Lawrence park capital partners credit strategies fund
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Lawrence Park Capital Partners Credit Strategies Fund

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Lawrence park capital partners credit strategies fund

Lawrence Park Capital PartnersCredit Strategies Fund

June 2014


Disclaimer

Disclaimer

THIS SUMMARY HAS BEEN PREPARED FOR INFORMATIONAL PURPOSES ONLY, SOLELY AS A PRELIMINARY DOCUMENT TO DETERMINE INVESTOR INTEREST REGARDING LAWRENCE PARK CREDIT STRATEGIES FUND(THE “FUND”), WHICH IS DESCRIBED HEREIN. EXCEPT AS OTHERWISE DESCRIBED IN THE FUND’S CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THE “PPM”), DATED March 3, 2014, THIS DOCUMENT MAY NOT BE REPRODUCED FOR ANY PURPOSE OR PROVIDED TO OTHERS IN WHOLE OR IN PART WITHOUT THE PRIOR WRITTEN PERMISSION OF THE FUND MANAGER OF THE FUND (THE “FUND MANAGER”). AN OFFER OR SOLICITATION WILL BE MADE ONLY THROUGH THE PPM, AND WILL BE SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THE PPM. THIS SUMMARY DOES NOT CONSTITUTE AN OFFER TO SELL OR BUY ANY SECURITIES. THE INFORMATION SET FORTH HEREIN DOES NOT PURPORT TO BE COMPLETE AND IS INTENDED TO BE READ IN CONJUNCTION WITH THE PPM. ALL INFORMATION AND OPINIONS AS WELL AS ANY FIGURES INDICATED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE INVESTMENT RATES OF RETURN SET FORTH HEREIN DO NOT REFLECT MANAGEMENT FEES, EXPENSES OR CARRIED INTEREST TO BE CHARGED BY THE FUND MANAGER.

THIS PRODUCT WILL BE AVAILABLE TO ACCREDITED INVESTORS AS THAT TERM IS DEFINED UNDER CANADIAN SECURITIES LEGISLATION. IN ONTARIO, IN ORDER FOR INVESTORS TO BE CONSIDERED ACCREDITED INVESTORS, INVESTORS MUST MEET CERTAIN ELIGIBILITY REQUIREMENTS WITH REGARDS TO FINANCIAL ASSETS AND/OR INCOME HISTORY. AN INVESTMENT IN THE FUND WILL INVOLVE SIGNIFICANT RISKS DUE, AMONG OTHER THINGS, TO THE NATURE OF THE FUND’S INVESTMENTS. THE RISK FACTORS WILL BE CONTAINED IN THE PPM. INVESTORS SHOULD HAVE THE FINANCIAL ABILITY AND WILLINGNESS TO ACCEPT RISKS WHICH ARE CHARACTERISTIC OF THE INVESTMENTS DESCRIBED HEREIN. THIS PRESENTATION DOES NOT CONSIDER THE SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY RECIPIENT. NO ASSURANCE CAN BE GIVEN THAT THE FUND’S INVESTMENT OBJECTIVE WILL BE ACHIEVED OR THAT THE INVESTORS WILL RECEIVE A RETURN OF THEIR CAPITAL. ACCORDINGLY, THE PPM SHOULD BE READ IN ITS ENTIRETY AND REVIEWED BY POTENTIAL INVESTORS’ LEGAL AND FINANCIAL ADVISORS.

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Lawrence park capital partners

Lawrence Park Capital Partners

Strong, Experienced Team.

Disciplined, repeatable process.

Specialists in Global Fixed Income.

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Lawrence park credit strategies fund

Lawrence Park Credit Strategies Fund

Over 27 months of performance in the Lawrence Park Credit Strategies Fund*:

  • Net return of 18.10%in 27 months/7.68% annualized return

  • Sharpe ratio of 4.07; Sortino ratio of 6.29

  • 25 months of positive returns

  • Annualized volatility of 1.55%

  • Very low correlation to traditional fixed income and equity markets

Capital Preservation.

