1 - Sandbourne Asset Management

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Authorised and regulated by the Financial
Conduct
Authority

August 2013

SANDBOURNE ASSET MANAGEMENT LTD

1

SANDBOURNE ASSET MANAGEMENT LTD


1

Fund Overview


Long / Short UK Equity Fund established November 2003


Aim is to provide absolute capital
appreciation


Best performing European long/short fund 2008
-
2010
averaging 31.2% per
annum
(
source:
BarclayHedge
)


Compound returns over 10% for nearly 10 years


Investment
process tested and refined over
9
years


Stock selection principally based on fundamentals with a
f
ocus on catalysts to crystallise value in positions


Futures overlay used to actively control net exposure: now
given more prominence after consistent positive contribution


Significant management commitment with over
$40m
own money
invested


Strategy reflecting the managers’ philosophy on how to manage
equity investment, not specifically “alternative investment”

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SANDBOURNE ASSET MANAGEMENT LTD


2

Fund
Overview (continued)


Fund only invests in liquid and listed securities


Investors able to redeem shares monthly with no gates


GBP, USD and EUR shares classes
available


Simple easy
-
to
-
understand strategy


100% transparency


all positions open to investor scrutiny


Managers available and eager to discuss fund with investors

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SANDBOURNE ASSET MANAGEMENT LTD


Monthly Returns

A Shares
-

GBP

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

2013

12.01%

2.70%

-
4.18%

-
0.89%

9.06%

-
9.18%

12.74%

21.98%

2012

24.04%

18.42%

-
10.72%

-
6.13%

-
22.33%

1.78%

-
3.10%

8.16%

9.07%

1.24%

2.33%

8.58%

25.13%

2011

-
0.64%

-
1.09%

-
3.84%

3.75%

-
6.68%

-
5.49%

-
2.67%

-
17.97%

-
13.76%

15.06%

-
1.56%

1.03%

-
31.87%

2010

-
3.08%

-
0.47%

10.63%

-
1.28%

-
6.12%

-
9.10%

15.44%

-
1.78%

16.99%

-
1.26%

-
1.09%

12.26%

30.75%

2009

-
10.57%

-
11.89%

8.71%

25.66%

3.41%

-
4.14%

13.36%

16.02%

5.98%

-
5.45%

0.01%

3.52%

45.58%

2008

9.58%

1.67%

2.42%

-
2.45%

2.39%

8.86%

0.61%

-
3.42%

12.09%

-
6.55%

-
6.26%

0.20%

18.62%

2007

-
0.18%

-
1.38%

4.20%

-
1.12%

-
1.08%

4.51%

4.74%

0.98%

-
5.29%

-
2.45%

2.72%

2.23%

7.58%

2006

3.31%

2.34%

1.46%

1.35%

-
2.76%

-
0.20%

-
2.73%

0.06%

-
2.22%

3.30%

-
1.36%

0.40%

2.73%

2005

0.76%

-
3.10%

2.63%

2.97%

0.02%

-
0.72%

5.04%

0.64%

-
1.26%

-
0.09%

0.91%

-
0.39%

7.41%

2004

0.98%

1.41%

-
0.12%

0.58%

-
1.48%

0.91%

-
7.79%

-
4.15%

-
0.61%

1.39%

1.08%

1.21%

-
6.81%

2003

2.13%

2.13%



Data is produced by
Sandbourne

Asset Management based on monthly NAV figures from Citco Fund Services (Ireland)




Monthly returns for US Dollar and Euro share classes available on request.



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SANDBOURNE ASSET MANAGEMENT LTD


Performance History

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SANDBOURNE ASSET MANAGEMENT LTD


Performance Data

A Shares
-

GBP

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 (YTD)

Since launch

Return

-
6.81%

7.41%

2.73%

7.58%

18.62%

45.58%

30.75%

-
31.87%

25.13%

21.98%

10.62%

Volatility
1

9.25%

7.09%

7.26%

10.34%

20.01%

36.91%

29.10%

27.55%

41.57%

27.08%

25.37%

Sharpe
Ratio

-
1.22

0.38

-
0.28

0.17

0.66

1.21

1.04

-
1.18

0.59

1.48

0.30


1

Annualised volatility of monthly returns

Correlation (based on B Shares


USD)

Fund/Peers

Fund/Market

Peers/Market

Since Launch

0.41

0.56

0.83

Last 12 Months

0.73

0.66

0.84

Peers: HFRX Equity Hedge Index

Market: MSCI World Total Return Index

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SANDBOURNE ASSET MANAGEMENT LTD


6

Investment Philosophy

Top
-
Down: Market Characteristics


Equity
markets
go through extended up
-

and down
-
swings which
many investors either ignore, misunderstand or fight against


We seek to capture returns on both sides by understanding turning
points and respecting genuine trends


