Ausbil Investment Roadshow 2018 Rising volatility risks and - PowerPoint PPT Presentation

Ausbil Investment Roadshow 2018 “Rising volatility – risks and opportunities” May 2018

Ausbil Investment Roadshow 2018 “Rising volatility – risks and opportunities” May 2018 Mark Knight – Head of Distribution

Investment performance Active process - strong results over the long term April 2018 3 months (% pa) 6 months (% pa) 1 year (% pa) 5 years (% pa) Inception* (% pa) Return Excess Return Excess Return Excess Return Excess Return Excess Active Equity 2.0 +1.7 6.5 +3.1 11.2 +5.5 9.7 +2.2 11.3 +3.1 Geared Equity 4.2 +3.9 13.9 +10.4 24.0 +18.3 20.7 +13.1 9.6 +5.6 Concentrated 2.6 +2.3 7.1 +3.7 11.4 +5.7 10.5 +3.0 11.3 +2.9 130/30 Focus 2.1 +1.8 6.3 +2.9 10.6 +5.1 11.4 +3.9 11.5 +2.9 Emerging Leaders 3.4 +2.7 9.6 +3.0 26.7 +10.8 13.6 +1.3 13.5 +4.0 Returns are gross of fees. Concentrated performance is based on a composite series. *Inception dates: Active Equity 01.07.97, Geared Equity 24.05.07, Concentrated 05.08.04, Active Sustainable 31.01.18, 130/30 Focus 14.07.10, Emerging Leaders 01.05.02, MicroCap 12.02.10 3

Ausbil MicroCap Opportunities ex 200 • Specialist investment team • Excellent track record • Proven process • Spare capacity • SQM – “Superior”  A gross investment return of 30% for the year ending April versus 25% for the benchmark*  A gross investment return of 34% since inception versus 2% for the benchmark* 4 Benchmark: (S&P/ASX Emerging Companies Accumulation Index)

Ausbil Active Sustainable Equity Process summary STAGE 1: Macroeconomic Analysis STAGE 3: Stock STAGE 2: Sectoral Selection Analysis Fundamental stock analysis integrated with STAGE 3: ESG & quantitative ranking Stock Selection STAGE 4: Portfolio i) ESG filter ii) Stock ranking Construction Refined investible Sustainable Earnings universe based on Evaluation Tool (SEET) ESG grounds analysis • What does ESG integration mean to Ausbil? ‒ more informed investment decisions can lead to better outcomes ‒ active ownership and engagement on ESG issues 5

MacKay Shields Unconstrained Bond Fund Seeking the highest absolute, risk adjusted return • Adds alpha through top-down asset allocation and bottom-up credit research • Dynamic asset allocation: different fixed income sectors outperform in different environments • Seeks to protect capital at times of market stress • Seeks to be more resilient than traditional strategies in rising interest-rate environments April 2018 3 months (% pa) 6 months (% pa) 1 year (% pa) Inception* (% pa) Return Return Return Return Excess Excess Excess Excess MacKay Shields Unconstrained Bond -0.4 -0.8 0.6 -0.3 3.7 +2.0 6.1 +4.3 Fund Performance is gross of fees. 6 *Inception date 01 June 2016. Past performance is not indicative of future results. Please see disclosures concerning comparisons to an Index.

Your speakers Experienced investment professionals Mason Willoughby- Jim Chronis Gian Pandit Paul Xiradis Thomas Chief Economist Deputy Head of Executive Chairman, Portfolio Manager Equities Head of Equities MicroCap Balanced Fund 130/30 Focus Active Equities Concentrated Equities Active Sustainable Equities 7

Ausbil Investment Roadshow 2018 Global outlook Jim Chronis Chief Economist

Global forecasts - synchronised & accelerating 3.9% growth is historically impressive Real Estimated Average Official Ausbil(f) Official Ausbil(f) Potential Post Crisis Sector GDP 2018 sector 2019 % yoy GDP 2008-2016 Consensus % Consensus % April 2018 % % 2018 (f) 2019 (f) % % 2.7- 3.0 ↑↑ 2.5 ↑↑ United States 1.8 1.3 2.6 2.3 1.4 ↑ 1.1 ↑ Japan 0.7 0.4 1.3 0.9 2.3 ↑↑ 2.2 ↑↑ Eurozone 1.5 0.4 2.2 1.8 6.5 ↑ 6.5 ↑ China 6.5 6.3 5.8 8.4 2.7- 3.0 ↑ 3.1 ↑ Australia 2.8 2.5 2.9 3.0 2.4 ↑↑ 2.4 ↑↑ Advanced Economies 1.1 2.3 2.1 5.0 ↑ 5.0 ↑ Developing Economies 4.7 4.9 5.1 3.9 ↑↑ 3.9 ↑↑ Global 3.3 3.8 3.7 Sources: (a) International Monetary Fund, World Economic Outlook Update, released 17 Apr 2018 (b) OECD Economic Outlook Update, released 13 March 2018 (c) The World Bank, Global Economic Prospects, released 22 Jan 2018 (d) US Federal Reserve Economic Projections of Federal reserve Board Members and Federal Reserve Presidents, released 22 March 2018 (e) European Central Bank Staff Macroeconomic Projects, released 08 March 2018 (f) European Commission, released Nov 2017 (g) ECB's Survey of Professional Forecasters Oct 2017 (h) Bank of England Inflation Report , released Nov 2017 (i) Bank of Japan Economic Outlook, released 23 Jan 2018 (i) Bank of Canada Monetary Policy Report, released 17 January 2018 (k) Australian Treasury MYEFO Budget 2017-18, released 18 December 2017 (l) Reserve Bank of Australia Statement on Monetary Policy, released February 2018 9

