Managing liquidity and financial investments in a challenging world
Treasury manages the liquidity and financial investments of L1 Investment Holdings. When the Group makes strategic investments, L1 Treasury provides the necessary funds, whereas when investments are sold or dividends received, L1 Treasury manages the available funds.
2018 proved to be a challenging year for the global economy. While the economy in the US still grew close to 3% year on year, growth in the rest of the world started to decline. In Europe, increased trade tensions between the US and its trading partners, Brexit coming ever closer, and the election of a populist government in Italy all contributed to a weakening of consumer confidence and a fall in investments. Consequently, growth in the Eurozone fell to 1.2% year on year. In China, economic growth came in at 6.4%, its lowest level since 2009, and in Japan, growth fell from 2% to 0% over the course of the year.
The fall in confidence in the economy had a significant effect on financial markets. Deutsche Bank research, which follows a sample of 70 asset classes, showed that 63 of those 70 asset classes produced negative returns for the year. Interestingly, the research indicated that such correlation of negative returns across these asset classes had not occurred in over a century.
The bearish economic outlook is also proving a challenge for central banks who had been preparing markets for a tightening of monetary policy, which of course had already started in the US. It remains to be seen how quickly central banks will adapt to the new situation and whether that will provide a boost for financial markets in 2019.
L1 Treasury’s performance was not immune to the correction in financial markets. While the return on the portfolio in the first half of the year was strong, some of that was lost in the second half. As a result, performance for the year ended at 1.97%, slightly below LIBOR but significantly above the performance of its benchmark portfolio, which returned -0.9% for the year.
L1 Treasury at all times maintains substantial amounts of liquidity in cash and money market funds supplemented by committed borrowing facilities to ensure sufficient funds are available at all times for strategic investment opportunities.Yves LeysenCHIEF INVESTMENT OFFICER L1 TREASURY
L1 Treasury’s return on assets was achieved while accommodating $2.4bn of outflow in funds required by the other parts of the Group and receiving $1.8bn returned funds from Group companies.
L1 Treasury maintains substantial amounts of liquidity in cash and money market funds supplemented by committed borrowing facilities to ensure sufficient funds are available at all times for strategic investment opportunities.
Total assets under management stood at $6.5bn at the end of 2018.
During the year, an allocation of up to $2bn of L1 Treasury’s assets under management became designated as permanent capital, allowing L1 Treasury to target longer-term investment with a higher risk profile and higher return expectations.
L1 Treasury also often collaborates with other business units of the Group in identifying, structuring, and executing investments either for its own portfolio or for the portfolio of another business unit.
L1 Treasury’s highly experienced global team
The L1 Treasury team is international with employees from around the globe. In the course of its activities, L1 Treasury deals with 20 of the largest international banks. The team is highly experienced and contains all the specialities that would be found in an institutional asset management company, from risk management and investment professionals to technology and infrastructure experts.
The CIO of L1 Treasury is responsible for implementing the investment strategy within the risk limits and parameters set by its Investment & Risk Committee. The Committee consists of Executives of the L1 Group as well as Non-Executives.