Performance Review - July 2011 - amLeague Competition Universe

MANAGER OF THE MONTH

In July the Invesco Europe Equity Fully Invested Mandate outperformed the benchmark by 243 basis points. Performance highlights during the month were our exposures to materials, healthcare, consumer staples, telecom and consumer discretionary. Our approach is to combine a minimum variance strategy with an active stock selection expertise to generate an attractive risk-return profile from investments in European equities. Active performance is generated through a quantitative bottom-up investment process. Risk assessment is paramount in our process and therefore we will only include a stock that is expected to add enough value for the risk that is associated to it.

Today our top sectors are healthcare, telecom, consumer staples, industrials and consumer discretionary. These five sectors make up about 70% of the portfolio. Financials are clearly underweight with approximately 7% in the portfolio and information technology is less than 2% of the portfolio. Although we clearly favor certain sectors our portfolio is quite diversified in terms of single stocks. Each single position will have a maximum weight of approximately 2%. Today we hold about 25 names with that maximum weight of 2%. In total we hold about 60 names in our portfolio.

During the month of July there was little trading activity in our portfolio. Highlight was a buy in financials and another in the telecom sector. We sold out three names from the consumer staples, materials and industrials sectors. Although these stocks have not necessarily been ranked poorly we find more interesting alternatives especially for the risk involved. Over the last twelve months we see more significant moves in sector positions. The largest position increase was in the materials sector and the largest decrease was in utilities.

Martin KOLREP

MANAGER OF THE MONTH

The investment philosophy we activate to build and manage the portfolio is based on two pillars :

1 – Security selection : we select our stocks using all public financial accounting information published by companies. Our main focus is to understand how a given company’s growth is supported by its ability to maintain its margins.

2 – Portfolio construction : from our initial selection, we build our portfolio using a risk parity approach where each security marginal risk contribution is equalized within the portfolio.

In July, our investment universe has shrunk: from 72 stocks present in the portfolio in May, we went down to less than 60 in July. This shows how difficult it has been for the equity market to deliver an attractive performance in July: in other words, July is typical of a bottom-up investment philosophy opposed to a pure indexed one.

Pierre GUILLEMIN

MANAGER OF THE MONTH

After the difficult delivery of the second bailout for Greece in mid-month, the limits of the solutions actually adopted by the European authorities and especially the failure of the white house to find with the Republican and the Democratic leaders a compromise on the federal debt ceiling, have kept the pressure on developed markets. Almost everywhere the macro-economic statistics have also confirmed the slowdown in growth.

Risk aversion remained present: the VIX (volatility index) has risen from 15 to 25. Long term rates "core" have violently tightened: 30 bps for the U.S., about 50 basis points in Germany and the UK. A rather good start of the second quarter earnings publication failed to protect the equity indices. They gave up about 2% in the United States, 2.5% in Europe, more than 5% in the Eurozone and ... 7.7% for the CAC. Only Japan has remained away from the turmoil due to the first effects of the reconstruction plan and the revision of growth expectations: the Nikkei ended the month slightly positive. The dollar lost all the appreciation achieved from the peak of the Greek crisis in the early period. It ultimately depreciated by 0.5% against all currencies, by 0.8% against the euro and more than 4% against the Yen.

Overall, emerging markets are not better off. More or less pronounced deceleration in growth and inflation remaining above expectations has caused some outflows. The Brazilian Bovespa index drop of nearly 6% after the 5% recorded the previous month. India has lost more than 3%, Shanghai nearly 2%. Only Korea and Indonesia eventually ended positive due to a less penalizing inflation problem.

In this more complicated context, we maintain the same strategy. We are still cautious on the euro zone on both the sovereign debt and the equity markets where we prefer all other areas expect Japan. The weight of the sovereign debt in the euro area accounts for only 7% of the total assets of the fund, Europe equities account for only 8%. We still prefer investments in emerging countries, a total in stocks and debt representing 21% of assets. And, the "High Yield" in the euro zone is still an attractive diversification in relative to equities in turbulent times and to debt in terms of yield.

Finally, in this context, it is the high resilience of the selected asset classes which has made the fund's performance.

Mathieu PIVOVARD

MANAGER OF THE MONTH

In July the Invesco Europe Equity Flexible Mandate outperformed the benchmark by 201 basis points. The equity weight was constant around 105% during the month and had a slightly negative contribution of 29 bps during the month. We overweight European equities because according to our models markets are attractively valued. In addition promising economic conditions with low interest rates, low inflation and stable company earnings favor further economic growth. However technical conditions with price trends seem to decrease. Nevertheless our outlook for the future development of European equity markets is moderately positive.

Stock selection contributed positive 230 basis points to the portfolio performance. The fund is invested to about 95% into the Invesco Europe Equity Fully Invested mandate. In this part we are combining a minimum variance approach with an active stock selection expertise to generate an attractive risk-return profile from investments in European equities. Active performance is generated through a quantitative bottom-up investment process based on four concepts: Earnings Momentum, Price Trend, Management Action and Relative Value.

Today our top sectors are healthcare, telecom, consumer staples, industrials and consumer discretionary. These five sectors make up about 70% of the portfolio. Financials are clearly underweight with approximately 7% in the portfolio and information technology is less than 2% of the portfolio. Although we clearly favor certain sectors our portfolio is quite diversified in terms of single stocks. Each single position will have a maximum weight of approximately 2%. Today we hold about 25 names with that maximum weight of 2%. In total we hold about 60 names in our portfolio. During the month of July there was little trading activity in our portfolio. Highlight was a buy in financials and another in the telecom sector.

Martin Kolrep

MANAGER OF THE MONTH

CM CIC AM managed to outperform the benchmark by 148pb, in a sharply declining market, thanks to the hedging strategy (21.3% in July of short).

On the equity side, stock picking materialised in July, with stocks like SAP, which is our sole bet on the sector, gaining 4.5% following a better publication than expected and a good order intake which saw some sizable contracts signed.

On the financial sector, we maintained our cautious stance by playing Deutsche Boerse (-1.5% in July) or Sampo, which generated both some outperformance. Following the same cautiousness, shares like Edenred, Fraport, Amadeus our Bureau Veritas played their defensive role during the month.

During the month of July, we reduced our exposure to Banco Santander, Axa and Credit Agricole and concentrated our conviction on quality stocks like BNP and Deutsche Bank, considering the discount on TBV (Tangible Book Value) significant enough on those major players, and enabling us to reduce the peripherical risk.

Team Managed