long European financials against EuroStoxx

Short European and US defensive stocks

Long/short equity 1.1%

Others (credit) -0.7% 3%

Benchmark -4.4%

-24.7%

-6.5%

-2.7%

46%

12%

38%

H2O MultiStrategies I EURFR0010930446

Short G4 sovereigns (incl. 5Y UST) 4.3%

Long GIPS vs. Bunds & OATs 9.5%

Long Dollar Index 6.1%

G10 currencies positions 1.7%

Short EM currencies against USD 2.8%

Long Eurostoxx against S&P 500

Long Nikkei against EM MSCI

Long European financials against EuroStoxx

Short European and US defensive stocks

Long/short equity -1.8%

Others (inc. credit & trading) 2.4%

Fees -4.6%

Benchmark 9.6%

33.7%

5.0%

-1.5%

2015

Year 2015 Past 3 months’ drawdown

23

H2O MultiStrategies’ ITD 3-year rollingannualized performance & volatility profile

Source: H2O AM, as at 29/02/2016. Please note that past performance is not indicative of future results.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

3-year rolling performance Average 3-year rolling performance

3-year rolling volatility Average 3-year rolling volatility

24

Why H2O MultiStrategies?

• It is managed by a well-established Global Macro investment team:Vincent Chailley, the CIO, started managing Global Macro funds in April1999.

• It is an Absolute Return product that:

• generates alpha primarily based on relative value management;

• whilst offering low correlation with global bonds & equity marketindices.

• It captures a broad set of investment opportunities by:

• using a top-down risk allocation process across the four assetclasses (i.e. Government Bonds, Currencies, Credit and Equities)

• in an unconstrained framework, in terms of markets, instrumentsand ratings

Important note: Investors should consider the investment objectives, risks, charges and expenses of the fund before investing. This piece ofinformation are detailed in the fund’s prospectus and KIID. To obtain these documents, please contact your usual investment advisor or visit ourwebsite www.h2o-am.com.Source: H2O AM.

25

Disclaimer

H2O is authorised and regulated by the Financial Conduct Authority (FCA) and the Bank of EnglandPrudential Regulation Authority (PRA), the two UK financial regulatory authorities. H2O has beenassigned a C4 conduct classification and a P3 prudential classification and is listed on the UK FinancialServices Register under firm reference number 529105.

This document (and any attachments thereto) is confidential and for use only by the intended recipient.Access by others is unauthorized. Its content should not be relied upon and no liability or responsibility isaccepted by us (H20 AM LLP) or associated companies), without subsequent written confirmation of itscontents, signed by an authorized signatory. If you are not the intended recipient, please notify uspromptly and delete all copies and note any discloser, copying, distribution or any action taken oromitted to be taken in reliance on the information it contains is prohibited and may be unlawful. Thismessage is provided for information purposes and should not be construed as a solicitation or offer tobuy or sell any securities or related financial instruments.

Company Name & Business Office: H20 AM LLP, 2nd floor, 10 Old Burlington Street, London W1S 3AG.Company Number OC356207.

Additional Notes

This material has been provided for information purposes only to investment service providers or other Professional Clients or Qualified Investors and, whenrequired by local regulation, only at their written request. It is the responsibility of each investment service provider to ensure that the offering or sale of fundshares or third party investment services to its clients complies with the relevant national law.

In Belgium This material is provided by NGAM S.A., a Luxembourg management company authorized by the Commission de Surveillance du Secteur Financierand incorporated under Luxembourg laws and registered under n. B 115843. Registered office of NGAM S.A.: 2, rue Jean Monnet, L-2180 Luxembourg, GrandDuchy of Luxembourg.

The above referenced entity is a business development unit of Natixis Global Asset Management S.A., the holding company of a diverse line-up of specialisedinvestment management and distribution entities worldwide. The investment management subsidiaries of Natixis Global Asset Management conduct anyregulated activities only in and from the jurisdictions in which they are licensed or authorized. Their services and the products they manage are not available toall investors in all jurisdictions.

Although Natixis Global Asset Management believes the information provided in this material to be reliable , including that from third party sources, it does notguarantee the accuracy, adequacy, or completeness of such information.

The provision of this material and/or reference to specific securities, sectors, or markets within this material does not constitute investment advice, or arecommendation or an offer to buy or to sell any security, or an offer of services. Investors should consider the investment objectives, risks and expenses of anyinvestment carefully before investing. The analyses, opinions, and certain of the investment themes and processes referenced herein represent the views of theportfolio manager(s) as of the date indicated. These, as well as the portfolio holdings and characteristics shown, are subject to change. There can be noassurance that developments will transpire as may be forecasted in this material.

This material may not be distributed, published, or reproduced, in whole or in part.

All amounts shown are expressed in USD unless otherwise indicated.

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