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GAA Q Fund

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Title: GAA Q Fund


1
Jeremy Smeeton
Managing Director Global Asset Allocation
Limited GAA Investment Funds Limited
2
Jeremy Smeeton
Managing Director Quant funds
3
Jeremy Smeeton
Managing Director Quant funds GAA USD Global Q
Fund
4
  • GAA Group
  • Global Asset Allocation Ltd, GAA Investment
    Funds Ltd, GAA Direct Ltd, GAA Marketing Ltd, GAA
    Singapore
  • International Fund Management, Trust and Advisory
    Group

5
  • GAA Group
  • Global Asset Allocation Ltd, GAA Investment
    Funds Ltd, GAA Direct Ltd, GAA Marketing Ltd, GAA
    Singapore
  • International Fund Management, Trust and Advisory
    Group
  • Regulated in Bermuda by BMA (GAAL GAAIFL)

6
  • GAA Group
  • Global Asset Allocation Ltd, GAA Investment
    Funds Ltd, GAA Direct Ltd, GAA Marketing Ltd, GAA
    Singapore
  • International Fund Management, Trust and Advisory
    Group
  • Regulated in Bermuda by BMA (GAAL GAAIFL)
  • Regulated in Malaysia by LOFSA (GAAD)

7
  • GAA Group
  • Global Asset Allocation Ltd, GAA Investment
    Funds Ltd, GAA Direct Ltd, GAA Marketing Ltd, GAA
    Singapore
  • International Fund Management, Trust and Advisory
    Group
  • Regulated in Bermuda by BMA (GAAL GAAIFL)
  • Regulated in Malaysia by LOFSA (GAAD)
  • Regulated in Singapore by MAS (GAAS)

8
  • GAA Group
  • Global Asset Allocation Ltd, GAA Investment
    Funds Ltd, GAA Direct Ltd, GAA Marketing Ltd, GAA
    Singapore
  • International Fund Management, Trust and Advisory
    Group
  • Regulated in Bermuda by BMA (GAAL GAAIFL)
  • Regulated in Malaysia by LOFSA (GAAD)
  • Regulated in Singapore by MAS (GAAS)
  • Has raised in excess of USD 200,000,000.00
    worldwide

9
  • Current Investor Profile
  • 78 of funds raised from 24 insurance companies,
    banks and trust companies
  • 22 of funds raised from private investors
  • Institutional investment in GAA is based solely
    on GAA fulfilling high standards of due diligence

10
Current Investor Profile
11
Wheres Bermuda?
12
Wheres Bermuda?
  • Situated 774 miles of east coast of United States
  • Stable political and economic environment since
    1612
  • Self governing Dependent Territory of UK

13

14
quant kwontnoun  (informal)
X
Mary Quant?
15
quant kwontnoun  (informal) a highly
paid computer specialist with a degree in a
quantitative science, employed by a financial
house, to predict the future price movements of
securities, commodities, currencies,
etc. ETYMOLOGY 20th Century from
quantitative
16

17
quant fund management Quant managers use
complex mathematical computer models developed by
scientists academics to identify and filter
specific sets of stock characteristics.
18
quant fund management Quant managers use
complex mathematical computer models developed by
scientists academics to identify and filter
specific sets of stock characteristics. Whole
markets can be analysed daily for buy and sell
signals, allowing portfolios to consider large
volumes of information.  
19
quant fund management Quant managers use
complex mathematical computer models developed by
scientists academics to identify and filter
specific sets of stock characteristics. Whole
markets can be analysed daily for buy and sell
signals, allowing portfolios to consider large
volumes of information.  Emotion and personal
biases that can hinder effective portfolio
management are eliminated, while allowing
insights into market inefficiencies to be applied
rapidly across a vast number of securities.
20

