Capital Partners SGR 2020 · Creazione di nuove asset class Cambiamenti per le asset class...

Anthilia

Capital Partners

SGR

Maggio

2011

2020

Financial Corporate Bonds

An asset class to harvest Risk Premium

Anthilia Capital Partners SGR SpaAnthilia Capital Partners SGR Spa

Introduction to Anthilia

2


Anthilia Yellow

Agenda

Anthilia Capital Partners SGR SpaAnthilia Capital Partners SGR SpaAnthilia Capital Partners SGR Spa

3

Investment Expertise


Founded in 2007, Anthilia is an independent Asset Management Company headquartered in Milan (other

offices in Bologna and Rome)

The company is a partnership among professionals with a long experience in different areas of Asset

Management in Europe and institutional partners

Anthilia manages 799 €Mln and advises 627 €Mln

Closed-ended fundsOpen-ended funds

Mandates Financial Advisory

Multi-asset

Low-volatilityFinancial

Corp. Bonds

Equity Europe

Flexible

Equity Europe

Long-Short

Equity Italy

Small CapGlobal Macro

Anthilia Yellow

AuM: 60 €Mln

8 yrs track record


4

Organisational Structure


Investment Team Business Development

Risk Management

Markus Ratzinger – Partner, Head of Credit

MSc Economics and Business Administration, University of Vienna

Anthilia Capital Partners Sgr (Bologna), 2010-Today

Banca Akros (Milan/Bologna), 2004-2010 Derivatives Trader

D.E. Shaw / KBC (London), 1998-2004 Derivatives Trader

Chase Manhattan Bank (London), Derivatives Trader

Citibank (Milan), Derivatives Trader

Giro Credit Bank (Vienna), Market Maker on Derivatives

Anne-Sophie Chouillou – Partner, Fund manager

MSc Economics and Finance, Essec Business School of Paris

Anthilia Capital Partners Sgr (Bologna), 2015-Today

Method Investments & Advisory (Milan/London), 2013-2015 Instit. Sales

Banca Profilo (Milan), 2007-2012 Institutional Sales

Banca IMI (Milan), 2004-2007 Fixed Income & Derivatives Sales

Natexis Banque Populaires (Paris/Milan), 2002 Derivatives Sales

Markus Ratzinger

Credit

21 yrs experience

A-Sophie Chouillou

Credit

16 yrs experience

Andrea Cuturi

CIO, Macro

26 yrs experience

Paolo Rizzo

Equity

30 yrs experience

Giuseppe Sersale

Macro

27 yrs experience

Pietropaolo Rinaldi

Equity

23 yrs experience

Massimiliano Orioli

Fund Selector

31 yrs experience

Attilio Benda

Risk Manager

27 yrs experience

Lorenzo Catalucci

Risk Manager

5 yrs experience

Daniele Colantonio

Head Business Dev.

19 yrs experience

Lucio Cuppini

Senior Advisor

34 yrs experience

Gherardo Derada

Troletti

Equity analyst

4 yrs experience

Matteo Soriani

Product Developer

10 yrs experience

Emanuela

Locorotondo

Operative Marketing

6 yrs experience

Antonio Luise

Institutional Sales

18 yrs experience

Rocco Arcomano

Wealth Management

Analyst

3 yrs experience

Andrea Manciocco

Institutional Sales

13 yrs experience



5


Anthilia Yellow

Agenda


6

Basel III and Solvency II – Why?


Introduced in order to avoid a repeat of 2008 when taxpayers had to bail out banks and insurance

companies to protect retail investors

Stricter rules: Bank Recovery and Resolution Directive (BRRD), the «bail in» process for banks and

Solvency II for insurance companies

Basel III and Solvency II

New instruments: Contingent Convertible (CoCo)

instruments with trigger (AT1, T2)

Created a new asset class Changes for existing asset classes

Change of rules (i.e. Legacy Tier 1, Lower Tier 2

and Senior Bonds) and grand-fathering period or a

gradual implementation of the new legislation


7

Banks and Insurance Companies: Investment Opportunities


Cause Effect

Increased capital requirements of Basel III and

Solvency II force banks and insurance companies to

issue large amounts of subordinated paper

Stricter rules (combined with capital requirements)

discourage financial institutions to pursue risky activities

(e.g. trading, market making, derivatives)

