Credit Suisse Credit Investments Group Presentation to … · Credit Suisse Credit Investments Group Presentation to the ... We leverage Credit Suisse’s best ideas, ... Credit Suisse

Credit Suisse Asset Management, LLC

March 8, 2012

Credit Suisse Credit Investments Group

Presentation to the

City of Fresno Retirement Boards

Thomas J. Flannery

Senior Portfolio Manager

Managing Director

[email protected]

John G. Popp

CIG Global Head and CIO

Managing Director

[email protected]

CONFIDENTIAL – NOT FOR REDISTRIBUTION

Prepared for One-on-One Presentation

For Information Purposes Only

All Terms Subject to Change

Stephen Murphy

Relationship Manager

Director

[email protected]

Credit Suisse Asset Management Slide 1

1. Credit Investments Group at Credit Suisse Asset Management


Credit Suisse Asset Management: Focused Investment Solutions

We are a client-centric organization

dedicated to providing focused investment

solutions to investors worldwide.

We leverage Credit Suisse’s best ideas,

access, resources and capabilities globally

to establish long-term partnerships with

clients to help them thrive.

We offer a deep talent pool with over

680 investment professionals, 63 traders,

67 quantitative analysts, 29

economists/research, 30 strategists and 29

market risk specialists.

We deliver the full strength of our

global franchise through:

– Seasoned investment expertise

– Broad capabilities and partnerships

– Intellectual capital

– Comprehensive risk management

– White-glove client service

Global Reach and Local Presence1

Credit Suisse Offices

Asset Management Credit Suisse

Located in 19 countries Located in 53 countries

1 As of December 31, 2011

2 Assumes CHF/USD conversion rate of 1.063 at the end of December 31, 2011.

Asset Management at a Glance1

Date of Establishment 1935

Assets Under Management $434 billion2

Number of Employees 2,700


Long-Standing Tradition in Managing Non-Investment Grade Credit

$16.2bn1 under management; one of the largest, most experienced

managers of non-investment grade credit

Resources primarily dedicated to understanding and evaluating non-

investment grade credit investments

Scale

Stability

Performance

All five members of the Credit Committee are in their 14th consecutive year

managing non-investment grade portfolios together

A culture of risk management and discipline is maintained throughout the

investment process

Investment process predicated on bottom-up credit selection has generated

attractive risk-adjusted returns with lower volatility than the benchmark

Top Quartile Performance in high yield bonds over the past 1, 3 and 5 year

periods2

1 As of December 2011.

2 Source: eVestment Alliance. Rankings refer to CIG US High Yield Composite within the eVestment US High Yield Universe. Data as of December 31, 2011.

.


1. As of December 2011

* Members of the CIG Credit Committee

† Years of experience refers to the number of years of financial industry experience.

Credit Suisse Credit Investments Group

$16.2 billion in Managed Assets1

Senior Management and Portfolio Management†

London-Based European Industry Analysts

Daragh Murphy, CFA 13 Yrs. Director Telecom & Cable; Manufacturing; Paper & Packaging

Jakob von Kalckreuth 9 Yrs. Director Aerospace & Defense; Chemicals; Healthcare; Trading

Roberta Girard 10 Yrs. Vice President Building & Real Estate; Consumer Products

Berchmans Rivera 6 Yrs. Associate Leisure, Hotels & Gaming; Transportation

US Industry Analysts

Vance Shaw, CFA 30 Yrs. Director Oil & Gas; Utilities

James Potesky 26 Yrs. Director Chemicals; Industrials

Louis Farano 19 Yrs. Director Consumer Products; Retail; Trading

Linda Karn 17 Yrs. Director Media & Telecom; Printing & Publishing

Edward DeBruyn 14 Yrs. Director Manufacturing; Paper & Packaging

Ramin Kamali 11 Yrs. Director Financial Services; Real Estate

Michael Chaisanguanthum 9 Yrs. Director Distressed & Restructurings; Aerospace & Defense

