+ All Categories
Home > Business > Citywire berlin credit_suisse

Citywire berlin credit_suisse

Date post: 22-Nov-2014
Category:
Upload: citywirewebsite
View: 631 times
Download: 0 times
Share this document with a friend
Description:
 
51
Berlin, November 16-18 th , 2011 Everything you ever wanted to know about ETFs Citywire Berlin Thomas Merz Head ETF Switzerland/Liechtenstein Enrico Camerini Head ETF Italy
Transcript
Page 1: Citywire berlin credit_suisse

Berlin, November 16-18th, 2011

Everything you ever wanted to know about ETFsCitywire Berlin

November 2011Page 1

Thomas MerzHead ETF Switzerland/Liechtenstein

Enrico CameriniHead ETF Italy

Page 2: Citywire berlin credit_suisse

October 2011Page 2

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Agenda

Overview of the European ETF Industry

Points to Consider When Evaluating an ETF

The European ETF Industry: Current Regulatory Review

Credit Suisse ETFs

Appendix

Page 3: Citywire berlin credit_suisse

October 2011Page 3

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

We have seen exponential growth across the ETF market

ETFs are a worldwide phenomenon with more than US$ 1.24 trillion invested across the globe and a Compounded Annual Growth Rate (CAGR) of 30% over the last 11 years

More than half of current assets are in US domiciled ETFs with Europe accounting for 20% of the market

•Source: CS ETF Sales Strategy, Blackrock

Sep 2011 Regional AUM Market Share

US 68%

Europe 21%

Asia 6%

Others 5%

74 105 142212

310412

566

796710

1,034

1,3071,241

0

200

400

600

800

1,000

1,200

1,400

Dec2000

Dec2001

Dec2002

Dec2003

Dec2004

Dec2005

Dec2006

Dec2007

Dec2008

Dec2009

Dec2010

Q32011

US$

bn

Debt and money marketCommodityEquity

CAGR Dec 2000 –

Q3 2011:30%

Page 4: Citywire berlin credit_suisse

October 2011Page 4

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

The European ETF Industry

Assets and flows of European ETFs, as of

30.09.2011

At the end of September 2011 the European ETF market recorded assets of USD 261.70bn, down 16.29% from USD 312.61bn at the end of Q2

The MSCI World Index declined 17.06% over the same period; while the Eurostoxx 50 and S&P 500 indices posted declines of 23.48% and 14.33%, respectively

ETF market growth therefore remains positive, despite serious adverse headwinds

Page 5: Citywire berlin credit_suisse

October 2011Page 5

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

2010 2011F 2012F 2013F 2014F 2015F

Projected Growth* of the ETF Market

Based on current projections, total global ETF AUM could grow from approximately USD1.5 trillion today to between USD3.1 trillion and USD4.7 trillion over the next five years.

1 Includes estimates for Americas, Europe, Asia (excluding Japan) and all other regions (eg

Japan, Mideast, etc.)2 Includes all exchange traded products (eg

ETF, ETFN, ETC) and baseline steady-state growth (no shocks to system)Source: McKinsey analysis; ETF Landscape Year-end 2010; industry reports*Financial market scenarios are not a guarantee for current or future performance

5-year CAGRPercent

26.7

16.7

High case

Low case

ETP AUM1,2

USD trillion

1.5 1.7 2.0 2.3 2.7 3.1

1.8

2.3

2.9

3.7

4.7

Page 6: Citywire berlin credit_suisse

October 2011Page 6

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Conversion from active to passive assets will drive growth

Source:

IGI for US data, as of 31.05.2011, and Asia total MF data, as of

Q4 2010; Lipper FERI FMI for Europe data, as of 31.03.2011, BlackRock

for Asia ETF AuM

data, as of 31.12.2011

Academics and investment advisors have increasingly been pushing for investors to shift from actively managed to passive funds. Current ratio of active:passive investments estimated by Towers Watson at 90:10, but optimally should be 30:70Increased allocations to passively managed funds is huge opportunity for ETFs

USD mm US Europe Asia Total

Total Mutual Fund AUM 12,402,900 8,400,670 3,067,323 23,870,893

Total ETF AUM 1,087,351 313,476 87,300 1,488,127

ETF as % of Mutual Fund AUM

Current

Potential

9%10%

4%10%

3%10%

6%

10%

Implied AUM Growth of ETFs

given potential

share of Mutual Fund AUM152,939 526,591 219,432 898,962

Implied total ETF AUM given potential share

of Mutual Fund AUM1,240,290 840,067 306,732 2,387,089

Page 7: Citywire berlin credit_suisse

October 2011Page 7

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

NNA flows

for

European ETFs

per asset class

Source:

