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Citywire em corp debt an asset class that has emerged

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  • 1. Citywire Montreux – 9th ‐11th May 2012Emerging Market Corporate DebtAn asset class that has emerged
  • 2. Contents• Emerging Market Corporate Debt – an asset class that has emerged  g g p g• Emerging Market Corporate Debt at BlueBay 2
  • 3. EM Corporate Debt – An asset class that has emerged Large and well diversified asset class • The EM Corporates universe is US$863bn(1) in size compared to US$608bn(2) for EM sovereign and US$325bn for European High Yield(3) • Of h US$863b Of the US$863bn EM Corporates Universe, US$580bn (67%) are rated Investment Grade C U i US$ 80b (6 %) dI G d • While still being a smaller universe, EM corporates as an asset class are now comparable to US HY (US$1.3tln), European IG (€1.3tln) and US IG (US$4.1tln)  EM Corporate debt is larger than EM sovereign and European HY(1)(2)(3) Estimated Corp Debt Stock (US$bn), to January 2012  1000 US$4100bn 900 800 700 Universe Size (US$bn) 600US$bn 500 400 300 200 US$1300bn 100 US$863bn 0 US$325bn 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD-12 EM Sovereign Debt European High Yield EM C orporate Debt US IG US HY EM C orp Euro HY Data source: JP Morgan (1) EM Corporates universe, as of January 2012      (2) EM sovereign  universe as at 30 September 2011    Data source: JP Morgan 3 (3) European High Yield universe based on the market cap of ML HY bond index, as at January 2012
  • 4. EM Corporate Debt – An asset class that has emergedLarge and well diversified asset class• The EM Corporate asset class encompasses over 60 countries providing opportunity to diversify and take advantage of different economic cycles • The asset class also offers sector diversification with banks being the largest issuersCountry Breakdown as at 10 January 2012* Sector Breakdown as at 10 January 2012* Ot her Utilities Co nsumer Saudi Arabia Thailand Transpo rt 8.06% 4.15% Poland 1.88% Turkey Colombia Diversified Hungary TM T 5.60% Argent ina 7.32% Peru Ukraine Czech Philippines pp Real Estate Israel 5.45% Sout h Af rica Supranat ion Malaysia P ulp & paper Indonesia 1.69% Qat ar Financial Chile 34.13% Singapore Venezuela India Kazakhst an Oil & gas China Hong Kong 19.67% UAE Mexico Industrial Korea 4.18% Russia M etals & mining Brazil Infrastructure 6.35% 0% 2% 4% 6% 8% 10% 12% 14% 1.52%Composition of Emerging Market Corporate bonds by issuer type Composition of Emerging Market Corporate bonds by rating Africa  Emerging  Latin  Rating Entity Total (US$mn) Total (US$mn)Issuing Entity Since 2002 & ME Asia Europe America Total High Yield Bank 44,431 Bank quasi‐sovereign 18,404Banks 30 105 94 121 350 Corporate 157,230Banks ‐ Govt guarantee 3 3 Corporate quasi‐sovereign 56,516 Supranational Bank 475 gBanks Quasi‐sovereign*** 35 77 70 40 222 Total 277,057Corporate 44 294 91 385 814 High Grade Bank 98,626 Bank quasi‐sovereign 97,817Corporate Quasi‐sovereign 62 111 56 86 315 Corporate 163,462Total number of Issues 171 587 314 632 1,704 Corporate quasi‐sovereign 214,287 Supranational Bank 11,915 Total 586,107 Total EM Corporate bond stock 863,164Data source:  Top charts – JP Morgan, Bloomberg, BlueBay Asset Management.     Bottom charts – JP Morgan as at 10 January 2012   *Based on US$863bn Universe      ***Includes Supranational Banks 4
