Damien Buchet, CFA – Head of Emerging Markets Fixed IncomeIva Alexandrova – Emerging Markets Portfolio Manager
Magda Branet, CFA – Emerging Markets Portfolio ManagerShiv Chopra, CFA – EM Portfolio Manager / Portfolio Engineer
AXA WF Emerging Markets Short Duration Bonds
October 17-18, 2013
This presentation is for professional advisers only and must not be relied upon by retail clients. Circulation must be restricted accordingly.
AXA WF Emerging Markets Short Duration Bonds
Emerging Markets expertise at AXA Fixed Income
Emerging Markets Macro and Markets Snapshot
AXA WF Emerging Market Short Duration bonds : Investment concept
Portfolio performance & Analysis
Reference material
2
Emerging Markets expertise at AXA Fixed Income
Our management style Active and collegial, with a team-based approach to investment decision
making Focussed on downside protection and income generation Robust blend of top-down and bottom-up analysis
Our investment process A strong top-down approach, where optimal portfolio construction is the
main driver of performance “Portfolio Manager Analyst” model ensures reactivity and ownership
throughout bottom-up credit selection
Why AXA Fixed Income We combine the benefits of a stable, global organisation with multi-local
knowledge and expertise Our investment process aims to achieve incremental, repeatable
outperformance within a robust risk control framework Our wide range of expertise will allow us to work together to choose
optimal strategies corresponding to your evolving constraints and the ever changing market environment
Fixed Income AUM (€bn)
Our solutions
Yield enhancement in an environment of very low yields
Protection against the downside risk of interest rates
Diversification within fixed income where appropriate
Low-turnover, fundamentally-driven credit strategy exempt from the flaws of traditional passive management
Source: AXA IM 30/06/2013.
Introduction to AXA Fixed Income
€391bn fixed income assets 100 investment professionals
Your challenges
Credit (Investment Grade & HY), Emerging Markets, Global Strategic Bonds
Suite of Short Duration funds (Credit, HY, EMD), “Redex” share classes
Universal Inflation, Local Currency EMD, High Yield, Global Strategic Bonds, Regional Credit
SmartBeta Credit strategyTM
4
158173
221 218 225
273 283
322 330342
371391
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jun-13
5
Source: AXA IM. Staff data as at 31/07/2013. AUM data as at 30/06/2013. Figures in parentheses denote years within the AXA Group followed by total years industry experience. *Shiv also belongs to the Portfolio Engineering Team and is the specialist Portfolio Engineer for the EM/Asia Team.
Damien Buchet, CFA (3/21)Head of Emerging Markets
Chris IggoCIO, Global Fixed Income
Paris
Iva Alexandrova (6/13)Portfolio Manager/Analyst
Emerging & Asian MarketsParis, Singapore
Singapore
Alvin Ong, CFA (1/4)Portfolio Manager/Analyst
Su Hwei Tee (3/13)Senior Credit Analyst
Magda Branet, CFA (8/8)Portfolio Manager/Analyst
Theo ZemekGlobal Head of Fixed Income
EMERGING MARKETS FIXED INCOME TEAM
7 PM Analysts / 13 years of average industry experience
• 2 Investment centres in Paris and Singapore• 6 nationalities, 4 CFA charter holders.• Sovereign and corporate credit research: 45 countries & 350 corporates covering 90% of the EM credit investment universe• €2.4bn in EM fixed income assets managed across all EM sub-asset classes (hard and local currency, sovereign and corporate credits)• A range of benchmarked and total return funds and mandates.
GLOBAL FIXED INCOME GROUP
€391bn Fixed Income AUM / 100 Investment professionals
• A unique top-down process, integrating all fixed income expertises• Substantial shared resources and synergies among teams.
EM TRADING AND EXECUTION 3 experienced Emerging Markets traders based in London
PORTFOLIO ENGINEERING GROUP11 Portfolio Engineers; one dedicated to Emerging Markets
RESEARCH AND INVESTMENT STRATEGY TEAM11 economists and strategists; two Emerging Markets specialists:
• Based in Paris: Emerging Markets Economist• Based in Hong Kong: China & Emerging Asia economistShiv Chopra, CFA (2/7)
EM Portfolio Enegineer/PM Analyst*
Emerging Markets Fixed Income at AXA IM
Rob Andrew (<1/18)Head of Fixed Income Asia
Experienced team with global resources
6
Our Emerging Markets investment philosophy
ConvictionsConvictions Management StyleManagement Style
We have a “Total Return” Bias
We are “Top-Down” Investors
We are Risk Managers
Our portfolios aim to deliver an optimal Yield-Liquidity-Volatility profile throughout the market cycle
Portfolio Construction follows a two-dimensional “Top-down” scale, considering both Fundamental and
Technical issues
Country research, corporate credit analysis and risk monitoring are central to our Investment Process
Fixed income assets provide the opportunity for income generation and offer relative capital preservation
AXA IM EM Fixed Income Funds : Risk/Return Profile
Our Emerging Markets product range
7
INVESTMENT AIMS
Better transparency on expected returns and low volatility => AXA WF Emerging Markets Short Duration Bonds
Optimal and balanced risk/return profile from EM USD credits => AXA WF Global Emerging markets Bonds
Strong capital gain potential from undervalued EM currencies => AXA WF Emerging Markets Local currency Bonds
An EM tool box for a variety of risk/return profiles
Medium Carry : 5.5%Short Duration : <3yHigher Credit Risk (BB Average rating)
High Carry : 6%Long Duration : 7yMedium Credit Risk (BBB‐ Average rating)
High Carry : 6.5%Medium Duration : 5yLower Credit Risk (BBB+ Average rating)
Source: AXA IM as at 31/05/2013. Return and Volatility are shown for the I Acc USD shareclass gross of fees over 1 year, except AXA WF Emerging Markets Short Duration Bonds which is shown since inception (05/09/2012). Past performance is not indicative of future results. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
EM Macro and Markets : making sense of the recent meltdown
9
Worst meltdown since 2008 for EM fixed Income, now on the mend?