Higher coupon rates in order to

attract investors’ demand

Lower risk of default


8

Banks: Basel III - Gradual Implementation Until 2019


2,0%3,5%

4,5% 4,5% 4,5%2,0%

1,0%

1,5% 1,5% 1,5%4,0% 3,5%

2,0% 2,0% 2,0%

1,3% 1,9% 2,5%1,3%

1,9%

2,5%

Until 2012 By 2013 … By 2017 By 2018 By 2019

Common Equity Tier 1 (CET1) Additional Tier 1

Tier 2 Conservation Buffer (CET1)

Anticyclical Buffer (CET1)

Basel II Gradual introduction of Basel III Basel III

…

4,5%

1,5%

2,0%

Categoria 1

CRD4 European capital

requirement

Pillar 2 (guidance)

Pillar 2 (required)

Pillar 2 (guidance) CET1

Pillar 2 (required) mostly CET1

Up to 5%


9

Banks: Strong Capital Rebuild


EU Banks’ CET1 Capital Ratio

Source: European Banking Authority

EU banks have continued to

strengthen their capital

positions, mainly through

raising additional equity and

retaining earnings

Since 2011, the EU Banks’

CET1 ratio has increased

following the efforts of

supervisors and regulators to

overcome banks’ vulnerable

capital position in the

aftermath of the financial crisis

2008 2011 2012 2013 2014 2015 2016 2017 2018 2019

< 6.0%

9.7%

11.0% 10.9%

12.1%

12.6%13.2%

14.6% 14.5% 14.6%


10

Insurance Companies: Solvency II Capital Requirements to Withstand Stress Scenario


More stringent capital definitions

compared to Solvency I

Solvency II capital requirementsNew capital definitions

Solvency Capital Ratio (SCR): capital

level necessary to withstand a stress

scenario within 12 month with a confidence

interval of 99,5%

Minimum Capital Requirement (MCR):

minimal capital level below which the

regulator should intervene (usually in the

range 25%-45% of SCR) Tier 3

Tier 1

(Perpetual Hybrid Debt)

Tier 2

(Dated Hybrid Debt)

Equity

up to 15%

of SCR

up to 20%

of Equityat least 50%

of SCR

up to 50%

of SCR



11


Anthilia Yellow

Agenda


12

Financial Corporate Bonds: Flexibility and Diversification

Anthilia Yellow

Investment Universe

Financial bonds

All levels of seniority / subordinations

All currencies

FocusSubordinated bonds

Europe (+ global special situations)

BenchmarkNo benchmark

Flexible asset allocation depending on investment opportunities

First Value Source Bottom-up security selection

HedgingFutures contracts

(FX, duration, country risk)


13

Investment Process

Anthilia Yellow

Diversification

› 40 issuers

› 10 countries

› 100 instruments

Flexible asset

allocation

Weights based on

risk contribution

Country

› Macro

› Regulation

Issuer

› Credit analysis

› Capital structure

Prospectus

› Collateral

› Optionality

Analysis of risk

premium

› Seniority

› Maturity

› Call structure

Pick seniority/

maturity with best

risk-return profile for

every issuer

Hedging

› Country risk

› Currency risk

› Duration

Issuer selectionBond

selection

Portfolio

construction

Controllo

rischio


14

Additional Tier 1 – CoCo (Contingent Convertible)

Anthilia Yellow

Perpetual maturity

Senior only with respect to equity

Coupons fully discretionary (in certain situations the

issuer is not allowed to pay)

Can be written down or converted into equity

No step-up

Characteristics

From 2019 issuance to replace called bonds

The supply in 2020 should be around € 20 billion

equivalent from € 34 billion, equivalent made in

2019, also supported by the second pillar

Issue amounts

Cedola: 6,375% (till first call)

Call: every 5 years from 2030

Iss. Spread: 482,20 bps

Rating: BB- (S&P), BB (Fitch)

Yield-to-Call (YTC): z+442 bps

Seniority Return


«Legacy Tier 1» Instruments

15

Anthilia Yellow

Coupon: 7,014%

Call: novembre 2037

Currency: USD

Iss. Spread: +203 bps vs Treasury

Step up Coupon: Libor $ +146 bps

Rating: Ba1 (Moody’s), BB (S&P),

BB+ (Fitch)