Bloomberg, Credit Suisse, data

as at end of September 2011

Page 8: Citywire berlin credit_suisse

October 2011Page 8

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Agenda

Overview of the European ETF Industry

Points to Consider When Evaluating an ETF

Choosing the right ETF

Case study: Gold ETFs

The European ETF Industry: Current Regulatory Review

Credit Suisse ETFs

Appendix

Page 9: Citywire berlin credit_suisse

October 2011Page 9

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

ETF performance can be compared on the basis of net asset values (NAVs)

Tracking error (TE) alone often fails to provide enough relevant information for comparing ETFs (for example where swap-based products are concerned)

In addition to the total expense ratio (TER), the relative performance of the ETF compared to the reference index (total return net) is also an key factor to consider

Choosing the Right ETF

Page 10: Citywire berlin credit_suisse

October 2011Page 10

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

The ETF creation and redemption process guarantees liquidity

Source: Credit Suisse

AuM

increase

AuM

decrease

Primary Market

ETF

AuM

increase

AuM

decrease

Underlying securities

Underlying securities

ETF Units

ETF Units

Creation

Redemption

Investor

Sell order:ETF Units

ETF Units

ETF market

Underlying Stock / Cash market

Futures

Options

Market maker /

authorised participant

Buy order:Cash or basket of stocks

Cash or basket of stocks

Investor

Primary

MarketSecondary

Market (Stock Exchange, OTC)

Trading mechanism of a long ETF position: Primary and Secondary market

Page 11: Citywire berlin credit_suisse

October 2011Page 11

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

The liquidity of the underlying defines the liquidity of the ETF

Spread of approx 34bps (ask-bid/bid) with no trading volume on exchange. Despite this a size of 2007 units is being quoted (approx CHF 250'000)

Reason: The underlying assets (in this case US treasuries) are liquid. It is therefore relatively easy for the market makerto hedge his position

The liquidity of an ETF is based on the liquidity of its underlying assets

Conclusion: Liquidity doesn't depend on trading volumes but on the hedging costs of the underlying market risk, and the number of market makers quoting a binding price for the ETF

Page 12: Citywire berlin credit_suisse

October 2011Page 12

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Indexing Strategies

All securities within an index are purchased according to their weightings

Ensures a minimal tracking error (deviations) of the portfolio

The full replication method may result in many positions depending on the index and requires a portfolio construction tool

It is used mostly for liquid and/or narrow defined indices and for fixed income indexes without tax implications

A limited number of securities are considered. The number of securities determines the tracking error which can be forecasted. A minimum risk optimization is conducted by the use of a risk optimization tool

Ensures a controlled and low expected tracking error (deviations) of the portfolio eliminating economically unattractive investments

It is used mostly for indices with illiquid investments and/or broad based equity and fixed income indices. It is also used for fixed income indices with tax implications

Full Replication Optimized Sampling

Synthetic replication involves the use of derivatives (e.g. Equity-Linked Swaps “ELS”)

The manager receives benchmark performance in exchange of the substitute basket return from the counterparty (i.e. the ELS issuer)

Through the ELS, the fund is subject to counterparty risk. Should the counterparty default, the investment objective may not be achieved

Synthetic Replication

ETF Indexing Methodologies

Page 13: Citywire berlin credit_suisse

October 2011Page 13

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

The traditional replication methodology with physical index constituents requires sophisticated portfolio management and optimisation

tools for trading and risk management.

Handling of index changes

Handling of corporate actions ( e.g. stock splits)

Handling of coupon and dividend reinvestments

Withholding tax reclaims (double tax treaties)

Management of inventory (Securities Lending, etc.)

Optimisation

of transaction costs through order pooling

ETF Selection: Physical Replication

Source: Credit Suisse, October

2011

Index Performance

Investor

ETF

USD 100ETF Shares

Basket ofEquities

Page 14: Citywire berlin credit_suisse

October 2011Page 14

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Indexing methodology –

swap replication

A popular choice in Europe under UCITS, the fund invests in (i) a basket of securities which might be unrelated to the replicated benchmark and (ii) enters into a performance swap with a counterparty

Under the swap, the fund receives the benchmark performance in exchange for the substitute basket performance

The tracking error is “outsourced” from the investor to the swap counterparty, but counterparty risk arises (max 10% of ETF NAV, per counterparty)

An efficient replication methodology, that (i) allows low tracking error for fragmented, highly costly or difficult to access markets and (ii) also allows exposure to a broader investment universe

ETF Selection: Synthetic Replication

Source: Credit Suisse, October

2011

Basket ofEquities

USD 100ETF Shares

Investment Bank

Pays index performance

Pays equity basket performance

Total Return Swap

Investor

ETF

Page 15: Citywire berlin credit_suisse

October 2011Page 15

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Synthetic ETF Considerations

Funded or unfunded swap?