Source : Bloomberg as at 02/10//2013. JPGCCOMP= JP Morgan EMBIG Div Index (Sovereign USD) / JCBBCOMP = JP Morgan Corporate EMBI Global Index (Corporate Credits in USD) / JGENVUUG = JPM GBI EM Global div Index (EM Local Currency Bonds)
US 10Y Yields : Navigating through tapering, US Gov Shutdown, FED succession.
Source: Bloomberg as at 01/10/2013.
11
EM Fixed Income Fund Flows: Closer to the end or to the beginning?
11
Source: EPFR, Morgan Stanley, as at 04/10/2013
Weekly fund flows into EM fixed income Funds (USD bn)
Currency Weakness : explained by fundamentals and/or positionning
12
Geared to US/JP/EU recovery : North Asia and Central Europe
No CAD* problems, some short term growth and/or positioning issues.
Portfolio positioning issues + CAD* deterioration, but, varying GDP models and no external debt issues.
Source : Bloomberg as at Aug. 30th, 2013 . * : CAD = Current Account Deficit
1313
EM Cyclical Indicators* : Improving growth momentum, low risk appetite
Source: AXA IM Research & Investment Strategy. The EM Economic Cycle Indicator is built using a set of high frequency cyclical data for 13 EM countries (Brazil, Chile, Mexico, Czech Republic,Poland, Hungary, Russia, Turkey, China, India, Thailand, Malaysia and Indonesia). The EM Liquidity and Risk Appetite indicator uses a set of variables representative of global risk and liquidity trends (VIX, cross currency spreads, equity markets, etc).
-6
-5
-4
-3
-2
-1
0
1
2
3
-1.5 -1 -0.5 0 0.5 1
Leve
l
Acceleration
EM Economic Cycle Indicator
SLOWDOWN Above long‐term average and decreasing EXPANSION Above long‐term average and increasing
CONTRACTION Below long‐term average and decreasing
RECOVERY Below long‐term average and increasing
Feb '08
August '13
-2
-1.5
-1
-0.5
0
0.5
1
1.5
-0.05 -0.03 -0.01 0.01 0.03 0.05
Leve
lAcceleration
EM Liquidity/Risk Appetite Cycle Indicator
SLOWDOWN Above long‐term average and decreasing
EXPANSION Above long‐term average and increasing
CONTRACTION Below long‐term average and decreasing
RECOVERY Below long‐term average and increasing
September '13
C
February '08
14
G3-induced global trade rebound to lift EM manufactured exports
Source: AXA IM Research & Investment Strategy as at Oct. 1st, 2013
15
-16 -14 -12 -10 -8 -6 -4 -2 0 2
PHMXPEMYBRTHKZRUHUIN
ZAVZTRUAID
Source: IMF, Citigroup, national central banks, Haver Analytics. As at August 2013 *Uses foreign exchange reserves minus gold where available, measured in US$ / Morgan Stanley
An Income Statement issue, not a Balance Sheet problem
FX reserves change as % of GDP on April-July 2013
Source: Morgan StanleySource: Citigroup
16
Fiscal house is in order, but needs some consolidation at the margin
Source : IMF and AXA IM Research
CZ
HK KR
SG
BR
CL
CN CO
EGHU
IN
ID
MY
MX PH
PL
RU
ZATH TR
UA
0
20
40
60
80
100
120
-6 -4 -2 0 2 4
Pu
blic
de
bt
% o
f G
DP
Cyclically adjusted primary balance % of GDP
Fiscal space in emerging economies, 2013
Fiscalstability boundary
ttt pbgrDD )(1
Dt= Debt ratio at time t (Debt/GDP)r =interest rate on debtg =nominal growth rate of the economypbt=primary balance at time t (budget balance excluding interest payments) in % of GDP
Sovereign Debt Dynamics Formula
17
Emerging Markets contribution to global growth remains outstanding……but will need a fresh wave of reforms over the next 2-5 years
Global Real GDP growth, %
-2
-1
0
1
2
3
4
5
6
7
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Recession shading DM Contribution EM Contribution Period Average
MS Fcast
Source: IMF, Morgan Stanley Research forecasts
AXA WF Emerging Market Short Duration Bonds
19
AWF Emerging Markets Short Duration : very resilient in the meltdown
Source : Bloomberg as at 01/10/13. AWEMIUA = AWF EMSD Fund I USD Share Class (White line) / JPGCCOMP= JP Morgan EMBIG Div Index (Sovereign USD –Orange line)) / JGENVUUG = JPM GBI EM Global div Index (EM Local Currency Bonds – Yellow line)
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Historical market annualised return* (31/12/2001 to 31/12/2012)
Income Return*
Price Return*
Total ReturnTotal Return
Income ReturnIncome Return
Price ReturnPrice Return
8.50%
7.32%
1.13%
Historically, a focus on income pays off
Income stream drives long-term returns in EM Fixed Income
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
20
Source: AXA IM / JP Morgan as at 31/12/2012. *Composite of 1-5 year maturity buckets for 60% CEMBI Broad and 40% EMBIG Diversified. Past results are not necessarily indicative of future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred.
