Amundi citywire emerging internal demand - oct 2013

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Amundi citywire emerging internal demand - oct 2013

  1. 1. Emerging Internal Demand - Citywire Asia 2013 10 -11 October 2013 Mickaël TRICOT, CFA Emerging Markets Fund Manager
  2. 2. Amundi, one of the world largest asset managers $1,000 Bn in Assets under Management1 Mutual fund Management Open-ended funds Institutional Assets under Management No.9 No.1 2 No.1 No.2 3 No.2 5 1.Amundi Group figures as at 30 June 2013. 2. Total net assets - Source : IPE «Top 400 global asset managers active in the European marketplace » published in June 2013, data as at December 2012. 3. Source Europerformance NMO – June 2013– French domiciled funds. 4.Source Lipper FMI – June 2013 - funds domiciled in Europe and in related offshore territories. 5. in Europe- Open-ended funds, dedicated funds, mandates- Source Top 120 IPE European Institutional Managers published in June 2013, data as at December 2012. 2 4 No.5 6 Citywire – October 2013 - page 2
  3. 3. Global capabilities Located in some 30 countries across 5 continents, Amundi covers the main markets and investment regions throughout the world. With a strong local presence, Amundi is committed to offering its clients a relationship defined by both proximity and a long term view. .Amundi Group figures as at 30 June 2013 Citywire – October 2013 - page 3
  4. 4. Amundi, a major player in Emerging Markets $24 bn in emerging market assets and a presence in all major emerging economies. An extensive research capacity with 125 analysts covering all aspects of investment research with prime access to companies. 40% of research resources are based in Asia. Emerging Market Equities are close to the market: – With investment teams based in Paris and in Hong Kong – Over $10 bn AUM in emerging equities – 6 portfolio managers backed by 5 analysts – An average of 14 years experience in the industry Amundi Group figures as at 30 June 2013 Citywire – October 2013 - page 4
  5. 5. Internal Demand in Emerging countries
  6. 6. Investment philosophy “ “ We believe that economic cycles and equity market volatility provide investment opportunities through mispricing of long term prospects, valuation or risk Citywire – October 2013 - page 6
  7. 7. Historical overview of economic development Countries reaching development status is not a new phenomenon Emerging countries are entering mass consumption or high investment phase United Kingdom United States France Germany Sweden Japan Russia Italy Canada Australia Taiwan South Korea Mexico Argentina Brazil Turkey China Thailand India Indonesia Philippines Vietnam Take-off March towards technology maturity Mass consumption 1780 1800 1820 1840 1860 1880 Analysis of Rostow Source : Rostow in 1960 (updated in 1990), « The Stages of Economic Growth », economica,3e édition 1900 1920 1940 1960 1980 2000 2020 2040 Our vision Citywire – October 2013 - page 7
  8. 8. Internal demand in Emerging countries An economic concept DOMESTIC DEMAND = Household consumption + Corporate investments + Government spending An opportunity for investors A long term trend : strong fundamentals supportive of a stable growth – Low product penetration rates and high investment requirements – Low credit penetration and high savings rate – Healthy banking sector – Supportive demographics A sizeable contributor to world growth Citywire – October 2013 - page 8
  9. 9. A growing contributor to world growth Internal Demand of Emerging Markets: 30% of world GDP Internal Demand of Emerging Markets: 51% of world growth World GDP breakdown (2012 - $) Household consumption 5% historical growth rate + Corporate investments 6% historical growth rate + Government spending 7% historical growth rate = DOMESTIC DEMAND 5.5% historical growth rate 51% of historical global economic growth (25% x 5.5% = 1.4% = 51% x 2.7%) Source : Datastream, Amundi Calculation : 2005-2012 Citywire – October 2013 - page 9
  10. 10. Example of the auto industry Past 10 years economic growth Monthly car sales Emerging markets : 1. Sales growing faster before 2008 2. Interruption in growth has been short lived 3. Current monthly sales are already 20% above 2008 level Developed markets : 1. A sharp drop during 2008 crisis 2. Recovery helped by government incentives 3. Sales still 20% below pre-crisis level Japan, Europe and US Source : Datastream, Amundi Citywire – October 2013 - page 10
  11. 11. A “true” emerging markets exposure Significant discrepancy between benchmark primary listing and geographical exposure – MSCI launches new economic exposure module A way to avoid confusion between global equity, global emerging and commodity funds Company MSCI Index SAB Miller MSCI UK 2% 71% Fanuc MSCI Japan 23% 52% Ericsson MSCI Sweden 1.7% 50% Unilever MSCI Netherlands <5% 53% developed Colgate MSCI USA 18% 48% indexes General Motors (*) MSCI USA 28% 56% CFAO MSCI France 0% 100% Samsung Electronic MSCI Korea 16% 47% Infosys MSCI India 2% 2% Hon Hai MSCI Taiwan 4% 19% Gazprom MSCI Russia 38% 48% Source: Amundi April 2013 - Given for illustrative purpose only Sales % coming from its index country Sales % coming from Emerging countries In the In the emerging indexes Citywire – October 2013 - page 11