Characteristics

Perpetual maturity

Coupon cancellable in case of large losses

Step-up coupons after call date

From 2022:

› do not count for capital requirements

calculations

› is not convenient for issuer to leave

outstanding

› potential tender offer

Seniority Return


16

Insurance «Legacy Tier 1»

Anthilia Yellow

Perpetual maturity

Senior only with respect to equity

Cumulaive coupons if not paid

Step-up coupons post call date

Also issued in currencies other than that of the

issuer's country of origin

Characteristics

Maturity: Perpetual

Coupon: 6.6862% fixed

Call: quarterly after Jul

2026

Iss. Spread: 203 bps vs Gilt

Step-up coupon: Libor £ + 275 bps

Rating: Baa1 / BBB


Seniority Return

Solvency II introduced a Grandfathering period for

existing titles for 10 years (up to 2026)

The new tools do not have "incentive to call"

Issue amounts


17

Insurance «Legacy Tier 1»

Anthilia Yellow

Tier 1 in struments in € and £ issued in 2007 and

2008

Various tenders or exchanges have been made

against senior cards

Since 2013, as a SEC document attests, this card

is no longer eligible as a tier1 instrument

Last tender dates back to 2015

Characteristics

Coupon: Eur3m + 173 bps

Call: quarterly after march

2017

Iss. Spread: +97.30 bps vs BUND

Step-up coupon: Eur3m + 173 bps

Rating: Baa2 (Moody’s), BBB-

(Fitch), BBB- S&P


Seniority Return

Solvency II introduced a Grandfathering period for

existing titles for 10 years (up to 2026)

The new tools do not have "incentive to call"

Issue amounts


18

Tier 2

Anthilia Yellow

Subordinated to senior debt only

In the past, there was a losses only in the case of

liquidation

Today, full loss-absorption in certain situations

The issuer can only suspend the payment of the

coupons (which must in any case be recovered

later)

In the past, there was an incentive for early

redemption (step-up call): they could be called up

by the bank or converted from fixed coupon to

variable

Characteristics

Maturity: 18/01/2029 call 24

Coupon: 6.125% fixed

Rating: Ba2/ BB+

Yield at acquisition: +575 bps, Jun 19

Current Yield: z+486 bps

Seniority Return


19

Senior Preferred issued by Italian banks

Anthilia Yellow

• Senior Preferred Instruments (less subordinated

of the new asset class of Senior Non Preferred

«bail-in»)

• Issued for the retail market

• Often issued in currency (USD, GBP, etc ...)

• Valued versus the yield on the BTP curve and the

Italian risk is subsequently hedged by BTP futures

• Issuers: Unicredit, Intesa, Mediobanca

Characteristics

Maturity: 31 May 2023

Coupon: fixed/ floater

Rating: Baa1/Baa1/BBB

Yield at acquisition: +180 bps vs BTP curve

Yield benchmark issue: +20 bps vs BTP curve

Seniority Return


20

Senior Bonds - bonds with more complex structures

Anthilia Yellow

• Bonds with call - variable maturity

• More evident undervaluation

• Less suitable for institutional investors buy-and-

hold

Characteristics

Option: callable every day

Coupon: step-coupon

Currency: USD

Maturity: 31/10/2023

Yield: z+150 bps

Seniority Return


21

Senior Bonds – Distressed Issuers

Anthilia Yellow

Can be bailed-in in certain situations

Regulamentation particularly important

Used only in particular situations:

› Interesting yield despite seniority

› Different pay-out scenarios for various parts

of capital structure

Characteristics

Coupon: 0%

Call: 1 Feb 2029

Redemption price: 215%

Currency: EUR

Yield: z+ 375

Yield at acquisition: z +375 bps

Seniority Return


22

Alpha Generation: Senior Structured Bonds with «Subordinated Yield»

Anthilia Yellow

Typically issued to retail investors

Simple structured coupons (e.g. fixed-floater,

reverse floater)

Often in foreign currencies

Yield particularly interesting for longer maturities

Can often be sold at tighter spread when closer to

maturity

High-quality issuers:

› Goldman Sachs, RBS

› Mediobanca, Intesa

Characteristics

Maturity: 18 sept 2025

Coupon: eur6m (floor 0%)

