High conviction investing 2nd February 2006 Andrew Dalrymple – Senior Portfolio Manager

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High conviction investing 2nd February 2006 Andrew Dalrymple – Senior Portfolio Manager. Investment risk. The investment definition of risk: Deviation from the benchmark The ‘real’ definition of investment risk: Losing money!. Market risks and the pitfalls of benchmarking. - PowerPoint PPT Presentation

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  • High conviction investing

    2nd February 2006

    Andrew Dalrymple Senior Portfolio Manager

  • Investment risk

    The investment definition of risk:Deviation from the benchmark

    The real definition of investment risk: Losing money!

  • Market risks and the pitfalls of benchmarking

  • Regional constituents of the MSCI World Index (2005)As at 31 Dec 05% More than 50% of the index is made up of US stocks Less than 4% from Asia Zero allocation in emerging markets: an area that has produced the highest returns over the last 2-3 years GDP vs MSCI weighting miss match

    Chart1

    3.5711.1145510836

    013.0030959752

    19.2822.9102167183

    11.6513.3126934985

    54.6534.6749226006

    10.854.9535603715

    MSCI World Index

    GDP

    Sheet1

    MSCI World IndexGDP

    Asia Pacific ex-Japan3.5711.1

    Emerging Markets0.0013.0

    Europe ex-UK19.2822.9

    Japan11.6513.3

    North America54.6534.7

    UK10.855.0

    Cash0.00

    100.00

    Sheet2

    Sheet3

  • Index comparisons performance of regional stock marketsThree years to 31 Dec 05 in USD. Source: Lipper Hindsight. Strong outperformance of certain regional markets over time v MSCI and S&P 500

    Benchmark investors miss key market trends

    0.0%3.6%11.7%30.0%% of MSCI World Index%54.7%

    Chart1

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    151.6681.0884.2167.65110.8251.46

    154.1982.1486.8368.36112.9151.51

    155.5282.4987.7968.36114.0351.16

    157.3683.7386.9468.76114.451.36

    157.9582.7588.1568.18114.9750.63

    156.3584.4785.0768.26113.5250.46

    155.9784.587.8568.79113.9750.88

    157.886.3291.7669.86115.5151.02

    158.8886.2592.8170.45115.5951.87

    159.1687.2294.5271.28116.5952.51

    158.4485.5492.7270.44116.2652.31

    158.2587.6793.5970.87115.9151.87

    159.8687.2794.470.29117.950.99

    159.786.2895.9270.11117.3150.96

    161.8786.0697.870.52118.6551.34

    162.2886.599.4671.2118.1852.01

    163.5586.6110071.35119.2352.1

    163.4986.61101.1771.46119.3252.1

    164.587.0498.4170.43119.9150.65

    163.0787.6299.9970.99120.2650.87

    165.2587.56100.3770.79121.5950.43

    164.8385.6898.3369.61121.3149.7

    MSCI EM (Emerging Markets)

    MSCI Europe

    MSCI Japan

    MSCI World

    MSCI AC Asia Pacific ex Japan

    S&P 500

    USD

    MSCI EM (Emerging Markets)MSCI EuropeMSCI JapanMSCI WorldMSCI AC Asia Pacific ex JapanS&P 500

    % Growth TR Def USD% Growth TR Def USD% Growth TR Def USD% Growth TR Def USD% Growth TR Def USD% Growth TR Def USD

