BANK DEGROOF
Presentation for VIVIUM Assurances
Bruxelles Kinepolis
14th October 2010
Mr. Thomas-Karl Palmblad
14th October 2010
Agenda
1. Introduction of Bank Degroof
2. Introduction to Degroof’s Global Investment approach for VIVIUM
3. Introduction of Bank Degroof’s Behavioral Value strategy
4. Q & A
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DEGROOF FUND MANAGEMENT COMPANY
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Bank Degroof
 Independent merchant Bank, founded in 1871, owned by its
management
 24.1 bn EUR in assets under management
 Asset management produces 80% of income
 Headcount 1000
 Offices in Belgium (HQ), Luxembourg, Switzerland, France,
Spain and Bahamas
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MANAGEMENT AND STAFF HAVE A STAKE IN THE GROUP’S SUCCESS
1. Senior management owns a majority stake
in the bank. This gives them, in a long-term
approach, a vital interest in the bank's
performance and reputation
Management & staff include (1) controlling
stake held by Guimard Finance and the
Philippson, Siaens, Schockert, Haegelsteen
and Fontaine families, (2) active partners and
(3) other members of management and staff
Management
and staff
63.85%
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2. Financial partners include Compagnie du
Financial
Bois Sauvage, Parmafin (Theo Maes family),
Luc Waucquez family, Levimmo and others.
partners and others
Own shares represent 1.19 %
36.15%
BANK DEGROOF’S REPUTATION IS BUILT ON THE EXPERTISE
MADE AVAILABLE TO ITS CLIENTS
Private clients
Private wealth management
• Protect and grow
Institutional clients
• Bank Degroof Brussel’s Institutional Portfolio
Management department, Degroof Fund
Managament Company and Degroof Gestion
Institutionnelle (DGI) are the Degroof group's
competence centres for institutional asset
management
• Full support at all stages of wealth creation
• Management of EUR 15.9 billion in UCIs
• EUR 21.0 billion in assets under
management
• Management of EUR 2.9 billion of institutional
portfolios
Legal and patrimonial structuring
Financial markets
• Specialists in legal, fiscal and inheritance
structuring
Credits & Structuring
• Credit facilities as part of overall asset
management relationships
• Long-established financial market player
• Advice and sales to institutional clients in
equities, bonds, undertakings for collective
investment, listed derivatives and treasury
management
• A leading liquidity provider on Euronext
Brussels
UCI administration
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Public and private
companies and their
shareholders
Corporate Finance
• M&A expertise, recognized by various
rankings
• Dominant position in the issue of fairness
opinions
• One of the main financial advisers to the
Belgian state and regional governments for
privatisations and other major financial
operations
• Active role in private and public placements
for private companies and companies listed
on Euronext Brussels
Credits & Structuring
• Structured and tailor-made credits
OUR REPUTATION AND
PROFESSIONAL APPROACH
ENABLE US TO ATTRACT AND RETAIN
HIGHLY COMPETENT PROFESSIONALS
• Our culture is that of top grade professionals,
working together in a climate of mutual trust and
respect to produce optimal, lasting solutions for
our clients
• This culture provides a stability stimulating
creative innovation
• We favour a long-term approach, with close
attention to financial fundamentals
• For example, the average length of service of
senior staff is 11.2 years
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DEGROOF FUND MANAGEMENT COMPANY
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Bank Degroof = excellent performance thanks to
• a clear and contrarian investment philosophy,
• inspired by academic research and, that is translated