We try to avoid temporary reversals and boost gains with top
-
down
stock plays


Bottom
-
Up: How to incorporate stock picking


Many stock picks take time to play out


Long
-
term stock picks are best separated from market view


Look for stock
-
specific risks and internal prospects to diversify top
-
down exposure


Don’t restrict net exposure to being the sum of stock
-
picks

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SANDBOURNE ASSET MANAGEMENT LTD


7

Portfolio Construction


Top Down

Horizon 1 to 3 months

Highly liquid instruments/stocks

Long and short positions


Futures


Actively used to control net exposure


Typically up
to +/
-
100
% of net assets


Top Down stock picks


50
-
80% of net assets


Typical position size at initiation 3
-
4% (depending on liquidity)


20 to 30 positions

Analysis



Current
issues


e.g. credit crisis


Economic
cycle


Technical
&
sentiment data


Valuation

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SANDBOURNE ASSET MANAGEMENT LTD


Exposure History

Positive but insubstantial
market
-
timing contribution

Change of strategy: More
aggressive
variation of net exposure, stronger
returns

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9

0
100
200
300
400
500
600
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Top Down:
Example

SANDBOURNE ASSET MANAGEMENT LTD


Short:
Wolseley

Shorted

Aug08: 444p


Cyclical fall in demand, negative sentiment


Earnings expectations halved and P/E contracted further

Covered
Mar09: 159p

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SANDBOURNE ASSET MANAGEMENT LTD


10

Portfolio Construction


Bottom Up

Core
Trades


Companies with internally generated prospects


Performance of shares not dependent on market


Holding period 6 months or more


Mainly long positions


Will accept lower levels of liquidity for high conviction ideas


50
-
80% of net assets


Typical position size at initiation 3%


20 to 30 positions




Research process:


Internal


Company
Meetings


Brokers


Broker reports


Sell
-
side analysts

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SANDBOURNE ASSET MANAGEMENT LTD


11

Portfolio Construction


Bottom Up

Short
-
term Trades


Companies with imminent results or
newsflow


Low correlation to market expected


Holding period less than 1 month


Both long and short positions


Need high levels of liquidity


Less than 30% of net assets


Typical position size at initiation 3
-
4% (depending on liquidity)


0 to 10 positions

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SANDBOURNE ASSET MANAGEMENT LTD


12

Summary


Process refined and improved over
9
years



Uncorrelated over cycle;
above average returns with current
strategy



Strategy reflecting the managers’ philosophy on how to manage
equity investment, not specifically “alternative investment”



Large management commitment (over
$45m
)



Process scalable to at least $500m




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SANDBOURNE ASSET MANAGEMENT LTD


13

Appendix

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SANDBOURNE ASSET MANAGEMENT LTD


14

Directors, Managers, Advisors and Fees


Launch Date:

01/12/2003


Investment Manager
:

Sandbourne

Asset Management Limited


Prime Broker
:

Goldman Sachs International


Lawyer UK
:

Stephenson Harwood


Cayman Islands Lawyer:

Maples and Calder Europe


Accountant
:

BDO


Administrator
:

Citco Fund Services (Ireland) Limited



Directors
:

William Scott (Chairman), David Bruce,



Nick England


Fees:

-

2% per annum Management Fee



-

20% Performance Fee paid annually in

arrears, with high watermark.


Capacity Limit:

$
500
-
750
million


Domicile:

Cayman Islands


Listing:

Irish Stock Exchange (A & B classes)

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SANDBOURNE ASSET MANAGEMENT LTD


15

Key Staff


David Bruce


Chief Executive, Fund Manager
is the founder of
Sandbourne

Asset Management, having left Abbey Life Investment Services Ltd where he was
the Managing Director. He spent 11 years in total with Abbey Life in a number of
positions including heading up the Japanese desk until 1991 and the UK equity
desk thereafter.


Paul Dixon
-
Box, CFA


Fund Manager

graduated from Cambridge University
with a degree in Mathematics in 2001 and joined the US desk of
Sandbourne

Asset Management in August of that year helping to run a US investment trust and
subsequently a US long/short equity hedge fund. Paul transferred to the UK desk
in April 2003 in preparation for the launch of
Sandbourne

Fund.


Alison Dean


Director
-

Operations

worked for David Bruce as Operations
Manager at Abbey Life before joining
Sandbourne

Asset Management. She plays a
key role in the operation by ensuring that the fund managers have the maximum
possible amount of time to spend on actually running the portfolios.


Barbara Minns


Investor Relations
joined
Sandbourne

Asset Management in
December 2010 following an 8 year career at J.P
. Morgan
Investment Bank.

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SANDBOURNE ASSET MANAGEMENT LTD


16

Dealing



Subscriptions
:


Minimum subscription for new investors is £100,000 for A Shares,
US$100,000 for B Shares or

100,000 for C Shares


Applications for shares must be received by the Administrator
before 12.00 pm on the Valuation Day immediately preceding the
relevant monthly Dealing Day.



