L1 Treasury manages the liquidity and financial investments of L1 Investment Holdings. When the Group makes strategic investments, L1 Treasury provides the necessary funds and when investments are sold or dividends received, L1 Treasury manages the available funds through a portfolio of financial investments in public and private equity, fixed income, real estate, direct lending markets and investments in special situations and private equity funds.
The CIO of L1 Treasury is responsible for implementing the investment strategy within the risk limits and parameters set by L1 Treasury’s Investment & Risk Committee. The Committee consists of executives of the L1 Group as well as non-executives.
Portfolio construction
L1 Treasury’s mandate includes 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 complemented by less liquid higher-yielding investments such as direct loans, funds and real estate.
Our loan book is a combination of large loans directly provided by L1 Treasury to borrowers and usually secured by real assets or financial assets and smaller loans usually provided through lending platforms. These lending platforms are specialty lending businesses for whom we are the sole, or at least the largest funder, and in which we may have an equity interest.
Our fund investments are generally in third party hedge funds, which we mostly access through Fund-of-Funds providers. We aim to have a well-diversified portfolio of funds and strategies.
Market background
2024 was another impressive year for global equity markets led by the US, particularly the mega cap technology companies. US exceptionalism remained largely intact with its GDP growth averaging 2.5% on an annualised basis in 2024. Conversely, European economic momentum weakened significantly over the year, with its manufacturing sector being particularly hard hit due to a combination of high energy costs, increasing regulation and a lack of export demand.
This divergence was compounded by political turmoil in both France and Germany, where fiscal pressures and the rise of populist parties fractured the political consensus. Economic weakness and limited exposure to Artificial Intelligence (AI) hindered European equities, resulting in the Euro Stoxx 50 index underperforming against its US peers. Finally, towards the end of the year, President-Elect Trump’s impending inauguration led to a “Trump Bump” with all risk assets rallying (leading to fears of elevated valuations, particularly in US technology stocks). In 2024, the Euro Stoxx 50 index went up by 11% and the FTSE 100 index was up by nearly 10%, while the S&P 500 index rallied by more than 25%.
In the Rates and Credit markets, 10-year US Treasury Bond Yields widened by 69.2 basis points and the 5-year CDX High Yield Index Spread tightened by 44.9 basis points over the year.
Performance review L1 Treasury’s portfolio recorded a strong performance of 7.79% gross returns in 2024. This compares with implied returns of the two benchmarks used by L1 Treasury of 6.89% and 8.78%, respectively, over the same period. All investment strategies delivered positive returns during 2024. Our unhedged FX exposure continued to be the biggest driver of volatility.
As in the past, L1 Treasury produced its returns whilst managing significant capital flows throughout the year. In 2024, L1 Treasury recorded $1,413mn of inflows and $2,028mn of outflows. These net capital outflows, together with the portfolio performance and expenses, resulted in L1 Treasury’s asset under management falling from $6,916mn to $6,735mn.
L1 Treasury’s highly experienced global team
The L1 Treasury team is international, with employees of 11 different nationalities. The team is highly experienced and contains all the specialism that would be found in an institutional asset management company, from risk management and investment professionals to technology and infrastructure experts.