Low Volatility.

Consistent Returns.

*A Series; Sharpe and Sortino ratios based on daily returns

CONFIDENTIAL


Lawrence park capital partners1

Lawrence Park Capital Partners

  • Established in 2011

  • Toronto-based alternative Fixed Income specialist

  • C$350m million Assets Under Management

    • Portfolio Manager Lawrence Park Credit Strategies Fund

    • Sub-advisor United FI Pool

    • Portfolio Manager CI Lawrence Park Strategic Income Fund

  • Veteran Fixed Income Team with significant international expertise

  • Partnered with CI Financial

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Distinctly canadian uniquely global

Distinctly Canadian, Uniquely Global

Andrew Torres: Founder & Chief Investment Officer

19+ years Global Fixed Income and Portfolio Management

Former Vice Chair & Global Head of Credit Trading for TD Securities

Former Partner and Portfolio Manager for Aladdin Capital Management UK

Jason Crowley, CFA: Partner, Portfolio Manager

17+ years Global credit portfolio manager, proprietary trader, global risk manager

Former Managing Director & Senior Bond Trader, Bank of Nova Scotia

John B. Young, CFA: Chief Risk & Financial Officer

18+ yearsGlobal fixed income manager, convertible arbitrage specialist

Former Chief European Portfolio Manager for Fore Research & Management

Former Managing Director and Convertible Arbitrage Specialist, TD Securities

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A solid seasoned and professional team

A Solid, Seasoned, and Professional Team

  • Partners and staff combine for over 70 years experience trading, structuring, and building fixed income credit businesses globally

    • Established investment strategy honed over two decades managing multi-billion dollar portfolios

    • Proprietary investment strategies employed using bank capital

  • Senior partners bring extensive experience from major global financial centres: London, New York, and Toronto

    • First hand knowledge and understanding of the nuances of each market/region

    • Experience evaluating and hedging credit opportunities across multiple currencies and markets

    • Extensive long-standing relationships with sell side community

    • Daily insight into the inventories and axes of 42 global bond dealer and broker desks

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The lawrence park approach

The Lawrence Park Approach

  • Process

    • Identify bonds which have become dislocated from normal pricing relationships, taking advantage of market inefficienciesand changes in investor sentiment

    • Focus on investment grade corporate bonds, which offer greater liquidity and are more resilient in times of market stress

    • Hedge out interest rate risk and currency risks, significantly reducing Fund volatility

  • Foundation

    • Nimble, mean reversion approach to trading

    • Technical based screening analysis with in-depth fundamental overlay

    • Active trading strategy with timely profit taking and redeployment of capital

    • Low exposure to interest rate moves

    • Disciplined trading governed by strong risk metrics/controls

  • Results

    • Target net annual returns of 6-10%

    • Low volatility: low correlation to traditional asset classes: superior risk-adjusted returns.

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Finding relative value

Finding Relative Value

The Bond Market is a massive, decentralized network of market participants

Example: Royal Bank of Scotland Subordinated Debt

Spread

Maturity

Plot of Royal Bank of Scotland subordinated debt in various currencies, as at April 7, 2014. For illustrative purposes only.

The Lawrence Park Credit Strategies Fund invests and profits from the inefficiencies across Global Bond Markets

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Consistent returns

Consistent Returns

6

4

Corporate Spread Index

Corporate Bond Index

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With low volatility

…With Low Volatility

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Superior risk adjusted returns

Superior Risk-Adjusted Returns

*Sharpe Ratio: [Annualized return - Risk Free Rate (1%)] / [Annualized Vol]

*As of May 31, 2014

  • LPCSF: LP Credit Strategies Fund Series A, net of all fees

  • DEX: XCB-T, an ETF based on the DEX Corporate Index, net of all fees

  • BGCI: Barclays Global Credit Index, excess returns in Canadian Dollars

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Low correlation to traditional asset classes

Low Correlation To Traditional Asset Classes

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Portfolio diversification

Portfolio Diversification

As of May 31, 2014

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Portfolio construction

Portfolio Construction

  • Core Credit

  • Best selections from global markets

  • Long positions with interest rate hedges in place

  • Momentum Trading

  • Opportunities arising from:

  • Short-term price dislocations

    • New issue calendar

    • Supply/demand considerations

    • Event driven movement

  • Carry and Roll Down

  • Short dated securities that provide income: coupon and convergence to maturity

  • Securities generally have less than three years to maturity

  • Credit Arbitrage

  • Taking both long and short positions in securities of the same company.

