L1 Treasury manages the liquidity and financial investments of L1 Investment Holdings. L1 Treasury’s mandate is to maximise returns on its financial investments within agreed constraints of liquidity and volatility, tailored to L1’s capital allocation.
The L1 Treasury team is international with employees from 10 different countries. L1 Treasury deals with 20 of the largest international banks. L1 Treasury’s primary role is to ensure that adequate funds are available for L1’s strategic investments. When divestments are executed, or dividends received, L1 Treasury manages the funds.
We aim to generate shareholder value through a portfolio of financial investments while ensuring adequate funds are available for L1 strategic investments.Yves LeysenCHIEF INVESTMENT OFFICER L1 TREASURY
L1 Treasury portfolio
L1 Treasury combines a portfolio of liquid fixed income securities with higher yielding investments such as direct loans and real estate with investments in the financial markets, both direct and via hedge funds. L1 Treasury also has the ability to enter into financing arrangements to further enhance its liquidity or returns.
Highly experienced global team
The L1 Treasury 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 and Risk Committee.
2017 proved to be a very good year for the global economy: with the exception of the UK where economic growth fell slightly, every developed market economy saw growth accelerating, unemployment falling and inflation picking up. Towards the end of the year, wage growth in many countries started to accelerate as well.
This positive economic picture allowed for a gradual normalisation of monetary policy, although faster in the US than in the rest of the developed world and offered some room for a more expansive fiscal policy. This set of circumstances in turn led to a benign year in financial markets: the S&P 500 experienced positive returns each month of the year and saw the lowest annualised volatility in at least 50 years.
Of course, the natural consequence of a long run of positive returns is high asset prices: equities, bonds and real estate prices are all reaching record levels while credit terms are relaxing and investors are willing to take increasingly more risk to maintain returns. As markets tend to look at the future more than the present, it is logical to expect a market correction before the end of the economic cycle. Whether this will occur in 2018 remains to be seen.
2017 was a strong year across all parts of the L1 Treasury portfolio: trading, hedge fund investments and direct investments.
L1 Treasury showed strong financial results in 2017 with a gross return on assets of 7%, outperforming its benchmarks by 3%. L1 Treasury’s return on assets was achieved while accommodating USD $4.8 bn of new investments by the other parts of the Group and receiving USD $1.8 bn from in dividends and disposal proceeds from Group companies.
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. Total assets under management stood at USD $7.0 bn at the end of 2017.
The biggest shift in the portfolio occurred with the disposal of the student accommodation business.
Sale of Student Accommodation
In two and a half years since the beginning of 2015, L1 Treasury had bought and built up a leading student accommodation business in the UK.
The portfolio had significant concentration in London with further properties in Bath, York, Edinburgh and Brighton, all cities where demand outstrips supply of purpose-built high quality student accommodation. All but one of the properties were in development, newly built or less than three years old at the time of acquisition. The location and the young age of the accommodation put it in the centre of demand by students and allowed L1 Treasury to create significant added value in a short space of time.
As the consolidation in the student accommodation sector accelerated, L1 Treasury decided to realise the value it had created and sell the portfolio. The transaction closed in December 2017 and generated an unlevered IRR over the holding period in excess of 10%
L1 Treasury also often works together 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 buys portfolio holding in Dia
In 2017 L1 Treasury bought a portfolio holding in the Spanish Food retailer Distribuidora Internacional de Alimentación, S.A. (“Dia”). It has now increased its shareholding to 93.4 million ordinary shares, or 15.0% of Dia’s total share capital. L1 Treasury has also entered into a collateralised forward purchase transaction to acquire a further 62.2 million ordinary shares, equal to an additional 10.0% of Dia’s total share capital.