Redemptions
:


Shares may be redeemed on each monthly Dealing Day at the
Redemption Price then ruling


21 calendar days notice of redemption

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SANDBOURNE ASSET MANAGEMENT LTD


17

Risk Management


Daily monitor


Sector exposure


Composition of portfolio in terms of large cap, mid cap and
small caps


Liquidity of positions


Balance Sheet


maximum leverage of 150%


Operations staff monitor portfolio to ensure that the fund does not
exceed its restrictions


Automatic stop losses are NOT used. Adverse moves are
assessed on a daily basis to evaluate changes to risk/reward.




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SANDBOURNE ASSET MANAGEMENT LTD


Example Turning Point: 2007 high

88
90
92
94
96
98
100
102
104
S&P Indices Rebased
0%
10%
20%
30%
40%
50%
60%
S&P 500 TR
S&P Equalweighted TR
AAII Bullish % (rhs)
Jul 07
Aug 07
Sep 07
Oct 07
Monitoring the indices
versus sentiment and
technicals
:


Index
makes higher high in
October, well after first signs
of the credit crisis


But investors are too bullish,
complacent


And market internals do not
confirm new high

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SANDBOURNE ASSET MANAGEMENT LTD


19

Example Futures Trades (FTSE 100)

81% net short at 31 Dec 2007

Covered
half of short
on 18 Jan

Went to 44%

short on 31 Jan

Covered to 8%

short on 17 March

Returned to 43%

short on 4 Apr

Increased to

100% short

on 16 May

Covered remaining

short on 22 Jan

Covered to
8% long on
17 Sep

Went to 25% short
between 19 Sep
and 23 Sep 2008

Chart: Bloomberg

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SANDBOURNE ASSET MANAGEMENT LTD


20

Performance Commentary


2004: Poor stock
-
selection from purchasing poor
-
quality, lagging names (having launched
many months into the new bull market).
Resolution:

Focus on quality stocks and improve
selection process, including better analyst contact. Take more decisive action on failing
positions.


2005: Both stock
-
selection and market
-
timing positive but not strong enough.
Resolution:

Continue to improve stock
-
selection, and manage/vary net exposure more aggressively.


2006: Strong market
-
timing including use of futures but largely offset by stock
-
selection,
including too many shorts caught up in M&A bubble.
Resolution:

Reduce the number of
positions held against market view (shorts in this case). Shrinking portfolio in this manner will
likely increase volatility but we believe strong returns will more than compensate.


2007: With increased use of futures, market
-
timing produced a decent return (final short
positioning was costly during the 2H07 but paid off in 1Q08). Stock
-
selection also satisfactory.


2008: Very strong market
-
timing returns, but a negative contribution from stock
-
selection.


2009: Early bullish call produced volatility, but very strong market
-
timing and stock selection
gains.


2010: Driven by market
-
timing; stock
-
selection significantly positive.


2011: Stock
-
selection poor, particularly
cyclicals

hurt by rise in risk
-
aversion. Believe
positioning is correct; added to positions and will hold into 2012 for a recovery.


2012: Strong market
-
timing gains; small contribution from stock
-
selection

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SANDBOURNE ASSET MANAGEMENT LTD


21

Contact Information


For further information, please contact:



Barbara Minns



Sandbourne Asset Management Ltd



4 Acorn Business Park



Ling Road



Poole



BH12 4NZ



United Kingdom



Telephone:

+44 1202 305904


Fax:

+44 1202 305905


e
-
mail:

barbara.minns@sandbourne.com


Website:

www.sandbourne.com

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SANDBOURNE ASSET MANAGEMENT LTD


22




This document does not constitute or form any part of an offer to sell or an invitation to purchase or subscribe for shares
or other securities, nor may it or any part of it, nor the fact of its distribution, form the basis of, or be relied upon in
connection with, any contract relating thereto.


The information contained herein is for background purposes only, has not been verified and is subject to amendment,
revision and updating. No representation or warranty, express or implied, is made as to the fairness, accuracy, or
completeness of the information contained herein and no reliance should be placed upon it.
Sandbourne

Asset
Management Limited do not accept any liability for any loss howsoever arising, directly or indirectly, from the issue of this

document or its contents.


The information in this document is only available in the United Kingdom to investment professionals (as defined in
Article 14 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions
Order 2001)) (“the Order”) and accordingly to persons who have professional experience of participating in unregulated
schemes or high net worth companies, unincorporated associations,
etc
, being persons of a kind described in Article 22
of that Order. Persons who do not fall within these categories should take no further action in respect of this document
and should not rely on it in any way. This document has not been approved for the purposes of section 21 of the
Financial Services and Markets Act 2000. Accordingly this document may only be issued or passed on in the United
Kingdom to those persons referred to above and to whom this document may also be lawfully communicated pursuant to
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001.


The attention of prospective investors is drawn to page 1 of the Continuing Offering Memorandum.


21 August 2013