    12/31/02000000

    1/1/030.040000.010

    1/2/030.741.86-0.942.430.363.33

    1/3/032.762.78-0.932.752.43.28

    1/6/033.943.781.664.714.015.6

    1/7/033.262.53-0.143.783.544.92

    1/8/033.510.71-1.82.223.83.47

    1/9/033.272.14-1.473.833.465.48

    1/10/033.772.9-1.714.124.145.48

    1/13/035.243-1.224.155.695.34

    1/14/035.413.720.374.96.225.95

    1/15/035.542.221.683.726.364.44

    1/16/034.852.081.713.435.664.03

    1/17/033.470.542.182.155.092.57

    1/20/033.1-0.710.871.654.822.57

    1/21/032.24-1.671.820.524.50.96

    1/22/031.46-3.220.95-0.593.89-0.08

    1/23/032.03-3.463.180.164.490.94

    1/24/030.71-3.842.27-1.723.96-2.01

    1/27/03-1.03-6.97-0.03-3.842.56-3.59

    1/28/03-0.55-6.78-0.79-3.182.06-2.33

    1/29/03-0.94-6.11-2.23-2.711.23-1.65

    1/30/03-0.64-4.7-3.12-3.661.32-3.88

    1/31/03-0.44-4.72-4.05-3.021.23-2.62

    2/3/030.07-3.09-2.7-2.120.92-2.09

    2/4/03-0.04-5.07-1.59-3.391.57-3.47

    2/5/03-0.07-3.64-1.47-3.281.02-3.98

    2/6/03-1.32-5.72-2.04-4.32-0.38-4.57

    2/7/03-2.42-6.72-2.54-5.19-0.84-4.97

    2/10/03-3.24-7.67-2.86-5.11-1.3-4.81

    2/11/03-2.83-5.99-3.16-5.11-1.71-5.58

    2/12/03-2.44-7.58-1.45-6.09-0.77-6.74

    2/13/03-3.95-7.3-1.51-6.12-2.29-6.88

    2/14/03-3.98-6.19-0.79-4.62-2.85-4.88

    2/17/03-1.53-4.96-0.19-4.13-0.62-4.88

    2/18/03-1.33-4.490.04-2.87-0.58-3.02

    2/19/03-1.82-6.20.07-3.71-0.14-3.69

    2/20/03-1.59-6.12-0.1-4.23-0.47-4.6

    2/21/03-1.32-5.36-1.5-3.41-0.57-3.34

    2/24/03-0.9-6.85-0.61-4.720.8-5.11

    2/25/03-2.81-9.66-2.61-5.41-1.31-4.43

    2/26/03-3.05-9.93-2.53-6.14-1.1-5.64

    2/27/03-3.01-9.65-2.96-5.45-1.67-4.52

    2/28/03-3.12-7.83-3.49-4.68-1.78-4.08

    3/3/03-1.94-6.93-2.49-4.70.01-4.8

    3/4/03-3.01-8.54-2.28-5.98-0.73-6.26

    3/5/03-4.15-8.83-2.3-5.54-2.04-5.34

    3/6/03-4.85-9.55-3.37-6.38-2.88-6.21

    3/7/03-5.45-10.9-5.04-6.5-4.04-5.44

    3/10/03-6.28-12.85-6.35-8.62-4.58-7.88

    3/11/03-6.95-12.78-8.46-9.26-5.76-8.64

    3/12/03-6.94-15.83-7.28-9.89-6.26-8.21

    3/13/03-6.05-12.12-8.81-7.16-6.54-5.04

    3/14/03-5.03-9.49-7.82-6.14-4.71-4.89

    3/17/03-6.87-7.23-8.67-3.61-6.24-1.51

    3/18/03-4.45-7.38-8.19-3.27-3.44-1.09

    3/19/03-4.46-6.47-8-2.49-2.8-0.22

    3/20/03-2.93-6.67-6.42-2.23-1.02-0.03

    3/21/03-2.54-4.24-7.42-0.32-1.032.26

    3/24/03-3.52-7.21-3.98-2.99-1.49-1.34

    3/25/03-3.96-5.94-5.99-2.1-1.92-0.14

    3/26/03-3.7-5.92-4.5-2.25-1.21-0.68

    3/27/03-4.15-7.22-4.07-2.68-1.59-0.83

    3/28/03-4.13-7.29-5.31-3.13-1.48-1.4

    3/31/03-5.87-9.15-7.75-4.94-3.18-3.15

    4/1/03-5.33-8.03-7.42-4.94-3.26-1.97

    4/2/03-4.45-5.94-7.04-1.79-3.110.61

    4/3/03-3.89-5.47-7.87-2-2.780.1

    4/4/03-2.74-4.63-8.18-1.57-1.190.37

    4/7/03-0.53-2.1-6.56-0.550.610.5

    4/8/03-1.03-3.24-7.45-1.050.290.35

    4/9/03-1.81-3.07-8.25-1.91-1.08-1.05

    4/10/03-1.73-3.75-8.42-1.74-0.62-0.41

    4/11/03-1.37-3.49-10.76-2.07-0.55-0.77

    4/14/03-0.74-2.26-11.44-0.68-0.941.16

