Ignis citywire berlin nov 2012

Where’s the alpha in global government bonds? Ignis Asset Management

Fixed income

Long only mandates have an inferior risk/reward profile

Unconstrained mandates result in more efficient portfolio management

True alpha can be applied to any benchmark

Pragmatic approach required

October 12

Where's the alpha in global government bonds

Investors need to consider return per unit of risk not return for return’s sake

1

We believe:

it is vital to separate alpha and beta

management of downside is critical

investors’ requirements for liquidity must be matched with the instruments invested in

Pragmatism in practice

October 12


2

Designed to deliver:

Performance in all market conditions

Low volatility: 4-6% standard deviation*

Low correlation with other asset classes

Alpha not beta

Investing in:

Highest quality and most liquid debt instruments (long and short exposure)

Foreign currency - max 25% of total risk budget (G10 only)

Ignis Absolute Return Government Bond Fund An innovative fund:

October 12

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*The fund’s target volatility is a standard deviation level of 4-6%, it is managed to deliver stable returns regardless of market moves.

Delivering performance in challenging markets

October 12

4


-5%

0%

5%

10%

15%

Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12

Performance* Ignis Absolute Ret Gov Bond EUR I class (10.3%)

EONIA (0.9%)

Lipper Global Absolute Return EUR Low (0.7%)

*Source: Lipper, NAV to NAV, gross income reinvested since launch on 31/03/2011 to 28/09/2012. EONIA is the rate that large banks use to borrow from, and lend to, one another on the overnight market. The performance data does not take account of the commissions and costs incurred on the issue and redemption of shares (including the initial charge). Performance comparisons are inappropriate due to the diverse nature of the objectives of the funds populating this sector, including differing benchmarks, risk characteristics and timeframes for delivering performance. **Source: Ignis, ex post volatility daily over one month since inception to 28/09/2012 based on Euro I Hdgd share class. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.

0%

5%

10%

15%

Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12

Volatility** Ex ante volatility

Ex post volatility

0

2

4

6

8

10

12

14

16

18

20

-1.6% -1.4% -1.2% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%

Freq

uen

cy

Histogram showing distribution of weekly returns*

Normal distribution at 5% volatility

5

October 12


Positive skew of returns

Performance (since launch): 10.26%**

Average weekly return: 0.12%*

Information ratio: 1.86

Realised tracking error: 3.29%

Source: Ignis, information since inception 31/03/2011 to 28/09/2012, based on EUR I Hdgd share class and net of fees.*Source: Lipper, based on weekly data from 31/03/2011 to 26/09/2012. **Source: Lipper, NAV to NAV, gross income reinvested since inception to 28/09/2012 based on EUR I Hdgd share class. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.

1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.4% -0.6% -1.0% -0.8% -1.2% -1.4% -1.6%

6

October 12


Lowly correlated returns

Source: Lipper at 28/09/2012, correlation of daily returns in EUR based on EUR I Hdgd share class since fund launch on 31/03/2011. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.

Since launch the fund has exhibited low correlation with other asset classes, and a negative correlation with equities:

Ignis Absolute Return Govt Bond Fund

MSCI World Barclays Capital

Global Aggregate Corporate

Citigroup WGBI

ETFS Physical Gold

Ignis Absolute Ret Govt Bond Fund

100%

MSCI World -30% 100%

Barclays Capital Global Agg Corporate

44% -21% 100%

Citigroup WGBI 39% -23% 92% 100%

ETFS Physical Gold 13% -13% 26% 25% 100%

Correlation, %

100

80

60

40

20

0

-20

-40

-60

-80

-100

Stable, experienced team

Flexible, innovative approach

Proprietary technology and investment tools

Led by Ignis CIO Chris Fellingham

October 12

7


Ignis Fixed Income: a broad range of capabilities

*Source: Ignis at 30/06/2012.

39%

24%

4%

30%

3%

Direct funds under management - €70bn*

Rates Credit

Stock Lending Liquidity

Other

Manages €27.3bn*

Specialises in government bonds

and currencies

Multi-specialist structure provides

combination of perspectives

Team includes chief economist

Stuart Thomson

October 12

8


Ignis rates team: complementary skill set

*Source: Ignis at 30/06/2012 (Figures in brackets are number of years of investment experience at 28/09/2012)

Head of Rates

Quant Team Macro

Economics Portfolio

Management Liquidity, Repo and

Collateral Management

Russ Oxley (15)

Adam Purzitsky (8) Josh Heming (14)

Stuart Thomson (27)

Grant Peterkin (13) Paul Shanta (4)

Ross Crawford (12) Jin Wong (6)

Aaron Rock (7)

Brian Jack (12) Colin Goymer (20)

CIO

Chris Fellingham (26)

Product Specialists

Helen Farrow (26) Joanna Howley (15)

