Portfolio Manager: Daniel Lacalle
Team: London, NYC, Hong Kong
Global Oil & Gas Fund – pure play on Oil & Gas (Exploration & Production, Services, Refining).
Long / Short Equity strategy in Energy to benefit from the global M&A, $780bn investment cycle, and consolidation to accumulate natural resources.
Low volatility, non-correlated returns in a sector that continues to de-rate, resource access is more challenging and capital intensity increases.
Strict Risk Management framework: Non-Directional (Oil Price) view risk-managed with maximum Beta-adjusted net length
1) To capture best relative performance of companies benefiting from the structural capex super cycle and M&A to accumulate resources.
2) To identify companies that generate superior ROIC and Cash-On-Cash-Invested returns in any part of the cycle as a key metric to outperform in a sector that continues to de-rate due to the high capex intensity and low reserve replacement.
3) To identify the winners and losers of the profound change in the Oil industry after twenty years of under-investment:
. Global war for resources just started. More than $150bn in acquisitions in 2010, $70bn so far in 2011 (YTD July 2011). Non-conventional (shale gas) and frontier areas (West Africa, Russian Arctic) as key themes.
. Global Upstream Capex 2011: $729bn to deliver a maximum 2% increase in supply and replace reserves by just about 100%. Multi Year cycle of structural underinvestment (90% of Majors have capex below depreciation) Key themes LNG, Deepwater exploration and mega-projects (Kashagan, Pluto, Pearl)
. Target return: 20% pa.
Super Majors and Integrated Majors (US, Europe, LatAm, FSU, China)
Independent E&Ps (Oil, Gas or Mixed) (US, Europe, FSU, MENA)
Oil Services: Subsea, Seismic, Drilling and EPC Contractors (US, Europe)
Shippers (US, Europe)
Refiners (EU, US)
Indices used for Hedging (XLE, SXEP, OSX, ad-hoc created baskets)
No Physical Commodities or Bonds.
Investment Selection and Monitoring Process
We have a systematic investment approach which combines bottom up analysis with macroeconomic analysis and technical trading, resulting in an emphasis on both the qualitative and quantitative assessment of investment opportunities.
Sector and industry expertise of over 25 years is utilised to generate and analyze ideas for long and short investments which are validated and monitored through a multiple stage process:
1) Perform original analytical work:
a. Fundamental Valuation of micro factors
b. Earnings, cash flow, ROIC expectations and catalysts ahead
2) Third Party Intelligence
a. Utilize extensive industry network for access to corporate management teams and further industry expertise.
3) Investment stress test
a. Written assessment of investment detail
b. Review of stock performance versus peers and sub-sector on a daily, weekly and monthly basis (portfolio monitor daily) to review what has changed and catalyst-price action.
Our extensive relationship network with corporate management teams, industry experts and the brokerage community facilitates regular access to corporate management and industry conferences.
Our trade experience is used to confirm the short-term validity of fundamental analysis and optimize the best entry and exit points for trading ideas. Our strong relationships in the brokerage community aid in obtaining best execution and liquidity.