    4/15/030.81-0.58-10.070.330.461.81

    4/16/032.04-1.05-10.23-0.482.060.56

    4/17/032.150.14-9.680.821.422.13

    4/18/033.120.14-9.520.832.042.13

    4/21/033.16-0.54-9.310.561.671.95

    4/22/031.951.07-10.352.261.514.16

    4/23/032.042.35-10.593.151.265.04

    4/24/030.661.48-9.462.470.194.17

    4/25/03-0.820.3-11.461.1-1.222.73

    4/28/03-0.132.38-12.52.68-1.264.57

    4/29/032.112.13-12.382.871.424.92

    4/30/032.513.25-8.473.551.734.83

    5/1/032.563.7-7.793.772.034.77

    5/2/033.084.03-7.614.751.826.35

    5/5/034.055.24-7.394.972.655.95

    5/6/034.037.32-4.816.332.956.85

    5/7/035.066.18-3.345.833.56.32

    5/8/034.384.6-4.574.683.545.25

    5/9/035.175.75-3.585.963.726.78

    5/12/036.376.36-3.167.065.118.12

    5/13/036.366.41-2.966.95.117.82

    5/14/036.136.49-2.366.864.557.5

    5/15/036.217.47-3.77.524.678.36

    5/16/035.448.61-3.967.714.58.1

    5/19/034.576.38-5.295.434.345.41

    5/20/034.346.59-5.115.434.185.29

    5/21/034.496.07-6.115.454.355.72

    5/22/035.157.34-5.446.485.096.69

    5/23/036.97.57-3.636.826.696.84

    5/26/038.217.76-3.476.937.956.84

    5/27/037.628.46-4.878.217.288.94

    5/28/038.969.69-5.278.67.729.15

    5/29/039.6610.78-3.658.868.158.75

    5/30/039.8710.07-4.029.518.3710.35

    6/2/0311.2811.88-2.0610.5310.6510.75

    6/3/0310.8411.1-2.0710.5810.2111.27

    6/4/0311.4611.87-1.8411.911.1612.98

    6/5/0312.4612.660.2712.6412.0813.44

    6/6/0313.0713.960.4612.8612.1213.17

    6/9/0313.5313.11.7211.8812.7111.82

    6/10/0313.2912.831.4712.3912.6512.84

    6/11/0313.415.132.114.0413.3314.33

    6/12/0314.6915.762.2414.3214.3814.45

    6/13/0315.114.812.9413.4515.1813.32

    6/16/0315.6417.091.6715.4714.8715.86

    6/17/0317.7118.013.115.9816.9315.96

    6/18/0317.0317.483.6715.7516.6115.79

    6/19/0317.6415.643.7514.217.1514.03

    6/20/0317.315.814.2614.3316.7214.14

    6/23/0315.6913.145.4212.6715.3212.53

    6/24/031512.442.7412.2814.1112.74

    6/25/0316.0613.292.9512.1115.211.81

    6/26/0316.0311.991.9112.3114.3613.06

    6/27/0316.411.993.5311.8514.8211.96

    6/30/0316.1311.23.0611.4514.2511.76

    7/1/0317.5710.125.4611.915.612.67

    7/2/0319.1911.559.2713.4316.5813.99

    7/3/0319.8812.2611.5813.3717.7713.07

    7/4/0320.4511.6910.6613.0917.6613.07

    7/7/0322.1812.912.9614.9319.1815.22

    7/8/0322.812.3313.9915.0318.7915.65

    7/9/0322.1711.6915.114.5518.0215.01

    7/10/0321.1610.8514.1313.317.8813.46

    7/11/0321.0411.7110.6113.8918.0714.55

    7/14/0323.5113.1411.8714.920.2715.21

    7/15/0323.0211.812.1114.2719.6714.82

    7/16/0322.4610.9410.7913.520.6114.09

    7/17/0321.019.647.7612.0119.312.68

    7/18/0320.4310.128.0312.8918.0614.01

    7/21/0320.1410.058.4211.9818.2712.35

    7/22/0320.6110.887.4712.7217.8113.41

    7/23/0320.3711.669.0713.1918.2113.47

    7/24/0321.6213.849.4913.4519.5912.67

    7/25/0322.6113.579.8514.5719.9914.63

    7/28/0324.0314.4710.6714.821.3714.38

    7/29/0323.6614.110.4714.221.2813.57