Portfolio construction

October 12


9

Identify key macro-

economic themes

Analysis of forward curves in clearcurve to

find optimal expression of

view

Express each key view through

multiple positions to

increase diversification

and reduce idiosyncratic risk

Allocate risk to key themes

depending on short term conviction

Monitor intraday P&L and

dynamically hedge as needed

Portfolio 5 key themes

expressed through 10-15 different

positions

US growth to accelerate through Q4 Acceleration likely to be driven by additional Fed easing (QE4 likely in December - consisting of $45bn purchases of longer dated treasuries per month), stimulus from ultralow interest rates and positive seasonal factors. Extension of this improvement into Q1 13 depends upon the fiscal cliff being delayed at least until the spring and net fiscal tightening likely to amount to 1.0-1.5%

UK economy to accelerate in Q4 Economy to benefit from the rebound from the distortions in the first half of 2012, a temporary easing of the fiscal tightening and further stimulus from the Bank of England

Europe stuck in destructive cycle of Crisis, Response, Anticipation, Improvement, Complacency Expect Spanish request for aid before end of October to trigger ECB buying of shorter-dated bonds. But ECB buying cannot solve Europe’s sovereign debt crisis and lack of growth will re-ignite the crisis in 2013

Global growth recession to re-emerge as key driver in 2013 Better US/UK growth and domestic stimulus should help stabilise activity over the winter, but with emerging economies remaining in growth-recessions and negative fiscal multipliers in the major industrialised economies during 2013

Key macro economic themes

October 12


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-1.0

-0.5

0.0

0.5

1.0

1y0y 1y2y 1y4y 1y6y 1y8y 1y10y 1y12y 1y14y 1y16y 1y18y 1y20y 1y22y 1y24y 1y26y 1y28y

%

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

1Y0Y 1Y2Y 1Y4Y 1Y6Y 1Y8Y 1Y10Y 1Y12Y 1Y14Y 1Y16Y 1Y18Y 1Y20Y 1Y22Y 1Y24Y 1Y26Y 1Y28Y

%

Forward - 04/01/2012

Forward - 30/04/2012

11

October 12


ClearCurve: a key proprietary tool Deconstructing the forward rate curve

Calculates forward curves for all instruments

Assists in benchmark construction and portfolio implementation

Dominated by changes in domestic structural supply and demand/regulation

Global competition for capital/global macro Expectation

of base rates

Source: ClearCurve, May 2012.

Monitors portfolio risk

Scales active positions according to risk budget

German forward rate curve

Short-dated inflation bonds cheap relative to expectations of inflation Fund positioned long of short-dated UK and German inflation-linked bonds

Rates ‘low for longer’ now fully priced into markets Fund positioned short US1y5y and UK1y3y rates

Given scale of central bank intervention, we expect rates to rise from current levels Fund positioned short 20y10y forward rates in the US

Global growth recession: emerging economies to slow and US to be best performing economy Fund positioned long USD and short AUD

Inflation expectations in the US are too high, and in the UK we expect further falls in inflation, driven by changes to the inflation calculations Fund positioned short 5y5y US and 25y25y UK inflation assets to benefit from falling inflation

Further concerns likely to emerge over banks related to the Libor scandal - this is likely to impact Libor-related products Fund positioned long 10y10y UK government bonds forward rates relative to 15y15y UK swap forward rates

Rise in rates expected to be led by shorter-dated maturities Fund positioned short volatility in long-dated rates and long volatility in short-dated rates

October 12

12


The Arc of Alpha: current positioning

< 2 years

2-15 years

> 15 years

FX

Asset Swaps

Inflation

Volatility strategies

-16

-14

-12

-10

-8

-6

-4

-2

0

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6

8

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12

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18

20

13

October 12


Using diversification to control risk

Ex-a

nte

tra

ckin

g er

ror

%

Source: UBS Delta, data at 28/09/2012. The fund takes risks by implementing different strategies. If each strategy was well correlated, the total risk of the fund would be a sum of the parts. In fact, the strategies are lowly correlated. This creates a diversification benefit, reducing the fund’s total volatility.

