Responsible Investment Association Australasia - MEMBER ONLY WEBINAR - Certjfjcatjon Quarterly June 2017 22 June 2017 Presenters: James Tayler - Morphic Asset Management Cheyne McKee - Bank Australia Kirsten Simpson - VicSuper
June 2017 Focussed | Vigilant | Agile
There is no Plan(et) B. Invest in change. We ar are e the e FIRS RST T gener neration tion exper perie ienci cing climate imate change ge an and d the e LAST ST that at can an do an anyth thing ab about ut it Focussed | Vigilant | Agile
Morphic Asset Management Founded in 2012 by senior portfolio managers with • Performance of $10,000 * AUD, Aug 2012 – May 2017 long standing track records 24,000 Strong alignment via majority ownership and co- • 22,000 investment by the investment team 20,000 18,000 Robust and multi level risk management embedded • at heart of investment approach 16,000 14,000 Strong governance – part of Westpac Group • 12,000 (Ascalon) which appoints two directors to MAM board 10,000 FUM growth > 540% in three years • Morphic Global Opportunities Fund ($125m) • *Calculations are based on exit price with distributions reinvested, after ongoing fees and expenses but excluding individual tax, member fees and entry fees (if applicable). Fund Inception 2 August 2012. Morphic Ethical Equities Fund ($49m) • 3 Focussed | Vigilant | Agile
Experienced and diverse investment team Jack ck Lowenst nstein, in, MD & Joint int Chief ief Invest stment nt Offic icer Chad Slater, r, ED D & Joint int Chief ief Invest stment nt Offic icer Jack co-founded Morphic Asset Management in Chad co-founded Morphic Asset Management in • • 2012. He was previously Deputy Chief Investment 2012. He was previously a Portfolio Manager and Officer at Hunter Hall with responsibility for risk Head of Currency and Macroeconomics at management and portfolio construction. Hunter Hall for five years. He played a key role in building Hunter Hall from Prior to this, Chad was an Investment analyst at • • just $13m under management when he joined, to a BT Financial Group including a secondment to peak of just under $3 billion. In ten years as a Putnam Investments in Boston. He began his Portfolio Manager with Hunter Hall, he generated career as an Economist at Australian Federal substantial out-performance. Treasury. Geoff Wood, Head of of Macro cro & Risk sk James Tayler ler, , Head of Rese search rch Geoff joined Morphic at the inception in 2012. He James joined Morphic in 2016. He was previously • • previously worked in risk management at Global Head of Investment Research at Knight Vinke, a Trading Strategies, a global macro hedge fund that leading activist investor focused on European managed in excess of US$1 billion through the global companies, based in Zurich and London. financial crisis. Prior to this, James was Head of Investment • Prior to that, he worked at Barclays Capital in London, Research for a single family office in Switzerland • managing the risks arising from the hedge fund following more than 10 years at Swiss clients of the bank's Prime Brokerage business. Reinsurance. 4 Focussed | Vigilant | Agile
Focussed | Vigilant | Agile
Morphic Ethical Equities Fund Limited (ASX: MEC) Strategy: Global Equities, long/short to manage risk • Negative & Positive Screens • Listed on ASX on May 3 rd , 2017 • Performance: +2.15% in May 2017 • Market Cap: $48m • Trades at a premium ($1.16 as at June 16 th , 2017) • Platform rm availa ilabili ility 6 Focussed | Vigilant | Agile
How the Ethical Screen works “Negative Screen” excludes buying shares in: Tobacco Intensi ensive anim imal Oil l & gas Coal l & Uranium ium Gambling ling Rain in forest & old Armamen ents & alc lcoho hol l farmin ing & aquacul ultur ure Mining ning growth h logg ggin ing We seek out “positive” investments that support: Water er quali lity Air ir quali lity Conser nservation Rene newable le ener nergy gy Can short screen ened ed out stocks s and sectors ors Ethical compliance check first, before investment research 7 Focussed | Vigilant | Agile
Focussed | Vigilant | Agile