Joshua Shedroff 9 Yrs. Vice President Automotive; Metals & Mining; Shipping

Amir Vardi 8 Yrs. Vice President Structured Credit

David Mechlin, CFA 6 Yrs. Associate Leisure; Technology

Buo Zhang 5 Yrs. Associate Restaurants; Ecological Services

Carson Cooper 3 Yrs. Analyst Hotels & Gaming; Healthcare

Alex Witkes 1 Yr. Analyst Healthcare

Dedicated Middle Office: 30 Professionals Asset Management Risk Management: 24 Professionals

Analyst Team†

US Trading and Strategy

Adrienne Dale 13 Yrs. Director Product Specialist

Grey Harris 16 Yrs. Vice President High Yield Bond Trading

Paul Roth 10 Yrs. Vice President Market Strategy; Product Specialist

Ilan Friedman 9 Yrs. Vice President Leveraged Loan Trading

Jonida Afezolli 3 Yrs. Analyst Market Strategy

Credit Portfolio Management and Research Capabilities

Andrew H. Marshak *

Managing Director

Head of Europe

22 Years Experience

David H. Lerner *

Managing Director

Sr. Portfolio Manager

22 Years Experience

Thomas J. Flannery *

Managing Director

Sr. Portfolio Manager

16 Years Experience

Linda R. Karn *

Director

Head of Research

17 Years Experience

Wing Chan, CFA

Director

Portfolio Manager

14 Years Experience

Lauri Whitlock

Director

Chief Operating Officer

22 Years Experience

John G. Popp *

Managing Director

Global Head and CIO

28 Years Experience


2. Investment Philosophy and Strategy


Investment Philosophy: Intensive Research, Relative Value Approach

Performance is driven by a strong credit culture and a systematic investment process

Bottom-up Portfolio Construction

Preservation of Principal

Relative Value Discipline

Driven by detailed fundamental credit

analysis

Seeks to protect against downside through loss

avoidance

Within capital structure, across comparable

companies, and across industries


Investment Process

Initial review of

prospectus

Assign to analyst or

pass based on industry,

size, business

prospects, rating,

sponsorship, financials

Top down analysis

Preliminary

Screening

Investment Strategy: Relative Value Among Issuers, Industries, Asset Classes, Tranches

Asset Sourcing Monitoring/Risk

Management

Investment

Selection

Fundamental

Credit Analysis

Analyst presentations

made to Credit

Committee to review

new investment

recommendations

Review pricing,

investment alternatives

Buy/Sell/Hold

recommendations

Consensus decision

Bottom-up research

Company specific

analysis

Meetings with

management

Prepare historical and

projected financial

analysis

Comparative credit and

pricing analysis

Analysis of structural

aspects of transaction

Commercial Banks

Investment Banks

LBO Firms

Financial Intermediaries

New Issues

Secondary Markets

Daily portfolio updates

to review market

conditions and forward

calendar

Ongoing comparable

company analysis

Ongoing review of

company’s securities

Credit reviews

Credit watch list

Regular analysis and

meetings between Risk

Management Team and

Portfolio Managers


-100%

0%

100%

200%

300%

400%

500%

600%

700%

800%

900%

Jul-

89

Jul-

91

Jul-

93

Jul-

95

Jul-

97

Jul-

99

Jul-

01

Jul-

03

Jul-

05

Jul-

07

Jul-

09

Jul-

11

US High Yield Bond Composite Gross

US High Yield Bond Composite Net

US High Yield Bond Composite Merrill Lynch Us High Yield Master II Index

CIG US High Yield Composite Performance

† Inception Date: July 1989. Data as of January 31, 2012.