    7/30/0322.9313.597.6113.5919.7313.38

    7/31/0323.4113.487.2513.7319.8313.73

    8/1/0323.6312.29812.8421.4112.22

    8/4/0323.212.366.5612.8620.6412.87

    8/5/0322.5913.16611.8519.6710.88

    8/6/0321.511.95.2811.4818.7811.09

    8/7/0322.4512.365.7212.219.3411.9

    8/8/0322.4212.75.7512.5719.5812.3

    8/11/0323.3813.087.7513.1620.4612.67

    8/12/0323.5413.488.3313.9820.6713.8

    8/13/0325.2113.919.7913.8722.3213.11

    8/14/0326.4114.9711.7314.7722.8813.11

    8/15/0326.8615.1411.5314.8423.1813.9

    8/18/0327.7815.312.6615.6323.7814.94

    8/19/0328.2514.814.3515.824.1715.25

    8/20/0328.4514.7616.8215.9124.9415.02

    8/21/0330.2114.2718.216.0825.9815.37

    8/22/0330.7113.6718.0115.2126.5114.19

    8/25/0330.1913.217.2715.0626.4414.27

    8/26/0329.4911.9417.5614.8925.2514.62

    8/27/0330.1112.8917.1915.1424.9914.64

    8/28/0330.2813.4216.6715.6925.0915.34

    8/29/0331.6913.2818.5516.2226.6315.95

    9/1/0332.8914.5821.8416.9127.3815.95

    9/2/0332.8213.8422.4917.6727.3217.56

    9/3/0333.8615.4123.4218.5127.5918.08

    9/4/0334.2815.922.1318.7128.0418.28

    9/5/0334.9716.6422.0518.5128.5317.53

    9/8/0335.4717.9122.3119.6429.5218.72

    9/9/0335.0517.3724.9319.1529.8117.73

    9/10/0334.616.4823.7717.9128.816.34

    9/11/0334.816.6321.1218.128.9517.01

    9/12/0334.7817.0723.1518.5729.117.27

    9/15/0333.5817.4623.0218.3928.5516.83

    9/16/0334.717.5626.519.7129.2718.5

    9/17/0335.118.4827.8419.9130.0618.12

    9/18/0334.9419.5829.5921.2929.5819.69

    9/19/0334.4619.4130.0121.0929.2119.31

    9/22/0333.0718.6228.3119.8428.6217.76

    9/23/0333.6418.2728.8420.2228.8817.76

    9/24/0334.6418.1728.8318.9431.0216.21

    9/25/0333.3517.7626.0318.1329.9915.53

    9/26/0332.3116.5225.9717.282914.82

    9/29/0332.4316.5525.4817.8928.5115.94

    9/30/0332.6615.5925.6216.9629.1714.72

    10/1/0334.0717.8828.4119.3829.6217.29

    10/2/0335.9718.2731.6420.0232.0617.54

    10/3/0337.1520.4933.121.4232.6118.64

    10/6/0338.4120.4833.0721.7633.919.16

    10/7/0339.1720.5635.4922.3734.6819.73

    10/8/0340.120.7732.5321.8634.9319.15

    10/9/0341.922.1833.4922.6936.4519.72

    10/10/0343.3822.3436.3323.0137.8619.65

    10/13/0344.3123.1435.8623.6938.4320.49

    10/14/0343.722.8937.2824.0537.4420.97

    10/15/0343.3923.4935.8923.9337.7720.68

    10/16/0344.7323.6137.7824.4239.1221.06

    10/17/0344.0522.7537.7623.4438.9219.82

    10/20/0344.5823.1338.0323.9239.3420.44

    10/21/0344.2123.4637.6924.1740.0620.6

    10/22/0343.8322.4535.9522.6940.4218.8

    10/23/0340.9521.528.5221.8636.8519.2

    10/24/0340.9421.7729.7521.7436.5818.63

    10/27/0341.0722.2931.8822.2437.1618.89

    10/28/0343.2222.6733.4723.5938.7520.7

    10/29/0343.8323.1435.6624.0439.4420.87

    10/30/0344.2223.9834.7924.1640.0620.77

    10/31/0343.9523.3331.3723.9240.0721.21

    11/3/0346.1923.7829.8724.4640.3722.16

    11/4/0346.8923.5335.524.5140.9721.5

    11/5/0346.9322.6734.3124.1241.7521.36