Single or multiple swap counterparty?

Financial strength/ viability of swap counterparty

Quality of swap collateral

Transparency of the swap structure (does the investor know what they own?)

Swap “reset” frequency (daily, weekly, 10% exposure limit?)

Is there a securities lending program in place for the substitute basket/ swap collateral?

What is the swap spread charged to the investor?

Page 16: Citywire berlin credit_suisse

October 2011Page 16

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Versatile: ETFs are popular among private and institutional investors both as long-term investments or to implement active trading strategies, for market making and to over- or underweight particular asset classes

Targeted use of assets: The Credit Suisse ETF portfolio covers the major equity and bond indices of the world's leading stock exchanges and economies. Thematic and regional funds such as those on emerging markets, global alternative energy and physical gold complement the range

Short term portfolio adjustments: ETFs can be traded throughout the entire trading day and are ideal for short term portfolio adjustments

Advantages

of ETFs

Page 17: Citywire berlin credit_suisse

October 2011Page 17

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

In line with the benchmark index

Risks

Involved

in Investing

in ETFs

Tracking

risk

Regulatory

risk

Currency

risk

Market risk

Counterparty

risk

In funds where the fund currency differs from the trading currency

As a result of TER and the replication method used, an ETF's NAV may differ slightly from the performance of the reference index

Swap-based ETFs carry a counterparty risk as a result of the swap transactions they are based on (the swap is used to replicate the index); securities lending in cash-based ETFs may also result in a counterparty risk

ETFs are only actively promoted in countries where they are registered for sale

Page 18: Citywire berlin credit_suisse

October 2011Page 18

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Securities Lending and CS ETFs

Securities lending constitutes a counterparty risk. The implementation differs greatly among ETF providers

Credit Suisse has a long track-record in securities lending, has the ability to generate excellent lending opportunities and is among the preferred counterparties in the market. This often results in advantageous prices and enables the portfolio manager to optimize portfolio returns

CS ETFs Irish domiciled fund range currently does not engage in securities lending. For CS ETFs Swiss and Luxembourg domiciled funds, Credit Suisse applies the following four step process:

1.

Principle lending with Credit Suisse

2.

Only

collateralized

securities

lending

3.

Overcollateralization

(105-115%)

4.

Daily valuation and monitoring of the collateralization

Page 19: Citywire berlin credit_suisse

October 2011Page 19

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Benefits and Risks of Different Exchange Traded Instruments

Page 20: Citywire berlin credit_suisse

October 2011Page 20

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Benefits and Risks of Different Exchange Traded Instruments (contd)

Page 21: Citywire berlin credit_suisse

October 2011Page 21

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Agenda

Overview of the European ETF Industry

Points to Consider When Evaluating an ETF

How to choose the right ETF

Case study: Gold ETFs

The European ETF Industry: Current Regulatory Review

Credit Suisse ETFs

Appendix

Page 22: Citywire berlin credit_suisse

October 2011Page 22

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

ETFs

on Gold in Switzerland –

a Comparison

CS ETF II (CH) on Gold* ZKB Gold ETF JB Physical Gold FundStructure Swiss domiciled investment fund Swiss domiciled investment fund Swiss domiciled investment fund

Physical gold Yes, Credit Suisse (Zurich) Yes, ZKB / SIS Sega Intersettle Yes, Julius Baer / SIS Sega Intersettle

Currency hedge Yes, CHF & EUR tranche Yes, CHF, EUR & GBP tranche Yes, CHF, EUR & GBP Tranche

AuM Approx CHF 3 bn Approx CHF 10 bn Approx CHF 6 bn

Exchange for physical Yes, all bars (min CHF 200’000) Yes, only standard bars (12.5 kg) Yes, only standard bars (12.5 kg)

Indicative spread (stock exchange)

10 -

20 bps (hist. avg.) 10 -

20 bps (hist. avg.) 10 -

20 bps (hist. avg.)

TER p.a.33 bps (USD)

41 bps (hedged EUR/CHF)

40 bps (USD)

45 bps (hedged EUR/CHF)

42 bps (USD)

43 bps (hedged EUR/CHF)

Reference price London PM Fixing New York Fixing London PM Fixing

Advantages of CS ETF on Gold

Swiss domiciled investment fund (no issuer risk) and 100% backed with physical gold

Competitive TER (0.33% p.a.)

The CS ETF on Gold is based on the „London PM Fixing“ gold price: the most liquid and well-known marketfor gold

Exchange for physical from CHF 200‘000

* This fund is not registered for public distribution in Germany

Page 23: Citywire berlin credit_suisse

October 2011Page 23

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Advantages of investing in Gold using ETFs

compared to Swaps and Direct Investments into Physical Gold

High level of security: the CS ETF on Gold is a Swiss domiciled investment fund. No issuer risk orcounterparty risk exists (investing in swaps or buying physical gold on a metal account would result in a counterparty risk)

The intraday liquidity of an ETF allows for timely access or exit of the market (particularly important in periods of high volatility)

Tight ETF spreads on exchange and OTC enable cost efficient implementation of tactical holdings

Easy to manage and generally cheaper than a direct investment in physical gold (investments into physicalgold need to be physically handled, incuring costs)

ETFs enable short positions to be taken

CS ETF on Gold can be traded either intraday or at closing NAV. The indicative spreads are:

On exchange

(intraday): 10-15 bps

(for

volumes

up to approx

CHF 1‘000‘000)

OTC (intraday

and closing

NAV order): 4-6 bps

Page 24: Citywire berlin credit_suisse

October 2011Page 24

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Gold and Asset Allocation Gold is by no means a risk free investment. Gold has similar volatility to equities. Silver, platinum and palladium have even higher volatilities.

However at the same time, gold has a different price cycle than traditional assets such as stocks or bonds. For instance, gold prices tend to do well during periods of falling real interest rates. They provide a certain hedge against USD weakness and inflation. Moreover, they tend to perform well during extreme events.

As a result, gold and other precious metals are good diversifiers for traditional portfolios. Adding gold to otherwise diversified stock and bond portfolios can reduce volatility significantly. Precious metals and gold in particular can also help to reduce risk (and particularly tail risk) in FX portfolios.

For academic research on precious metals and asset allocation please refer to:

Erb

& Harvey (2005), The Tactical and Strategic Value of Commodity Futures, NBER Working Paper Series Vol. w11222

Gorton & Rouwenhorst

(2005), Facts and Fantasies about Commodity Futures, Financial Analysts Journal Vol. 62 No. 2

Michaud, Michaud & Pulvermacher

(2006), Gold as a Strategic Asset, World Gold Council

Mongars

& Marchal-Dombrat

(2006), Commodities: An Asset Class

in their

own

Right?, Banque de France Financial Stability

Review

No. 9

Page 25: Citywire berlin credit_suisse

October 2011Page 25

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

The Importance of the Currency HedgeHistorically and over the long term, gold had the opposite performance compared to the foreign exchange USD/CHF and USD/EUR. An active strategy on the currency hedge side is important for non-USD clients

Historical performance indications and financial market scenarios are no guarantee for current or future performance.

Source: Bloomberg, periode

31.12.2002-30.09.2011

Return over

the

period:

Gold in USD: +364%

Gold converted

in CHF +203%

Gold hedged

in CHF +312%

USD/CHF -35%

80100120140160180200220240260280300320340360380400420440460480500520

12/0

2

04/0

3

08/0

3

12/0

3

04/0

4

08/0

4

12/0

4

04/0

5

08/0

5

12/0

5

04/0

6

08/0

6

12/0

6

04/0

7

08/0

7

12/0

7

04/0

8

08/0

8

12/0

8

04/0

9

08/0

9

12/0

9

04/1

0

08/1

0

12/1

0

04/1

1

08/1

1

12/1

1

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5Gold Spot in USD (indexed)

Gold Spot converted into CHF (indexed)

Gold Spot hedged CHF (indexed)

USD/CHF (right hand scale)

Page 26: Citywire berlin credit_suisse

October 2011Page 26

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Costs of Currency Hedge –

the Interest Rate Differential

Source: Bloomberg, Credit Suisse. Data

as of 30.09.2011

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

12/0

2

06/0

3

12/0

3

06/0

4

12/0

4

06/0

5

12/0

5

06/0

6

12/0

6

06/0

7

12/0

7

06/0

8

12/0

8

06/0

9

12/0

9

06/1

0

12/1

0

06/1

1

12/1

1

Interest Rate Difference USD-CHF (1-month Libor)

Hedging costs are currently very low (approx 0.2% p.a.)!

Page 27: Citywire berlin credit_suisse

October 2011Page 27

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Agenda

Overview of the European ETF Industry

Points to Consider When Evaluating an ETF

The European ETF Industry: Current Regulatory Review

Credit Suisse ETFs

Appendix

Page 28: Citywire berlin credit_suisse

October 2011Page 28

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Regulatory Spotlight on ETFs

-

an Overview

April Mai June July August September October

12.04 FSB

13.04 IMF

13.04 BIS

Conflicts of interestSecurities lendingTransparency requirementsUse of derivativesCollateralizationRegistration requirementsLiquidityRegulatory arbitrageMismatched incentivesSystemic risk

Bank of

England

FSA

UK Serious

Fraud Office

22.07 ESMA

07.09 IOSCO

21.09 ESRB

21.09 FINMA

ComplexityOpacityInterdependenceMarketing of ETFs

Potential dangers emanating from ETFsETF structuresTransparencyLiquidity

Product classificationTransparencyConflicts of interestFinancial stabilityIndependence/ GovernanceSystemic risks emanatingfrom ETFs and UCITSLiquidity risks of swap providersCounterparty risk and securities lendingLiquidity risks in trading ETFsRisk transparency

Page 29: Citywire berlin credit_suisse

October 2011Page 29

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Agenda

Overview of the European ETF Industry

Points to Consider When Evaluating an ETF

The European ETF Industry: Current Regulatory Review

Credit Suisse ETFs

Appendix

Page 30: Citywire berlin credit_suisse

October 2011Page 30

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Credit Suisse ETFs: A Leading European ETF Provider4th largest ETF provider in Europe with $17bn of AUM*The largest ETF provider in Switzerland*

One of the most experienced ETF providers in the European market: ETFs since 2001, indexing solutions since 1994

A leading ETF Provider

The second largest provider of physically replicated ETFs in Europe*

Sound foundations in the Credit Suisse Asset Management (CSAM) expertise in indexing: 17 years track record of performance

Holistic investment approach: a team of 50+ professionals, to deliver excellence to our clients via ETFs, index funds and dedicated mandates

Asset Management expertise

Products listed on 5 stock exchanges across Europe: SIX Swiss Exchange, Borsa Italiana, Xetra, London Stock Exchange and NYSE Euronext Paris

Client coverage across the globe: Switzerland, UK, Ireland, Italy, Germany and Austria, France, Spain, Nordics, Benelux, HK

Global Reach

“Building block” approach with 58 ETFs to replicate all the main markets by geography and market cap

42 Equity, 13 Fixed Income and 3 Physically-backed Commodity ETFs

UCITS Irish & Luxembourg based funds and non-UCITS Swiss-domiciled funds

Comprehensive Product Range

CS ETFs is 100% owned by CSAM

Operates solely within CSAM’s fiduciary framework, minimising conflicts of interest to the greatest degree possible

A Regulated Fiduciary

* Source: CS ETFs

Sales Strategy, Bloomberg, 27.10.2011

Page 31: Citywire berlin credit_suisse

October 2011Page 31

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Credit Suisse ETFs: A Focus on Physical Replication

In today’s turbulent markets clients are demanding less complex, more transparent products to achieve their investment objectives

Physically replicating ETFs

embrace the traditional, core benefits of this investment vehicle that have proved so popular with investors for nearly 20 years: simplicity, transparency, liquidity and low cost.

Efficient access to various asset classes in a safe and informed

manner: physical ETFs

offer benchmark exposure through a transparent, direct replication structure

Credit Suisse ETFs

product range comprises 46 physical and 12 synthetic funds: we

are committed to producing the industry’s best physical ETFs, offering synthetic ETFs

only when physical ETFs

are not possible, or demonstrably less efficient than synthetic in terms of TER, trading costs or liquidity.

Where we offer synthetic ETFs, we provide the highest levels of quality and transparency including daily swap reset to minimise counterparty risk and visibility of

all holdings on the website each day.

A return to the fundamentals of ETF investment:

A commitment to quality, trust and transparency:

Page 32: Citywire berlin credit_suisse

October 2011Page 32

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Our Product Suite58 ETF products enabling our clients to use a “building block” approach to gain exposure to the primary markets by asset class, geography and market capital structure

Developed Equities:

-

Credit Suisse ETFs

cover over 90% of global equity market capitalization-

Unique provider of a consistent range of MSCI Large/Small Cap by region-

Some of the largest ETFs

in Europe, such as the SMI with AUM of CHF3.2bn-

Among the most competitive providers, in terms of total efficiency on a risk-adjusted basis

Source: Credit Suisse

Fixed income (13) Commodities (3)

Regional Single country

Canada Italy Japan UKEurozone

(EMU)Switzerland* US

MSCI SMM

MSCI FTSE MSCI MSCIMSCIDowJones

MSCI

MSCI MSCIMSCI MSCI

MSCI Nikkei MSCIMSCI SLI SMI MSCI NasdaqDowJones

S&P 500

Emerging Equity (13)Developed Equity (29)

Mid cap

All cap

Small cap

Large cap

Pac ex.Japan

Europe

MSCI FTSE

Australia

MSCI

World

MSCI

* These funds are not registered for public distribution in Germany

Page 33: Citywire berlin credit_suisse

October 2011Page 33

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Our Product SuiteEmerging Equities:

-

12 Dublin domiciled ETFs

/ 1 Luxembourg domiciled ETF-

4 Regional funds / 9 single country including the first European listed Chinese A Shares enabling investors to take part in thegrowing consumer market in China.

Source: Credit Suisse

Fixed income (13) Commodities (3)Emerging Equity (13)

Regional Single country

Emerging Market

EMLatAM

EM Asia

EMEMEA

Russia

Mid cap

All cap MSCI MSCI MSCI MSCI MSCI

Small cap

Large cap

Developed Equity (29)

South Africa

MSCI

Brazil

MSCI

Chile

MSCI

MexicoCapped

MSCI

China A Share

CSI 300

India

MSCI

Korea

MSCI

Taiwan

MSCI

Page 34: Citywire berlin credit_suisse

October 2011Page 34

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Fixed income:

-

Unique provider of consistent range of EUR and USD government bond indices

-

Sole provider of Swiss government bond exposure

Commodities:

-

Fund’s holdings of physical gold are safe-kept in Credit Suisse’s own vaults in Zurich

-

Unique provider of EUR-

and CHF-hedged gold exposures

Our Product Suite

Source: Credit Suisse

Fixed income (13) Commodities (3)Equity (42)

Physical

Single sector

Gold (USD / Hedged EUR / Hedged CHF)

Fixed income (13) Commodities (3)Equity (42)

Switzerland*

Europe

USA

Govt 1–3 years Govt 3–7 years Govt 7–10 years* ILB

iBoxx iBoxx iBoxx iBoxx

iBoxx iBoxx iBoxx iBoxx

SBI SBI SBI

Money Markets

Fed Funds Effective Rate

EONIA

* Switzerland

7-15 Years

* These funds are not registered for public distribution in Germany

Page 35: Citywire berlin credit_suisse

October 2011Page 35

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Total Cost Considerations and Capital Markets Support

Explicit –

Headline costs to investors

Implicit –

Other significant factors to consider

Total Cost of Holding an ETF

Explicit Costs Implicit Costs

Total Expense Ratio (TER) Tracking Error

Trading Costs: commission, spread

Dedicated capital markets team to help clients in reducing trading cost

Rebalancing Costs

Securities Lending: within ETF, of the ETF

Securities Lending is a revenue item (negative cost) but may add further risk

(Swap Spread)

Source: Credit Suisse, October

2011

Page 36: Citywire berlin credit_suisse

October 2011Page 36

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

CS ETF Platforms

Switzerland (since March 2001)

Contractual structureFund management => Credit Suisse Funds AG

Luxembourg (since October 2002)

Contractual structure (FCP)Management company => Credit Suisse Fund Management S.A.

Ireland (since July 2009)

Corporate structure (SICAV / VCC)Management company and investment managerOutsourcing model

Page 37: Citywire berlin credit_suisse

October 2011Page 37

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

1

Structure

and

Contracts

Promoter

Credit Suisse AG

Investment Manager

Credit Suisse AG

Distributors

Credit Suisse AG

Company Secretary

Carne

Group

Legal Advisor

Maples

& Calder

I n v e s t o r s

Irish

ManCo

Credit Suisse Fund

Management Company

(Ireland) Ltd.

Administrator

BNY Mellon Fund Services

(Ireland) Limited

Custodian

BNY Mellon Trust

Company (Ireland)Limited

The

Company

CS ETF (IE) PLCCredit Suisse

Securities

(Europe) Ltd.

6

2

3

5

7

4

2

Custodian

Agreement1

2

3

4

Administration Agreement

Management Agreement

Investment Management Agreement

5

6

7

ISDA

Securities

Lending

Agreement

Master Securities

Lending

Agreement

Page 38: Citywire berlin credit_suisse

October 2011Page 38

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

What Determines the Spread of an ETF?

Overall two way flow in the product

-

Overall buyers and sellers involved in the ETF at any given point

Liquidity/ Cost of hedge

-

Market makers have to hedge the exposure when clients buy/sell ETF from/to them

Creation/ redemption charges and costs

-

There can be custody charges imposed by custodians of assets on

behalf of issuers

-

Taxes and stamp duty costs imposed by regulators (e.g. 50bp stamp duty in UK)

Page 39: Citywire berlin credit_suisse

October 2011Page 39

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Total cost of ownership: The comprehensive method of assessment–

How one overcomes liquidity constraints is one of the most critical issues raised by our investor base

Coupled with this is the question of “How to achieve best execution when trading ETFs”?