21
5.3% Yield to Worst, for a 2.6 years Average Duration and a BB average rating
A “Total Return” approach without reference to a market Index
Focus on the delivery of an optimal risk-return profile along the market cycle. No market timing.
Expected annualized volatility in normal market conditions: 2 to 4%
Exposure to Sovereign and Corporate Credits, both Investment Grade and High Yield
Investment across entire EM Credit spectrum over 45 countries reduces default correlation risk
Emerging Markets Short Duration Credit Universe: $532bn outstanding, 740 bonds, 335 issuers*
Portfolio performance is mostly driven by carry and reinvested coupons.
Capital gain potential from a tactical allocation to local currency bonds (15% maximum)
Average portfolio duration to worst of less than 3 years
A set of clear and transparent Internal Investment Guidelines
Intensive coverage of 45 countries and 350 corporates (90% of outstanding) by the EM team
AXA WF Emerging Markets Short Duration BondsInvestment concept
Attractive Risk-Return Proposal
Large opportunity set
Clear performance drivers
Research and risk management
Source: AXA-IM as at 31/08/2013. Data is unaudited and sourced from our front office portfolio management system, ThinkFolio®. Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield. *As at 10/12/2012. The description set forth above represents investment and risk objectives only. No representation is made that the Fund will achieve such objectives. Yield figures quoted will vary in the future and are not guaranteed. Past performance is not a guide to future performance. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
22
Investment universe and strategy capacity
Investment policy is to cap maximum holding of a bond to 5% of its outstanding Minimum issue size considered for investments is USD 150 million. This policy allows for a 3-5 day average disposal period for most bonds in normal
market conditions. Strategy capacity currently estimated to be around $4-5bn with 120-150 holdings Fast expansion of the investment universe will allow this capacity to increase
4 to 5bn USD
Strategy Capacity
Emerging Markets Short Duration credit investment universe Number of Bonds Number of issuers Outstanding ($bn)
Overall EM Credit Universe 1723 (1274 Corps) 677 (579 Corps) 1376.3 (786 Corps)
Less than 3Y maturity – outs > $150m 342 (242 Corps) 130 (102 Corps) 260 (154 Corps)
Less than 5Y maturity – outs > $150m 740 (574 Corps) 335 (287 Corps) 532 (342 Corps)
Less than 8Y maturity – outs > $150m 1061 (801 Corps) 441 (376 Corps) 835 (511 Corps)
A deep and diversified EM short duration universeSource: AXA IM EM database as at 10/12/2012. Corps: Corporations. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
23
An expanding short duration investment universe
Net issuance of EM corporate debt is expected to remain around $100-150bn per annum over the next few years, with about 70-100 new issuers every year.
The current stock is expected to rise every year up to 2018, with an increasing proportion of high yield (30 to 50%)
Future supply will likely target the 2018-2021 maturities, to enter the “Short Duration” universe in future years
Source: JP Morgan as at 26/09/2013
Expanding universe will enhance the likely capacity of the strategy
Annual EM Corporate Credit Maturities ($ bn)*
24
Emerging Markets default risk
S&P 12-month speculating default rates since 1997 (%)*
Default rates in Emerging Markets are generally lower than for developed markets over the long run
Defaults peaks in Emerging Markets are often linked to specific sovereign crises rather than systemic
Properly addressing the sovereign risk dimension remains key in avoiding defaults
Source: *Standard & Poor’s Global Fixed Income Research and Standard & Poor’s CreditPro as at 31/12/2012, **JP Morgan as at 30/09/2013; includes distressed exchanges.
