Amplia quantitative equity strategy Quant Core Contents 1) - PowerPoint PPT Presentation

Amplia quantitative equity strategy – Quant Core

Contents 1) Quantitative asset management model – why? 2) How does the quantitative model work? 3) Key information on the Certificate 4) Portfolio management team 5) Disclaimer 2

Quantitative asset management model – why? Flood of data Complexity of financial markets Emotions Investors are overwhelmed by the amount of The majority of market participants cannot Abrupt and strong moves in financial markets information and false rumors. This creates white objectively process the increasingly complex lead to irrational and panicky behaviour. noise which hampers decision-making, resulting data available. Moreover, much information is Investors are often guided by emotions such as in action bias and failure to capture the relevant processed in different ways by various greed, fear and heard-behaviour, all of which data. information providers increasing the complexity expose them to volatility and market further. corrections. 3

Quantitative asset management model – why? Advantages of our quantitative analysis Pro-cyclicality Avoiding overconfidence Reduction of complexity Our method systematically analyses investor By controlling the instincts of fear and greed we Structuring relevant market information without emotions and markets without being at their can avoid psychological decision-making biases prejudice. mercy. and overconfidence in our own capabilities. Stability and continuity in reacting to constantly By using a fully quantitative process we remain We systematically eliminate subjective and changing data patterns. objective and can exploit overcrowding and selective perceptions of the market trends without drifting into herd-behaviour. environment. 4

Quantitative asset management model – why? Asset allocation – performance contribution of a balanced portfolio 1 3,5% 6,0% Scientific studies and empirical observations have confirmed the main research study of 8,0% 1991 that pure equity selection offers limited added value. The asset allocation however contributes 82,50% to the portfolio return. Our core competence is based on this, and we focus our efforts on the most important factors influencing the investment process. In practical terms this means we try to systematically interpret and analyse a vast number of macroeconomic and market 82,5% sentiment factors to have an understanding of the correct valuation of asset classes. Then we implement and follow that asset allocation without being confined to traditional static allocations or benchmarks. Within individual asset classes, we apply our valuation metrics to derive a list of preferred Equity selection Timing Asset allocation Other factors instruments that we believe are undervalued. These instruments, such as single stocks, are acquired and subsequently re-evaluated regularly. The strength of the valuation model is emphasised on the single-stock level as we are not influenced by investor mass behavior that oftentimes results in crowded trades and distorted valuations. 1) Source : Financial Analyst Journal (1991) – G. Brinson, B. Singer, G. Beebower 5

How does the quantitative model work? Asset allocation Hedging Economic Market Industry Consumption Monetary Valuation Market risk Money flow demand surprises breadth Signals from macro economy and financial markets Market psychology signals Market risk exposure Asset allocation and preferred securities to implement it . High conviction stocks by geographies, market size and sector. Growth Value Momentum Quality Stock selection The model has two parts: market exposure (asset allocation) and stock selection. Market exposure defines the degree to which we seek equity market risk. It stipulates the equity allocation, varying between either 0%, 50% or 100%. Stock selection is derived from the client-specific stock universes (usually European and North-American indices) and lays out the individual equities we want to invest in. 6

How does the quantitative model work? I – Asset allocation Asset allocation Hedging Economic Market Industry Consumption Monetary Valuation Market risk Money flow demand surprises breadth Signals from macro economy and financial markets Market psychology signals Market risk exposure Asset allocation model has two sub-categories: Macro economy and financial markets (fundamentals) and market sentiment (psychology). Both fundamentals and psychology have their own consolidated signals. Thus, the equity market exposure is: - If both fundamentals and psychology signals are > 0 (positive), market exposure is 100% - If either of the two signals is < 0 (negative), market exposure is 50% - If both signals are negative, market exposure is 0%. Changes in market exposure are implemented by taking short positions in futures of the underlying index that comprises the universe from which the equities in the client portfolio are chosen from. This usually gives a quick and cost-effective way of adjusting the portfolio hedge. Fundamental and psychology signals in their turn derive from four sub-categories each that are outlined on the following page. 7