    11/6/0345.6622.6830.624.1840.1322.09

    11/7/0346.6224.3732.5524.5740.8921.55

    11/10/0345.7823.6532.8223.9940.6120.86

    11/11/0344.2223.328.7623.4138.9920.8

    11/12/0345.2424.9228.4524.7439.3822.23

    11/13/0347.0326.0230.8225.3241.1822.21

    11/14/0347.0627.2629.1524.9840.4621.3

    11/17/0344.4725.1424.3423.4338.0220.53

    11/18/0344.6426.1925.6223.2538.719.44

    11/19/0342.3625.7321.8723.3837.2220.4

    11/20/0341.2625.4224.5422.9636.7119.39

    11/21/0342.1725.9224.6823.236.5719.59

    11/24/0341.2326.6824.224.4335.4121.53

    11/25/0342.826.9625.324.7836.8921.75

    11/26/0344.1327.8727.7925.6638.0522.3

    11/27/0344.0428.2128.2525.7937.5822.3

    11/28/0345.7128.5827.3225.8439.0422.27

    12/1/0348.5230.3430.1127.4240.5123.65

    12/2/0349.023131.2227.5641.4723.25

    12/3/0349.3631.9531.0527.7442.2823.07

    12/4/0348.5131.2732.2127.9742.2323.65

    12/5/0347.9831.2231.9327.3941.6322.7

    12/8/0347.6831.4529.4427.7741.5323.61

    12/9/0349.2532.2429.6227.3642.1522.56

    12/10/0348.7831.5926.4126.8142.5122.45

    12/11/0349.3931.3427.7527.6342.5823.87

    12/12/0350.4132.4229.5228.3744.0624.21

    12/15/0351.553332.8828.4645.2223.51

    12/16/0350.1932.7930.5228.6243.5124.33

    12/17/0348.933.4328.9228.7542.4824.5

    12/18/0350.2534.6128.829.9442.4125.99

    12/19/0350.9434.7330.7830.1243.1725.93

    12/22/0351.9434.9232.2730.6343.9326.42

    12/23/0351.9735.6232.3431.0744.0326.78

    12/24/0352.5836.2432.1531.1844.8126.55

    12/25/0352.636.2432.2531.1944.9126.55

    12/26/0352.9336.2433.0731.444.9126.77

    12/29/0353.973734.1532.745.7228.38

    12/30/0355.8738.0136.4533.2447.6728.42

    12/31/0356.2839.1436.1533.7648.6628.68

    1/1/0456.4139.1436.1533.7648.7628.68

    1/2/0459.1240.3436.343450.6228.3

    1/5/0463.2641.9939.5335.7852.7129.89

    1/6/0462.7942.7839.0136.153.4430.06

    1/7/0462.441.538.4635.8453.1730.4

    1/8/0463.1143.2639.0136.7953.8831.05

    1/9/0465.3143.8739.9436.4556.129.89

    1/12/0465.0643.239.8736.6156.1430.52

    1/13/0465.2743.2939.0836.1756.0429.83

    1/14/0464.0243.4439.4936.8356.3130.91

    1/15/0462.1242.5737.6836.4554.7631.08

    1/16/0462.3141.6938.7736.8354.0131.99

    1/19/0463.6341.8239.9836.9854.3831.99

    1/20/0465.2843.2940.4537.5256.4131.86

    1/21/0464.7244.6240.3638.557.3232.9

    1/22/0464.7845.641.3338.6657.8432.47

    1/23/0465.5845.0742.2138.4158.2132.2

    1/26/0466.2643.2840.9238.6958.3333.8

    1/27/0466.8544.0141.0738.1458.7332.49

    1/28/0465.9344.5140.6337.0957.0330.71

    1/29/0462.5340.9539.1736.1454.2731.39

    1/30/0461.8340.7838.6235.9454.2631.05

    2/2/0461.6841.2439.1636.3753.2631.53

    2/3/0461.8742.2438.2936.6553.2831.62

    2/4/0461.3141.4235.2735.4552.5630.54

    2/5/0460.642.1435.8535.8453.0730.78

    2/6/0462.8644.1536.3237.555.0532.43

    2/9/0465.6845.5735.4237.7558.0632.11

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    Chart

    Chart

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