Global growth - synchronised & accelerating Inflationary impulse is on the horizon, costs are rising 10 Source: Factset, Ausbil

US - fiscal boom Larger deficits from tax cuts and budget deal Budget deal would cement return of trillion-dollar deficits 11 Source: CRFB calculations based on Congressional Budget Office data

US - fiscal boom Capex investment lift next phase of growth 12 Source: Factset, Ausbil

US - fiscal boom Inflation overshoot new focus for Fed policy 13 Source: Factset, Ausbil

Europe - motoring ahead GDP accelerates to 2.7% Q4 from 3-yr average 2.1% 14 Source: Factset, Ausbil

China - “high quality” growth long term Exporter of inflation 15 Source: Factset, Ausbil

Japan - positive output gap Low unemployment, raising wages and inflation expectations 16 Source: Factset, Ausbil

Australia - trend growth Business is the driver, indebted households furloughed Drivers of Real GDP Growth annual contributions by sector 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 1-Dec-15 1-Jun-16 1-Dec-16 1-Jun-17 1-Dec-17 -2.0 17 Source: Ausbil

Australia - trend growth Wages to rise as unemployment rate falls to 5.1% 18 Source: Factset, Ausbil

Ausbil model - Australian inflation Forecast to be back in the range 2-3% 12% 10% 8% 6% 4% 2% 0% -2% 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 Actual Forecast 19 Source: Ausbil

Reflation theme ongoing Global  Accelerating synchronised global growth • Rising input costs and inflation  Global cash rates and bond yields higher • Quantitative tightening - US480bn 2018, 600bn 2019 & 2020 • ECB bond buying tapering to end Q3 2018  Expansionary fiscal policy • US tax and $1.5 trn infrastructure spend compounds reflationary growth • Next option for Europe and other major economies  Risks – Geopolitical and Trade Wars 20

Reflation theme ongoing Australia  GDP growth 2.7-3%  Unemployment rate lower to 5.1%  Expect income tax cuts for Budget 2018/19  Core inflation 2-3%  Cash rate to move higher  AUD currency - range 72 to 78c, closes at 75c  Risk? A change of government 21

Ausbil Investment Roadshow 2018 “Rising volatility – risks and opportunities” Gian Pandit Paul Xiradis Deputy Head of Equities Executive Chairman Chief Investment Officer Head of Equities

Australian equity market Broadening of earnings EPS Growth (%) 16 FY17 = +12.5% 2016 2017 2018 2019 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 FY16 = -12.6% -13 -14 -15 Apr-2018 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Feb-2018 23 Source: Ausbil, CLSA, IBES.

Australian equity market Broadening of earnings EPS Growth (%) 16 2016 2017 2018 2019 15 14 13 12 11 10 FY18 = +8.0% 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 -14 -15 Apr-2018 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Feb-2018 24 Source: Ausbil, CLSA, IBES.

Australian equity market Broadening of earnings EPS Growth (%) 16 2016 2017 2018 2019 15 14 13 12 11 FY19 = +8.4% 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 -14 -15 Apr-2018 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Feb-2018 25 Source: Ausbil, CLSA, IBES.

Australian equity market Valuation is not stretched % yoy X 120 24 Market EPS growth (lhs) PE ratio on one year forward EPS (rhs) PE ratio average of low inflation era 100 20 80 14.6 16 60 40 12 20 8 8.0 8.4 12.5 0 4 -12.6 -20 Forecast -40 0 1988 1992 1996 2000 2004 2008 2012 2016 26 Source: Ausbil, Citi, Factset

Australian equity market Consensus expectations for EPS growth and P/Es EPS EPS Ausbil* PE PE Growth Growth EPS April 2018 FY 2018 (f) FY 2019 (f) FY 2018 (f) FY 2019 (f) Growth X X % % FY19 *(f) % MARKET 15.9 14.6 +8.0 +8.4 Financials 13.1 12.4 +1.2 +6.2 REITS 15.6 15.0 +3.9 +4.3 Industrials 19.7 17.8 +7.1 +10.7 Resources 15.5 13.9 +28.2 +11.0 Source: Ausbil, 26 April 2018 27 Note: * Ausbil view of earnings direction relative to consensus