1. BANK DEGROOF
Presentation for VIVIUM Assurances
Bruxelles Kinepolis
14th October 2010
Mr. Thomas-Karl Palmblad
14th October 2010
2. Agenda
1. Introduction of Bank Degroof
2. Introduction to Degroof’s Global Investment approach for VIVIUM
3. Introduction of Bank Degroof’s Behavioral Value strategy
4. Q & A
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3. Bank Degroof
Independent merchant Bank, founded in 1871, owned by its
management
24.1 bn EUR in assets under management
Asset management produces 80% of income
Headcount 1000
Offices in Belgium (HQ), Luxembourg, Switzerland, France,
Spain and Bahamas
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4. MANAGEMENT AND STAFF HAVE A STAKE IN THE GROUP’S SUCCESS
1. Senior management owns a majority stake
in the bank. This gives them, in a long-term
approach, a vital interest in the bank's
performance and reputation
Management & staff include (1)
controlling stake held by Guimard Finance
and the Philippson, Siaens, Schockert,
Haegelsteen and Fontaine families, (2)
active partners and
(3) other members of management and staff
Management
and staff
Financial
2. Financial partners include Compagnie du
Bois Sauvage, Parmafin (Theo Maes
partners and others
63.85%
family), Luc Waucquez family, Levimmo
and others. Own shares represent 1.19 %
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36.15%
5. BANK DEGROOF’S REPUTATION IS BUILT ON THE EXPERTISE
MADE AVAILABLE TO ITS CLIENTS
Private clients
Institutional clients
Private wealth management
• Bank Degroof Brussel’s Institutional Portfolio
Management department, Degroof Fund Managament
Company and Degroof Gestion Institutionnelle (DGI)
are the Degroof group's competence centres for
institutional asset management
• Protect and grow
• Full support at all stages of wealth creation
• EUR 21.0 billion in assets under
management
• Management of EUR 15.9 billion in UCIs
• Management of EUR 2.9 billion of institutional
portfolios
Financial markets
• Specialists in legal, fiscal and inheritance
structuring
• Long-established financial market player
• Advice and sales to institutional clients in equities,
bonds, undertakings for collective investment, listed
derivatives and treasury management
• A leading liquidity provider on Euronext Brussels
Credits & Structuring
UCI administration
Legal and patrimonial structuring
• Credit facilities as part of overall asset
management relationships
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Public and private
companies and their
shareholders
Corporate Finance
• M&A expertise, recognized by various
rankings
• Dominant position in the issue of fairness
opinions
• One of the main financial advisers to the
Belgian state and regional governments for
privatisations and other major financial
operations
• Active role in private and public placements
for private companies and companies listed
on Euronext Brussels
Credits & Structuring
• Structured and tailor-made credits
6. OUR REPUTATION AND
PROFESSIONAL APPROACH
ENABLE US TO ATTRACT AND
RETAIN HIGHLY COMPETENT
PROFESSIONALS
• Our culture is that of top grade professionals,
working together in a climate of mutual trust and
respect to produce optimal, lasting solutions for
our clients
• This culture provides a stability stimulating
creative innovation
• We favour a long-term approach, with close
attention to financial fundamentals
• For example, the average length of service of
senior staff is 11.2 years
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7. Bank Degroof = excellent performance thanks to
• a clear and contrarian investment philosophy,
• inspired by academic research and, that is translated
• into disciplined investment processes by Teams
• through a "fundamental-quantitative” approach
• and with tight risk control
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8. VIVIUM, the switch to Degroof Active Management Styles
VIVIUM Managed Funds
4 Compartments
Degroof Active Funds
Selection of 4 Management Styles
Low
Stability Fund
Balanced Fund
Global Medium
Dynamic Fund
Global High
Aggressive Fund
8
Global Low
Equities Europe
Behavioral Value
DEGROOF FUND MANAGEMENT COMPANY
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Active
Risk
Level
High
9. VIVIUM, the switch to Degroof Active Managed Investment Processes
VIVIUM Managed Funds
4 Compartments
12 months return as at
30th September 2010
Stability Fund
Return 1 Year : + 6.61%
Balanced Fund
Return 1 Year : + 8.51%
Dynamic Fund
Return 1 Year : + 9.89%
Aggressive Fund
Low:
20%
Return 1 Year : + 5.31%
Equity
Level
High:
100%
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10. VIVIUM, the switch to Degroof Active Managed Investment Processes
VIVIUM Managed Funds
4 Compartments
Low:
20%
Stability Fund
Tracking Error 1.92% Vol. 5.29%
Balanced Fund
Tracking Error 2.92% Vol. 9.8%
Dynamic Fund
Tracking Error 6.28% Vol. 15.5%
Aggressive Fund
Tracking Error 5% Vol. 19.7%
Equity
Level
High:
100%
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11. ASSET
ASSET ALLOC
ALLOCATION
INTRODUCTION
•
DIVERSIFICATION
PERFORMANCE
CONCLUSION
3 RISK PROFILES
ASSETS UNDER MANAGEMENT (mio €)
GLOBAL LOW
2,500
1,918
2,000
GLOBAL MEDIUM
1,500
GLOBAL HIGH
1,000
580
EQUITY RATIO
DEGROOF