Past performance is not a guarantee or an indication of future results

July 1989 Inception to January 2012CIG US High Yield

Composite, Gross

CIG US High Yield

Composite, Net

ML US High Yield

Master II

Constrained Index

Average Monthly Return 0.83% 0.79% 0.73%

Annualized Return 10.14% 9.54% 8.62%

Standard Deviation (Monthly) 2.23% 2.23% 2.66%

Annualized Volatility 7.74% 7.73% 9.21%

Sharpe Ratio 0.85 0.77 0.55

Information Ratio 0.38 0.23

Annualized Alpha 2.75% 2.14%

Annualized as of January 31, 2012 YTD 1-year 3-year 5-year 10-year ITD†

CIG US High Yield Bond Composite, Gross 2.52% 6.87% 22.50% 8.54% 9.13% 10.14%

CIG US High Yield Bond Composite, Net 2.45% 6.09% 21.48% 7.57% 8.33% 9.54%

Merrill Lynch US High Yield Master II Constrained Index 2.90% 5.19% 22.65% 7.91% 9.02% 8.62%

Gross Outperformance -0.38% 1.68% -0.15% 0.63% 0.11% 1.52%

Net Outperformance -0.45% 0.90% -1.17% -0.34% -0.69% 0.91%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

CIG US High Yield Bond Composite, Gross 3.17% 4.23% -6.84% 6.02% 0.83% 22.86% 12.39% 2.51% 10.94% 2.71% -23.52% 53.47% 15.55% 6.70%

CIG US High Yield Bond Composite, Net 2.70% 3.79% -7.19% 5.66% 0.52% 22.43% 11.96% 1.72% 9.76% 1.65% -24.22% 52.09% 14.52% 5.92%

Merrill Lynch US High Yield Master II Constrained Index 3.59% 1.74% -5.67% 5.44% -1.53% 30.63% 10.79% 2.09% 10.69% 2.53% -26.16% 58.10% 15.07% 4.37%

Gross Outperformance -0.42% 2.49% -1.17% 0.57% 2.36% -7.76% 1.60% 0.42% 0.25% 0.18% 2.65% -4.63% 0.48% 2.33%

Net Outperformance -0.89% 2.05% -1.53% 0.22% 2.05% -8.20% 1.17% -0.37% -0.93% -0.88% 1.94% -6.01% -0.54% 1.56%

1989 1990 1991 1992 1993 1994 1995 1996 1997

CIG US High Yield Bond Composite, Gross -1.94% -4.35% 44.07% 23.76% 33.38% -1.98% 20.09% 13.82% 15.70%

CIG US High Yield Bond Composite, Net -2.16% -4.79% 43.48% 23.23% 32.81% -2.42% 19.78% 13.40% 15.23%

Merrill Lynch US High Yield Master II Constrained Index -3.23% -7.04% 39.93% 17.86% 17.36% -1.25% 19.71% 11.29% 13.18%

Gross Outperformance 1.29% 2.68% 4.14% 5.90% 16.02% -0.73% 0.38% 2.53% 2.52%

Net Outperformance 1.06% 2.25% 3.55% 5.37% 15.45% -1.17% 0.07% 2.11% 2.05%


High Yield Representative Portfolio Characteristics

For illustrative purposes only

Data as of January 31, 2012

Index used is BofA Merrill Lynch Master Constrained II Index

Portfolio Index

Modified Duration 2.77 4.20

Effective Maturity 3.49 5.45

Average Quality B+ B+

Effective Yield 7.06 7.59

Average Coupon 8.36 8.22

Number of Holdings 173

Number of Distinct Issuers 162

Largest Corp Credit Issuer 2.14%

Total Portfolio Characteristics

89.00%

5.41%

5.06% 0.53% North America

DevelopedEurope/MiddleEast

Cash

Asia/Australia/NewZealand

Industry Breakdown

Ratings Breakdown

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Portfolio

Index

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Portfolio

Index


CIG Competitive Advantages

Sourcing

Fundamental

Analysis

Sell Discipline

Relative Value

Trading

A key to portfolio management is ensuring that investments are selected from the largest

number of potential opportunities

CIG’s scale, reputation, and long-standing relationships provide access and larger

allocations to new issue deals

17 dedicated sector analysts perform detailed bottom-up fundamental analysis on

corporate issuers and make recommendations to the Credit Committee

Daily, quarterly, and ad-hoc meetings serve to introduce new investments, monitor existing

holdings, and frame overarching portfolio strategy and themes

PMs actively monitor trading levels to determine attractiveness of each company on a

relative value basis

Buy/sell transactions are executed to rotate portfolios to credits with more attractive

risk/return profiles

Credits are sold when they meet or exceed relative value targets, credit quality is expected

to decline materially, or there is a material change to the original investment thesis

Sell decisions may be made by PMs without the need for Credit Committee approval


3. Appendix


A. High Yield Review and Market

Outlook

Please see “Important Legal Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.