Emerging Markets defaults since 2011**
Lower systemic default risk than in developed markets
Russian Crisis Argentinean CrisisDubai IncKazahk Banks
Year Issuer Country Region
2011
RTM Group Russia EM EuropeSaska Czech Republic EM Europe
Cap Cana Dominican Republic Latin AmericaSatmex Mexico Latin America
Trump Ocean Club Panama Latin America
2012
Davomas Indonesia AsiaTitan petrochemicals China Asia
Sino Forest China AsiaBLT Indonesia Asia
BTAS Kazakhstan EM EuropeCELPA Brazil Latin America
Banco Cruzeiro do Sul Brazil Latin AmericaNew Reclamtion Group South Africa MENA
Rede Brazil Latin AmericaSu Casita Mexico Latin America
2013
Axtel Mexico Latin AmericaCEDC Russia EM EuropeUrbi Mexico Latin America
Corporation GEO Mexico Latin AmericaLupatech Brazil Latin AmericaHomex Mexico Latin America
Maxcom Mexico Latin AmericaMagyar Telecom Hungary EM Europe
25
EM HY companies are less leveraged their US peers
Emerging Markets vs. US creditsHigher yields for a lower credit risk
EM corporate issuers enjoy a lower leverage and higher credit spreads at each S&P rating level
Source : BofA Merrill credit indexes, AXA-IM as at 02/10/2013
Source: BofA, September 2013
EM Corporates enjoy higher credit spreads than similarly rated US peers
A
BBBIG
BB
B
CCC
HY
A
BBB
IG
BB
B
HY
0
100
200
300
400
500
600
700
800
900
3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0
Spre
ad (b
ps)
Duration (yrs)
US EM
Portfolio Analysis & Performance
0.67%
2.25%
1.40% 1.40% 1.34%
0.0%
0.4%
0.8%
1.2%
1.6%
2.0%
2.4%
Nigerian Naira Mexican Peso Polish Zloty Brazilian Real PhilippinesPeso
Cash7% 0‐1 Years
6%
1‐3 Years31%
3‐5 Years43%
5‐8 Years13%
7%11%
66%
13%
3% <1%0%
10%
20%
30%
40%
50%
60%
70%
Cash Sovereign &Quasi Sovereign
Non‐financialsCorporate
Financials Sovereign &Quasi Sovereign
Non‐financialsCorporate
Hard Currency Local Currency
Source: AXA IM at 30/09/2013. *Yield and duration calculations include cash held within the portfolio, use the next-call method for all Financials in the portfolio and duration/yield-to-worst for all other holdings.**ML Lvl 2 breakdown. All breakdowns exclude currency forwards. Data is unaudited and sourced from our front office portfolio management system, ThinkFolio®. Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield. Yield figures are not guaranteed and will change in the future. Past performance is not indicative of future results. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
Local currency exposure
Fund breakdown by sector**
Fund breakdown by maturity
Portfolio Analysis
27
Key characteristics
Size $696.5m
Yield* 5.26%
Duration* 2.64 years
Average maturity 3.17 years
Average rating BB
Cash position 6.9%
EM local currency risk exposure 7.1%
Number of holdings 124
Investment in Sovereign & Corporate credits with a tactical local currency exposure
Cash7% A
1%
BBB24%
BB35%
B31%
CCC2%
0.02
0.55
1.42
0.59
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0‐1 year 1‐3 years 3‐5 years 5‐8 years
28
Source: AXA IM as at 30/09/2013. *ML lvl 2 for Sovereign & Quasi Sovereign, ML lvl 3 for remainder of fund. **Rating is the worst of S&P, Moody’s and Fitch. All breakdowns exclude currency forwards except local currency exposure. Data is unaudited and sourced from our front office portfolio management system, ThinkFolio®. Past performance is not indicative of future results. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
Portfolio Analysis
Local Currency exposure
Spread Duration Contribution by Maturity Bucket
Fund breakdown by sector*
Fund breakdown by Rating**
14% 14%13% 13%
10%
7% 7%
4% 4% 3% 3% 3% 2%1% 1%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Sovereign & Quasi
Sovereign
Real Estate
Basic
Industry
Energy
Banking
Utility
Cash
Cons. N
on‐Cyclical
Telecommunications
Capital G
oods
Consum
er Cyclical
Services
Financial Services
Med
ia
Automotive
6.6%7.8%
1.1%
9.4%
7.8%
3.6%
1.7%
5.9%
3.5%
1.2% 1.2% 1.6%
7.1%
0%
5%
10%
15%
Sep‐12
Oct‐12
Nov
‐12
Dec‐12
Jan‐13
Feb‐13
Mar‐13
Apr‐13
May‐13
Jun‐13
Jul‐1
3
Aug‐13
Sep‐13
‐6%‐5%‐4%‐3%‐2%‐1%0%1%2%3%4%5%6%7%8%9%10%11%12%13%
Hard Currency Sovereign & Quasi Sovereign Local Currency Sovereign & Quasi Sovereign Hard Currency Corporates
Local Currency Corporates Cash FX
Portfolio Net Exposure
29
Source: AXA IM as at 30/09/2013. Data is unaudited and sourced from our front office portfolio management system, ThinkFolio®. Past performance is not indicative of future results. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
Country risk exposure
Investment across over 35 countries reduces default correlation risk
30
Top 10 holdings
Top 10 Holdings (% of fund)
Source: AXA IM as at 30/09/2013. *Rating is the worst of S&P, Moody’s and Fitch. Data is unaudited and sourced from our front office portfolio management system, ThinkFolio®. Past performance is not indicative of future results. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
Description % Rating*
Dominican Republic International Bond 9.04 01/23/18 1.45% B
Afren 11 1/2 02/01/16 1.32% B+
Country Garden Holdings 10 1/2 08/11/15 1.31% BB-
Kuwait Projects Co 8 7/8 10/17/16 1.30% BBB-
Vedanta Resources Plc 6 3/4 06/07/16 1.30% BB-
Israel Electric Corp 6.7 02/10/17 1.26% BB+
Emaar Sukuk 8 1/2 08/03/16 1.25% B+
Republic Of Angola 7 08/16/19 1.22% BB-
Dubai Holding Commercial Operations Mtn 4 3/4 01/30/14 1.22% B
Cemex Sab De Cv 9 01/11/18 1.20% B
31
Performance and growth in assets under management
Cumulative Performance* Growth in AUM
Source: AXA IM as at 30/09/2013. *Performance is calculated using close prices, rebased to 100, net of management fees, for I Acc USD shareclass since launch on 06/09/2012. Past results are not necessarily indicative of future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred.