  • Capturing anomalies

  • Cross currency

  • Capital structure

  • Curve trading

  • Relative Value

  • Taking a long position in one company’s securities vs. taking a short position in another company’s securities, or a short position in an index

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Strategy allocation 2

Strategy Allocation2

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Return attribution strategy 2

Return Attribution-Strategy2

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Risk metric change in cs01

Risk Metric: Change in CS01

The sensitivity of the value of the portfolio to a 1 basis point change in credit spreads.

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Risk metric change in cs1

Risk Metric: Change in CS1%

The sensitivity of the value of the portfolio to a 1% change in the credit spread of each bond in the portfolio.

This risk measure describes the behaviour of the value of the portfolio to a non-parallel change in credit spreads

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P ortfolio trends

Portfolio Trends

Top Ten Holdings

  • Macroeconomic Themes

  • Global interest rates to remain volatile as central banks grapple with uneven growth

  • US wage inflation to become a more pressing issue heading into 2015

  • Credit fundamentals remain broadly stable with low default rates

  • Portfolio & Trading Themes

  • Corporate credit spreads remain reasonably valued compared to historic tights, and adequately compensate for default risk

  • New issue supply to remain robust, fuelled by increased M&A activity

  • Bank & Insurance sectors continue to restructure capital profile to meet regulatory hurdles

  • Select opportunities in European and Emerging Market credit over North America

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Risk management

Risk Management

Market Risk Management Policy

  • Stop-loss limits for trade groups as well as the overall portfolio

  • Extensivedaily risk reports

  • Detailed risk management policy manual

    Regular portfolio review by Risk Committee

  • Non-trading risk committee chair

  • Minimum mandated weekly meetings

  • Full audit trail with committee member sign-off

    Committee Chair: John Young, CA, CFA

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Risk management policy

Risk Management: Policy

Portfolio Governing Limits

Concentration Limits

  • Maximum 30% Total Exposure in non-investment grade credits

  • Single name exposure limited to 15% of Total Exposure

    Diversification Objectives

    • Capital allocation based on expected return, volatility, and correlation vs. overall portfolio

      Liquidity Objectives

  • Alternative Debt Instruments limited to 20% of Total Exposure

  • Maintain “unencumbered cash” balance to act as a guard against forced liquidation in times of market stress.

  • Hard limits on Total Exposure-based leverage

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Global portfolio characteristics

Global Portfolio Characteristics

As of May 30, 2014

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Fund facts

Fund Facts

Lawrence Park Credit Strategies Fund

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Lawrence park team contact information

Lawrence Park Team Contact Information

The Lawrence Park Credit Strategies Fund is offered to Qualified Investors. Please contact us for full offering documents.

Portfolio Management and Trading:

CEO/CIO - Andrew C. Torres, [email protected]

PM - Jason Crowley, [email protected]

Trader - Rory Stack, [email protected]

Corporate:

CFO/CRO/COO - John B. Young, CFA, [email protected]

Business Development:

Director - Kathleen [email protected]

Operations:

Snr. Analyst - Sharon Liu, BMath, MA, [email protected]

Lawrence Park Capital Partners Ltd.

2 Berkeley Street, Suite 304

Toronto, Ontario M5A 4J5

(416) 646-2180

www.lpcapitalpartners.com

CONFIDENTIAL


Performance and benchmark disclaimer

Performance And Benchmark Disclaimer

  • All return figures for the Lawrence Park Credit Strategies Fund (the “Fund”) are based on the A Series units and are net of management fees, performance fees, trailing commissions (if any) and Fund expenses. Other series may have higher fees and differing redemption terms. Monthly returns are based on monthly NAV calculations by RBC Investor Services.

