Centre Global Select Equity Fund Large Capitalization Foreign (non-U.S.) Stock Fund Concentrated Portfolio Differentiated Regional GDP-Driven Portfolio Construction Actively Managed to Seek Long Term Alpha Fund Profile: Summary Investment Objective: The Fund seeks to generate long-term capital growth Investment Strategy Highlights: An international equity fund for investors seeking higher growth through overseas market exposure, without suffering the excessive volatility associated with dedicated emerging markets funds Invests in a diversified portfolio of large capitalization foreign (non-U.S.) blue chip equity securities High conviction investment ideas – What we believe are the best 80 to 100 stocks of global (non-US) companies, concentrated in the top 40 names We consider these the best blue chips of developed markets plus emerging blue chips from the developing world Bottom Up Fundamental Stock Selection Process driven by Economic Value Added (EVA) investment philosophy Stock selection is combined with portfolio construction process that is focused on GDP-driven regional weightings rather than market capitalization; regional weights determined by economic footprint rather than market capitalization Two sources of potential excess return – stock selection alpha and portfolio construction “smart beta” 2 Fund Profile: Fund Manager Xavier Smith, MBA, CFA is Investment Director and Fund Manager at Centre Asset Management, LLC and is responsible for the firm's Global Select Equity strategy. Prior to joining Centre Asset Management, Mr. Smith was a Managing Director at Guggenheim Global Trading in New York where he was a Portfolio Manager responsible for the European Industrials Fundamental Equity Long/Short Portfolio. Before Guggenheim, Mr. Smith worked at Calypso Capital Management in New York as the Sector Head for the Global Industrials Sector where he was responsible for generating long and short fundamental equity investments for the fund. Prior to Calypso, Mr. Smith was an Executive Director at Goldman Sachs Asset Management in London, England. At Goldman Sachs, Mr. Smith was an Equity Analyst covering the Consumer Products, Healthcare, Industrials, and Technology sectors. Mr. Smith worked on Goldman Sachs' institutional UK, Pan-European, and Global portfolios. Mr. Smith joined Goldman Sachs after attaining his MBA from the Wharton School at the University of Pennsylvania. Prior to business school, Mr. Smith worked in information technology consulting at Ernst & Young. Mr. Smith graduated with honors from Tulane University and earned a degree in Economics. Mr. Smith is a CFA charter holder. 3 Fund Profile: Characteristics Style: Foreign Large Cap Core/Blend Regional Weightings Region # of Stocks Held Weight % Asia Pacific 32 42.0 Western Europe 25 34.5 Central Asia 5 7.5 North America 6 7.0 South & Central America 6 4.7 Eastern Europe 3 2.4 Africa/Middle East 2 1.8 Market Cap Definitions Giant > $40 billion Large $8 billion - $40 billion Mid $1 billion Small $500 million - $1 billion Micro < $500 million Source: Morningstar (as of 31-Dec-2014) Source: Centre Asset Management (as of 27-Feb-2014) 4 Differentiated Fundamental Approach Concentrated Portfolio: Invests in high conviction investment ideas – the best 80 to 100 stocks of global (ex-U.S.) blue chip companies, concentrated in the top 40 names. High Emerging Market Exposure: Fund has a material exposure to Emerging Market regions. Current exposure is roughly 40 percent (normal range of exposure is approximately 35% to 50%). Improved Stock Selection Through EVA: Historically, high Economic Value Added (EVA®) companies have outperformed low EVA ones. By targeting companies with attractive EVA profiles, Global Select Equity narrows its focus to high quality companies that make wise capital allocation decisions. Additionally, EVA facilitates cross-border comparisons between the best emerging market names and developed market blue-chip firms because it standardizes accounting across nations. Quite simply, EVA is the profit earned by the firm less the cost of financing the firm's capital. The idea is that value is created when the return on the firm's economic capital employed is greater than the cost of that capital. Smart Beta-Enhanced Global Growth Exposure: Utilizing a smart beta approach to portfolio construction that focuses on Gross Domestic Product (GDP) weights instead of market capitalization as guideposts for regional and country weightings, Global Select Equity is structured to tilt towards the world’s fastest growing economies as well as avoiding/underweighting overvalued markets, e.g., Japan in 1990. Over the last 40 years, GDPweighted indices have materially outperformed market cap-weighted indices and also have higher exposure to developed market powerhouses like Germany, Hong Kong, and Israel. 