Risk taken by independent risk buckets

Ex-a

nte

tra

ckin

g er

ror

%

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

20Risk mitigated by diversification

Strategy: sell volatility

European policymakers will do just enough

Market attaching too high a probability to extreme events eg Grexit

Risk bucket: volatility

Short volatility through option strategies

Volatility levels fell as central banks intervened in July and September

Theme: crisis, response, anticipation, improvement, complacency

Source: Bloomberg at 28/09/12

50

60

70

80

90

100

Jun 12 Jul 12 Aug 12 Sep 12

Merrill Lynch Option Volatility Estimate move Index

%

October 12


14

Strategy: long short-dated forward rates

Deleveraging continues to weigh on economic growth

Failure to address European issues will prolong crisis

Rates therefore set to remain low for longer than market pricing suggests

Risk bucket: 2-15 years

Long position taken in German 3y2y forward rates

Theme also expressed through 3y3y UK forward rates

Theme: rates low for longer

Source: ClearCurve at 28/09/12

0

0.5

1

1.5

2

2.5

Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12

German 3y2y forward rate

%

October 12


15

Strategy: sell US inflation

Bernanke emphasised importance of Fed’s inflation credibility

Policy to be less accommodating than market expects, reducing inflation expectations

Recognised risks to this strategy around Sept Fed meeting but 5y5y rates at extreme level

Risk bucket: inflation

Short position taken in US 5y5y inflation swap

Fed announcement of QE3 in September impacted this position as inflation rates rose for all maturities

Theme: tough love from central banks

2.4

2.6

2.8

3

3.2

Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12

US 5y5y inflation swap


October 12


16

Strategy: long short-dated rates, short long-dated rates

Relaxation of policy would anchor short-dated rates

Long-dated rates would rise due to longer term growth expectations

Any relaxation of regulatory rules would cause a further sell off in long-dated rates

Risk bucket: 2-15 years and >15 years

Yield curve flattened in September due to a large UK insurer buying long-dated forwards

In addition front-dated forwards sold off

Theme: UK yield curve to steepen

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

-1

0

1

2

3

4

5

6

1Y0Y 1Y5Y 1Y10Y 1Y15Y 1Y20Y 1Y25Y 1Y30Y 1Y35Y 1Y40Y 1Y45Y

UK forward rate curve

Change (RHS) UK forward 03/09/2012 UK forward 28/09/2012


October 12


17

October 12


Outperformance since launch

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12

Ignis Absolute Ret Gov Bond EUR I Hdgd class

EONIA

Lipper Global Absolute Return EUR Low

Source: Lipper, NAV to NAV, gross income reinvested since launch on 31/03/2011 to 28/09/2012. EONIA is the rate that large banks use to borrow from, and lend to, one another on the overnight market. The performance data does not take account of the commissions and costs incurred on the issue and redemption of shares (including the initial charge). Performance comparisons are inappropriate due to the diverse nature of the objectives of the funds populating this sector, including differing benchmarks, risk characteristics and timeframes for delivering performance. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.

10.3%

0.9% 0.7%

18

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

-1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5%

Weekly returns of Ignis Absolute Return Government Bond Fund versus Citigroup G7 Government Bond Index

Source: Ignis, Lipper; ARGBF data based on EUR I Hdgd share class net, Citigroup G7 data shown in local currency; all information based on weekly data from 31/03/2011 to 26/09/2012. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.

Strong performance in all market conditions

October 12


51% 18%

15% 16%

Citigroup G7 GBI weekly returns

ARGBF weekly returns

19

Contribution by strategy

October 12

20


0

50

100

150

200

250

300

350

Rates < 2y Rates 2-15y Rates 15y+ Asset Swap Global Inflation FX: Active Volatility

Bp

s

Contribution by strategy: cumulative since launch

Source: Ignis, internal trading systems, indicative only, base currency, data since launch on 31/03/2011 to 28/09/2012. The fund generates performance by implementing different strategies. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and is not guaranteed.

List header three List header four List header one List header two

ClearCurve – developed by Ignis in 2005

Unique in extracting forward rates from government bonds

Provides a more accurate view of the path of interest rates

High level of experience in both long and short investing

Chief economist part of team

Risk management embedded within process

Team have dedicated quant specialists

What sets us apart?

October 12

Alpha not beta Diversified skill set Innovative approach

Designed to deliver performance in all market conditions

Non-directional (although core views taken)

Lowly correlated to credit, gilts, gold and equities

Manager not constrained by any particular biases


21

Appendix

^This is the rate that large banks use to borrow from, and lend to, one another on the overnight market. In Europe this is EONIA (Euro Over Night Index Average). *Performance fee is net of fees, over compounded cash rates and subject to a high water mark.