  • Strategies

    • Momentum Trading –involves taking a long or short position in a security to take advantage of short-term price dislocations 

    • Outright Credit – involves taking a long or short position in a security based on longer-term value technicals or fundamentals

    • Carry and Roll Down – involves levered positions in short dated securities primarily to earn income

    • Relative Value – involves taking a long position in one company’s securities vs. taking a short position in another company’s securities, or a short position in an index

    • Credit Arbitrage – involves taking both long and short positions in securities of the same company

  • Asset Classes

    • CAD IG – Canadian $ Investment Grade Bonds (rated at least BBB- or equivalent by one major rating agency)

    • CAD HY – Canadian $ High Yield Bonds (rated no higher than BB+ or equivalent by any major rating agency)

    • USD IG - US$ Investment Grade Bonds (rated at least BBB- or equivalent by one major rating agency)

    • USD HY - US$ High Yield Bonds (rated no higher than BB+ or equivalent by any major rating agency)

    • EUR IG - Euro denominated Grade Bonds (rated at least BBB- or equivalent by one major rating agency)

    • EUR HY – Euro denominated High Yield Bonds (rated no higher than BB+ or equivalent by any major rating agency)

    • Hybrid and Pref - Capital instruments issued by banks and corporations, typically lower in the capital structure with some equity-like attribute

  • The DEX XCB is an index-based ETF that replicates the DEX Corporate Index, a benchmark index of Canadian Dollar corporate bonds published daily by PC Bond Analytics. The Fund has a high % of its assets in C$ corporate bonds, and thus the DEX Corporate is a relevant index for comparing risk and return in the Fund. The DEX Corporate Index has a high component of interest rate risk, whereas the Fund has a low component of interest rate risk.

  • The TSX is a widely-known equity index of Canadian large-cap companies. It is included for purposes of comparing fund returns and volatility against different asset classes. The Fund invests primarily in debt instruments, and the inclusion of the TSX is not intended to imply that equity indices are an appropriate benchmark for the Fund.

  • BGCI refers to the Barclays Global Corporate Index. Returns for this benchmark are calculated as excess daily returns, or the difference between total returns of the security and an implied Treasury portfolio matching the term-structure profile of that security. Returns are calculated in Canadian dollars, assuming currency exposures on non-Canadian holdings are fully hedged. In the opinion of the portfolio managers, this index represents a valid benchmark for the Credit Strategies Fund on the basis it is a) based on a global portfolio of publically traded corporate bonds, b) expressed in Canadian Dollars, and c) assumes currency and interest rate risk have been hedged from the portfolio.

  • Annualized volatility and Sharpe calculations are based on daily returns since inception, calculated by the Manager. The risk-free rate used for the Sharpe ratio calculation is 1.00%, approximately equal to the average Canadian 3 month T-bill rate over the past 12 months. All comparisons to the benchmark are since inception of the Fund, March 1, 2012, unless noted otherwise.

  • Ratings and Regional Breakdowns reflect the end of the month portfolio composition on a Total Exposure basis. Total Exposure is equal to the total directional long positions, plus total directional short positions, excluding hedges & cash. Investors should note that because the portfolio is turned over frequently, current composition may differ materially from the numbers stated herein.

  • The Fund’s returns are not guaranteed, its value changes frequently, and past performance may not be repeated. No representations or warranties of any kind are intended or should be inferred with respect to the economic return or the tax consequences from an investment in the Fund. Potential qualified investors should read the Fund’s offering memorandum carefully prior to investing.

  • Investors should note that the Fund utilizes long and short positions in both domestic and international fixed-income products, and may incorporate leverage and derivative overlays. Fund performance may deviate significantly from benchmark indices shown.

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Thank you

THANK YOU

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