How does the quantitative model work? II – Stock selection Stock selection High conviction stocks by geographies, market size and sector. Growth Value Momentum Quality Stock selection assigns a pre-defined number of shares into the portfolio. This number of the shares as well as the stock universes are defined according to the client’s preferences. Usually, the higher the value of the portfolio, the greater the number of the shares. We normally can the number of shares at 30 in order to have more conviction in the selection and to avoid overdiversification and latent indexing. Each sub-category (growth, value, momentum and quality) are assigned equal weights, and the shares of the target universe are ranked by the overall score of the sub-categories. The shares with the best overall score are selected into the portfolio. Rebalancing occurs usually monthly, unless exceptional market circumstances warrant for a more frequent rebalancing interval. 8

Key information on the Certificate Currency breakdown 1 Issuer Societe Generale Luxembourg (Moody's: A1 / S&P: A) % of deployed capital: Lead Manager Societe Generale Paris EUR 67.7% USD 32.3% Portfolio Manager Amplia & Co. AG, Zurich Grand Total 100.0% ISIN number CH0476259525 Valor number 47625952 Issue size EUR 15'000'000 (initially) Issue currency EUR Currency hedging No Denomination EUR 1'000 Liquidity Daily (provided by issuer) Secondary market orders Central European trading hours Mid Price +/- 0.25% 1 Bid-ask quoting Management fee Issuer: 0.20% p.a., Portfolio Manager: 1.50% p.a. Transaction fees 0.02% on transaction volume (est. 0.06% - 0.08% p.a.) Number of securities at outset 30 Hedging / market exposure changes Short positions in benchmark indices Euro STOXX 50 Net Total Return Index Benchmarks indices S&P Net Total Return Index Euro STOXX Mid Price EUR Index 1) Euro equivalent, based on Bloomberg closing rates as of 17.06.2019. 9

Illustration: initial portfolio at launch Company Sector The equity allocation will comprise 30 single stocks at all times. To warrant good liquidity TOTAL SA Energy and sufficient geographical as well as sectoral diversification, the basis stock populations AXA SA Financials are: ENEL SPA Utilities Euro STOXX 50 for European (Eurozone) large-caps DANONE Consumer Staples S&P 100 for US large-caps UNIBAIL-RODAMCO-WESTFIELD Real Estate Eurozone large-cap ORANGE Communication Services Euro STOXX Mid: the 100 largest shares of the index (total index stock number: 200). SAP SE Information Technology BANCO BILBAO VIZCAYA ARGENTA Financials The share ranking will be updated monthly and changes implemented accordingly. ESSILORLUXOTTICA Consumer Discretionary FRESENIUS SE & CO KGAA Health Care Equity allocation is altered by taking short positions in the underlying indices directly. This is FOX CORP - CLASS B Communication Services a cost-efficient and swift way of hedging market exposure, depending on the signals from ABBVIE INC Health Care the asset allocation model. The asset allocation signal is observed bi-weekly. BIOGEN INC Health Care CONOCOPHILLIPS Energy No currency hedging takes place. Thus, an investor is exposed to a degree of almost 1/3 of WALT DISNEY CO/THE Communication Services US large-cap the portfolio’s value to fluctuations in EUR/USD spot rate. We consider this risk immaterial, MICROSOFT CORP Information Technology BRISTOL-MYERS SQUIBB CO Health Care since FX rate changes tend to have an opposite impact on companies’ EBIT margins and INTEL CORP Information Technology their share prices. HOME DEPOT INC Consumer Discretionary TARGET CORP Consumer Discretionary DEUTSCHE LUFTHANSA-REG Industrials AGEAS Financials MTU AERO ENGINES AG Industrials RHEINMETALL AG Industrials GALP ENERGIA SGPS SA Energy Eurozone mid-cap KLEPIERRE Real Estate STORA ENSO OYJ-R SHS Materials OMV AG Energy VOESTALPINE AG Materials NOKIAN RENKAAT OYJ Consumer Discretionary 10