AVIVA INVESTORSEMERGING MARKET EQUITY SMALLEMERGING MARKET EQUITY SMALLCAP FUNDMAY 2013This document is for Professional C...
CONTENTSAviva Investors Emerging Markets Equity Review & Outlook 2013CONTENTS1. Emerging Markets Equities2 Emerging Market...
Aviva Investors Emerging Markets Equity Review & Outlook 20131. EMERGING MARKET EQUITIES3
EMERGING MARKETS OUR BELIEFSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKETS – OUR BELIEFS1.E...
EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYEMERGING AND DEVE...
EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYINCREASING IN GLO...
EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYFINANCIALLY ROBUS...
EMERGING MARKET GROWTHAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET GROWTHA LONG TERM STORY...
EMERGING MARKETS ARE UNDER RESEARCHEDAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKETS ARE UND...
A VERY VOLATILE ENVIRONMENT FOR EQUITIESAviva Investors Emerging Markets Equity Review & Outlook 2013A VERY VOLATILE ENVIR...
EMERGING MARKET CORPORATE EARNINGSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET CORPORATE E...
EMERGING MARKET VALUATIONAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET VALUATIONVALUATION D...
EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYATTRACTIVELY VALU...
EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYCHEAP ACROSS ASSE...
Aviva Investors Emerging Markets Equity Review & Outlook 20132. EMERGING MARKETS EQUITY SMALL CAP15
THE CASE FOR EMERGING MARKET EQUITY SMALL CAPSAviva Investors Emerging Markets Equity Review & Outlook 2013THE CASE FOR EM...
S C S O OS O G G G OAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS OFFER EXPOSURE TO EMERGING MAR...
S C S O OS O G G G OAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS OFFER EXPOSURE TO EMERGING MAR...
SMALL CAPS ARE UNDER RESEARCHEDAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS ARE UNDER RESEARCHE...
EMERGING MARKET SMALL CAPSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET SMALL CAPSA NARROWI...
EMERGING MARKET SMALL CAPSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET SMALL CAPSLOWER REA...
SMALL CAPS OFFER DIVERSIFICATIONAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS OFFER DIVERSIFICAT...
Aviva Investors Emerging Markets Equity Review & Outlook 20133. EMERGING MARKETS EQUITY SMALLCAP FUND PROCESSCAP FUND PROC...
EMERGING MARKET SMALL CAPAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET SMALL CAPINVESTMENT ...
Aviva Investors Emerging Markets Equity Review & Outlook 2013FUNDAMENTAL ANALYSISFUNDAMENTAL ANALYSISINVESTMENTS ARE ANALY...
Aviva Investors Emerging Markets Equity Review & Outlook 2013FUNDAMENTAL ANALYSISFUNDAMENTAL ANALYSISINVESTMENTS ARE ANALY...
Aviva Investors Emerging Markets Equity Review & Outlook 2013MACRO INPUTMACRO INPUTCOUNTRY EFFECTS HAVE GREATER INFLUENCE ...
PORTFOLIO CONSTRUCTIONAviva Investors Emerging Markets Equity Review & Outlook 2013PORTFOLIO CONSTRUCTION- 40 – 80 Holding...
Aviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITY SMALL CAP FUNDEMERGING MARKET EQUITY S...
Aviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITY SMALL CAP FUNDTop 10 weights (%)EMERGI...
Aviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITY SMALL CAP FUNDEMERGING MARKET EQUITY S...
Aviva Investors Emerging Markets Equity Review & Outlook 20135. APPENDICES32
BIOGRAPHIESAviva Investors Emerging Markets Equity Review & Outlook 2013BIOGRAPHIESJerome NunanClient Portfolio Manager,Eq...
EMERGING MARKETS EQUITY TEAMAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKETS EQUITY TEAMSOME ...
IMPORTANT INFORMATIONAviva Investors Emerging Markets Equity Review & Outlook 2013IMPORTANT INFORMATIONThis document is fo...
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2013 may em small cap to send to citywire

  1. 1. AVIVA INVESTORSEMERGING MARKET EQUITY SMALLEMERGING MARKET EQUITY SMALLCAP FUNDMAY 2013This document is for Professional Clients and institutional/qualified investors only. It is not to be viewed by or used with retailclients.