Type: Fixed / Floater

Currency: EUR

Yield z+145

Seniority Return


Portfolio Breakdown

Anthilia Yellow

23

Weights by issuers Net weights by countries

Data as of August 2020

More than 50 names

20,34%

17,60%

9,81%

6,59%

5,19%

4,09%

3,71%

2,99%

2,00%

0,61%

UK

France

Italy

US

Spain

Netherlands

Germany

Switzerland

Austria

Sweden

8%

6%

5%

4%

4%

4%

3%

3%3%

3%

Anthilia Capital Partners SGR SpaAnthilia Capital Partners SGR SpaAnthilia Capital Partners SGR SpaAnthilia Yellow

24Source: Anthilia (Management Team, Risk Management). Data as of August 2020

Risk and Return contribution(2015-2020)

19,2%

31,0%31,6%

17,7%

0,0%0,7%

31,1%

21,8%

18,1%

16,5%

11,6%

0,9%

14,9%

30,2%

40,9%

11,7%

0,6%1,8%

Senior Financials Sub Insurance CoCo Sub Banks Cash Other

Return Contribution Mean Weight Risk Contribution


25Source: Anthilia (Management Team, Risk Management)

Risk and Return contribution (2017 – 2020)

24,1%

30,1%

34,6%

11,4%

0,0%

-0,3%

34,2%

24,0%

17,5%

11,5% 11,7%

1,1%

14,4%

33,3%

41,1%

8,8%

0,3%

2,2%

Senior Financials Sub Insurance CoCo Sub Banks Cash Other

Return Contribution Mean Weight Risk Contribution


26

Correlations Multiple Regression Beta

Period of analysis: May 2017 – August 2020

0,51

0,40

0,27

MSCI Daily TR Gross World

Iboxx Subordinated Financials EUR

Iboxx Euro Sovereign Overall

Iboxx Euro Corporates Overall

1,04

-0,06

Risk Profile: Credit Risk Without Duration

0,96


27

Additional Tier 1

Insurance Legacy Tier 1

Bank Tier 2

Preference for high-quality issuers as real risk is low and risk premium interesting

Preference for long calls which offer higher yield with little additional risk

Still most interesting asset class, attractive return for low risk

High quality issuers, often investment grade

Low yields for potentially real risk, has suffered losses in all recent restructurings

Current Themes


ITRAXX Sub Fin 5 years

ITRAXX Crossover 5 years

Index

Anthilia Yellow

28Period of analysis: October 2017 – August 2020

• There is a marked widening of the spread for in

conjunction with the spread of the covid19

virus.

• Investment opportunities on issuers with good

fundamentals at these spread levels

ITRAXX Senior Fin 5 years

40

70

100

130

160

Oct-15 Jun-16 Feb-17 Oct-17 Jun-18 Feb-19 Oct-19

190

300

410

520

630

Oct-15 Jul-16 Apr-17 Jan-18 Oct-18 Jul-19 Apr-20

90

150

210

270

330

Dec-17 May-18 Oct-18 Mar-19 Aug-19 Jan-20 Jun-20


Brief Summary

Anthilia Yellow

29

Retail Share Class (A) Institutional Share Class (B)

Start Date 2nd July 2012 26th August 2016

ISIN Code LU1377525735 LU1377525818

Bloomberg Ticker PLAYELA LX PLAYELB LX

Management Fees 1.25% 0.70%

Performance Fees20%

Perpetual HWM

20%

Perpetual HWM

Minimum Investment None 250.000 €

Anthilia Capital Partners SGR SpaAnthilia Capital Partners SGR SpaAnthilia Capital Partners SGR SpaDisclaimer

This document is produced for information only and does not constitute an offer to sell or an invitation to buy any

financial instruments. Any research or analysis used in the preparation of this document is based upon sources

believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those

sources. Any opinions, estimates or forecasts may be changed at any time without prior warning.

This document is not intended for distribution to retail investors and is not directed to, or intended for distribution to or

use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction

where such distribution, publication, availability or use would be contrary to law or regulation.

Past performance is no guarantee of future performance.

This document has been issued by Anthilia Capital Partners Spa for information use only.

This document may not be reproduced or distributed, either in part or in full, without prior authorization being obtained

from Anthilia Capital Partners SGR SpA.

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Capital Partners SGR 2020 · Creazione di nuove asset class Cambiamenti per le asset class...

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