Fund manager Russ Oxley (lead manager), Stuart Thomson, Adam Purzitsky,

Grant Peterkin (co managers)

Launch date 31 March 2011

Sector Lipper Absolute Return Euro Low

Structure UCITS IV SICAV

Domiciled Luxembourg

Benchmark EONIA^

Liquidity Daily dealing

Minimum investment EUR A Class: €1,000 EUR I Class: €1,000,000

Annual management fee EUR A Class: 1% EUR I Class: 0.3%

Performance fee* Fund manager is entitled to 10% of performance generated above EONIA^ with a high water mark

Registered for sale: Luxembourg, UK, Spain, Germany, Austria, France, Italy, Sweden, Switzerland, Finland, Belgium and the Netherlands

Fund profile

October 12


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October 12


Contact us

France and Switzerland (French)

Philip Goldsmith, Managing Director Europe

Mob: +41 (0)79 753 35 74 / +44 (0)7836 243 999

Email: [email protected] Iberia and Latin America

Mauro Loran Garcia, Regional Director

Mob: +34 (0)616 463 917

Email: [email protected]

Germany, Austria and Switzerland (German)

André Haubensack, Regional Director

Mob: +41 (0)79 373 79 13

Email: [email protected] Benelux

Roger de Passe, Regional Director

Mob: +32 (0) 470 99 16 68


Italy and Ticino

Arcangelo Barletta, Regional Director

Mob: +39 (0)392 89 60 736


Nordics

Philip Goldsmith, Managing Director Europe

Mob: +41 (0)79 753 35 74 / +44 (0)7836 243 999


Telephone calls may be monitored and/or recorded for the purpose of security, internal training, accurate account operation, internal customer monitoring and to improve the quality of service.

Your main contact Your regional support

European Sales Support Manager Dee Clarkin Tel: +44 (0)20 3003 3127 Email: [email protected]

Business Development Executive Riccardo Villa Mob: +39 (0)347 27 52 557 Email: [email protected]

Business Development Executive Johanna Pollet Tel: +44 (0)20 3003 3128 Email: [email protected]

Sales Support Executive

Christina Kniep Tel: +44 (0)20 3003 3124 Email: [email protected]

25

October 12


Disclosure This information is intended for professional clients and investment professionals only and should not be relied upon by retail investors.

The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice.

Distribution of this document and the offering of shares in certain jurisdictions may be restricted by law and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. This document does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such offer or solicitation.

Further detailed information regarding the Fund, its Prospectus, its Key Investor Information Document (KIID), its latest annual reports and any subsequent half-yearly reports (including information on how to switch, buy and sell units of the Fund and other unit classes available), is available free of charge from Ignis Investment Services Ltd. You can also obtain these documents through our website www.ignisasset.com/international.

Past performance is not a guide to future performance.

The fund takes long and short positions based on the fund manager’s views of the market direction. This means the fund’s performance is unlikely to track the performance of broader bond and equity markets. While this creates the opportunity for the fund to deliver positive returns in falling markets, it also means that the fund could deliver negative returns in rising markets. The value of investments and any income from them can fall as well as rise and is not guaranteed. Exchange rate movements may cause the value of investments to fluctuate.

The fund is a sub fund of Ignis Global Funds SICAV, an investment company organised under the laws of the Grand Duchy of Luxembourg as a Self Managed SICAV. The investment company has its registered office at Vertigo-Polaris, 2-4 Eugene Ruppert, L-2453 Luxembourg, and is authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg.

The sub fund is a Recognised Scheme in the UK under Section 264 of the Financial Services & Markets Act 2000 and is promoted in the UK accordingly.

The sub fund is currently registered for public distribution in the following countries: Luxembourg, UK, Spain, Germany, Austria, France, Netherlands, Belgium, Sweden, Switzerland, Finland and Italy. It is registered for institutional distribution only in Italy. Copies of all relevant scheme documentation can be obtained free of charge from the locally appointed paying agents. Austrian Paying Agent: Unicredit Bank Austria, 8398 Global Securities Sales & Services, P.O. Box 35, A-1011 Vienna; Belgium Paying Agent: Fastnet Belgium SA, B-1000 Brussels, Avenue de Port 86C, b320; French Paying Agent: Société Générale SA, 29 Boulevard Haussmann, F-75009 Paris; German Information Agent: Société Générale SA, Neue MainzerStraße 46-50, D-60311 Frankfurt / Main; Italian Paying Agent: RBC Dexia, via Vittor Pisano 26, 20124 Milan; Luxembourg Paying Agent: Société Générale, 11 Avenue Emile Reuter, L-2420 Luxembourg; Netherlands Paying Agent: ING Bank NV, Van Heenvlietlaan 220, Location Code BV.06.01, NL-1083 CN Amsterdam; Spanish Paying Agent: RBC Dexia Investor Services España SA, calle Fernando El Santo no20, Madrid 28010; Swedish Paying Agent: SEB Merchant Banking, Sergels Torg 2, SE-106 40 Stockholm; Swiss Paying Agent: NPB Neue Privat Bank AG, Limmatquai 1, P.O. Box, CH-8022 Zurich.

This document has been issued by Ignis Investment Services on behalf of Ignis Global Funds SICAV. Ignis Investment Services is registered in Scotland Number SC101825. Registered Office: 50 Bothwell Street, Glasgow G2 6HR. Authorised and regulated by the Financial Services Authority.

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Ignis citywire berlin nov 2012