5 EVA Advantage: High EVA Companies Outperform Low EVA Companies EVA Returns Spreads (1998-2014) Small Cap – Market capitalization $0.5 Billion to $5 Billion Large Cap – Market capitalization > $5 Billion All Cap – Any market capitalization Source: Compounded log returns from EVA Dimensions Equity Research performance report January. As of 31-Dec-2014. The performance information quoted above represents past performance, which is not a guarantee of future results 6 Underinvestment highlights few opportunities for creating shareholder wealth or short-termism by management at the expense of long-term investment for growth Shareholder wealth is maximized by internal growth and related, strategic acquisitions GDF Suez Kone SAP China Merchant Bank Novo Nordisk Tata Motors 0% 5% 10% 15% 20% 25% 30% 35% Excess Returns Relative to Capital Growth Rate ("Economically" Profitable Reinvestment) QUADRANT I (- +) QUADRANT II (+ +) "Dead Money" "Stable or High Growth" AVOID POTENTIAL BUY QUADRANT III (+ -) "Empire Building" AVOID Stock repurchases, dividends, debt pay-down and other measures of wise contraction (asset sales & restructuring) create shareholder wealth Inefficient growth and wealth destruction - excessive capital spending at cycle peak, empire building M&A transactions - nonrelated, non-strategic or overpriced acquisitions -20% -15% -10% -5% QUADRANT IV(- -) "Wise Contraction or Cyclical Restructuring" POTENTIAL BUY -30% -25% BHP Billiton Michelin Iberdrola Vale Intesa Sanpaolo Bridgestone -35% Excess Return on Invested Capital (Operating Return Less Required Return) Investment Process: EVA-driven Stock Selection -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% Invested Capital Growth Rate 7 Selected Position: Tata Motors High Growth Firm With Higher Quality than Global Peers Higher Profitability: 10% margins vs. 8% at peers. Return on Capital (ROC) 14% vs. 6% at peers Faster Growth: 11% sales growth vs. 3% at peers Lower Leverage: 0.6x net debt/EBITDA vs. 3x for peers Peers: Honda, Toyota, Volkswagen (owns Audi), Hyundai, Daimler (owns Mercedes) TATA vs. Peers Comparison 16.0% 14.0% 14.0% 12.0% 11.0% 10.0% 10.0% 8.0% 8.0% 6.0% 6.0% 4.0% 3.0% 2.0% 0.0% Sales Growth Operating Margins TATA Peers Return on Capital Tata Motors was 1.14% of the Fund’s portfolio as of 31-Dec-2014 Source: Bloomberg as of 13-Mar-2015. Past performance is not a guarantee of future results 8 Smart Beta Advantage: GDP Adjusted World Ex-U.S.A. Index Outperforms Market Cap Weighted World Ex-U.S.A. Benchmark Cumulative Total Return MSCI ACWI Ex-U.S.A. GDP Weighted Index vs. MSCI ACWI Ex-U.S.A. Market Cap Weighted Index From 30-Jun-2000 to 27-Feb-2015 $3.0 2.5 2.0 1.5 1.0 0.5 0.0 2000 2001 2002 2003 2004 2005 2006 MSCI ACWI EX-USA 2007 2008 2009 2010 2011 2012 2013 2014 MSCI ACWI EX-USA GDP Source: Bloomberg as of 27-Feb-2015. Past performance is not a guarantee of future results 9 Smart Beta Advantage: Risk and Return Over the long term, investors were rewarded for the higher risk of GDP indices Return/risk metric for GDP index historically favorable to market cap based index Index Return and Risk Metrics 30-Jun-2000 to 27-Feb-2015 Performance Metric MSCWI ACWI Ex-U.S.A. GDP Index MSCI ACWI Ex-U.S.A. Index Annualized Return 5.22% 1.50% Annualized Risk 19.40% 17.9% 0.27x 0.08x Return/Risk All information is historical and not indicative of future results and subject to change. Reader should not assume that an investment in the securities mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results. Source: Bloomberg as of 27-Feb-2015. Risk is defined as standard deviation 10 Smart Beta Advantage: Attractive Fundamentals Profitability and cash generation metrics are currently higher for MSCI ACWI Ex-U.S.A. GDP index Valuation metrics are currently lower for MSCI ACWI Ex U.S.A. GDP index constituents Index Fundamentals (same constituents, differing weights—economic footprint vs. market cap) Fundamental Metric MSCWI ACWI Ex-U.S.A GDP Index MSCI ACWI Ex-U.S.A. Index Operating Margin 11.1% 10.1% Return on Capital 4.8% 4.6% Free Cash Flow Growth 2015 47.3% 41.9% Leverage (Net Debt/EBITDA) 1.7x 1.8x Price to Earnings 2015 13.6x 15.5x Price to Sales 2015 1.05x 1.11x