• into disciplined investment processes by Teams
• through a "fundamental-quantitative” approach
• and with tight risk control
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VIVIUM, the switch to Degroof Active Management Styles
VIVIUM Managed Funds
4 Compartments
Degroof Active Funds
Selection of 4 Management Styles
Low
8
 Stability Fund
Global Low
 Balanced Fund
Global Medium
 Dynamic Fund
Global High
 Aggressive Fund
Equities Europe
Behavioral Value
DEGROOF FUND MANAGEMENT COMPANY
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Active
Risk
Level
High
VIVIUM, the switch to Degroof Active Managed Investment Processes
VIVIUM Managed Funds
4 Compartments
12 months return as at
30th September 2010
 Stability Fund
Return 1 Year : + 6.61%
 Balanced Fund
Return 1 Year : + 8.51%
 Dynamic Fund
Return 1 Year : + 9.89%
 Aggressive Fund
Return 1 Year : + 5.31%
Low:
20%
Equity
Level
High:
100%
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DEGROOF FUND MANAGEMENT COMPANY
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VIVIUM, the switch to Degroof Active Managed Investment Processes
VIVIUM Managed Funds
4 Compartments
Low:
20%
 Stability Fund
Tracking Error 1.92% Vol. 5.29%
 Balanced Fund
Tracking Error 2.92% Vol. 9.8%
 Dynamic Fund
Tracking Error 6.28% Vol. 15.5%
 Aggressive Fund
Tracking Error 5% Vol. 19.7%
Equity
Level
High:
100%
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ASSET
ASSET
ALLOC
ALLOCATION
INTRODUCTION
•
DIVERSIFICATION
PERFORMANCE
CONCLUSION
3 RISK PROFILES
ASSETS UNDER MANAGEMENT (mio €)
GLOBAL LOW
2,500
GLOBAL MEDIUM
1,918
2,000
1,500
 GLOBAL HIGH
1,000
580
EQUITY RATIO
DEGROOF
GLOBAL ISIS
LOW
-
20%
ISIS LOW
DEGROOF
GLOBAL ISIS
MEDIUM
48%
DEGROOF
GLOBAL ISIS
HIGH
75%
0%
11
347
500
20%
40%
60%
80%
DEGROOF FUND MANAGEMENT COMPANY
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100%
ISIS MEDIUM
ISIS HIGH
INTRODUCTION
•
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
CONCLUSION
MEDIUM = Flagship Management of Banque Degroof, 1.92 billion euros
reflects the allocation strategy of medium risk
•
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OBJECTIVE
DEGROOF FUND MANAGEMENT COMPANY
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OPTIMIZE THE RETURN
1. Allocation
between
assets classes
80% OF THE RETURN
2. Diversification
within every
asset class
20% OF THE RETURN
INTRODUCTION
Offices
Commercial
Residential
ASSET
ALLOCATION
REAL ESTATE
CONVERTIBLE
BONDS
ALTERNATIVE
Flex Collar
Hedge Funds
Timber
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DIVERSIFICATION
PERFORMANCE
CONCLUSION
Govies / Agencies
Securitized
Corporates
Inflation linked
BONDS
EQUITIES
SHORT TERM
Currencies
Deposits
Commercial papers
Large caps
Small caps
Private Equity
INTRODUCTION
1.
ASSET
ALLOCATION
PERFORMANCE
CONCLUSION
ALLOCATION : MEDIUM
(July 2010)
EQUITIES
BONDS
CONV BDS
ALTERN.
CASH
REAL PROP.
TOTAL
EURO
Belgium
Germany & Austria
France
Netherlands
Italy
Spain
Others (Port,Irel,Finl,Gr)
14.8
0.7
4.1
4.4
1.5
1.5
1.7
0.9
24.8
0.9
5.5
11.3
0.5
0.5
1.0
5.0
0.3
0.3
0.0
11.0
0.0
2.9
0.9
0.2
1.1
0.5
0.0
53.9
2.8
9.8
16.9
2.5
2.1
2.7
6.1
EMEA ex-Euro
Great Britain
Switzerland
Others (Swed, Norw, Denm, Isr)
5.4
3.1
1.0
1.2
0.9
0.3
0.3
NORTH AMERICA
United States
Canada
14.5
13.0
1.6
0.0
0.0
JAPAN
2.2
ASIA ex-Japan
Australia & NZ
Hong Kong
Singapore
2.0
1.3
0.5
0.2
0.3
0.1
0.1
0.1
EMERGING MARKETS
10.7
1.9
TOTAL
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DIVERSIFICATION
49.5
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0.1
0.9
0.3
0.3
4.4
4.4
0.0
0.0
0.0
0.0
0.1
0.1
6.6
3.5
1.0
2.1
0.3
0.2
0.0
0.5
0.5
20.0
18.4
1.6
0.1
25.7
3.2
2.3
0.0
1.2
1.1
2.3
0.1
0.0
0.1
0.0
4.6
1.4
1.8
1.4
12.6
15.4
2.6
3.6
100.0
Low
High
ASSET
ALLOCATION
INTRODUCTION
DIVERSIFICATION
PERFORMANCE
CONCLUSION
2. BENCHMARK
ISIS MEDIUM
Max
60%
58%
50%
Bench
48%
40%
Min
38%
