Transcript Slide 1

Signature Global Advisors
Global Investing from a
Canadian Perspective
Deep, specialized investment team
CHIEF INVESTMENT OFFICER
ERIC BUSHELL, CFA (18)
GLOBAL INVESTMENT STRATEGISTS
Drummond Brodeur, CFA (22)
Eric Bushell, CFA (18)
Matthew Strauss, CFA (17)
GLOBAL SECTOR/ ASSET CLASS SPECIALISTS
Tech, Media, Telecom
Malcolm White, CFA (16)
Jeremy Yeung, CFA (10)
Industrials, Transport
Joe D'Angelo, CFA (14)
Yvonne Lau, CFA (9)
Financials
John Hadwen, CFA (18)
Goshen Benzaquen (10)
Income Trusts/REITS
Ryan Fitzgerald, CFA (7)
Joshua Varghese (1)
Aero, Auto, Defence, Utilities
Massimo Bonansinga, M.B.A. (21)
Gorlen Zhou (2)
Energy & Materials
Scott Vali, CFA (15)
Hoa Hong, CFA (10)
Sara Shahram, CFA (9)
Consumer
Stephane Champagne (16)
Henry Kwok (11)
High Yield
Geof Marshall, CFA (15)
Kevin McSweeney, CFA (11)
Brad Benson, M.A. (13)
Carlton Ling, CFA (8)
Darren Arrowsmith, CFA (12)
Investment Grade
John Shaw, CFA (21)
Paul Simon, CFA (10)
Leanne Ongaro, CFA (4)
Jonathan Chew (1)
Derek Tucker, CFA (11)
Shelly Ghai, M.B.A. (7)
Rates and Foreign Exchange
Eric Bushell, CFA (18)
Paul Simon, CFA (10)
Matthew Strauss, CFA (17)
Preferreds
John Shaw, CFA (21)
Health Care
Rui Cardoso, CFA (14)
TRADING PROFESSIONALS
Shawna McIntee (7)
Aldo Sunseri (26)
Connie Lee (10)
Global Road Map
Will the private sector bite?
Developed markets: Running out of policy bullets
Europe
Fiscal
C.Bank
US
Fiscal
C.Bank
1.5
LTRO
QE1
QE2
Twist
OMT
QE3
400 pt drop
in Fed funds
1600
1500
1.0
1400
1300
0.5
1200
1100
0.0
1000
-0.5
900
800
-1.0
US Economic Surprise Index (Actual vs Expected Data)
700
S&P 500
600
-1.5
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
A non-deflationary deleveraging recipe
Add ingredients in equal measure
• Debt paydown
• Default
• Positive growth
• Inflation
Apply low interest rates to support asset prices. Ensure
banks and credit markets function. Stir for 7-10 years.
Financial repression
Bernanke
Do not ignore valuations
Source: TD Securities
Income trust redux
Financial
repression:
negative
real rates
Capital
flows
High payout
financial
structures
Cost of capital
advantage for
high payout
model
Accretive
acquisitions
& earnings
growth
Dilemma:
convert or be
left behind
Income opportunities – caution
The progression of the yield trade – technical indicators
• Massive inflows?
• Sell-side justification of valuations?
• New products?
• Hard for fundamentals to get any better?
• Spread compression between ratings?
• Increased leverage and credit risk?
Signature flexibility
• Continue to invest in good, risk-adjusted securities
• Continue to invest in securities and asset classes set
to benefit from deleveraging
• Will not simply invest in higher-yielding, higher-risk
securities that have not yet run up in price
• Seek maximum diversification and remain cautious of
common themes that can creep into portfolios
• Take full advantage of fund flexibility to manage
downside risk
Income opportunities – high yield bonds
Value in top tier assets – MGM Resorts: 6.7%
Premier resort operator on the Las Vegas
Strip with such properties as Bellagio,
Mirage, MGM Grand as well as joint
ventures CityCenter and MGM Macau.
B3/B- rated US$8.625% bonds due
2/1/2019 and numerous secured bonds
rated Ba2/B+
Bellagio, Las Vegas
Aggressive balance sheet expansion
prior to 2008 left MGM exposed during
the credit crisis. A rebound in visitation,
borrowing on a secured basis against
‘trophy’ assets and dividends from Macau
allowed for the refinancing of near-term
maturities and ongoing debt reduction.
