01.06.2012

Costas Mesaritis

Portfolio Manager

Piraeus Bank (Cyprus) Ltd.

 

Spreading risk and diversification are two of the fundamental tenets of successful long-term investing. Combining these with the opportunities of markets across the globe, superior asset allocation and fund management, the WSP Global Strategy Risk 10% Portfolio is an attractive global investment opportunity.

OVERVIEW

The Fund offers investors the opportunity to maximise long-term capital growth subject to volatility over a set period. Investments are made into global equity and bond markets with the objective of long-term capital growth in EUR via a carefully-selected series of sub-funds focusing on markets, regions and sectors across the world.

 

INTRINSIC ADVANTAGES

The Fund has a set of intrinsic characteristics which make it an attractive investment proposition.

 

  • Investment in global emerging markets which are expected to lead economic recovery and which also have a high growth potential.
  • Diversification not just in terms of countries and regions but also its access to specialized local knowledge via fund managers. The managers of the portfolio’s underlying funds have access to local knowledge, society and political developments in the region of their respective markets.
  • Balanced investment opportunity with an appropriate level of investment risk and growth potential.
  • Volatility is actively-managed, providing a stable risk profile during the investment horizon.

 

MANAGED VOLATILITY

One of the key elements of the Fund and its performance is its volatility management process which ensures that volatility is maintained at a low level. The Fund aims to bind volatility between 9% and 11% per year on a three year basis, using a special investment allocation process to do so. This asset allocation model is based on the 30-day and 250-day volatility of the Fund and employs a ranking model that encompasses economic data and forecasts, market valuation ratios as well as the quality of the manager covering the particular country/region. Monitoring the volatility and underlying asset classes allows an optimal allocation between equities, bonds, property and cash. A ranking model incorporating two-year real GDP growth forecasts, market valuation ratios PE (price to earnings) and PB (price to book value) and data on manager tracking of particular markets is also used to establish an allocation range. Volatility is maintained within the set limit through daily monitoring and a subsequent reallocation between the asset classes if volatility moves above or below the set limit.

 

UTILISING LOCAL EXPERTISE

The managers of underlying funds within the portfolio are locals with vast knowledge of the history of their specialised region, the culture and specific corporate histories. They have access to local knowledge, corporate management, society and political developments in their respective markets and are thus well positioned to take advantage of any new developments, local news, speculation and any trends in society. This puts them in an ideal position to assess the political stability of their region - one of the most important risk factors for emerging and frontier markets.

 

OUTLOOK

Crucial to the Fund is, of course, the conditions and performance of world markets. Market performance so far this year has been a combination of sentiment and corporate and economic fundamentals. The fundamentals were mostly in place in 2011 but sentiment was negative due to the uncertainty connected with the Eurozone debt crisis. Overall for 2012, emerging equity markets should perform better than they did in 2011 and Africa is likely to be among the best performing emerging market regions. It would also be no surprise to see Russia do exceptionally well following Vladimir Putin’s return to the presidency and his plans to revive the Russian economy. Unlike last year, equities should also outperform bonds in 2012. However, the Fund’s bond position contributes added value to the Fund because of its low contribution to volatility and because it further reduces overall risk by increasing diversification. These benefits outweigh the possibility of underperformance of the bond market for 2012. However, there remain some clouds on the horizon. A serious potential threat to the health of major economies is the rising price of oil. Any conflict in the Middle East, especially between Iran and the US, could force crude prices sharply upwards, potentially severely suppressing economic growth in a number of countries. The increasing uncertainty over the Eurozone debt situation and the potential slow down of regional growth could also weigh on equity performance in the near term.

 

INVESTMENT MANAGER

The Fund is managed by Piraeus Bank (Cyprus) Ltd, a wholly owned subsidiary of the Athens-based Piraeus Bank Group. Piraeus Bank (Cyprus) provides full retail, corporate, international banking, wealth management and asset management services. The investment management unit consists of well qualified and experienced personnel and focuses on regional markets including Greece and Cyprus. Piraeus Bank Group has subsidiaries in nine countries outside Greece including Romania, Bulgaria, Ukraine, Serbia, Egypt, Albania and Cyprus, as well as London and New York.

 

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Strategy Portfolios (“WSP”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WSP believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WSP prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WSP Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WSP and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WSP is a suitable investment for them.