  • 5. EM Corporate Debt – An asset class that has emerged Large and well diversified asset class • Approximately two thirds of EM Corporates are rated Investment Grade, a number of which are of systemic importance to the sovereign.  Quasi sovereign credits account for one third of the asset class • New issuance remains strong in EM Corporates with the majority of issuance coming from IG corporates.  2011 issuance was US$202.5bn and  a further US$185bn is anticipated for the full year 2012 Rating Breakdown of EM Corporate Universe  Estimated EM Corporate Debt Stock (US$bn) to 10 January 2012 Q uasi-sovereign* I nvestment G rade H igh Y ield C C C and AAA US$116.0bn US$283.5bn US$179.0bn US$285.0bn US$863.2bn lower* 1.25% 100% 8.85% 8 85% AA 14.52% 5.55% 90% 20.60% 23.36% 24.47% B 31.72% 10.47% 80% 20.22% A 70% 26.05% 26 05% 12.27% 12 27% 30.36% 30 36% 60% 38.32% BB 37.93%13.44% 50% 40% 65.26% 30% 56.01% 56 01% 46.27% 20% 41.08% 37.60% BBB 10% 34.40% 0% Africa & Asia Emerging Latin Total Middle East Europe America Data source: JP Morgan, BlueBay Asset Management, as of  10 January 2012 Data source: JP Morgan   *Including supranationals and government guaranteed 5 *Including not rated
  • 6. EM Corporate Debt – An asset class that has emerged Exposure does not match increasing economic importance • EM is 37% of GDP but just 13% of MSCI AC World Index and 3% of Barclays Capital Global Aggregate Index EM / DM breakdown of indices EM Corporates EBITDA growth vs debt growth120% 80% Developed Markets EM: China EM: Brazil, Russia, India EM: Other EBITDA Debt100% 3% 7% 19% 4% 60% 2%80% 9% % growth 9%60% 40% 97% 87%40% 63% 20%20% 0% 0% Share of 2010 Sh f Share of MSCI Sh f Share of Barcap Sh fB Q4 09 Q1 10 Q2 10 Q3 10 Q1 11 Q4 10 World GDP AC World Index Global Agg Index* • Emerging Markets currently contribute close to 40% of global GDP and yet share only 15% of global market capitalisation and 3% of global  g g y g y y g p g credit. We expect both numbers to increase significantly as EM growth outperformance occurs • In fixed income, we believe the strong internal growth story in EM creates the need for capital to fund this growth and leads to significantly  increased EM corporate issuance and its growing share of fixed income issuance globally Data source: MSCI, BarCap, FactSet, World Federation of Exchanges, Goldman Sachs Global ECS Research estimates, as at October 2011 6 *EM also accounts for approx. 6% of US$ denominated Merrill Lynch HY index
  • 7. EM Corporate Debt – An asset class that has emerged EM dedicated investor base is small but growing • The launch of JP Morgan CEMBI Diversified index in November 2007 opened the door for a dedicated EM Corporate investor base. Despite fast  g p p p AUM growth during 2011, dedicated EM corporate investors only account for US$29.6bn versus US$863bn asset class. Majority of the mandates are run for mixed rating products as well as EM IG and EM HY dedicated mandates • We expect to see further growth in the dedicated investor base for EM Corporates Total AUM managed against EM indices, to 14 December 2011 300 Local Market Debt External Debt 231.4 228.5 226.5 226.4 250 Corporate External Debt 206.6 6 2 205.4 4 2 204.2 2 197.2 192.0 189.1 187.3 181.2 178.8 178.2 174.1 200 162.7 158.9 149.8 146.5 33.3 30.2AUM (US$bn) 5.0 121.3 .3 150 13 125 119. 13 111.4 79.2 79.2 79.2 79.2 100 62.3 62.3 55.1 .9 .9 29.6 6 5 29.5 35. 35. 3 28.3 26.7 24.8 50 21.9 21.0 20.9 20.8 17.2 13.9 13.9 8.1 8.1 7.2 6.7 0 y-11 Ma r-11 n-08 n-09 n-10 ct-10 c-10 c-11 n-08 p-10 n-11 p-11 ul-07 ul-09 Apr-10 ul-10 Apr-11 ul-11 Jan Jan Jan Jun Jun Sep Sep Dec Dec May Ju Ju Ju Ju Oc Data source: JP Morgan 7