GLOBAL ISIS
LOW
-
20%
ISIS LOW
DEGROOF
GLOBAL ISIS
MEDIUM
48%
DEGROOF
GLOBAL ISIS
HIGH
75%
0%
11
20%
347
500
40%
60%
80%
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100%
ISIS MEDIUM
ISIS HIGH
12. INTRODUCTION
•
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
CONCLUSION
MEDIUM = Flagship Management of Banque Degroof, 1.92 billion euros
reflects the allocation strategy of medium risk
•
OBJECTIVE
OPTIMIZE THE RETURN
1. Allocation
between
assets classes
2. Diversification
within every
asset class
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80% OF THE RETURN
20% OF THE RETURN
16. INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
3. ALLOCATION TOOLS (ASSETS CLASSES)
INVESTMENT COMMITTEE
MACRO-ECONOMY
-Growth: Europe, USA, Japan, Emerging countries
-Inflation :
CPI, PPI
Monetary aggegates
Commodities prices
World trade volume
Labor cost
-Short term interest
-Long term interest
-Exchange rates
-Equity markets valorisations
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Leading indicators
Consummer confidence
Labour market
New orders
Inventories
Profitability
Real estate activity
Credits
CONCLUSION
17. INTRODUCTION
ASSET
ALLOCATION
PERFORMANCE
DIVERSIFICATION
CONCLUSION
3. ALLOCATION TOOLS (ASSETS CLASSES)
INVESTMENT COMMITTEE
FINANCIAL RATIOS
FIXED INCOME COMMITTEE
BONDS ALLOCATION
- Duration/Positioning
- Price/Earnings
- Earnings revision
- Govies-Inflation linked: Expected inflation
QUANTITATIVE TOOLS
- Credit: Corporate - govies:
- Allocation Equity-Bonds: Risk premium
- Sectors
- Allocation Blue-Small:
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Real interest rate
Yield curve
- Countries
Relative P/E
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Rating/risk
18. INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
4. STRATEGY
A. GLOBAL ALLOCATION
Slightly overweighted in equity
Underweighted in real estate
(%)
Lower bonds duration
50
40
30
20
10
0
e
s
y
ve
ds
tat
uit
nd
ati
s
q
o
on
E
B
rn
B
le
lte
nv
ea
A
R
Co
Isis Medium
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Benchmark
sh
Ca
CONCLUSION
19. INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
4. STRATEGY
B. EQUITY ALLOCATION
Underweighted in Japan
25
(%)
20
15
10
5
0
a
ts
ro
uro
ri c
eu
mk
e
E
g
ex
Am
e
Em
h
p
rt
&
uro
No
E
sia
A
Isis Medium
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Benchmark
pa
Ja
n
CONCLUSION
29. Introduction to Bank Degroof’s Behavioral Value strategy
Unfortunately …
Cumulative value of British shares between 1955 and 2001
You are here
Source: “Capturing the Value Premium in the UK; 1955-2001” Dimson, Nagel & Quigley, LSE, January 2003
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30. Introduction to Bank Degroof’s Behavioral Value strategy
2. Quality of forecasting is a disaster
Behavioral Value deals with these flaws through
A. Strong buying and selling discipline
Obtained through a quantitative approach and improved by
behavioral criteria such as earnings revision momentum
B. Behavioral Value eliminates the analysts’ bias of
long term optimism
By introducing mean reverting in the valuation model/business plan
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31. Behavioral Value
The Wheel of Fortune – where Degroof is
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32. Risk Premium
Last update : 02/09/201
0
1
4.75%
DJ Stoxx 50 Earnings Yield Gap - Growth sensitivity
1
4.75%
No rmative RP = 2.90% ; Last = 1 4% ; 30/08/201 = 1
0.1
0
0.60%
1
3.75%
1
3.75%
1
2.75%
1
2.75%
1 .75%
1
1 .75%
1
1
0.75%
1
0.75%
9.75%
9.75%
8.75%
8.75%
7.75%
7.75%
6.75%
6.75%
5.75%
5.75%
4.75%
4.75%
3.75%
3.75%
2.75%
2.75%
1
.75%
1
.75%
0.75%
0.75%
-0.25%
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Risk P remium
32
No rmative RP
-25%
-1
5%
-5%
5%
1
5%
Stdev
Stdev
-35%
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Jan-1
0
-0.25%
33. Degroof Equities Europe Behavioral Value Gips
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34. Market snapshot
Source: Bloomberg 8th October 2010
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35. Outlook
Comparison to previous crises
Start
End
Return US Equity Market
Q4 1948
Q4 1949
-15%
Q2 1953
Q2 1954
-12%
Q3 1957
Q2 1958
-19%
Q2 1960
Q1 1961
-11%
Q4 1969
Q4 1970
-30%
Q4 1973
Q1 1975
-46%
Q1 1980
Q3 1980
-7%
Q3 1981
Q4 1982
-24%
Q3 1990
Q1 1991
-16%
Q1 2001
Q4 2001
-46%
Q1 2008 (?)
Q1 2009 (?)
-43%
Mean
-23%
Median
-17%
Source: Lehman Brothers, Global Strategy Outlook, 7 December 2007
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36. Outlook
Equities
Performance US equities 12 months after bear market bottom
Bottom reached at
8 July 1932
171%
31 March 1938
29%
28 April 1942
54%
19 May 1947
19%
13 June 1949
42%
22 October 1957
31%
26 June 1962
33%
7 October 1966
33%
26 May 1970
44%
3 October 1974
38%
12 August 1982
58%
4 December 1987
21%
11 October 1990
29%
9 October 2002
9 March 2009
34%
Oct 8, 2010 +68%
Average
45%
Median
33%
Source: Global Financial Data
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37. Contact details
Thomas Palmblad,
Institutional & Corporate Desk
Rue de l’Industrie 44
1040 Bruxelles
E-mail: TKP@degroof.be
Phone: +32 2 287 93 27
www.degroof.be
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