A resilient investment proposal in the recent EM fixed Income market correction
In its first year the fund has grown to nearly $700m and returned +5% despite the recent EM market sell-off.
32
Monthly Gross Performance Attribution in bp since Oct. 1st, 2012.
Source: AXA IM Portfolio Engineering Group as at 30/09/2013. Gross performance as per the calculations of the Portfolio Engineering Team. Indicative only. The above figures may differ from official performance figures given system constraints and potential differences in market data sources. Performance attribution from FX does not include carry. The Nigerian Naira performance is not supported by our systems, hence is not included here. For illustrative purposes only.
Cumulative Monthly Gross Performance Attribution Analysis in bp since 01/10/12
Investment information
33
Investment objective & strategyInvestment objective To seek performance by investing mainly in short duration debt securities issued in
the emerging debt universe in USD over a medium term period.
Investment universe Transferable debt securities issued by emerging countries governments, corporations, public or private companies and supranational entities. The Fund may invest up to 15% of its assets in bonds in local currency
Investment horizon Three years
Investment team Damien Buchet, CFA, Iva Alexandrova and Magda Branet, CFA (portfolio managers)
Fund structure Luxembourg SICAV
Launch date 06 September 2012
Institutional shareclasses Retail shareclassesInitial Charge None (I) / 2% (F) 3% (A) / None (E)
Annual Management Charge 0.55% (I) / 0.75% (F) 1.00%
Minimum initial investment* $5,000,000 (I) / $500,000 (F) None**
Minimum subsequent investment* $1,000,000 (I) / $10,000 (F) None
Currencies Available EUR, USD, GBP, CHF (I) / EUR, USD (F) EUR, USD, GBP, CHF (A) / EUR (E)
Hedged shareclass availability Yes Yes
Source: AXA IM. *Subscriptions in USD or the equivalent in the relevant currency of the relevant class. **Minimum initial investment for A GBP (H) shareclass is $5,000 (or equivalent in the relevant currency of the relevant shareclass). There is no guarantee that the objectives of the investment strategy described herein will be achieved.
Appendix
35
JPM EMBI Global spreads : around the middle of the 5 year range
Source: Bloomberg as at 30/09/2013.JP Morgan EMBIG Diversified Sovereign hard currency index.
3636
Value opportunity : EM Hard Currency Spreads retracement since 08/05/13
Source: AXA IM as at 02/10/2013; Bloomberg; JP Morgan Indexes. Past performance is not indicative of future results.
Country/Sector Type Now 08/05/2013 Difference Ratio Vs Histo
Pakistan Sov 638 747 -109 85.4%Argentina Sov 1,029 1,203 -174 85.5%Saudi Arabia Corp Corp 109 120 -11 90.7%Mexico Corp Corp 301 327 -25 92.3%S.Korea Corp Corp 190 203 -13 93.4%Egypt Sov 533 569 -36 93.7%Taiwan Corp Corp 162 170 -9 95.0%Jamaica Sov 640 671 -31 95.4%HK Corp Corp 273 283 -10 96.5%Ecuador Sov 627 642 -15 97.7%Qatar Corp Corp 195 199 -3 98.4%Jamaica Corp Corp 546 549 -3 99.5%Lebanon Sov 441 435 6 101.4%Bulgaria Sov 69 68 1 101.5%Hungary Sov 327 320 7 102.2%Russia Corp Corp 381 366 15 104.1%Iraq Sov 522 501 21 104.2%China Corp Corp 394 375 18 104.9%Romania Sov 233 221 12 105.4%Venezuela Corp Corp 1,279 1,213 67 105.5%Ivory Coast Sov 480 448 32 107.1%Malaysia Corp Corp 265 243 21 108.8%Philippines Corp Corp 460 422 38 109.1%UAE Corp Corp 250 228 22 109.7%CEMBI HY Corp index 569 516 53 110.3%CEMBI HG Corp index 280 252 27 110.9%Singapore Corp Corp 259 234 25 110.9%CEMBI Broad Corp Index 365 329 36 111.1%Belize Sov 872 768 104 113.5%Kazakhstan Sov 286 251 35 113.9%Kuwait Corp Corp 398 345 53 115.2%El Salvador Sov 408 351 57 116.2%China Sov 175 150 25 116.7%Lithuania Sov 165 140 25 117.9%KZ Corp Corp 776 657 119 118.1%Israel Corp Corp 250 210 40 119.3%Brazil Corp Corp 427 356 71 119.9%
Spreads
Country/Sector Type Now 08/05/2013 Difference Ratio Vs Histo
Peru Corp Corp 340 284 57 120.0%Dominican Republic Sov 429 357 72 120.2%Chile Corp Corp 363 297 66 122.3%India Corp Corp 379 307 72 123.5%Poland Sov 147 118 29 124.6%Chile Sov 167 134 33 124.6%Russia Sov 221 177 44 124.9%JP EMBIG DIV BMK Sov Index 339 270 69 125.4%Indonesia Corp Corp 718 568 149 126.3%Nigeria Sov 341 270 71 126.3%Nigeria Sov 341 270 71 126.3%Georgia Sov 416 328 88 126.8%Egypt Corp Corp 301 237 64 126.9%Colombia Corp Corp 356 278 77 127.8%Serbia Sov 420 327 93 128.4%Mexico Sov 209 161 48 129.8%Croatia Sov 370 284 86 130.3%Venezuela Sov 1,076 819 257 131.4%South Africa Corp Corp 450 342 108 131.7%Philippines Sov 172 129 43 133.3%Malaysia Sov 152 113 39 134.5%Sri Lanka Sov 464 342 122 135.7%Ghana Sov 554 407 147 136.1%Uruguay Sov 198 145 53 136.6%Viet nam Sov 320 233 87 137.3%Senegal Sov 558 403 155 138.5%EMBIG Div IG SpreadSov Index 221 159 62 138.7%EMBIG Div HY SpreadSov Index 614 428 187 143.7%Brazil Sov 241 166 75 145.2%Peru Sov 179 121 58 147.9%Panama Sov 206 139 67 148.2%Colombia Sov 187 124 63 150.8%Turkey Sov 279 181 98 154.1%South Africa Sov 269 173 96 155.5%Gabon Sov 353 222 131 159.0%Ukraine Sov 973 611 362 159.2%Indonesia Sov 314 197 117 159.4%Belarus Sov 952 565 387 168.5%
Spreads
3737
Source : AXA IM Database, Bloomberg as at 02/10/2013, Indices Merrill-Bank of America. Past performance is not indicative of future results.
