Quarterly Reporting Portfolio Performance Summaries
Q3 2017
FIXED INCOME PORTFOLIO September 30, 2017
The portfolio aims to preserve capital and generate long-term returns relative to the Citigroup 1-10 year AAA / AA credit index. The minimum credit ratings are S&P A- / Moody's A3 with a maximum term to maturity of 10 years and a minimum issue size of $500 million. The universe consists of CP, Government guaranteed, agency, sovereign, supranational, corporate US Bonds and Eurobonds.
Quarterly Reporting PORTFOLIO CHARACTERISTICS
Sector Diversification
S&P Rating Composition
5.4%
Sovereign
5.9% 2.4% 22.0%
Information Technology 7.6%
9.4%
Consumer Discretionary 0.0%
10.0%
A-1+ 23.4%
40.0%
A-1 11.7%
30.0% 20.0%
AAA 12.0%
30.9%
Consumer Staples
10.0%
AA+ 4.7% 20.0%
30.0%
69.9%
50.0%
Other 35.2%
AA22.7%
4.7%
Energy
60.0%
A+ 23.6%
11.8%
Health Care
Industrials
70.0%
A 1.8%
Financials
Regional Government
Maturity Profile
17.6%
12.4%
0.0%
40.0%
Under 1 Yr
CUMULATIVE PERFORMANCE
1 Yr - 3 Yrs
3 Yrs - 5 Yrs
ROLLING PERFORMANCE
Since Management Inception 200 180
Portfolio Performance 2 Year Treasury Performance Citigroup 1-10 Yr AAA/AA
160 140
Annualised 1 Year 3 Year 5 Year 10 Year Inception*
QTD
YTD
0.35%
1.01%
1.09%
0.82%
2.16%
2.73%
0.18%
0.54% -0.03% 0.59%
0.54%
1.80%
2.03%
0.59%
2.44%
1.78%
3.42%
3.89%
0.71%
0.29%
2.22%
120 100
Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17
80
Portfolio
Citigroup 1-10 Yr AAA/AA Credit Index
Portfolio Std. Deviation 2 Year Treasury Std. Deviation Citigroup 1-10 Yr AAA/AA
0.20%
0.20%
0.51%
0.65%
0.53%
1.61%
1.53%
0.69%
0.40%
0.61%
0.78%
0.64%
1.38%
1.53%
1.70%
1.20%
2.16%
1.96%
1.96%
3.35%
3.38%
2 Yr US Treasury Note Yield
*Portfolio Inception Date: Nov 2001
PERFORMANCE COMMENTARY
Bond yields were somewhat volatile during the third quarter although longer term bonds finished the quarter where they began while shorter term bonds ended up at higher levels. Yields moved lower across the curve through July and August as reports of continued low inflation even in the face of solid economic growth caused investors to decrease their rate hike expectations for the Federal Reserve. Bonds also rallied as we moved though August on increased geopolitical concerns due to the heightened tensions with North Korea. Investor sentiment changed abruptly in September though as continued rhetoric from the Fed regarding their intentions to gradually hike rates later this year and into 2018 along with persistently solid economic data caused bond yields to move higher into quarter end. As a result of the shorter duration of the portfolio, it has underperformed its benchmark in 2017 as it increased in value by 1.01% whereas the Citigroup 110 Year AAA/AA Credit Index increased in value by 2.44%. For comparison, the two year U.S. treasury note increased in value by 0.54% over the same period.
About Us: Quantum Investment Management Inc. is an independent Investment Advisor, registered in Barbados, regulated by the Financial Services Act. With over 60 years of collective experience, we offer expert wealth management services; including construction and management of fixed income, public equity, options, private equity, hedge fund, mutual fund and gold portfolios. Our overriding goal is to offer clients a fully personalized and superior service in terms of both wealth management and client communication. Investment Team: Heinrich N. Funk, BA CA TEP Contact:
www.quantumbarbados.com
Duane E. Francis, CA CFA
[email protected]
Selena L. McDonald, MBA
Tel: (246) 421-8600
Jabari D. Banfield, CFA FRM
Fax: (246) 421-8610
INDEXATION PORTFOLIO September 30, 2017
Quarterly Reporting
The portfolio aims to track the performance of the S&P 500 Index within a 2.5% tolerance, while holding 80 stocks. This is achieved through the use of the proprietary modeling software, and rebalancing the portfolio as required.
PORTFOLIO CHARACTERISTICS
PERFORMANCE COMMENTARY
Sector Diversification
Portfolio Top 5 Holdings
2.1%
Telecommunication Services
14.2%
Health Care 3.4%
Utilities
22.3%
Information Technology 10.7%
Industrials 5.8%
Energy
16.1%
Financial 12.7%
Consumer Discretionary 3.0%
Materials 0%
5%
10%
Volatility in the equity markets hovered near historically low levels for most of Portfolio Top Five Holdings the third quarter except for a brief spike Company Ticker % 4% higher in mid-August as the indices Apple Inc AAPL 4.33% produced another strong quarter of 3% Microsoft Corp MSFT 3.20% returns. The S&P500 Index initially 2% Johnson & Johnson JNJ 2.35% moved higher in July on strong company 1% Home Depot JPM 2.26% earnings along with solid economic 0% JP Morgan Chase & Co HD 2.26% reports both in the U.S. and internationally. Unfortunately this uptrend did not last as increased tensions with North Korea hurt investor confidence and caused a brief selloff in ROLLING PERFORMANCE the markets in the middle of August. Luckily though, these concerns were Annualised short lived as stocks again focused on the QTD YTD 1 Year 3 Year 5 Year 10 Year Inception* positive fundamentals supporting the markets along with new hope for tax Portfolio 4.31% 13.20% 16.87% 10.57% 12.93% 6.77% 6.75% Performance reform legislation and infrastructure S&P 500 Index 3.96% 12.53% 16.19% 8.50% 11.83% 5.14% 5.70% spending from the Federal government. Performance This positive sentiment allowed the S&P500 Index to again move higher and Portfolio Std. 2.95% 4.19% 5.21% 9.99% 9.42% 14.74% 13.58% close the quarter at another all time high. Deviation 3.69%
9.7%
Consumer Staples
15%
20%
25%
CUMULATIVE PERFORMANCE Since Management Inception 300 250 200 150 100 50
AAPL
S&P 500 Index Std. Deviation
Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17
0
Portfolio
S&P 500 Top 5
3.76%
4.08%
2.66%
MSFT
5.36%
10.04%
1.88%
FB
9.52%
1.78%
AMZN
15.15%
Standard & Poor's 500 Index
N.B. Benchmark reflects gross capital returns only, due to differences in taxes and reinvestment policy.
*Portfolio Inception Date: May 2002
1.63%
BRK/B
14.03%
This portfolio has performed very well in 2017 as it has increased in value by 13.2% on a year to date basis whereas the S&P500 Index increased by 12.53%.
About Us: Quantum Investment Management Inc. is an independent Investment Advisor, registered in Barbados, regulated by the Financial Services Act. With over 60 years of collective experience, we offer expert wealth management services; including construction and management of fixed income, public equity, options, private equity, hedge fund, mutual fund and gold portfolios. Our overriding goal is to offer clients a fully personalized and superior service in terms of both wealth management and client communication. Investment Team: Heinrich N. Funk, BA CA TEP Contact:
www.quantumbarbados.com
Duane E. Francis, CA CFA
[email protected]
Selena L. McDonald, MBA
Tel: (246) 421-8600
Jabari D. Banfield, CFA FRM
Fax: (246) 421-8610
US VALUE EQUITY PORTFOLIO September 30, 2017
The portfolio aims to achieve long-term capital growth, with a value-style bias. It concentrates on the selection of specific stocks which meet our quantitative and qualitative investment criteria. Portfolio companies are drawn from the Russell 1000 index, our stock universe. The portfolio is structured to hold between 25 and 35 positions on an ongoing basis.
Quarterly Reporting PORTFOLIO CHARACTERISTICS
Sector Diversification
Best 5 Performers in Quarter
Worst 5 Performers in Quarter
% of 22.2%
Health Care
22.2%
Information Technology
20.9%
Industrials 6.5%
Energy 3.1%
Financial
6.4%
Consumer Staples
14.6%
Consumer Discretionary 4.1%
Materials
5.0%
0.0%
10.0%
15.0%
20.0%
Security
IRR %
% of Portfolio
Allergan PLC
-15.5%
3.5%
Security
IRR %
Portfolio
Quanta Services Inc
13.5%
4.8%
Chevron Corp
13.5%
1.1%
Amerisourcebergen Corp
-12.1%
4.0%
Dollar General Corp
12.7%
4.2%
Medtronic PLC
-11.5%
4.2%
Visa Inc - Class A
12.4%
4.9%
Omnicom Group
-10.1%
2.4%
Activision Blizzard Inc
12.1%
1.3%
Delta Air Lines Inc
-9.8%
2.1%
25.0%
CUMULATIVE PERFORMANCE
ROLLING PERFORMANCE
Since Management Inception QTD
450 400 350 300 250 200 150 100
Portfolio
Russell Value Index
Sep-17
Sep-16
Mar-17
Sep-15
Mar-16
Sep-14
Mar-15
Sep-13
Mar-14
Sep-12
Mar-13
Sep-11
Mar-12
Sep-10
Mar-11
Sep-09
Mar-10
Sep-08
Mar-09
Sep-07
Mar-08
Sep-06
Mar-07
Sep-05
Mar-06
Sep-04
Mar-05
Sep-03
Mar-04
Mar-03
50
Russell 1000 Index
YTD
Annualised 1 Year 3 Year 5 Year 10 Year Inception*
Portfolio Performance Russell Value Index Perf. Russell 1000 Index Perf.
2.39% 16.15% 17.01% 10.40% 15.70% 6.97%
9.92%
2.47%
5.94% 12.28% 5.84% 10.44% 3.22%
5.86%
3.97% 12.50% 16.19% 8.41% 11.97% 5.34%
6.99%
Portfolio Std. Deviation Russell Value Index Std. Dtn. Russell 1000 Index Std. Dtn.
3.84%
4.65%
6.21% 11.07% 11.02% 15.42%
13.90%
3.70%
4.98%
7.01% 10.19% 9.83% 16.01%
14.08%
7.40%
5.21%
6.19% 10.18% 9.68% 15.44%
13.59%
*Portfolio Inception Date: June 2003
N.B. Benchmarks reflect gross capital returns only, due to differences in taxes and reinvestment policy.
PERFORMANCE COMMENTARY
Aside from a brief spike in mid-August, third quarter volatility was very subdued in the equity markets as stocks marched higher for most of this three month period other than a brief pause mid-quarter. The initial move higher in July was in response to strong company earnings reports along with solid economic data. This trend lasted until the middle of August when geopolitical issues such as escalating tensions with North Korea came to the fore causing a brief selloff in equities. This downdraft was short lived though as stocks moved significantly higher from the low in August through to the end of the quarter as investors again focused on the positive fundamentals supporting the markets along with the possibility of economic stimulus from the Trump administration in the form of tax reform and infrastructure spending. The value portfolio increased in value by 16.15% on a year to date basis as it easily outperformed its benchmark, the Russell 1000 Index, which increased in value by 12.5%. The portfolio also earned premiums from put & call options written on the stocks in this portfolio. This is included in reported performance.
About Us: Quantum Investment Management Inc. is an independent Investment Advisor, registered in Barbados, regulated by the Financial Services Act. With over 60 years of collective experience, we offer expert wealth management services; including construction and management of fixed income, public equity, options, private equity, hedge fund, mutual fund and gold portfolios. Our overriding goal is to offer clients a fully personalized and superior service in terms of both wealth management and client communication. Investment Team: Heinrich N. Funk, BA CA TEP Contact:
www.quantumbarbados.com
Duane E. Francis, CA CFA
[email protected]
Selena L. McDonald, MBA
Tel: (246) 421-8600
Jabari D. Banfield, CFA FRM
Fax: (246) 421-8610
BIOS & ENDNOTES MANAGEMENT TEAM BIOS HEINRICH N. FUNK BA CA TEP President & Managing Director Building on the success of prior experiences in the investment arena, Heinrich established Quantum Investment Management in January 2015. As President/Managing Director he has responsibility for overall management and strategic development of the business. Having spent 24 years working in the international financial services sector in multiple jurisdictions, Heinrich brings significant experience to the company. Prior to developing Quantum, he spent 18 years combined as the Managing Director of two private Barbados international banks, the latter of which he was instrumental in establishing, controlled by clients of reputable Canadian wealth. These private banks provided investment and other services to high net worth clients and corporations. He also spent 5 years as a senior manager with PricewaterhouseCoopers – 3 years in Jersey, Channel Islands and 2 years in Barbados, as well holding management positions with two large accounting firms in the UK.
DUANE E. FRANCIS B ADMIN CA CFA Senior Investment Manager Duane joined Quantum Investment Management at its inception. As Senior Investment Manager, he has responsibility for the development of investment management strategy for Quantum along with execution and supervision of day-to-day trading activities in the investment management department. Duane has 21 years experience in the international financial services sector. Before joining Quantum, he spent 17 years combined as an Investment Manager in two private international banks in Barbados. He was instrumental in the success of his previous employer, a private international bank, prior to its dissolution for strategic reasons. His responsibilities included the management of portfolios for both institutional and high net worth clients. Prior to this, he was a Manager with Deloitte & Touche for 2½ years in the Barbados office. He also worked with Deloitte & Touche in Regina, Canada for 2½ years.
IDA V. TAYLOR TEP Senior Investment Accountant Ida joined Quantum at its inception. She has responsibility for the operational, financial and reporting functions of the company. Further, she plays a key role in the compliance, procedural and development aspects of company, as a growing business. Prior to joining Quantum she was the Senior Investment Accountant for 14 years at a private international bank with responsibilities for financial and reporting functions, along with ensuring regulatory and legislative compliance, and the developmental aspects of the bank. Prior to this she was also Senior Trust/Account Officer in another private Barbados international bank for 6 years where she was responsible for overseeing all aspects of clients’ affairs, ranging from investment portfolio monitoring and reporting to trust and corporate administration.
JABARI D. BANFIELD CFA FRM Investment Manager Jabari joined the firm from inception after spending 8 years combined at two other private international banks in Barbados. He holds a BSc Honors Degree in Economics, has the Financial Risk Manager (FRM) designation as well as being a CFA charter holder since 2012. He has 9 years experience in investment management and he is involved in all aspects of our investing activities including fixed income, equities, hedge funds and derivatives.
NOTES & DISCLAIMERS i. ii. iii. iv. v. vi. vii.
Performance presented herein reflects the team’s management history and includes periods prior to the formation of Quantum Investment Management Inc. (“Quantum”). Past performance is no guarantee of future results. Indices are used for comparison of past performance only. This document is confidential and intended only for the recipient. It should not be distributed without the prior consent of Quantum. This document is under no circumstances to be used or considered as an offer to buy/sell any security. Nothing herein constitutes investment, legal or other advice and is not to be relied upon in making an investment decision. While every care has been exercised in compiling and publishing the data contained in this document, Quantum accepts no responsibility for any errors or omissions.
CONTACT QUANTUM INVESTMENT MANAGEMENT INC. 4th Floor, Williams Tower Warrens, St. Michael BB 22026 BARBADOS, West Indies
Telephone: Facsimile: E-mail: Website:
(246) 421-8600 (246) 421-8610
[email protected] www.quantumbarbados.com