  12. 12. A strong focus on domestic sectors A way to avoid cyclical bias of Emerging equity universe GLOBALLY DRIVEN SECTORS 36,8% DOMESTIC FOCUS SECTORS 63,2% Global cyclicals 16,5% Domestic cyclicals Cement Auto 16,1% 1,5% 3,8% Semi & emi eqpt 8,1% Tech hardware 3,3% Machinery 1,0% IT services 1,2% Marine 0,3% 2,5% Commodity cyclicals 20,3% Energy Chemical 12,0% 2,6% Metals, mining & paper 5,7% 4,1% 0,8% 2,3% 2,3% Construction & engineering Electrical eqpt 0,2% Airlines Industrial conglomerates Retailing Consumer durables Consumer services Software 0,9% 0,2% Defensives 19,8% Roads, rail & ports Food beverage & tobacco Household & personal products Telecommunication services Utilities Health care 1,1% 5,3% 1,1% 7,5% 3,2% 1,5% Rate sensitive sectors Banks Insurance Asset sensitive financials Real estate Diversified financials Source: Amundi front office data Sept 2013 - Given for illustrative purpose only Allocations are as of date shown and are subject to change 22,3% 19,1% 3,2% 5,0% 2,3% 2,7% Citywire – October 2013 - page 12
  13. 13. Investment approach Judgmental decisions based on fundamental analysis are core A long-term investment horizon Combined top-down and bottom-up approach Emphasis on liquidity control Citywire – October 2013 - page 13
  14. 14. Investment process One common disciplined approach Outlook Valuation Risks Combining top-down and bottom-up approach Citywire – October 2013 - page 14
  15. 15. 60% Filter Equity Universe ~19000 stocks Emerging Internal Demand Universe ~1000 stocks GEM process How we deal with stock picking Final portfolio ~250 stocks Min 60% of revenue derived from Emerging markets Out of benchmark: min 200m$ market cap and 2m$ daily volume 1. Monitor universe 2. Build investment cases 3. Decide, implement & monitor Company meetings A qualitative assesment of the Interactive decision making Consensus valuation multiples/quant investment case process screens A comprehensive financial analysis Efficient implementation and Stock performances rigourous portfolio monitoring Top down ideas Sell side research Major characteristic: 23% of the portfolio are invested outside the benchmark and 27% are invested in mid and small caps Large caps > 5bn$, Small caps <1bn$ Citywire – October 2013 - page 15
  16. 16. Stock selection Investment case Qualitative assessment of the investment cases Source: Amundi Given for illustrative purpose only Comprehensive financial analysis Valuation tool Citywire – October 2013 - page 16
  17. 17. Emerging Internal Demand expertise
  18. 18. Emerging Internal Demand expertise Performances Annualized Performance Representative Portfolio Calendar year performance 1 year 3 years Since inception 30% 20,27% 18,88% 17,51% 18,22% 15% Net Performance 1,09% 0,16% -2,63% Spread +0,26 -0,92 +0,30 Information Ratio 0,06 -0,25 0,07 -15% -9,27% -10,19% -19,38% -18,42% -30% 2010 Benchmark is MSCI EM ( Emerging Markets) Inception date - October , 2007 GIPS Composite 0% Representative Portfolio 1 year 3 years 0,53% 0,40% -0,10 -0,84 2013 MSCI EM 15,20% Spread 2012 10 years Gross Performance 2011 2,77 Benchmark is MSCI EM ( Emerging Markets) Composite asset USD 2 Bn Inception date - October , 2007 Source : Amundi August 2013, net performance in USD of a representative portfolio . The performance of the representative portfolio does not represent actual trading and therefore the performance results may not compensate for the impact, if any, of the lack of liquidity, money flow, tax implications and other market risk factors. Past performances and simulations based on these, do not guarantee future results, nor are they reliable indicators of futures performances. Given for indicative purpose only. Citywire – October 2013 - page 18
  19. 19. Performance Attribution Gross relative performance -0.4% 11.6% 4.9% 1.3% 2.9% 2.6% 14% 12% 10% 8.7% 8% 6% 4% 6.0% 5.0% 2% 0.6% 3.3% 3.0% 0.3% 0.9% -2,1% -2.0% -0.2% 0.5% -0.9% 0,4% -1.0% 2009 2010 2012 YTD 08/2013 0.2% 0% 0,3% -0.9% -2% -4% 2008 Country allocation 2011 Sector allocation Stock picking Source: Amundi August 2013. Representative portfolio gross relative performance (ex transaction fees) . The performance of the representative portfolio does not represent actual trading and therefore the performance results may not compensate for the impact, if any, of the lack of liquidity, money flow, tax implications and other market risk factors. Past performance does not prejudge future results, nor is it a guarantee of future returns. Citywire – October 2013 - page 19
  20. 20. Emerging Internal Demand expertise An experienced investment team Mickael Tricot, leader portfolio manager since the launch of the strategy in Oct.07, 14-years experience in the industry $ 350 million AUM in the strategy Competitive ranking over 5 years 1st quartile - Lipper 1st quartile - Morningstar Upper quartile - Emerging Markets Equity universe Mercer Data Source - ©[2013] Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. 3 Lipper is not responsible for the accuracy, reliability or completeness of the information that you obtain. In addition, Lipper will not be liable for any loss or damage resulting from information obtained from Lipper or any of its affiliates. © Thomson Reuters 2013. All rights reserved. Citywire – October 2013 - page 20
  21. 21. What about the ‘Internal Demand’ now?