Portfolio positioning As at May 2017 by country, sector and stock Stocks ( Shorts ) Theme Region Position Weighting Rural Electrification Indian Infrastructure Central Asia 4.0% Power Grid Indian Infrastructure Central Asia 3.7% Fund Managers basket* Fund Managers Global -3.7% Alstom Global Rail Europe 3.2% D.G. Khan Cement Pakistan Infrastructure Central Asia 3.2% Ping An Insurance Hong Kong Insurance Spread Asia Pacific 3.1% HCA US Healthcare North America 2.8% Service Corp US Deathcare North America 2.4% People’s Insurance Hong Kong Insurance Spread Asia Pacific -2.4% Wells Fargo US Banking North America -2.3% *Includes: Invesco, Och-Ziff, Affiliated Managers, Fortress, Eaton Vance, Legg Mason, Waddell & Reed, Artisan Partners, Janus Capital, Blackrock, AGF Management, IGM, Pzena, T Rowe, Alliance Bernstein, Federated Investors, Wisdomtree, Manning & Napier, CI Financial, GAMCO, Henderson Group, Schroders, Aberdeen, Man Group, Rathbone Brothers, GAM & Azimut. 9 Focussed | Vigilant | Agile
Portfolio positioning As at May 2017 By Region By Sector 46% 19% Consumer Discretionary North America 17% Information Technology 22% 15% Asia Pacific Financials 12% Health Care 16% Western Europe 9% Industrials 13% Morphic Ethical Equities 8% Central Asia Materials Fund Morphic Ethical Equities 7% Consumer Staples Fund 1% Africa / Middle East 6% Utilities Benchmark Benchmark 4% 1% Real Estate South & Central America 3% Telecommunication Services 1% Eastern Europe 0% Energy 0.0% 20.0% 40.0% 60.0% 0.0% 10.0% 20.0% 30.0% 10 Focussed | Vigilant | Agile
Alstom – a global player in sustainable mobility Context Alstom outperforms European market Revived global demand for rail and tram networks driven by: Relative to SX01 Index normalised between February 2014 and February 2017 Demographic changes • 160 Urbanization • Economic development • 140 Change Driver Trains = Highly efficient transport mode • 120 Trains = Low emissions • Pioneer of hydrogen fuel-powered, zero-emission regional train • 100 Insight edge Analysts still confused by Alstom’s legacy JVs • 80 Market not focused on new business • Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Member of Dow Jones Sustainability Indices ALO FP relative to Stoxx Europe 600 Morphic ownership Source: Bloomberg, Team analysis 11 Focussed | Vigilant | Agile
Power Grid – enabling India’s “green energy corridor” Context Power Grid share price performance • Operates world’s largest electricity grid Relative to ACWI Index (USD), normalised between September 2014 and February 2017 • Brings power to cities from renewables 140 Change Drivers 130 Push for alternative energy sources driving high growth • Strong growth from Rail Electrification; strengthening • 120 state level transmission 110 Insight edge 100 Understanding Modi government commitment to • 90 renewables = good regulatory backdrop Falling cost of debt = easier to grow 80 • Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16 Sep 16 Jan 17 PWGR IN relative to ACWI US Morphic ownership Source: Bloomberg, Team analysis 12 Focussed | Vigilant | Agile
Focussed | Vigilant | Agile
Strong Governance – Board of Directors JoAnna Anna Fishe her, , Non-Execu ecutive Mark Forstm tmann, ann, Non-Execu ecutive Chai airman man Directo ector Ex BT Funds Management Float director Hunter Hall Investment Investment Committee Australian Management Catholic Super & Retirement Fund Former Director NSW Nature Conservation Trust Virgini nia Malley, , Non-Execu ecutive Jack Lowens nstei ein, n, Executive Direc ector Directo ector MD MAM NED Perpetual LIC Float Director Hunter Hall Global Member The Clean Energy Regulator Value LIC & the Nature Conservation Trust of New South Wales 14 Focussed | Vigilant | Agile
MEC continues our longstanding commitment to charitable giving Morphic has rebated $278,100 in fees so far through FGG since its launch in 2015 to youth mental health. Morphic Asset Management will donate 2.5% of its fees from managing Morphic Ethical Equities Fund to Bush Heritage. Bush Heritage has been selected for its passionate commitment to maintaining species diversity in Australia through land conservation. 15 Focussed | Vigilant | Agile
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