21
moores law /morz law/ prov. The
observation that the logic density of silicon
integrated circuits has closely followed the
curve (bits per square inch) 2(t - 1962) where
t is time in years
22
moores law /morz law/ prov. The
observation that the logic density of silicon
integrated circuits has closely followed the
curve (bits per square inch) 2(t - 1962) where
t is time in years that is, the amount of
information storable on a given amount of silicon
has roughly doubled every year since the
technology was invented.
23
moores law /morz law/ prov. The
observation that the logic density of silicon
integrated circuits has closely followed the
curve (bits per square inch) 2(t - 1962) where
t is time in years that is, the amount of
information storable on a given amount of silicon
has roughly doubled every year since the
technology was invented. Gordon Moore,
co-founder of Intel, first predicted the above
more than 40 years ago
24

25
(No Transcript)
26

27
INVESTMENT ISSUES
28
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?

29
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?
  • How often should a Portfolio be REBALANCED?

30
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?
  • How often should a Portfolio be REBALANCED?
  • Dont investors deserve HANDS ON discretionary
    management?

31
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?
  • How often should a Portfolio be REBALANCED?
  • Dont investors deserve HANDS ON discretionary
    management?
  • Dont investors deserve some PROTECTION against
    falling markets?

32
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?
  • How often should a Portfolio be REBALANCED?
  • Dont investors deserve HANDS ON discretionary
    management?
  • Dont investors deserve some PROTECTION against
    falling markets?
  • Can all of the above issues be SOLVED in a
    structured, repeatable manner?

33

34
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?

35
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?
  • The Solution
  • The GAA quant model analyses ALL relevant data
    available on the complete universe of stocks

36
INVESTMENT ISSUES
  • How much global data should a global equity
    manager ANALYSE before selecting a stock for
    purchase?
  • The Solution
  • The GAA quant model analyses ALL relevant data
    available on the complete universe of stocks
  • Complete data on more than 38,000 stocks listed
    on 52 global stock exchanges is extracted and
    analysed from multiple institutional data feeds

37
INVESTMENT ISSUES
  • How often should a Portfolio be REBALANCED?

38
INVESTMENT ISSUES
  • How often should a Portfolio be REBALANCED?
  • The Solution
  • GAA utilises a forward looking stock selection
    methodology which looks forward 30 days only

39
INVESTMENT ISSUES
  • How often should a Portfolio be REBALANCED?
  • The Solution
  • GAA utilises a forward looking stock selection
    methodology which looks forward 30 days only
  • The portfolio is COMPLETELY rebalanced every 30
    days

40
INVESTMENT ISSUES
  • How often should a Portfolio be REBALANCED?
  • The Solution
  • GAA utilises a forward looking stock selection
    methodology which looks forward 30 days only
  • The portfolio is COMPLETELY rebalanced every 30
    days
  • There is NO correlation between the portfolio
    held one month and that of the next

41
INVESTMENT ISSUES
  • Dont investors deserve HANDS ON discretionary
    management?

42
INVESTMENT ISSUES
  • Dont investors deserve HANDS ON discretionary
    management?
  • The Solution
  • Size of underlying portfolio large enough to
    consider 52 markets smaller portfolios cannot

43
INVESTMENT ISSUES
  • Dont investors deserve HANDS ON discretionary
    management?
  • The Solution
  • Size of underlying portfolio large enough to
    consider 52 markets smaller portfolios cannot
  • Real time data feeds provide up to the minute
    information across 52 markets

44
INVESTMENT ISSUES
  • Dont investors deserve HANDS ON discretionary
    management?
  • The Solution
  • Size of underlying portfolio large enough to
    consider 52 markets smaller portfolios cannot
  • Real time data feeds provide up to the minute
    information across 52 markets
  • Data is analysed every day of every week of
    every month

45
INVESTMENT ISSUES
  • Dont investors deserve HANDS ON discretionary
    management?
  • The Solution
  • GAA has established the ability to execute
    trades in 52 countries - many institutions have
    difficulty in acquiring or disposing foreign
    stocks on certain counters

46
INVESTMENT ISSUES
  • Dont investors deserve some PROTECTION against
    falling markets?

47
INVESTMENT ISSUES
  • Dont investors deserve some PROTECTION against
    falling markets?
  • The Solution
  • The Fund buys an insurance policy each month
    which helps protect the Fund in the event that
    markets fall that month