Yield as of October 17, 2012
Income opportunities – caution in Europe
Select buying opportunities in restructuring plays – Gecina 5.7%
Gecina
27%
31%
Metrovacesa
96%
Former insiders
42%
Public
Loans
Spanish banks
Class A Paris office and apartments,
leveraged at 40% LTV by YE 2012
Dividend yield well covered at 5.25% and
company un-surfacing value through
apartment sales and share buybacks
Louis Vuitton French headquarters, Paris
Trades at approximately 25% discount to
liquidation value
Yield as of October 17, 2012
Signature Diversified Yield
Portfolio Snapshot, as at Sept. 30, 2012
Signature Solutions
Source: “PalTrack”, as at Sep. 30, 2012
Signature team awards
Eric Bushell, Chief Investment Officer, Signature Global Advisors
Morningstar Equity Manager of the Year, 2009
Morningstar Fund Manager of the Decade, 2010
• Signature High Income Fund – Best Canadian income trust fund, 2004, Best
Global Balanced 2010, 2011
• Signature Canadian Balanced Fund – Best Canadian balanced fund, 2007,
2009
• Signature Canadian Resource Fund – Best natural resource equity fund,
2008, 2009
• Signature Dividend Fund – Best dividend fund, 2001, 2002, 2009
• Signature Income & Growth Fund – Best global balanced fund, 2008
• Signature Select Canadian Fund – Best Canadian equity fund, 2001
Appendix
Income opportunities – high yield bonds
The Schaeffler Group – European borrower in U.S. dollars: 5.4%
Leading supplier of highly-engineered
components to the global automotive and
industrial sectors. Debt levels increased
substantially when the company tendered
for shares in tire manufacturer Continental
AG in September 2008.
Ba3/B+ rated US$8.5% bonds
due 2/15/2019
Schaeffler’s slimline spur gear differential
European banks were no longer willing or
able to refinance the company’s debt,
forcing them into the public bond market;
particularly the deep U.S. dollar high yield
market. More opportunities like this to follow
as the European banking sector shrinks.
Yield as of October 17, 2012
Income opportunities – high yield bonds
Barret xPlornet – high yield bonds in Canadian dollars: 9.5%
Largest Canadian provider of broadband
Internet access to rural households using
satellites and terrestial towers.
Un-rated C$9% cash coupon and 4% PIK
senior secured bonds due 5/15/2017 with
warrants
Un-served market is 2.5mm households
with only ~6% penetration so far compared
to ~85% in urban/suburban regions.
Projected growth should enable quick
deleveraging with government subsidies
accelerating business model de-risking.
LTV = 60% on subscribers and spectrum.
Yield as of October 17, 2012
Income opportunities – real estate
Value in unique assets – Hudson Pacific Properties: 2.8%
West Coast specialist consolidating assets
in top markets such as San Francisco and
L.A.
Small market cap ($9000m) which means
that acquisition and development strategy
can dramatically increase cash flow per
share.
Valuation: valuation trades in line with
peer group despite the exposure to
superior markets and far better growth
prospects. Low dividend yield of 2.5% but
set to grow in coming years.
Sunset Bronson Studios, Hollywood CA
Yield as of October 17, 2012
Income opportunities – real estate
Value in irreplaceable assets – Whistler Blackcomb: 8.5%
Irreplaceable asset that requires little
capital expenditures and spins off a
tremendous amount of free cash flow.
Cash flows have proved very resilient to
both weather and recession.
Spun out of IntraWest which was taken
private by Fortress in a disastrous top-ofthe-market deal in 2006.
Valuation: 9x 2013 EBITDA. 8% dividend
yield and substantial potential for capital
gains.
Peak to Peak Gondola, Whistler Blackcomb, B.C.
Yield as of September 5, 2012
Income opportunities – caution in Europe
Latin American infrastructure on sale
San Cristobal Tunnel completed in 2008.
and operated by Spanish firm ACS and
German firm Hochtief. ACS is highlylevered. At the beginning of 2011 they
faced €12B in 2012 debt maturities against
a market cap of €11B.
ACS began selling assets in 2011, starting
with Latin American infrastructure assets.
Brookfield Asset Management buys a
stake in the Vespicio toll road as well as
the San Cristobal tunnel for $291mm.
San Cristobal Tunnel, Santiago, Chile
Conclusion – European deleveraging will
create global opportunities for capital
providers for years to come.
Canada’s Investment Company
Thank you