EM USD Credits : relative value opportunity vs EUR & US Credits
€ AAA - A A BBB IG BB B CCC+< HY All € CorpsDuration 4.15 4.52 4.27 4.42 3.47 3.96 3.54 3.60 4.42Yield 1.49 1.87 2.70 2.16 4.29 6.79 10.40 5.42 2.16Spreads 85.00 110.00 199.00 141.00 394.00 559.00 968.00 482.00 141.00
$ AAA - A A BBB IG BB B CCC HY All US CorpsDuration 6.30 6.34 6.65 6.46 5.21 4.82 4.34 4.90 6.12Yield 2.84 2.93 4.01 3.37 5.36 6.73 10.32 6.76 4.10Spreads 111.00 118.00 208.00 155.00 345.00 461.00 845.00 478.00 224.00
EM Corp ML AAA - A A BBB IG BB B CCC HY All EM CorpDuration 5.21 5.11 5.49 5.38 4.69 3.67 3.15 4.17 5.05Yield 3.02 3.07 4.64 4.02 6.36 9.72 18.52 8.57 5.25Spreads 157.00 164.00 303.00 247.00 493.00 855.00 1800.00 731.00 378.00
EM Sov ML AAA - A A BBB IG BB B CCC HY All EM SovsDuration 7.29 6.06 5.01 6.68 5.50Yield 4.35 5.68 9.59 10.79 8.47Spreads 214.00 374.00 782.00 846.00 660.00
EM Corporate Credits currently offer a 50-80% spread premium to US peers at each rating level
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Top-Down Inputs:
•AXA IM’s Investment Strategy team •External experts •AXA Fixed Income portfolio managers
FI CIO summarises macro views to build a framework for Alpha Groups*
Alpha Groups define market expectations and active strategies using MVST analysis:
• Macro • Valuation • Sentiment • Technical
Active strategies and market forecasts
Alpha Group forecasts and recommendations define Portfolio Construction:
•Portfolio Engineering Group (PEG) calibrates risk exposure and optimises allocations•Rigorous security and instrument selection•Effective trade execution
Efficient use of risk budget and trade implementation
Risk is continuously monitored:
•Proprietary and third party risk models•Weekly review of exposures, risk metrics and active strategy performance•On-going adjustment of exposures to maintain risk targets
PEG and portfolio managers continuously manage portfolio risks and performance
Continuous MVST factor analysis and performance reviews:
•Investment committees•FI dealers meetings •Team meetings•Formal weekly Alpha Group calls•Ad-hoc discussions
Active portfolio management
Portfolio construction delivers our performance
1Define Macro Environment
2Define Active Strategies
3Portfolio Construction
5Continuous Strategy Review
4Risk Monitoring
*Alpha Groups: small sub teams of the FI team split by expertise: country allocation/term structure/inflation/investment grade/high yield/emerging markets.
Global EM investment process overview
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MeetingsEM Team Rates / Credit Teams
Global Economic and Market AssessmentMonthlyFixed Income and Investment Strategy Teams
Monthly
EM Investment Committee(EM Alpha Group)
Active Strategy Group(EM & Global Rates Teams)
Macro Investment ThemesStrategic Country Allocation
Technical Risk Allocation
Proposed EM Strategies for Global Funds
US/EU Duration Calls
WeeklyEM Portfolio Risk Review
EM Team & PEG
WeeklyInvestment Team Meetings
Markets, Strategy, Business Development
Daily EM Team Morning Meeting (Paris, Singapore, London)
Ongoing assessment of global top down influences
Team-based market assessment and investment themes guiding strategic country and technical risk allocations
Portfolio risk control and ongoing optimisation with Portfolio Engineering Group
Tactical calls & position monitoring
Research Committee
Country / Sector AnalysisWeekly Weekly rolling country and corporate credit
sectors review and scoring.
Weekly fine tuning of strategic options and investment themes
Step 1 Investment Review Process
Emerging Markets Fixed Income Universe
Yield – Volatility –Liquidity
Bond Screening
Portfolio constraints
Portfolio Construction
Issuer Screening&
Credit Analysis Template
Proprietary Credit Analysis : PM Analyst model 45 countries and 350 corporates covered (90% of outstanding) Specific research templates for sovereigns and corporates Internal database of 1800 bonds
Market Indicators & Comparable Analysis Internal scoring of bonds based on Yield / Volatility / liquidity 4 distinct risk buckets (Liquidity / Low Vol / Carry & Rolldown / Momentum
Total Return Benchmarked / Free Alpha Yield / Maturity / Rating / Sector constraints
EM Sovereign and Corporate Screening and Analysis
Source: AXA IM
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Shiv Chopra, CFA,MBA - Portfolio Engineer / Portfolio Manager - Analyst Portfolio Engineer in the Emerging Markets Fixed Income Team where he works on portfolio construction, monitors the consistencies of investment strategies and runs quantitative
simulations. Additionally, he covers specific emerging market credit sectors including Oil and gas credits, and assists the team in external client communication. Seven years industry experience Joined AXA IM in 2011 having previously worked for 5 years on the Institutional Lending desk at HDFC Ltd, a leading private sector lender in India, where he was responsible for
corporate loans financial analysis. Holds a Bachelors Degree in Accounting & Finance (First Class Honours) from the University of Delhi, a Masters in Business Administration from HEC Paris (Excellence Scholar) and
is a CFA Charterholder.
Iva Alexandrova – Portfolio Manager Portfolio manager within the Emerging Markets Fixed Income Team, with a specific focus on Hard Currency emerging debt. 13 years industry experience Joined AXA IM in 2007 as an assistant portfolio manager in the Global Rates team, having previously worked at First Investment Bank Ltd., Sofia, Bulgaria as an FX and Rates trader
on the foreign exchange desk (2004-2006), in the International Department (2002-2004) and in the Customer Service Department (1999-2001). Holds a Master’s in Banking and Financial Techniques from the University Panthéon-Assas Paris II (2006-2007) and a Master’s in Finance from the University for National and World
Economy in Sofia (2005-2006). She graduated with a Bachelor’s degree in Banking and Finance from the same university
Magda Branet, CFA– Portfolio Manager Portfolio manager within the Emerging Markets Fixed Income Team, with a particular focus on Emerging local currency markets Eight years industry experience Joined AXA IM in 2005 and prior to her appointment within the investment team in 2010, was a bond and emerging markets strategist and developed a cross-asset allocation model
aimed at diversified/balanced funds. She focused mainly on Central and Eastern European countries where she developed a strong macroeconomic expertise. Graduated in Finance from Orléans University and from Paris Dauphine University in Applied Economics and obtained a Master’s degree from Paris Dauphine in Asset Management.
She is a CFA Charterholder
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Emerging and Asian Markets team biographies
Damien Buchet, CFA - Head of Global Emerging Markets Head of Global Emerging Markets, responsible for overseeing and developing our EMD offering 20 years of asset management and trading experience on Emerging Markets Joined AXA IM in 2010. He started his career in Hong Kong with Société Générale as an analyst on Hong Kong and Chinese corporates, then as an Asian equity fund manager based
in Hong Kong for Crédit Agricole Group. In 1996, he joined Barep Asset Management (Alternative Asset Manager of SG Group) as fund manager for Emerging Markets Debt. He developed and managed Barep’s product offering on Emerging Markets absolute return funds, of which Barep Nouveaux Horizons and Barep Global Credit, from 1999 to 2005. After a stint at CCR Gestion (Commerzbank Group) to develop an EM Global Macro investment process, he became head of Emerging Markets proprietary trading and structuring at Dexia.
Graduated from EDHEC Business School (Lille, France) and is a CFA Charter holder
Source: AXA IM as at 31/08/2013
Alvin Ong, CFA - Portfolio Manager Portfolio Manager within the Asian Fixed Income team Four years industry experience Joined AXA IM in October 2011 as a Portfolio Manager Assistant in the Asian Fixed Income team, responsible for assisting in the management of the Asian credit and sovereign
portfolios. Prior to joining AXA IM he was a Fixed Income Portfolio Manager with the Monetary Authority of Singapore investing Singapore’s foreign reserves in both global credits and Japanese government bonds.
Holds a Bachelor of Engineering, majoring in Electrical Engineering, from Nanyang Technological University of Singapore and is a CFA Charter holder.