48
  • Data input

49
  • Data input

The Funds underlying quant model analyses ALL
relevant data available on the complete universe
of stocks.
50
  • Data input

The Funds underlying quant model analyses ALL
relevant data available on the complete universe
of stocks. This requires significant computing
power as well as complete data on more than
38,000 stocks listed on 52 global stock exchanges
at any given time.
51
  • Data input

The Funds underlying quant model analyses ALL
relevant data available on the complete universe
of stocks. This requires significant computing
power as well as complete data on more than
38,000 stocks listed on 52 global stock exchanges
at any given time. Thanks to Moores Law,
computing power today is fast enough to allow us
to run the models required for real time quant
data management.
52
  • Data input

The costs inherent in such a programme are
significant
53
  • Data input
  • The costs inherent in such a programme are
    significant
  • Quant model development costs

54
  • Data input
  • The costs inherent in such a programme are
    significant
  • Quant model development costs
  • Quant model maintenance and operational costs

55
  • Data input
  • The costs inherent in such a programme are
    significant
  • Quant model development costs
  • Quant model maintenance and operational costs
  • the cost of real time global analytical data

56
  • Data input
  • Liquidity

57
  • Data input
  • Liquidity

Only mid to large cap stocks are selected for the
portfolio each month.
58
  • Data input
  • Liquidity

Only mid to large cap stocks are selected for the
portfolio each month. Typically more than 90
of stocks selected by the model each month are
capitalised at more than US100 million each,
whilst more than 50 are capitalised at more than
US1 billion.
59
  • Data input
  • Liquidity
  • Dynamic stock selection process

60
  • Data input
  • Liquidity
  • Dynamic stock selection process

By far the most important element of the
programme is the proprietary quant stock
selection process.
61
  • Data input
  • Liquidity
  • Dynamic stock selection process

By far the most important element of the
programme is the proprietary quant stock
selection process. The process was developed
over period of seven years by GAAs investment
advisory team headed by a former university
lecturer with a Masters degree (honours) in
Computer Engineering, as well as separate degrees
in both Banking and Finance.
62
  • Data input
  • Liquidity
  • Dynamic stock selection process

No stock will be considered unless at least 4
independent stock reports are available for
consideration.
63
  • Data input
  • Liquidity
  • Dynamic stock selection process

No stock will be considered unless at least 4
independent stock reports are available for
consideration. Consequently more than 3,800,000
individual analyst opinions (38,000 x 4 feeds x
25 variables per stock) could be considered and
incorporated into the stock selection model each
month.
64
  • Data input
  • Liquidity
  • Dynamic stock selection process
  • Monthly reweighting

65
  • Data input
  • Liquidity
  • Dynamic stock selection process
  • Monthly reweighting

The stock selection process is run continuously
resulting in the portfolio being completely
rebalanced every 30 days. There is no
correlation between the portfolio held one month
and that of the next. NO stocks are ever
automatically held across to the next month
unless they are reselected based on their own
fundamental merits.
66
  • Data input
  • Liquidity
  • Dynamic stock selection process
  • Monthly reweighting

On average 70 of stocks held are replaced each
month.
67
GAA USD Global Q Fund Asset Allocation _at_ May 08

68
  • Data input
  • Liquidity
  • Dynamic stock selection process
  • Monthly reweighting
  • Maximum weighting

69
  • Data input
  • Liquidity
  • Dynamic stock selection process
  • Monthly reweighting
  • Maximum weighting

No single stock will account for more than 5 of
portfolio NAV no single country will make up
more than 30 of portfolio NAV
70
  • Data input
  • Liquidity
  • Dynamic stock selection process
  • Monthly reweighting
  • Maximum weighting
  • Diversification

71
  • Data input
  • Liquidity
  • Dynamic stock selection process
  • Monthly reweighting
  • Maximum weighting
  • Diversification

Typically 120 - 150 stocks are purchased each
month.
72
  • Dynamic stock selection process in more detail