  22. 22. EM equities confronting QE tapering Net FX debt at much lower levels Situation very different from EM crisis of 97/98 – – Current account balances and net foreign debts are in much better shape Most EM countries have flexible exchange rates today Higher bond yields and monetary tightening should lead to lower economic growth – Impact to be softened by exports picking up and regain of competitiveness Very positive medium as balance of payment deterioration has stopped Source: Oxford, Amundi Citywire – October 2013 - page 22
  23. 23. Economic growth for GEM to be lower but should stay higher A mix of cyclical and structural slowdown – – – – – – Real GDP growth (yoy) Lower growth in exports to US and EU Less dynamic commodity and energy prices Governments reacting less to current slowdown vs 2008 Less room for big cuts in interest rates than before Fewer under-valued currencies limit room for domestic demand boost Banking sectors have less excess deposits But higher GDP growth vs DM to stay – – – – – – – – – Better relative demographic trends Better fiscal situation and external position Lower overall debt burden Higher productivity growth potential Financial leveraging potential Lower labor costs & competitive currencies Beneficiary of global corporate capital expenditure Improving education level/GDP per capita convergence WTO rules favoring lower social and environmental standards We favor countries able to maintain a balance between economic growth and financial stability Source : Factset, Amundi Developed countries : GDP weighted of US, EU & Japan Citywire – October 2013 - page 23
  24. 24. Appendices
  25. 25. A growing contributor to world growth Private consumption of Emerging Countries represents more than 40% of Developed Economies consumption, compared to just 19% ten years ago Private consumption of Emerging Countries as % of private consumption of developed economies Source: EIU, MSCI, AMUNDI Citywire – October 2013 - page 25
  26. 26. Stock picking How do we build our own opinions on stocks? Information Company meetings Top sell-side research Annual and quarterly reports Top down inputs Each Analyst/PM responsible for a comprehensive analysis of companies under its coverage 1. In-depth qualitative analysis – Company specific : activity, competition, risks, corporate governance, shareholding structure, industry and regulation etc. Discussed with lead/co lead PM 2. Comprehensive financial analysis – Understand the company business model : ability to deliver growth and return (cash flow generation and investment) – Valuation : EVA models and valuation multiples Formulate investment cases Citywire – October 2013 - page 26
  27. 27. Comparison with the Emerging Markets Equity universe Emerging Internal Demand expertise at Amundi versus EM Universe Citywire – October 2013 - page 27
  28. 28. Amundi Funds Equity Emerging Internal Demand - page 28 Citywire – October 2013 - page 28
  29. 29. Disclaimer This document is only for the attention of “Professional” investor as defined in Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments (“MIFID”), to investment services providers and any other professional of the financial industry, and as the case may be in each local regulations and, as far as the offering in Switzerland is concerned, a “Qualified Investor” within the meaning of the provisions of the Swiss Collective Investment Schemes Act of 23 June 2006 (CISA), the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the FINMA’s Circular 08/8 on Public Advertising under the Collective Investment Schemes legislation of 20 November 2008. In no event may this material be distributed in the European Union to non “Professional” investors as defined in the MIFID or in each local regulation, or in Switzerland to investors who do not comply with the definition of “qualified investors” as defined in the applicable legislation and regulation. This document neither constitutes an offer to buy nor a solicitation to sell a product and shall not be considered as an unlawful solicitation or an investment advice. Amundi accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi can in no way be held responsible for any decision or investment made on the basis of information contained in this material. The information contained in this document is disclosed to you on a confidential basis and shall not be copied, reproduced, modified, translated or distributed without the prior written approval of Amundi, to any third person or entity in any country or jurisdiction which would subject Amundi or any of “the Funds”, to any registration requirements within these jurisdictions or where it might be considered as unlawful. Accordingly, this material is for distribution solely in jurisdictions where permitted and to persons who may receive it without breaching applicable legal or regulatory requirements. The information contained in this document is deemed accurate as at September. Data, opinions and estimates may be changed without notice. Amundi, French joint stock company (“Société Anonyme”) with a registered capital of € 584 710 755 and approved by the French Securities Regulator (Autorité des Marchés Financiers-AMF) under number GP 04000036 as a portfolio management company, 90 boulevard Pasteur -75015 Paris-France - 437 574 452 RCS Paris. www.amundi.com - www.amundi-funds.com Citywire – October 2013 - page 29

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