Su Hwei Tee - Senior Credit Analyst Senior Credit Analyst within the Asian Fixed Income team, covering Asian credits across the financial, utilities, industrial and property sectors. 13 years industry experience Joined AXA IM in 2010 having previously worked as a Credit Analyst with UOB Asset Management where she was responsible for analysing Asia Pacific ex-Japan
telecommunications, utilities, oil & gas and Indonesian coal mining sectors. Before UOB AM she was a Fixed Income Analyst with Nikko Asset Management for 3 years, responsible for Asian local currency bond market research. Prior to that she was a Credit Analyst with Mitsubishi Turst, responsible for analysing Asia Pacific ex-Japan investment grade corporates
Holds a Bachelor of Business Studies from Nanyang Technological University of Singapore
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Emerging and Asian Markets team biographies
Robert Andrew – Head of Asia Fixed Income Head of Asia Fixed Income and is responsible for the Asian Fixed Income team and oversees the management of Asian Fixed Income portfolios 18 years industry experience Joined AXA IM in 2013 having previously been Head of South Asian Investments at Manulife Asset Management for two years where he was accountable for the profitability, asset
growth and smooth operation of the front, middle, and back offices in Singapore, Indonesia, Malaysia, Philippines, Vietnam and Thailand. Prior to this, he was with ABN Amro Asset Management where he held key fixed income portfolio management roles in London and in Singapore for 11 years. During his time in London, he managed global fixed income portfolios on behalf of central banks and sovereign wealth funds. He then moved to Singapore to take up his new role of Head of Asia Pacific Fixed Income. Prior to this, he worked with the Reserve Bank of Australia where he fulfilled roles in economic analysis, exchange rate analysis, portfolio management and prudential supervision in Sydney and in London for 5 years
Graduated from the University of New England with a first class Bachelor of Economics
Source: AXA IM as at 31/08/2013
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DisclaimerThis presentation is intended for institutional non US investor use only and should not be relied upon by retail clients. Circulation must be restricted accordingly. Any reproduction of this information, in whole or in part, is prohibited.
This document is being provided for informational purposes only. The information contained herein is confidential and is intended solely for the person to which it has been delivered. It may not be reproduced or transmitted, in whole or in part, by any means, to third parties without the prior consent of the AXA Investment Managers Inc (the “Adviser”). Nothing herein is or should be construed as an offer to enter into any contract, investment advice, a recommendation of any kind, a solicitation of clients, or an offer to sell or an offer to invest in any particular fund, product, investment vehicle or derivative. The information contained herein is not complete, may not be current, and is subject to change. The Adviser is under no obligation to update such information. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. This material is not directed at, nor is it available for distribution to, U.S. investors or any persons in any jurisdictions in which the Adviser or its affiliates are prohibited by law from making this information available. An investment in strategy may be offered only pursuant to a prospectus, subscription agreement and other related documents (the "Offering Package"). Any information regarding the Fund contained herein is qualified in its entirety by the more complete disclosures, risk factors and other terms that are contained in the Offering Package.
Any decision to invest in the strategy should be made after reviewing the Offering Package carefully, conducting such diligence and investigations as the investor deems necessary and consulting the investor’s own legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment in the strategy. The Advisor disclaims any and all liability relating to a decision based on or for reliance on this material.
This presentation does not constitute an offer or solicitation to sell shares/units in any of the funds referred to, by anyone in any jurisdiction in which such offer, solicitation or distribution would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation .The strategy described in this presentation are administered and managed by companies within the AXA Investment Managers Group and can be marketed in certain jurisdictions only. It is your responsibility to be aware of the applicable laws and regulations of your country of residence. Further information is available in the prospectus or other constitutional document. Information concerning portfolio holdings and sector allocation is subject to change and, unless otherwise noted herein, is representative of the target portfolio for the investment strategy described herein and does not reflect an actual account . Past performance is not a guide to future performance. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Changes in exchange rates will affect the value of investments made overseas. Investments in newer markets and smaller companies offer the possibility of higher returns but may also involve a higher degree of risk. The holdings shown herein should not be considered a recommendation or solicitation to buy or sell any particular security, do not represent all of the securities purchased, sold or recommended for any particular advisory client, and in the aggregate may represent only a small percentage of an account’s portfolio holdings.
The securities described herein are not suitable for all investors and nothing in this material or any subsequent document or any communication should be construed as a recommendation by the Advisor or any of its respective affiliates to invest , or to refrain from investing in any other transaction. The information contained in this material is not based on the particular circumstances of any named recipient. It does not take into account the particular investment objectives, financial situation or needs of individual clients. Potential investors must make their own investment decisions whether or not to invest . The Advisor is not acting in the capacity of advisor or fiduciary of any recipient. Nothing contained herein should be construed in any jurisdiction as tax, accounting, regulatory, legal, investment or other advice.
Investing involves risk and past performance does not guarantee future results. Global fixed income securities are subject to interest rate risk, currency risk, credit risk, prepayment risk and market risk. Emerging Market and High yield securities are subject to a greater risk of loss of principal and interests than higher-rated, investment grade fixed income securities. Investors in offshore vehicles advised or sub-advised, in whole or in part, by the Adviser employing the investment strategy described herein may be subject to currency exchange risk. There is no guarantee that the objectives of the investment strategy described herein will be achieved.
Investment in the strategy is speculative and involves substantial risks, including a high degree of risk, potential conflicts of interest and risks of loss. It is suitable only for sophisticated investors that have the financial ability and willingness to accept the high risks and lack of liquidity inherent in an investment in the strategy.
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DisclaimerThis presentation is intended for institutional non US investor use only and should not be relied upon by retail clients. Circulation must be restricted accordingly. Any reproduction of this information, in whole or in part, is prohibited.
The Adviser is not a tax or legal advisor. Prospective investors should consult their tax and/or legal advisors before making tax-related and/or legal-related investment decisions.