  2. 2. CONTENTSAviva Investors Emerging Markets Equity Review & Outlook 2013CONTENTS1. Emerging Markets Equities2 Emerging Market Small Cap2. Emerging Market Small Cap3. Aviva Investors Emerging Markets Equity Small Cap Fund Process4 A di4. Appendices– BiographiesTeam Awards– Team Awards2
  3. 3. Aviva Investors Emerging Markets Equity Review & Outlook 20131. EMERGING MARKET EQUITIES3
  4. 4. EMERGING MARKETS OUR BELIEFSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKETS – OUR BELIEFS1.Emerging Market economies are projected to grow faster than developed economies,while offering stronger fundamentals and more attractive valuationswhile offering stronger fundamentals and more attractive valuationsff f2.Emerging Markets are less efficient than Developed Markets allowing for theachievement of higher relative returns over the long term3.Emerging Markets offer a different opportunity set and diversification from developedmarketsSource: Aviva Investors, 31 January 2013. 4
  5. 5. EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYEMERGING AND DEVELOPED MARKET COMPARATORSEmerging Economies as a percentage of world totalEmerging Economies as a percentage of world totalPopulationLand MassForeign Exchange reservesEnergy consumptionGDP at PPPExportsGDP at market ratesMarket Cap (Full market)0% 20% 40% 60% 80% 100%Market Cap (float adjusted)Emerging Markets Developed MarketsEmerging markets are under represented in financial marketsSource: Empirical Research and Aviva Investors, 2012 5
  6. 6. EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYINCREASING IN GLOBAL IMPORTANCEGDP Growth by Region Proportion of Global GDP81063%51%41%50%75%100%24637%49%59%0%25%50%2010 2020 2030-2022000 2002 2004 2006 2008 2010 2012 2014 20162010 2020 2030Proportion of Global Market Cap45%75%100%-6-4Emerging Markets Developed Markets 44%55%71%56%45%25%50%75%Emerging Markets Developed Markets29%0%2010 2020 2030– Emerging Markets are expected to continue their higher growth trajectoryEmerging markets are expected to grow dramatically in global relevance– The importance of Emerging Markets to global financial markets will only continue to increaseSource: IMF World Economic Outlook Database April 2012 Source: Goldman Sachs. March 2011 6
  7. 7. EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYFINANCIALLY ROBUSTDebt to GDP ratio %9010011060708020304050202000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Advanced economies Emerging Economies– Developed markets are still working off the excess leverage from the credit boom– Prior Emerging Market crisis have meant governments have been more prudentEmerging Market sovereign debt has remained at manageable levelsExcess leverage is currently a developed market phenomenon– Emerging Market sovereign debt has remained at manageable levelsSource: IMF World Economic Outlook April 2012. General government gross debt as a percentage of GDP 7
  8. 8. EMERGING MARKET GROWTHAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET GROWTHA LONG TERM STORYPer Capita GDP Emerging vs Developed Markets since 1980 Emerging Market Population pyramid (2015)– Emerging Markets are growing significantly faster than Developed Markets– Attractive Emerging Market demographics should continue to drive domestic growthAttractive Emerging Market demographics should continue to drive domestic growthA secular growth storySource. IMF, United Nations Population Division, Credit Suisse September 2012 8
  9. 9. EMERGING MARKETS ARE UNDER RESEARCHEDAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKETS ARE UNDER RESEARCHEDINFORMATION DISCOVERY LEADS TO GREATER LONG TERMRETURNSMarket Cap Number of Companies Analyst Coverage<$1.5bn 2044 9$$1.5bn<$5bn 373 22$5bn<$20bn 164 26>$20bn 31 31>$20bn 31 31Analyst coverage is focused on the mega cap space– Analyst coverage is focused on the mega cap space– Analyst coverage is shallow and rapidly falls away1/3rd of companies within our universe have less than 5 analysts following the company– 1/3rd of companies within our universe have less than 5 analysts following the company– Coverage is often dominated by local brokerage firmsMarket inefficiencies create long term investment opportunitiesSource: Factset, February 2013 9