Momentum factors The model takes into account
both historic and future forecasts with regards
to stock momentum
73
  • Dynamic stock selection process in more detail
  • Momentum factors
  • The model takes into account both historic and
    future forecasts with regards to stock momentum
  • Analyst Revision FY1 FY2 (a minimum of
    four research reports must be available)
  • Change in Consensus Earnings 1 3 months of
    both FY1 FY2
  • Price Change last month

74
  • Dynamic stock selection process in more detail

Valuation factors The model takes into account
both current and future forecasts with regards to
stock valuation
75
  • Dynamic stock selection process in more detail
  • Valuation factors
  • The model takes into account both current and
    future forecasts with regards to stock valuation
  • Earnings Growth FY1 FY2
  • Forward Price Earnings Ratio FY1
    FY2
  • Price to Book Value FY1
  • Dividend Yield FY1
  • Price to Cash Earnings FY1
  • Price to Sales Ratio FY1 FY2
  • EBITDA Growth FY1 FY2

76
  • Dynamic stock selection process in more detail

Complete table with all factors in the total
universe
77
  • Dynamic stock selection process in more detail

Factor weighting allocation process The key to
the success of the strategy is the method used
for assigning weightings to the different
factors.
78
  • Dynamic stock selection process in more detail
  • Factor weighting allocation process
  • The key to the success of the strategy is the
    method used for assigning weightings to the
    different factors.
  • Extensive back testing of factors and cross
    factor combinations
  • Screening for market movement in the factors
    for different time intervals
  • Optimisation of timing

79
  • Dynamic stock selection process in more detail

Factor weighting allocation process The result of
this dynamic process is a monthly listing of
those stocks most likely to perform over the next
30 days from a universe of more than 38,000
worldwide
80
  • Dynamic stock selection process in more detail

81
  • Dynamic stock selection process in more detail

Factor weighting allocation process As can be
seen from this actual snap shot, 9 of the top 10
stocks selected were listed in different
countries whilst 18 of the top 32 were traded on
different stock markets
82
  • Dynamic stock selection process in more detail

83
  • Dynamic stock selection process in more detail

The Quant model in action an actual
example HK listed Orient OS International was
identified as being a strong buy. The model
re-selected this stock every month for the
following 7 months and thus it was retained
within the portfolio. It provided a net gain of
316 over this period
84
  • Dynamic stock selection process in more detail

The Quant model in action an actual example
85
  • Dynamic hedging facility in more detail

Protecting the Portfolio against adverse market
conditions
86
  • Dynamic hedging facility in more detail

Protecting the Portfolio against adverse market
conditions The stocks chosen for purchase each
month are rigorously filtered, and yet the stock
portfolio itself will always be long only.
87
  • Dynamic hedging facility in more detail

Protecting the Portfolio against adverse market
conditions The stocks chosen for purchase each
month are rigorously filtered, and yet the stock
portfolio itself will always be long
only. Although proven time and again to be able
to secure gains in both bull and bear markets,
any long only portfolio is subject to sudden
and unexpected drawdowns in the market economy
88
  • Dynamic hedging facility in more detail

Protecting the Portfolio against adverse market
conditions To that end, the GAA Global Q Fund
employs a dynamic hedging facility.
89
  • Dynamic hedging facility in more detail

Protecting the Portfolio against adverse market
conditions Each month, the model buys put
options on the underlying component stock indices
which make up the MSCI World Index in order to
protect the portfolio in the event those markets
fall
90
  • Dynamic hedging facility in more detail

Protecting the Portfolio against adverse market
conditions Consequently the long only portfolio
always enjoys an element of protection against
the components of the MSCI from falling
91
  • Dynamic hedging facility in more detail