  • 8. EM Corporate Debt – An asset class that has emergedIssuer Selection is Key• The dispersion between the top 5 returns and the bottom 5 returns within the index has been increasing• Thi d This demonstrates the need for bottom up credit research to identify the best credit specific opportunities h df b di h id if h b di ifi ii Return Dispersion in the JP Morgan CEMBI Div index 150 median (div) ( ) 100 50 turn (%) Total ret - -50 -100 2003 2004 2005 2006 2007 2008 2009 2010 2011Data source: BlueBay Asset Management 8
  • 9. EM Corporate Debt – An asset class that has emergedHistoric Risk Reward is Attractive• Despite the September 2008 sell‐off, the historical performance of EM Corporates has been strong, generating a high return per unit of risk• As the EM Corporates asset class develops we are seeing a trend towards lower levels of volatility as evidenced by the 5 year vs 2 year risk As the EM Corporates asset class develops we are seeing a trend towards lower levels of volatility, as evidenced by the 5 year vs 2 year risk  reward profile of the asset class2 year period: 31 March 2010 to 31 March 2012 ML EUR  JULI  IBOXX EUR  GBI‐EM  CEMBI Div CEMBI Div EMBIG Div EMBIG Div S&P 500 S&P 500 MSCI EM Equity MSCI EM Equity High Yield (US High Grade) IG Corps Glob Div UnhedgedCorrelation to CEMBI Div 1.00  0.75  0.87  0.41  0.34  0.59  0.66  0.63 Annualised return 8.6% 7.8% 9.8% 8.9% 9.8% 2.4% 4.5% 7.9%Historical volatilityHi i l l ili 5.8% 5 8% 8.7% 8 7% 6.2% 6 2% 4.8% 4 8% 19.0% 19 0% 23.9% 23 9% 3.6% 3 6% 10.3% 10 3%Return per unit of risk 1.49  0.89  1.59  1.85  0.51  0.10  1.27  0.77 5 year period: 31 March 2007 to 31 March 2012 y p GBI‐EM  ML EUR  JULI  IBOXX EUR  CEMBI Div EMBIG Div S&P 500 MSCI EM Equity Glob Div High Yield (US High Grade) IG Corps UnhedgedCorrelation to CEMBI Div 1.00  0.74  0.86  0.51  0.41  0.59  0.55  0.61 Annualised returnA li d 8.1% 8 1% 8.4% 8 4% 8.2% 8 2% 8.5% 8 5% ‐0.2% 0 2% 2.3% 2 3% 4.4% 4 4% 8.9% 8 9%Historical volatility 9.5% 11.9% 11.2% 6.2% 23.4% 30.4% 4.2% 11.5%Return per unit of risk 0.85  0.71  0.73  1.37  ‐ 0.01  0.08  1.06  0.77 Data source: Bloomberg, JP Morgan, Morgan Stanley, UBS, and BlueBay Asset Management  9
  • 10. EM Corporate Debt – An asset class that has emergedOffers spread pickup vs DM Corporates• EM corporate spreads (excluding financials) are materially higher than similar rated corporates in developed markets, offering potential for  spread pickupInvestment Grade, as at 04 April 2012 High Yield, as at 04 April 2012 Spread  Spread pick up  Spread  Spread pick up  Asset Class Asset Class Rating Asset Class Asset Class Rating (bps) in EM over DM (bps) in EM over DM DM CORPS ex fin AAA 50 DM CORPS ex fin BB 405 EM CORPS ex fin AAA 116 2.32  EM CORPS ex fin BB 567 1.40  DM CORPS ex fin AA 87 DM CORPS ex fin B 607 EM CORPS ex fin AA 203 2.33  DM CORPS ex fin A 120 EM CORPS ex fin B 972 1.60  EM CORPS ex fin A 197 1.64  DM CORPS ex fin CCC 943 DM CORPS ex fin BBB 216 EM CORPS ex fin BBB 287 1.33  EM CORPS ex fin CCC 1084 1.15 Data source: Merrill Lynch 10
  • 11. EM Corporate Debt – An asset class that has emerged EM Corporates spreads offer value over US Corporates The EM corporates asset class offers spread pickup over similar rated corporates in the US, in particular: • EM High Grade spread pickup is greatest in Peru, India, Singapore and Brazil • EM HY spread pickup is largest in PDVSA, China, Ukraine, Kazakhstan and India EM HG USD CORP  Ratings Adjusted Bench Spread Basis to US Corporates EM HG USD CORP ‐ Ratings‐Adjusted Bench Spread Basis to US Corporates EM HY USD CORP  Ratings Adjusted Bench Spread Basis to US Corporates EM HY USD CORP ