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Emerging Market EquitiesNeptune Investment
Management
For investment professionals only. Not for use by private investors
201183x
201136x 2011
32x201160x
201110,500x
20112,500x
Emerging economy stockmarkets have grown beyond all recognition
2
Source: Emerging Stock Markets Factbook 2011. Investments in Emerging Markets are higher risk and potentially more volatile than those in established markets.
Market capitalisation in US$bn
3Travel itinerary
The journey so far….
Short-term concerns and outlook
Accessing emerging market growth
4The journey so far……Demographics
“Demographic dividend”
Burgeoning youth population
– Spending greater share of disposable income
– Larger work force → more money being ploughed back into the economy
– “Dependency ratio” → fewer dependents to support
Source: Neptune Research, Feb 2012
Exponential population growth fuelling EM economies
Source: Polity IV Data Series, Dec 2010
The journey so far…… Political
Dramatic demographic transition in late 1980s and 1990s
5
Source: International Monetary Fund, World Economic Outlook Database, December 2011.
Emerging economies’ average annual inflation rate 1980-2010 (%)
EM governments today fight inflation; before the late 1990s, they did not
The journey so far……Financial stability
6
Source: International Monetary Fund, World Economic Outlook Database, Apr 2011.
Gross general government debt in advanced and emerging economies 2000 and 2010 (% of GDP)
EM government debt is low compared to developed markets today and EM historically
The journey so far……Financial stability
7
Short-term concerns 8
EMs are well insulated against a European downturn but cannot come away unscathed from a European fallout
China’s growth concerns
– Inflation dilemma
– Property bubble
– Policy uncertainty clearing
European solvency crisis
– Recessionary fears
– Confidence crisis
– Political response
De-risking of portfolios
These are Neptune’s personal views and as such the content of this document is deemed to be impartial research.
2012 YTD and outlook 9
We believe the best opportunities are in EM rate-sensitive sectors
Ongoing policy easing is supportive of EM equities
YTD global liquidity surge is driving markets
2011 laggards are rallying the hardest YTD
Key risks remain in Europe
These are Neptune’s personal views and as such the content of this document is deemed to be impartial research.
OutlookReal global growth forecast (%)
Period 2009 2010 2011 2012e 2013e
US -3.5 3.0 1.5 2.2 2.6
Eurozone -4.3 1.8 1.6 -0.5 1.7
Japan -6.3 4.0 -0.5 1.1 1.0
UK -4.9 1.4 1.1 0.5 1.8
China 9.2 10.3 9.5 8.4 8.8
Russia -7.8 4.0 4.3 4.5 5.0
Brazil -0.6 7.5 3.8 3.3 4.3
India 6.8 10.1 7.8 6.8 7.3
Economic forecasts point to EM economies for growth potential
Source: Neptune Economics Team, March 2012. Please remember that forecasts are not a reliable indicator of future performance. The forecasts are Neptune’s personal views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views.
10
Accessing EM growth
EM listed companies
– Local leaders sometimes best way to access niche areas
Western listed companies
– Multi-nationals invested globally
– Western brands in EMs e.g. Estee Lauder/Burberry/Rolls Royce
Corporate (M&A) activity
– Unilever purchases Kalina in Oct 2011
– PepsiCo consolidates ownership of Wimm-Bill-Dann in Sept 2011
11
Investment opportunities can be accessed via Western and EM companiesReferences to specific securities are for illustrative purposes only and should not be taken as advice to invest.
Why Neptune for EM exposure?
1. Long-term exposure to EM
– History of investing in EM as part of global portfolios since 2002
2. Size and scale
– Nearly £1.6bn invested in EM across the Neptune fund range
3. Series of firsts
– Launched the first UK long-only Russian equity and Chinese equity income funds
4. In-house proprietary research
– Combining analysis of macroeconomic drivers, global industry sectors and individual companies
5. Team-based process
– Fund managers are also sector analysts, feeding off research from the 24-person investment team
Think Neptune for emerging markets!
Source: Neptune as at 31.01.12.
12
Fund Fund manager Fund size S&P fund rating
Neptune Balanced Robin Geffen £908.8m N/A
Neptune Emerging Markets Ewan Thompson £35.0m A
Neptune Global Alpha Robin Geffen £94.1m N/A
Neptune Global Equity Robin Geffen £1.1bn AA
Accessing EM growth via Neptune fund range 13
Neptune’s flagship funds with exposure to EM growth
Source: Lipper as at 31.01.12. An S&P Fund Management Rating represents an opinion only and should not be relied on when making an investment decision. “S&P” and “Standard & Poor’s” are trademarks of The McGraw-Hill Companies, Inc. Copyright © 2011 Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.
*Source: Neptune Projection. Please remember that forecasts are not a reliable indicator of future performance. The forecasts are Neptune’s personal views and as such this document is deemed to be impartial research. We do not undertake to advise you as to a change of our views. Investments in Emerging Markets are higher risk and potentially more volatile than those in established markets.
Neptune’s projection: split of nominal global GDP growth 2009-2014
1980s 1990s 2000-08 2009-14*
Advanced economies
86% 92% 60% 38%
Emerging economies
14% 8% 40% 62%
GDP expectations14
“By 2014, two-thirds of global GDP will be generated by emerging markets” Robin Geffen, Neptune Investment Management
Moneywise Fund Awards 2009 &
2010 North America
Sector Winner
Active North American
Equity Manager Award
High Alpha Equity
Manager Award
UK Equity Small Winner - 3 YearsEquity North America Winner - 5 Years
Trustnet Awards 2010Neptune US Opportunities Fund
wins North America award
Neptune European Opportunities Fund wins Europe ex
UK award
Neptune’s industry recognition 15
Neptune Investment Management Limited 3 Shortlands, London, W6 8DA
Tel: 020 3249 0100Fax: 020 3249 0123
Adam Hughes, Head of Intermediary Sales 020 3249 0158Dennis Pellerito, Manager, UK Strategic Partners 020 3249 0170Andrew Taylor, Intermediary Sales Manager 020 3249 0161Phil Horton, Sales Manager, Strategic Partners 020 3249 0171Sean Cooney, Sales Consultant, Strategic Partners 020 3249 0167
Justin Ralph, Sales Support Manager 020 3249 0177Angela Ferrar, Senior Sales Support 020 3249 0173Andrew Nickson, Sales Support 020 3249 0213
Calls may be recorded for monitoring and training purposes and for your protection
Contact details 16
This document is issued by Neptune Investment Management Limited (“Neptune”), 3 Shortlands, London, W6 8DA which is authorised and regulated by the Financial Services Authority, FSA number 416015. Details of Neptune's regulatory status and authorisation by regulators in other countries are available from us on request. The Neptune web address is www.neptunefunds.com
Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are the analyst’s personal views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of Neptune's views. This is not a solicitation or an offer to buy or sell. Neptune Investment Management Limited has produced this report for private circulation to Investment Professionals only. The material is not intended for the use of Private Investors. All information is given in good faith but without any warranty.
Neptune Funds are available to any persons that may be marketed to under the Financial Services and Markets Act (Promotion of Collective Investment Schemes) (Exemptions) Order 2001.
This communication is only intended for persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.
The provision of investment services may be restricted in certain jurisdictions. You are required to acquaint yourself with any local laws and restrictions on the availability of any services described.
Please check whether such products are available in the country in which your clients are resident. None of the Neptune products are available to residents in the United States.
Some Neptune Funds may have a high historic volatility rating and past performance should not be a guide for future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. These Funds may invest more than 35% in government and public securities in a number of jurisdictions. Forecasts and past performance are not an indicator of future performance. Investments in Emerging Markets are higher risk and potentially more volatile than those in established markets. These and other risks are described in the prospectus which should be read carefully prior to investing.
The current Prospectus, Simplified Prospectus and most recent annual and semi-annual reports can be obtained by calling 0800 587 5051 or downloaded from www.neptunefunds.com.
Any past performance data that has not been shown is due to the information not being available.
Neptune is not authorised to give investment advice and only provides information on Neptune products .
Important information 17