Protecting the Portfolio against adverse market
conditions Consequently the long only portfolio
always enjoys an element of protection against
the components of the MSCI from falling Every
month the Fund protects 50 of the value of the
long only portfolio. If markets are deemed to be
unstable or listless, this is increased to 100
of the value, resulting in zero net exposure to
global stock market movements
92
The Result?
93
Actual returns which have consistently beaten
all major global stock markets
94
98 winning months out of 132
NB Uncompounded figures used in this back tested
graph are proforma and net of all management fees
95
and significant out performance of the MSCI
NB Uncompounded figures used in this back tested
graph are proforma and net of all management fees
96
The statistics speak for themselves
NB Uncompounded figures used in this back tested
graph are proforma and net of all management fees
97
Real time performance since launch has been
impressive
1 May 2004 1 May 2008 106.68 gain net of
charges in first 48 months of trading!
NB Figures used in this graph are based on actual
NAV and are net of all management fees
98
Real time performance since launch has been
impressive
1 May 2004 1 May 2008 106.68 gain net of
charges in first 48 months of trading!
NB Figures used in this graph are based on actual
NAV and are net of all management fees
99
How has Q Fund compared with the MSCI World
Index?
100
How has Q Fund compared with the MSCI World
Index?
101
How has Q Fund compared with the MSCI World
Index?
102
How has Q Fund compared with the MSCI World
Index?
103
How has Q Fund compared with the MSCI World
Index?
104
How has Q Fund compared with the MSCI World
Index?
105
How has Q Fund compared with the MSCI World
Index?
106
Total returns compared 1 May 04 1 May 08
107
Total returns compared 1 May 04 1 May 08
108
Total returns compared 1 May 04 1 May 08
109
Real time performance since launch has been
impressive
Average winning month 5.00 Average losing
month -3.23 60.4 (29/48) winning months vs
39.6 (19/48) losing months
NB Figures used in this graph are based on actual
NAV and are net of all management fees
110
ALL 12 month rolling returns since launch have
been positive
WORST 12 month rolling return since launch
7.36 BEST 12 month rolling return since launch
60.24
111
  • Corporate Strength
  • Fund GAA USD Global Q Fund
  • Issued by GAA Investment Funds Limited,
    Bermuda
  • Fund Manager Global Asset Allocation
    Limited, Bermuda
  • Custodian Bermuda Commercial Bank, Bermuda
  • Administrator ICMOB, Bermuda
  • Auditor Deloitte Touche, Bermuda
  • Legal Council Conyers Dill Pearman,
    Bermuda
  • Authority Bermuda Monetary Authority

112
  • Key Features of GAA USD Global Q Fund
  • Excellent performance 106.68 since launch
  • 19.90 pa annualised return since launch
  • 7.36 to 60.24 12 month rolling returns since
    launch
  • More than twice the growth of MSCI World Index
    106.68 vs 44.86
  • Retail access to quant fund either directly or
    via platforms
  • Zero cost of purchase redemption fees zero after
    5 yrs

113
Jeremy Smeeton
Managing Director Global Asset Allocation
Limited GAA Investment Funds Limited THANK YOU!
114
Jeremy Smeeton
Managing Director Global Asset Allocation
Limited GAA Investment Funds Limited THANK YOU!
www.gaafunds.com
115
  • This presentation does not constitute investment
    advice specific to any one individual investor
    and is not an offer to purchase the GAA USD
    Global Q Fund (the Fund), which may only be
    bought under the terms of the prospectus. The
    Fund is a Class Fund of GAA Investment Funds
    Limited (the Company), a Bermuda based mutual
    fund company. The Company is an unregulated
    collective investment scheme under the UK
    Financial Services Act 1986, and therefore does
    not carry the protection provided by the UK
    regulatory system.
  • This document is being issued by Global Asset
    Allocation Limited for information purposes only.
    Changes in foreign exchange rates may have an
    adverse effect on the price or value of the
    investment. No representation is being made by
    the Fund or its directors as to the accuracy or
    completeness of the information contained in this
    document. Past performance is not necessarily a
    guide to the future. The value of the shares in
    this Fund may fall as well as rise.
  • Returns are paid gross and tax may be due
    according to the residence or domicile of the
    investor. Tax concessions are not guaranteed and
    may change at any time their value will depend
    on individual circumstances. It is the investors
    responsibility to ensure that the making or
    holding of an investment complies with any
    restrictions or other provisions of any relevant
    trust deed or any other regulations affecting the
    investor.
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