38%
30%
28%
21%
16%
11%
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DEGROOF FUND MANAGEMENT COMPANY
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st
at
le
R
ea
h
2%
0%
C
as
e
e
at
iv
rn
Al
te
Bo
n
v
C
on
Eq
u
iti
e
ds
s
0%
10%
8%
4%
0%
6%
3%
0%
ds
10%
18%
Bo
n
20%
Low
High
INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
3. ALLOCATION TOOLS (ASSETS CLASSES)
INVESTMENT COMMITTEE
MACRO-ECONOMY
-Growth: Europe, USA, Japan, Emerging countries
-Inflation :
CPI, PPI
Monetary aggegates
Commodities prices
World trade volume
Labor cost
-Short term interest
-Long term interest
-Exchange rates
-Equity markets  valorisations
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Leading indicators
Consummer confidence
Labour market
New orders
Inventories
Profitability
Real estate activity
Credits
CONCLUSION
INTRODUCTION
ASSET
ALLOCATION
PERFORMANCE
DIVERSIFICATION
CONCLUSION
3. ALLOCATION TOOLS (ASSETS CLASSES)
INVESTMENT COMMITTEE
FINANCIAL RATIOS
FIXED INCOME COMMITTEE
BONDS ALLOCATION
- Duration/Positioning
- Price/Earnings
Real interest rate
Yield curve
- Earnings revision
- Govies-Inflation linked: Expected inflation
QUANTITATIVE TOOLS
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- Credit: Corporate - govies:
- Allocation Equity-Bonds: Risk premium
- Sectors
- Allocation Blue-Small:
- Countries
Relative P/E
DEGROOF FUND MANAGEMENT COMPANY
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Rating/risk
INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
4. STRATEGY
A. GLOBAL ALLOCATION
 Slightly overweighted in equity
 Underweighted in real estate
(%)
 Lower bonds duration
50
40
30
20
10
0
s
y
tive state onds
uit
nd
a
q
o
n
E
B
le
v B Alter
a
n
e
o
R
C
Isis Medium
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Benchmark
sh
a
C
CONCLUSION
INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
4. STRATEGY
B. EQUITY ALLOCATION
 Underweighted in Japan
25
(%)
20
15
10
5
0
a
kts
u ro
ric
e
m
e
ex
Am
mg
e
E
h
t
p
&
ro
or
a
u
i
N
E
As
Eu
Isis Medium
19
DEGROOF FUND MANAGEMENT COMPANY
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ro
Benchmark
pa
Ja
n
CONCLUSION
INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
4. STRATEGY
C. BOND ALLOCATION
(%)
Overweighted in corporate & securitized bonds
80
70
60
50
40
30
20
10
0
AAA
ISIS Medium
20
AA
Benchmark
DEGROOF FUND MANAGEMENT COMPANY
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A
BBB
NR
CONCLUSION
INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
5. ASSET ALLOCATION: CONCLUSIONS
Based on long term views
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PERFORMANCE
CONCLUSION
INTRODUCTION
ASSET
ALLOCATION
1. NON EQUITY CLASSES
- BONDS
- FLEXIBLE COLLAR
- CONVERTIBLE BONDS
- HEDGE FUNDS
- REAL ESTATE
- COMMODITIES
- OTHERS: TIMBER
DIVERSIFICATION
PERFORMANCE
2. EQUITY CLASSES
- STYLES:
INDEXED
VALUE
GROWTH
…
- PRIVATE EQUITY
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DEGROOF FUND MANAGEMENT COMPANY
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CONCLUSION
INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
CONCLUSION
1. NON EQUITY CLASSES
MEDIUM
Real properties
4%
Conv bonds
3%
Equity
51%
Non equity
49%
Bonds
25%
Flex collar
14%
Hedge funds
1%
Timber
Cash
Cash1%
2%
2%
Bonds 16.5% Govies,
 3.1% Inflation linked
 2.4% Corporates
3.7% Securitized
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DEGROOF FUND MANAGEMENT COMPANY
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INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
CONCLUSION
2. EQUITY CLASSES
MEDIUM
Non equity
49%
Equity
51%
Index
31%
value
6%
third party
12%
private equity
1%
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DEGROOF FUND MANAGEMENT COMPANY
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INTRODUCTION
ASSET
ALLOCATION
DIVERSIFICATION
PERFORMANCE