Key considerations:–

Many of the liquidity issues raised are a perception of what is possible, not the reality

Although ETFs trade like stocks, they are not stocks and they have their own dynamics–

Underlying liquidity of the fund is the true determinant of the ETF’s

liquidity

Key to this is an understanding of :–

The creation and redemption process

Looking at the underlying liquidity of the fund

ETF “Best Execution”–

Is conceptually simple, albeit different for every fund

Is possible in practice as long as one follows certain rules–

Credit Suisse ETFs

has a dedicated Capital Markets Team to help navigate this

Best Execution

Page 40: Citywire berlin credit_suisse

October 2011Page 40

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Agenda

Overview of the European ETF Industry

Points to Consider When Evaluating an ETF

The European ETF Industry: Current Regulatory Review

Credit Suisse ETFs

Appendix

Page 41: Citywire berlin credit_suisse

October 2011Page 41

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Appendix: The Benefits of ETFs

Market AccessPrecise access to a wide range of asset classes including difficult to enter marketsDiversified exposure to a whole index - rather than a specific stock - in one tradeIdeal building blocks for implementing asset allocation strategies

Transparency Total transparency on fund holdings

Low FeesLow total expense ration (TER)

Cost effective alternative to traditional mutual funds

Highly RegulatedFully funded, open ended structures

Eligible for inclusion in ISAs and SIPPs

Liquid

ETFs experience price changes throughout the day as they are bought and sold continuously, with bid/ ask spread determined by the spread of the underlying index

Liquidity is provided by market makers throughout exchange opening hours

Operationally EasyNot a derivative – no ISDA (International Swaps and Derivatives Association) documentation,no margin requirements; single stock transaction

Page 42: Citywire berlin credit_suisse

October 2011Page 42

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

The use of full replication or optimised sampling method depends on the type of benchmark, the size of the portfolio, tax issues and specific restrictions.

Depending on the specific situation, Credit Suisse will apply the appropriate replication method that keeps the tracking error and the costs to a minimum, focusing on the needs of our investors.

Credit Suisse ETFs: Implementation (Physically-Backed)

Initial parameters

Benchmark characteristics: number of securities, regions, etc.

Consideration of factors which could impact cost and tracking error such as the liquidity of benchmark securities, tax implications, and other restrictions

Possible reduction of benchmark universe and / or enlargement by non benchmark securities

Derivation of replication method

Benchmark Portfolio size Other constraints

Full replication method Optimised sampling method

Purchase of complete set of securities

Optimisation

Cash based ETF, fully replicated Cash based ETF, optimised sampled

Define replication method

Build investment universe

Analyse liquidity, tax, restrictions on benchmark universe

Analyse benchmark universe

Tracking error Costs

Source: Credit Suisse

Page 43: Citywire berlin credit_suisse

October 2011Page 43

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

The Optimal Way for Investors to Trade CS ETFs

CS ETFsSales

Clients

Cap Mkts

Group work with Salesand Client to conduct pre-tradeanalysis and where necessary

recommend APs Liquidity Providers

Primary Market

BID OFFER

Order Book

Authorised Participants

Specialist

ETF BrokerProvide

two way quotes OTC

or

Cap Mkts

Exchange

OTC

Inventory/Borrow

or

ETFs can be traded on the secondary market by any broker recognised by the particular Exchange

Primary market (creation/ redemption) trading with CS ETFs available only to Authorised Participants (APs). Authorised Participants tend to be market makers (making market on exchange and/ or over the counter) but market makers don’t needto be Authorised Participants!

The Credit Suisse ETFs Capital Markets Team works with clients to provide optimal management of trading

Credit Suisse ETFs can help match flows, minimise market impact, provide information on optimal execution and sources of liquidity

Our sole focus is costs of trading and working with Credit Suisse ETFs clients

Source: Credit Suisse, October

2011

Page 44: Citywire berlin credit_suisse

October 2011Page 44

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Trading ETFs: Don’t Impose a Single Stock Mindset on ETFs

ETF execution is often done by traders who come from a single stock background. This means that they apply the same concepts to ETFs when they are trading.