  10. 10. A VERY VOLATILE ENVIRONMENT FOR EQUITIESAviva Investors Emerging Markets Equity Review & Outlook 2013A VERY VOLATILE ENVIRONMENT FOR EQUITIESSTUMBLING BETWEEN CRISIS AND BAIL OUTSMSCI Emerging Markets (January 2011- April 2013)12001250Japanese110011501200+20% +23%ECB bondbuying andQE3.0EarthquakeOperation twist +LTRO rally105011009501000850900Spanish CrisisEuropean crisis andEmerging Market-28%-18%800Spanish Crisisg gDecelerationSource: Bloomberg and Factset, April 2013 10
  11. 11. EMERGING MARKET CORPORATE EARNINGSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET CORPORATE EARNINGSA STABILISATION IN EARNINGS150%MSCI Emerging Markets: Earnings growth year-on-year (1995-April 2013)100%50%50%0%-100%-50%01-199607-199601-199707-199701-199807-199801-199907-199901-200007-200001-200107-200101-200207-200201-200307-200301-200407-200401-200507-200501-200607-200601-200707-200701-200807-200801-200907-200901-201007-201001-201107-201101-201207-201201-2013We believe a recovery in earnings growth should help drive emerging market equity returnsSource: Bloomberg and Factset, April 2013We believe a recovery in earnings growth should help drive emerging market equity returns11
  12. 12. EMERGING MARKET VALUATIONAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET VALUATIONVALUATION DISPERSION SHOWING SIGNS OF CONTRACTINGMSCI Emerging Markets: top quintile compared to market average (1992 – 2012)2.53Economic Slowdowns1.52O St d d00.51One StandardDeviationAverage-1-0.50 AverageOne StandardDeviation-1.5E i k l i di i di i ll id d i i l dValuation dispersion creates attractive investment opportunities– Equity market valuation dispersion traditionally widens during economic slowdowns– We believe a wide valuation dispersion creates an attractive opportunity set for active investment managers.Source: Bloomberg and Factset, April 2013Valuation dispersion creates attractive investment opportunities12
  13. 13. EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYATTRACTIVELY VALUED2 83.31618Emerging Market historic price to earnings and price to book ratio1.82.32.8101214P/EP/B20%0.81.368102007 2008 2009 2010 2011 2012P/B-20%-10%0%10%20%P/E Relative todevelopedMarketsP/B Relative todevelopedk t-40%-30%markets– Emerging Market equities are cheap when compared to their historic valuation levels– The discount to developed markets is approaching an extreme for emerging markets– Current valuations are based on earnings depressed by a mid cycle economic slowdownEmerging markets currently trade at an extreme discount to developed marketsSource: Factset/Bloomberg, April 2013Emerging markets currently trade at an extreme discount to developed markets13
  14. 14. EMERGING MARKET EQUITYAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITYCHEAP ACROSS ASSET CLASSES111315DividendYieldEmerging Market Sovereign Debt, Equity and Dividend Yield3579EarningsYield1 52.0Earnings-1131997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012SovereignYield-0.50.00.51.01.5 EarningsYield / DebtYield-1.0– Emerging Market Sovereign yield has compressed over the last decade– Sovereign yield is nearing parity with Emerging Market dividend yield– Emerging Market earnings yield compared to sovereign yield is at an all time extreme– “Fed Model” suggests emerging market equity is looking exceptionally cheapEmerging market equity is cheap compared to emerging market debtSource : Factset/MSCI, April 2013; Sovereign Yield is based on the JPMorgan EMBI+ Yield; Earnings Yield is based on the MSCI EmergingMarket IndexEmerging market equity is cheap compared to emerging market debt14
  15. 15. Aviva Investors Emerging Markets Equity Review & Outlook 20132. EMERGING MARKETS EQUITY SMALL CAP15
  16. 16. THE CASE FOR EMERGING MARKET EQUITY SMALL CAPSAviva Investors Emerging Markets Equity Review & Outlook 2013THE CASE FOR EMERGING MARKET EQUITY SMALL CAPS1. Small cap stocks have greater exposure to domestic growth within Emerging Markets2 Small cap stocks trade at cheaper m ltiples and ha e s perior long term gro th2. Small cap stocks trade at cheaper multiples and have superior long-term growthprospects / superior long term returns expected3 The asset class is under researched and less efficient We believe this allows for the3. The asset class is under researched, and less efficient. We believe this allows for theachievement of higher relative returns over the long term4. In a period of increasing global correlation, Emerging Market Equity Small Caps offer4. In a period of increasing global correlation, Emerging Market Equity Small Caps offerdiversification16
  17. 17. S C S O OS O G G G OAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS OFFER EXPOSURE TO EMERGING MARKET GROWTHTHE ACCELERATING PACE OF URBANISATIONI f t t di f t f E i M k tUrban Population vs GDP per capita910Infrastructure spending forecast for Emerging Markets(USD tn)5678123401ChinaIndiaRussiaBrazilIndonsiaMexicoSaudiArabiSouthAfricaUAEOther– The growth of GDP per capita and that of an urban population are intrinsically linked– Urbanisation requires a step change in infrastructure investmentiaaUrbanisation requires a step change in infrastructure investment– Emerging Markets are struggling to keep pace with their populations demands for better infrastructureExposure to the Emerging Markets key investment needsSource. Bloomberg, United Nations Population Division, Credit Suisse, Dow Jones, Morgan Stanley September 201217
  18. 18. S C S O OS O G G G OAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS OFFER EXPOSURE TO EMERGING MARKET GROWTHACCESS TO DOMESTIC DEMAND25%30%– Small caps have greater exposure to thethemes of growing domestic demand such as:20%– Increased urbanisation– Rising income levels– Consumer goods and servicesHealthcare10%15%– Healthcare– Infrastructure– Industrials5%– By comparison, large caps are dominated byenergy and commodities0%Large Cap Small CapA more targeted approach to emerging market growthSource: Factset, MSCI September 2012. 18
  19. 19. SMALL CAPS ARE UNDER RESEARCHEDAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS ARE UNDER RESEARCHEDINFORMATION DISCOVERY LEADS TO GREATER RETURNSAnalyst coverage Large cap Small capNo. of companies 821 1,902p ,Analysts per stock 14 4Stocks with no analyst coverage 43 667Stocks with 2 or less analysts 68 907Stocks with 2 or less analysts 68 907Analyst coverage is focused on the mega cap space– Analyst coverage is focused on the mega cap space– Analyst coverage is shallow and rapidly falls away– Nearly 40% of small caps in emerging markets did not have any coverage as at January 2012Market inefficiencies create long term investment opportunitiesSource: Factset, January 2012 19
  20. 20. EMERGING MARKET SMALL CAPSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET SMALL CAPSA NARROWING DISCOUNT22.53S ll C11.52Small Cap000.52005 2006 2007 2008 2009 2010 2011 2012Large Cap-0.3-0.2-0.1 P/BDiscount-0.5-0.4– Emerging Market Small Caps still trade at a discount to Large Caps– The discount to larger market cap companies is gradually decreasingEmerging market small cap stocks trade at an unjustified discount to large capsThe discount to larger market cap companies is gradually decreasing– In developed markets small cap indices traditionally trade at a premium to large capSource: Factset/Bloomberg, as at May 2013. 20
  21. 21. EMERGING MARKET SMALL CAPSAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET SMALL CAPSLOWER REALISED VOLATILITYHistoric Realised 1 Year Volatility35.0040.0025.0030.00EM Small Cap15 0020.00EMDM Small CapDM10.0015.00– Emerging Market Small Caps have recently experienced significantly lower volatility than otherbroad indicesUnlike in developed markets emerging market small caps are less volatile than their larger peers5.002008 2009 2010 2011 2012 2013Emerging market small cap stocks trade at an unjustified discount to large caps– Unlike in developed markets, emerging market small caps are less volatile than their larger peers– Volatility has substantially reduced since the credit crisisSource: Bloomberg/MSCI, as at May 2013.Emerging market small cap stocks trade at an unjustified discount to large caps21
  22. 22. SMALL CAPS OFFER DIVERSIFICATIONAviva Investors Emerging Markets Equity Review & Outlook 2013SMALL CAPS OFFER DIVERSIFICATIONAN OPPORTUNITY TO REDUCE RISKMSCI InvestmentUniverseEmergingMarket SmallCapsEmergingMarketsWorldNorthAmericaEuropeEmerging MarketSmall Caps1Emerging Markets 0.962 1World 0.837 0.879 1North America 0.778 0.832 0.975 1Europe 0.811 0.855 0.961 0.890 1p– Emerging market small caps have the lowest correlation with other major equity marketsReduced correlation improves risk adjusted returns– Reduced correlation improves risk adjusted returnsMarket inefficiencies create long term investment opportunitiesSource: Bloomberg March 2013 22
  23. 23. Aviva Investors Emerging Markets Equity Review & Outlook 20133. EMERGING MARKETS EQUITY SMALLCAP FUND PROCESSCAP FUND PROCESS23
  24. 24. EMERGING MARKET SMALL CAPAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET SMALL CAPINVESTMENT PROCESSClient portfolioSmall capinvestmentQualityscreeningValuescreeningCore fine filtersP i t– Unconstrained– High conviction– 40 - 80 stocksuniverse– 4,000 +companiesg– Quality filter.scorescompaniesfor:g– Valuations:– P/E– Earningst– ProprietaryResearch– CompanyMeetingsI d th– Profitability– Growth– Spendingefficiencymomentum– Pricemomentum– Filtersi t– In-depthAnalysisy– Sustainability– Persistencyuniverse to100 - 150stocks– Our primary source of alpha is our in-house, bespoke research:– Emerging market small cap universe is under-researchedOur proprietary research is augmented by selected independent third-party research– Our proprietary research is augmented by selected independent third-party researchRigorous process combining quantitative filters with bottom-up stock picking24
  25. 25. Aviva Investors Emerging Markets Equity Review & Outlook 2013FUNDAMENTAL ANALYSISFUNDAMENTAL ANALYSISINVESTMENTS ARE ANALYSED ON AN INDIVIDUAL BASISWe look for factors that affect the long term potential of a business:Att ti b i d l- Attractive business model- Quality of management and alignment with shareholder objectives- Accounting quality and practices- Balance sheet strength- Cash flow existence, stability and growthUndervalued- UndervaluedIn-depth company analysis25Source: Aviva Investors
  26. 26. Aviva Investors Emerging Markets Equity Review & Outlook 2013FUNDAMENTAL ANALYSISFUNDAMENTAL ANALYSISINVESTMENTS ARE ANALYSED ON AN INDIVIDUAL BASIS– An in-depth report is produced on all investmentsIn-depth company analysis– The underlying business model and industry dynamics are analysed in detail26Source: Aviva Investors
  27. 27. Aviva Investors Emerging Markets Equity Review & Outlook 2013MACRO INPUTMACRO INPUTCOUNTRY EFFECTS HAVE GREATER INFLUENCE IN EMERGING MARKETSDeveloped Markets Emerging Markets6070607030405030405010201020092 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12Region Country Sector Industry092 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12Region Country Sector Industry– Emerging markets are influenced by country factors to a greater degree than developed markets.– We ensure that our portfolio construction coherently addresses macro factors.We invest in companies but build portfolios that will lastMacro factors are given due consideration in portfolio construction– We invest in companies, but build portfolios that will last.Source: Empirical Research, February 2013 27
  28. 28. PORTFOLIO CONSTRUCTIONAviva Investors Emerging Markets Equity Review & Outlook 2013PORTFOLIO CONSTRUCTION- 40 – 80 HoldingsT 2/3 d f f li i i d $2b k- Target 2/3rds of portfolio in companies under $2bn market cap- Valuation below that of the MSCI Emerging Market Small Cap Index- Balanced target beta range 0.90 to 1.10- Average position size 1.5%- No holding >5.0%- No Sector or Country deviation >10% of MSCI Emerging Market Small Cap Index weighty g g p g- Target tracking error range 4-8%1 to 3 year investment horizon ensures low turnover- 1 to 3 year investment horizon ensures low turnover28There is no guarantee that the projected returns will be achieved.
  29. 29. Aviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITY SMALL CAP FUNDEMERGING MARKET EQUITY SMALL CAP FUNDPORTFOLIO CONSTRUCTIONRegion No. of Stocks % of Fund % IndexAsia 37 69 74EMEA 12 19 14L i A i 6 10 12Active sector weights (%)Top active country weights (%)Latin America 6 10 12Total 55 100 100g ( )p y g ( )4 084.676.55Health CareInformation TechnologyConsumer Discretionary3 024.045.98PhilippinesThailandTurkey-1.40-0.950.244.08EnergyTelecommunication ServicesIndustrialsHealth Care-2.132.763.003.02IndiaRussiaMexicoPhilippines5 77-2.92-2.57-1.93MaterialsUtilitiesConsumer StaplesFinancials8 41-5.79-2.76-2.69TaiwanHong KongBrazilIndonesiaDiversified portfolio across region, country and sector-5.77Materials-8.41TaiwanSource: Aviva Investors, 30 April 2013 29
  30. 30. Aviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITY SMALL CAP FUNDTop 10 weights (%)EMERGING MARKET EQUITY SMALL CAP FUNDPORTFOLIO CONSTRUCTIONLiquidity Analysis – % of portfolio to cash byTop 10 weights (%)12%9%6%0 3< 0.2< 0.1number of days required4.404.84GS Home Shopping Inc.Filinvest Land Inc.27%17%14%12%< 1< 0.5< 0.4< 0.33.583.603.93Intelligent Digital Integrated SecuritySungwoo Hitech Co. Ltd.Turk Traktor ve Ziraat Makineleri A.S.Qualitas Controladora S.A.B. de C.V.61%53%42%< 4< 3< 22 802.872.923.22H iti I t ti l H ldi LtdLife Healthcare Group Holdings Ltd.KPJ Healthcare BhdIntelligent Digital Integrated SecurityCo. Ltd.79%66%< 10< 5N t t b t >10%2.752.80DGB Financial Group Co. Ltd.Haitian International Holdings Ltd.– No sector or country bet >10%– Concentrated stock specific bets however no individual position greater than 5%– 80% of portfolio realisable within 10 days, 50% within 3 days in a traditionally illiquid asset classCarefully managed risk80% of portfolio realisable within 10 days, 50% within 3 days in a traditionally illiquid asset classSource: Aviva Investors, 30 April 2013 30Source: Aviva Investors, 28 February 2013
  31. 31. Aviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKET EQUITY SMALL CAP FUNDEMERGING MARKET EQUITY SMALL CAP FUNDINVESTMENT APPROACH– Global Emerging Market Small Cap strategy William BallardFund manager, Emerging Markets– Quality and Value focus– A focused, unconstrained portfolio of high-conviction positionsAviva Investors Emerging Market Small Cap fundMSCI Global Emerging Markets SmallInvestment experience: 13yrsconviction positions– Robust risk management practicesLow turnover due to 1 3 year investmentBenchmarkMSCI Global Emerging Markets SmallCap indexFund/strategy Size USD 142m as at 28 February 2013Target Alpha 3% p.a. over rolling 3 year periods– Low turnover due to 1-3 year investmenthorizon– A niche product. One of the few EM SmallC f dTarget tracking error 4-8%Typical number of stocks 40-80Max. active stock weights 10%Cap fundsgMin. market cap No min.Max. market capMin: 2/3rds of portfolio <$2bn marketcapSource: Aviva Investors, 28 February 2013. There is no guarantee that the projected returns will be achieved. 31
  32. 32. Aviva Investors Emerging Markets Equity Review & Outlook 20135. APPENDICES32
  33. 33. BIOGRAPHIESAviva Investors Emerging Markets Equity Review & Outlook 2013BIOGRAPHIESJerome NunanClient Portfolio Manager,EquitiesWill BallardEmerging Markets FundManager qJoined the investment industry in1998 and Aviva Investors in 2009Jerome bridges the investment and distribution teamsgJoined the investment industry in2000 and Aviva Investors in 2009Will is responsible for fund management in emerging Jerome bridges the investment and distribution teams,supporting clients and the distribution process.Prior to joining Aviva, Jerome spent eight years atDeutsche Bank, working in Global Equities. Previously hek d f fi i l lt fi d hi fi t j bWill is responsible for fund management in emergingmarketsWill previously worked at the Royal Bank of Canada in theirGlobal Arbitrage Trading division. Prior to this role he was afund manager at Henderson Global Investors on their Pan worked for a financial consultancy firm, and his first jobwas in the British Army, where he served for 10 years inthe Royal Tank RegimentJerome holds a BA (Hons) in Modern Languages from theUniversity of East Anglia and a MBA from Cranfieldfund manager at Henderson Global Investors on their PanEuropean Equity Multi-strategy team.Will holds an MA (Hons) from Cambridge University. Healso holds the Investment Management Certificate and is aCFA charter holder University of East Anglia and a MBA from CranfieldUniversity, School of ManagementCFA charter holder.33
  34. 34. EMERGING MARKETS EQUITY TEAMAviva Investors Emerging Markets Equity Review & Outlook 2013EMERGING MARKETS EQUITY TEAMSOME PRESTIGIOUS AWARDSEuropean Convergence FundWinner of 2009 Lipper Fund AwardsTaiwan, Singapore – Aviva FundsEmerging Markets Equity P1 - bestEmerging Markets Small Cap2012 winner in the Equity GlobalEmerging Markets best fund over3 years categoryEmerging Markets Small Cap2010 winner in the EmergingMarkets Equity category by theExpansión/Interactive Data Funds g g q yfund over 3 and 5 years in the‘Equity Global Emerging Markets’sectory g y pAwardsOther recent awards:European Convergence Fund:Winner of 2010 Morningstar LibreBelgique De Standaard in theBelgique De Standaard in the‘Equities Emerging Markets’ sectorWinner of 2009 FondsProfessionell/Die Presse Awards –3 year performance and 5 yearperformanceEmerging Markets EquityWinner of 2009 ‘Best of the Best’ forthe ‘Most Innovative Product –Singapore’ categoryEuropean Convergence FundWinner of 2010 Les Victoires desSICAV Vainquer France, LaTribune/Morningstar in theEmerging Europe Equity category performanceEmerging Europe Equity categoryPast performance is not a guide to future performance 34
  35. 35. IMPORTANT INFORMATIONAviva Investors Emerging Markets Equity Review & Outlook 2013IMPORTANT INFORMATIONThis document is for Professional Clients only. It is not to be viewed by or used with retail clients. The information provided in this document and any appendix isconfidential and should only be used for the purposes requested.Except where stated as otherwise, the source of all information is Aviva Investors as at 31 March 2013.Aviva Investors Emerging Market Small Cap Fund (“the Fund”) is a sub-fund of Aviva Investors SICAV, an open-ended investment company incorporated as aSociété dInvestissement à Capital Variable in Luxembourg. It is authorised by the Commission de Surveillance du Secteur Financier (CSSF) and qualifies as anUndertaking for Collective Investment in Transferable Securities (UCITS) under Part I of the law of 17 December 2010 relating to undertakings for collectiveinvestment. The Management Company is Aviva Investors Luxembourg. Investment Manager is Aviva Investors Global Services Limited, regulated and authorisedby the FCA.Th di t ib ti d ff i f h b t i t d b l i t i j i di ti Thi d t h ld t b t k d ti ff b iThe distribution and offering of shares may be restricted by law in certain jurisdictions. This document should not be taken as a recommendation or offer by anyone inany jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. The distribution and offering ofshares may be restricted by law in certain jurisdictions. This document should not be taken as a recommendation or offer by anyone in any jurisdiction in which suchan offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. The content of this document does not purport to berepresentational or provide warranties above and beyond those contained in the legal documentation and subscription documentation of the Fund. The legaldocumentation and the subscription document contain the full terms, conditions, representations and warranties in respect of the Fund. Nothing in this documentshall be construed as forming any part of those terms conditions representations or warranties The legal documentation and the subscription documents should beshall be construed as forming any part of those terms, conditions, representations or warranties. The legal documentation and the subscription documents should beread before an investment is made.Any future returns and opinions expressed are based on the internal forecasts of Aviva Investors and should not be relied upon as indicating any guarantee of returnfrom an investment managed by Aviva Investors. No part of this document is intended to constitute advice or recommendations of any nature. Past performance isnot a guarantee of future returns.The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount investedThe value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.Information about specific securities should not be construed as a recommendation to buy or sell any securities.IMPORTANT INFORMATION HONG KONG: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. It is not intended toconstitute, and under no circumstances should it be construed as, an offer or invitation to anyone to invest in any products, an offer of or solicitation for services, oran advice on any products, services or investment, associated with Aviva Investors Asia Pte Ltd. If Investors are in any doubt about any of the contents of thisdocument they should obtain independent professional advice This document is not being distributed in Hong Kong other than (1) to "professional investors" withindocument, they should obtain independent professional advice. This document is not being distributed in Hong Kong other than (1) to professional investors withinthe meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the "SFO") and any rules made under the SFO; or (2) in other circumstances whichdo not result in the document being a "prospectus" as defined in the Companies Ordinance (Cap. 32) of Hong Kong (the "CO") or which do not constitute an offer tothe public within the meaning of the CO. No action has been taken, in Hong Kong or elsewhere, to permit the distribution of this document to the public of Hong Kongor in a manner in which this document may be accessed or read by the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong).This document is distributed on a confidential basis.Aviva Investors Asia Pte. Limited, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital MarketsServices Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and is an Exempt FinancialAdviser for the purposes of the Financial Advisers Act (Singapore Statute Cap. 110).Registered Office: 6 Temasek Boulevard, #32-08 Suntec Tower 4, Singapore038986.13/0330/30062013-20130509_0135
  36. 36. THANK YOU

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