Managing liquidity and financial investments in a challenging world
L1 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.
The L1 Treasury team is international with employees of 12 different nationalitiesYves LeysenChief Investment Officer
31 December 2019
2019 saw global economic growth continue to decelerate: in Q4 2019, growth in the US, Eurozone, and Chinese economies stood at 2.3%, 0.9%, and 6%, respectively, while Japan recorded -0.4%. As a result, central banks continued or increased quantitative easing during the year, and the US Federal Reserve lowered the target fed funds rate 3 times starting July 2019.
Financial markets however are forward looking and had already priced in the economic slowdown at the start of the year. Driven by expectations of a rebound in the global economy in 2020 and fueled by central bank policies, equity markets forged ahead further rebounding from the sharp losses in Q4 2018 and recorded a stellar performance: equity indices in the US, Europe, China, and Japan all finished the year up 25% or more. Oil finished the year up 10%, and gold rose more than 20%.
Negative yielding debt used to be an anomaly, yet 30% of the bonds in the global aggregate bond index (containing both government and investment grade bonds) trade with a negative yield. While the debate continues over the effectiveness of negative interest rates, it seems, absent a surge in inflation, they are here to stay for quite a while.
On the geopolitical front, trade tariffs and sanctions continue to grow as the weapons of choice to settle political disputes; climate change has risen to the top of the list of threats to Mother Earth; and after 3.5 years, Brexit is finally happening.
L1 Treasury’s portfolio performed well in 2019, producing a return of 5.85% for the year, equivalent to 3.53% over 1-month LIBOR. All of our investment books showed positive performance with the biggest contribution coming from our hedge fund investments and our bond portfolio.
L1 Treasury’s return on assets was achieved while experiencing significant movements in its capital base: during the year, it accommodated $3.1bn of outflow in funds required by the other parts of the Group and received $1.5bn returned funds from Group companies.
In order to manage these capital flows, 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 $5.2bn at the end of 2019, down from $6.5bn at the end of 2018.
The composition of L1 Treasury’s portfolio at the end of 2019 was as follows:
|Cash and Money Market Funds||13.9%|
L1 Treasury’s mandate incorporates both liquidity and return objectives. Therefore, in its portfolio construction, L1 Treasury pursues a “barbell” strategy, whereby a portfolio of cash and liquid securities is combined with higher yielding, less liquid investments, such as loans, funds, and real estate.
Total assets under management at the end of 2019
Return for year in 2019
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 of 12 different nationalities. 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 and Risk Committee. The Committee consists of executives of the L1 Group as well as non- executives.