High Yield: Q4 2011 Market Overview

Source: BofA Merrill Lynch, Credit Suisse, As of December 31, 2011.

BofA High Yield Master II Constrained Index

Q4 Total Return 6.19%

Average Price 98.01

Spread-to-Worst 730

Yield-to-Worst 8.27%

Average Quality B1

Mod. Duration 4.74

Average Maturity 6.8 yrs

Ratings Returns

BB 5.54%

B 6.30%

CCC 7.80%

CC 14.31%

Top Industries

Real Estate 12.65%

Technology and Electronics 10.70%

Bottom Industries

Utility -1.56%

Energy -2.09%

40

50

60

70

80

90

100

110

0

500

1,000

1,500

2,000

2,500

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Price

Spre

ad (bps)

BofA ML High Yield Constrained Index Spread-to-Worst

BofA ML High Yield Constrained Index Average Price


Market Update: Fundamentals

*Source: Credit Suisse. As of December 2011.

** Source: S&P LCD. As of December 2011.

Defaults

– High yield par-weighted default rates at 1.82%*, versus historical average of 4.52%

Distressed Ratio

– High yield distressed ratio fell from 22.3% to 17.9%** in Q4 2011

0%

4%

8%

12%

16%

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Senior Loan Defaults

High Yield Defaults

Distressed Ratio by Number of Issuers LTM Par-Weighted Default Rates

0%

20%

40%

60%

80%

100%

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

S&P LSTA Index Distress RatioBofA HY Index Distress Ratio


Market Update: Technicals

Data as of December 2011

New-issuance market

– High Yield priced $38.1bn in bonds in Q4. 2011. FY 2011 marked the second most

active bond new issue year on record with total issuance of $246bn

Mutual Fund Flows

– High yield mutual fund saw inflows of $11.7bn in Q4 for a total inflow of $13.5bn in 2011

HY and Senior Loan Mutual Fund Flows


B. Additional Information

Please see “Important Legal Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Asset Management November 2011

Slide 17

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Experienced Leadership

Name

John G. Popp

Andrew H. Marshak

David H. Lerner

Thomas J. Flannery

Linda R. Karn

Managing Director

Group Head and CIO

Managing Director

Head of Europe

Managing Director

US Portfolio Manager

Managing Director

US Portfolio Manager

Director

Wharton School, M.B.A.

Pomona College, B.A.

Wharton School, B.S.

George Washington

University, B.B.A.

Georgetown University, B.S.

Babson College, B.S.