Source: Bloomberg, MSCI as of 10-Mar-2015 11 Smart Beta Advantage: Warren Buffett and GDP “Probably the best single measure of where valuations stand at any given moment” —Warren Buffet on Market Cap to GDP ratio International markets currently more favorable than United States Potentially highlights ability to avoid/underweight overvalued markets Market Cap and GDP Ratios For Selected Countries Market Cap to GDP Ratio 2014 GDP ($ Trillion) March 2015 Market Cap ($ Trillion) United States 1.4x 17.4 24.6 Japan 1.0x 4.8 4.8 India 0.8x 2.0 1.7 France 0.7x 2.9 2.0 China 0.5x 10.4 5.5 Germany 0.5x 3.8 1.9 Country Source: Bloomberg, International Monetary Fund as of 10-Mar-2015. Warren Buffet quote Fortune 10-Dec-2001 12 Portfolio Construction: “Smart Beta” - GDP-driven Regional Weightings for Portfolio Construction Ensures a Mix of Developed and Developing Blue Chips Centre Global Select Equity Fund Region MSCI ACWI Ex-U.S.A. MSCI ACWI Ex-U.S.A. (Market Capitalization (GDP Based Weight) Weight) Americas 11.7% 10.3% 10.6% Europe, Middle East & Africa (EMEA) 38.8% 51.0% 40.5% Asia Pacific 49.5% 38.7% 48.9% MSCI ACWI ExMSCI ACWI Ex-U.S.A. U.S.A. (Market (GDP Based Weight) Capitalization Weight) Source: MSCI, World Bank and Centre Asset Management as of 27-Feb-2015 Centre Global Select Equity Fund 13 Investment Outlook and Key Observations From Bottoms Up Data Europe Getting Ahead of Itself: Region with highest number of stocks with negative business operations momentum but positive relative stock price performance European companies have seen a lack of margin progression since Euro Crisis European market multiples have expanded materially ECB (European Central Bank) quantitative easing speculation driving current outperformance Investors Underestimating Asian Reforms: Region with highest number of stocks with positive business operations momentum but negative relative stock price performance Japanese margin progression Chinese local debt reform 14 Outlook: Aggregate Japanese Margins Need Momentum For Market Strength To Continue Nikkei 225 Index - Operating Margins vs. Enterprise Value to Sales Enterprise Value/Sales is a valuation measure that compares the enterprise value (equity and debt) of a company to the company's sales Source: Bloomberg as of 9-Mar-2015 15 Outlook: Aggregate Chinese Margin Progression and Valuations Look Favorable Hong Kong Hang Seng China Index - Operating Margins vs. Enterprise Value to Sales Enterprise Value/Sales is a valuation measure that compares the enterprise value (equity and debt) of a company to the company's sales Source: Bloomberg as of 9-Mar-2015 16 Outlook: Aggregate European Margin Progression Has Lagged Other Regions and Improvement, If It Occurs, Is Priced In MSCI Pan Europe Index - Operating Margins vs. Enterprise Value to Sales Enterprise Value/Sales is a valuation measure that compares the enterprise value (equity and debt) of a company to the company's sales Source: Bloomberg as of 9-Mar-2015 17 Holdings And Sector Allocation Top 10 Active Weights % Top 10 Weights % Infosys Ltd-Sp ADR 2.3% China Mobile Ltd 2.8% Financials 26.8% China Mobile Ltd 2.3% Intesa Sanpaolo 2.5% Information Technology 13.1% Intesa Sanpaolo 2.3% Infosys Ltd-Sp ADR 2.3% Industrials 11.0% Lenovo Group Ltd 1.9% Tencent Holdings Ltd 2.2% Consumer Discretionary 9.1% Hdfc Bank Ltd- ADR 1.9% Novo Nordisk A/S-B 2.1% Telecommunication Services 8.0% Bridgestone Corp 1.7% Zurich Insurance Group AG 2.0% Consumer Staples 7.9% Zurich Insurance Group AG 1.7% Lenovo Group Ltd 2.0% Health Care 6.0% Iberdrola SA 1.7% Hdfc Bank Ltd- ADR 1.9% Energy 6.0% Tencent Holdings Ltd 1.7% Iberdrola SA 1.9% Utilities 5.5% Securitas Ab-B SHS 1.7% Bridgestone Corp 1.9% Materials 5.0% Sector Allocation % Source: Bloomberg as of 27-Feb-2015. Holdings are subject to change. 18 Disclosures The statements and opinions expressed are those of Xavier Smith and are as of the date of this brochure. All information is historical and not indicative of future results and subject to change. Reader should not assume that an investment in the securities mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results. Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus containing this and other most current information regarding the fund, please go to our website www.centrefunds.com or call 1-855-298-4236.Read the prospectus carefully before you invest. Important Risk Disclosure: There is no assurance that this investment philosophy will consistently lead to successful investing. An Investment in the Funds involves risk, including loss of principle. Foreign investing involves special risks such as currency fluctuations and political uncertainty. Investing in emerging markets typically involves greater risks due to the smaller size and less liquid nature of those markets. The fund is subject to risks including undervalued securities risk, portfolio turnover risk (which may result in tax consequences) and political/economic risk. Funds focusing on a single sector may experience greater price volatility. Centre Global Select Equity Fund is distributed by ALPS Distributors, Inc. Centre Asset Management, LLC and ALPS Distributors, Inc. are not affiliated. Centre Global Select Equity Fund Top 10 Holdings (as of 31-Dec-2014 and subject to change); excluding cash: Holding China Mobile HK Ltd Intesa Sanpaolo China Pacific Ins. H Shares Infosys Tech Ltd ADR Zurich Financial Svs China Merchants Bank H Shares Iberdrola SA Shaw Communications DL Tencent Holdings Ltd Bridgestone Corp Weight 2.46% 2.23% 2.10% 2.07% 2.01% 1.98% 1.96% 1.91% 1.87% 1.77% 19 Disclosures Definitions 1.MSCI All Country World Index (ACWI) -MSCI All Country World Index is a free float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. You cannot invest directly into an index. You cannot directly invest in an index. 2.MSCI All Country World Index (ACWI ex-USA) – Similar to MSCI ACWI but doesn’t have U.S. based companies as constituents. Includes both developed and emerging markets 3.HSCEI Index: Hong Kong Stock Exchange Hang Seng China Enterprises Index. Free float capitalization weighted index of H-Shares listed on the Hong Kong Stock Exchange 4.Nikkei 225 Index: Price weighted average of 225 top rated Japanese companies. 5.MSCI Pan Europe Index: An index of 201 European and United Kingdom companies. Created to serve as the basis for derivative contracts, exchange traded funds and other passive investment produces. Comprises large and liquid securities. 6.Alpha - A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its riskadjusted performance to a benchmark index. 7.Beta - A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. 8.GDP - Gross Domestic Product is the monetary value of all the finished goods and services produced within a country's borders in a specific time period 9.Blue Chip - A nationally recognized well-established and financially sound company. Blue chips generally sell high quality, widely accepted products and services. Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth. 10.Economic Value Added - An estimate of a firm's economic profit - being the value created in excess of the required return of the company's investors (being shareholders and debt holders). Quite simply, EVA is the profit earned by the firm less the cost of financing the firm's capital. The idea is that value is created when the return on the firm's economic capital employed is greater than the cost of that capital 11.M&A – Mergers and Acquisitions DRX000347 Exp. 06/30/2015 20 Definitions 12. Net Debt/EBITDA – Ratio of Net Debt (interest bearing liabilities less cash). The ratio is used as an indicator and measure of leverage and shows how many periods would the company need to pay off its debt using its cash operating earnings (EBITDA). 13. Return on Capital – A measure of company’s efficiency with capital budget allocation. Often compared relative to its marginal cost of capital (WACC) to determine whether the company is generating 14. Free Cash Flow growth – Free Cash Flow is operating cash flow available for distribution to capital providers of the company after capital expenditures and investment in net working capital have been made and deducted. 15. P/E – Price to earnings ratio is a valuation ratio that indicates how much an investor is paying for a dollar of company net income earnings. 16. Price to Sales – Price to sales ratio is a valuation ratio that indicates how much an investor is paying for a dollar of company revenue 17. Market Cap to GDP ratio – Market capitalization of a region divided by GDP of the region. The ratio is often used as a fundamental valuation indicator. 18. Quantitative Easing – Unconventional monetary policy that involves the central bank buying/selling government securities in order to lower interest rates and borrowing costs to promote economic growth 19. Standard Deviation – A statistical measure of dispersion of a data set from its mean. Commonly used as a measure of risk and variability when applied to investment returns. 21
© Copyright 2024