DIVERSIFICATION: CONCLUSIONS
Based on convictions, on medium term views
25
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CONCLUSION
INTRODUCTION
1
ASSET
ALLOCATION
RISK CONTROL
MEDIUM
Risk
Control
26
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DIVERSIFICATION
PERFORMANCE
CONCLUSION
ASSET
ALLOCATION
INTRODUCTION
DIVERSIFICATION
PERFORMANCE
OPTIMISTIC SCENARIO
CONCLUSION
PESSIMISTIC SCENARIO
Positive years: 1993 - 2000
250
230
+25.5%
210
190
Negative years: 2000 - 2003
170
150
110
130
100
110
90
90
80
70
1993
1994
1995
1996
1997
Global bonds
1998
1999
2000
-10.1%
70
Isis Medium
60
Positive years: 2003 - 2007
50
150
40
2000
140
+36.5%
130
2001
Global bonds
2002
2003
Isis Medium
120
110
100
UPSIDE HIGHER THAN DOWNSIDE
90
80
2003
2004
2005
Global bonds
27
2006
Isis Medium
DEGROOF FUND MANAGEMENT COMPANY
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2007
Bank Degroof’s
Behavioral Value strategy
Introduction to Bank Degroof’s Behavioral Value strategy
Unfortunately …
Cumulative value of British shares between 1955 and 2001
You are here
Source: “Capturing the Value Premium in the UK; 1955-2001” Dimson, Nagel & Quigley, LSE, January 2003
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DEGROOF FUND MANAGEMENT COMPANY
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Introduction to Bank Degroof’s Behavioral Value strategy
2. Quality of forecasting is a disaster
Behavioral Value deals with these flaws through
A. Strong buying and selling discipline
Obtained through a quantitative approach and improved by
behavioral criteria such as earnings revision momentum
B. Behavioral Value eliminates the analysts’ bias of
long term optimism
By introducing mean reverting in the valuation model/business plan
30
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Behavioral Value
The Wheel of Fortune – where Degroof is
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Risk Premium
Last update : 02/09/2010
14.75%
14.75%
No rmative RP = 2.90% ; Last = 10.14% ; 30/08/2010 = 10.60%
13.75%
13.75%
12.75%
12.75%
11.75%
11.75%
10.75%
10.75%
9.75%
9.75%
8.75%
8.75%
7.75%
7.75%
6.75%
6.75%
5.75%
5.75%
4.75%
4.75%
3.75%
3.75%
2.75%
2.75%
1.75%
1.75%
0.75%
0.75%
-0.25%
Jan-99
32
DJ Stoxx 50 Earnings Yield Gap - Growth sensitivity
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Risk P remium
No rmative RP
-25%
-15%
-5%
5%
15%
Stdev
Stdev
-35%
DEGROOF FUND MANAGEMENT COMPANY
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Jan-10
-0.25%
Degroof Equities Europe Behavioral Value Gips
33
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Market snapshot
Source: Bloomberg 8th October 2010
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Outlook
Comparison to previous crises
Start
End
Return US Equity Market
Q4 1948
Q4 1949
-15%
Q2 1953
Q2 1954
-12%
Q3 1957
Q2 1958
-19%
Q2 1960
Q1 1961
-11%
Q4 1969
Q4 1970
-30%
Q4 1973
Q1 1975
-46%
Q1 1980
Q3 1980
-7%
Q3 1981
Q4 1982
-24%
Q3 1990
Q1 1991
-16%
Q1 2001
Q4 2001
-46%
Q1 2008 (?)
Q1 2009 (?)
-43%
Mean
-23%
Median
-17%
Source: Lehman Brothers, Global Strategy Outlook, 7 December 2007
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Outlook
Equities
Performance US equities 12 months after bear market bottom
Bottom reached at
8 July 1932
171%
31 March 1938
29%
28 April 1942
54%
19 May 1947
19%
13 June 1949
42%
22 October 1957
31%
26 June 1962
33%
7 October 1966
33%
26 May 1970
44%
3 October 1974
38%
12 August 1982
58%
4 December 1987
21%
11 October 1990
29%
9 October 2002
9 March 2009
34%
Oct 8, 2010 +68%
Average
45%
Median
33%
Source: Global Financial Data
36
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Contact details
Thomas Palmblad,
Institutional & Corporate Desk
Rue de l’Industrie 44
1040 Bruxelles
E-mail: TKP@degroof.be
Phone: +32 2 287 93 27
www.degroof.be
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