Good single stock liquidity indicators are:

Average Daily Volume (ADV)

Orderbook size

Number of orders in the orderbook

These concepts are relevant to ETFs but not in the same way

Page 45: Citywire berlin credit_suisse

October 2011Page 45

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

On-Exchange spread of 3bps

Some ETFs

May Have Tighter Spreads than the Underlying

Source: Bloomberg

Page 46: Citywire berlin credit_suisse

October 2011Page 46

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Basket Spread of 15bps

Underlying market spread

CS ETF (CH) on SMI* Underlying Liquidity

Source: Credit Suisse, October

2011* This fund is not registered for public distribution in Germany

Page 47: Citywire berlin credit_suisse

October 2011Page 47

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Does the Average Daily Volume dictates the size you can trade? In this example we have an ADV of 31,950 shares

Source: Bloomberg

Page 48: Citywire berlin credit_suisse

October 2011Page 48

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

This is not the case: 174,135 shares traded on this day, nearly 6 times the average shown

Source: Bloomberg

Page 49: Citywire berlin credit_suisse

October 2011Page 49

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

This is not the case: 1,206,480 shares printed as an OTC trade on this day, nearly 40 times the ADV shown

Source: Bloomberg

Page 50: Citywire berlin credit_suisse

October 2011Page 50

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Credit Suisse ETFs Contacts

Head ETF Switzerland/Liechtenstein

Thomas Merz +41 44 334 18 07

[email protected]

Head ETF Italy

Enrico

Camerini

+39 335 1726 557

[email protected]

Bloomberg: CXTF <GO>

Page 51: Citywire berlin credit_suisse

October 2011Page 51

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

Important Information

This document was produced by Credit Suisse AG and/or its affiliates (hereafter "CS") with the greatest of care and to the best of its knowledge and belief. However, CS provides no guarantee with regard to its content and completeness and does not accept any liability for losses which might arise from making use of this information. The opinions expressed in this document are those of CS at the time of writing and are subject to change at any time without notice. If nothing is indicated to the contrary, all figures are unaudited. This document is provided for information purposes only and is for the exclusive use of the recipient. It does not constitute an offer or a recommendation to buy or sell financial instruments or banking services and does not release the recipient from exercising his/her own judgment. The recipient is in particular recommended to check that the information provided is in line with his/her own circumstances with regard to any legal, regulatory, tax or other consequences, if necessary with the help of a professional advisor. This document may not be reproduced either in part or in full without

the written permission of CS. It is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under local law. Neither this document nor any copy thereof may be sent, taken into or distributed in the United States or to any U. S. person (within the meaning of Regulation S under the US Securities Act of 1933, as amended). Every investment involves risk, especially with regard

to fluctuations in value and return. Investments in foreign currencies involve the additional risk that the foreign currency might lose value against the investor's reference currency. Historical performance indications and financial market scenarios are no guarantee for current or future performance. Performance indications do not consider commissions levied at subscription and/or redemption. Furthermore, no guarantee can be given that the performance of the reference index will be reached or outperformed. In connection with this investment product, the Issuer and/or its affiliates may pay to third parties, or receive from third parties as part of their compensation or otherwise, one-time or recurring remunerations (e.g. placement or holding fees). In receiving payments by third parties the Issuer's and/or its

affiliates' interests may be adverse to those of the holders of this investment product and such payments can affect the investors return. You may request

further information from your bank/relationship manager. Potential conflicts of interest can not be excluded. This document qualifies as marketing material that has been published for advertising purposes. It must not be read as independent research.

THE INDEX PROVIDER MAKES NO WARRANTY AND BEARS NO LIABILITY WITH

RESPECT TO THE FUNDS OR ANY INDEX ON WHICH SUCH FUNDS ARE BASED, AND MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF TRADING IN SUCH FUNDS.

For prospective investors in Germany:

Each purchaser of shares acknowledges that CS ETF II (CH) on Gold, CS ETF II (CH) on Gold -

hedged CHF, CS ETF II (CH) on Gold -

hedged EUR, CS ETF (CH) on SBI Domestic Government 1-3, CS ETF (CH) on SBI Domestic Government 3-7, CS ETF (CH) on SBI Domestic Government 7-15 and CS ETF (CH) on SMI®

are not and will not be registered for public distribution in Germany. This document does not constitute a sales prospectus pursuant to the German Investment Act (Investmentgesetz) or the German Securities Prospectus Act (Wertpapierprospektgesetz). Accordingly, no offer of the shares may be made to the public in Germany. This document and any other document relating to the shares, as well as information or statements contained therein, may not be supplied to the public in Germany or used in connection with any offer for subscription of the interests to the public in Germany or any other means of public marketing. An offer of the shares exclusively to credit institutions and financial services

providers as defined in the German Banking Act, private or public insurance companies, investment companies and their investment managers as well as pension

funds and their administrators is not deemed to be a public distribution.

Copyright ©

2011 Credit Suisse Group and/or its affiliates. All rights reserved.


Recommended