Background

Education

Title

Over 27 years of leveraged finance investment experience

First Dominion Capital - Founding Partner and Head of

Asset Management

Indosuez Capital – Managing Director

Kidder, Peabody – Senior Vice President – Investment

Banking

Drexel Burnham – Vice President – Investment Banking

Member of Brookings Institution’s Foreign Policy

Leadership Committee


First Dominion Capital – Founding Partner and Managing

Director

Indosuez Capital – Vice President

Donaldson, Lufkin & Jenrette Investment Banking


First Dominion Capital – Senior Vice President

Mitsubishi Trust and Banking Corp. – Leveraged Finance

Group

Banque Francaise du Commerce Exterieur

Chase Manhattan Bank


First Dominion Capital

Houlihan Lokey Howard & Zukin – Financial Restructuring

Group


CIG Credit Committee Member

First Dominion Capital – Vice President

TD Securities (USA) – Media and Telecom Equity Research


Disclosures

This material has been prepared by Credit Suisse Asset Management, LLC (“Credit Suisse”) on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information. All opinions and views constitute judgments as of the date of writing without regard to the date on which the reader may receive or access the information, and are subject to change at any time without notice and with no obligation to update. This material is for informational and illustrative purposes only as in intended solely for the information of those to whom it is distributed by Credit Suisse. No part of this material may be reproduced or retransmitted in any manner without the prior written permission of Credit Suisse. Credit Suisse does not represent, warrant or guarantee that this information is suitable for any purpose and it should not be used as a basis for investment decisions. This material does not purport to contain all of the information that a prospective investor may wish to consider. This material is not to be relied upon as such or used in substitution for the exercise of independent judgment. Past performance is no guarantee or indication of future results. This material should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment strategy. The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that any investment in companies, securities, sectors and/or markets identified or described herein were or will be profitable and no representation is made that any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able to avoid incurring substantial losses. This information report does not constitute research and may not be used or relied upon in connection with any offer or sale of a security or hedge fund or fund of hedge funds. Performance differences for certain investors may occur due to various factors, including timing of investment and eligibility to participate in new issues, Investment return will fluctuate and may be volatile, especially over short time horizons. Current and future portfolio compositions may be significantly different from the information shown herein. Investing entails risks, including possible loss of some or all of the investors principal. The investment views and market opinions/analyses expressed herein may not reflect those of Credit Suisse Group as a whole and different views may be expressed based on different investment styles, objectives, views or philosophies. To the extent that these materials contain statements about the future, such statements are forward to looking and subject to a number of risks and uncertainties. The only legally binding terms of any investment products described herein including risk considerations are set forth in the private placement memoranda and subscription documents which are available upon request. This document does not constitute an offer or invitation to enter into any type of financial transaction. The issuer has no obligation to issue any investment product described herein. Before deciding to invest, prospective investors should carefully read the relevant private placement memorandum and subscription documents and pay particular attention to the risk factors contained therein and determine if such investment product suits the investors particular circumstances and should be independently asses (with the investors tax, legal and financial advisers) the specific risks (maximum loss, currency risks, etc.) and the legal, regulatory, credit, tax and accounting consequences. Prospective investors should have the financial ability and willingness to accept the risk characteristics of this investment product for any particular investor or as to the future performance of such investment product. Performance data are net of management fees unless otherwise stated. The asset management business of Credit Suisse Group is comprised of a network of entities around the world. Each legal entity is subject to distinct regulatory requirements and certain asset management products and services may not be available in all jurisdictions or to all client types. There is no intention to offer products or services in countries or jurisdictions where such offer would be unlawful under the relevant domestic law. The charts, tables and graphs contained in this document are not intended to be used to assist the reader in determining which securities to buy or sell or when to buy or sell securities. Benchmarks are used solely for purposes of comparison does not mean that there will necessarily be a correlation between the returns described herein and the benchmarks. There are limitations in using financial indices for comparison purposes because, among other reasons, such indices may have different volatility, diversification, credit and other material characteristics (such as number or type of instrument security). IRS Circular 230 Notice: Any tax statement herein regarding any U.S. federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any U.S. federal tax penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement relates. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent advisor. RISKS Portfolios contain investments rated below investment grade. These investments are speculative in nature and are considered to have a high degree of investment risk. Such assets have greater default risks, greater exposure to market volatility and liquidity risks when compared to investment grade debt obligations There may be limited liquidity for some of the securities that the funds invest in due to the lack of a secondary market, while transfer restrictions on the securities will further limit liquidity Portfolios invest in globally denominated assets, some of which may be subject to a greater degree of regional economic conditions and sovereignty risks As portfolio investments may be denominated in currencies other than the reference currency, the overall value can be impacted by changing exchange rates No capital protection

Copyright © 2012, CREDIT SUISSE GROUP AG and/or its affiliates. All rights reserved.



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Credit Suisse Credit Investments Group Presentation to … · Credit Suisse Credit Investments Group Presentation to the ... We leverage Credit Suisse’s best ideas, ... Credit Suisse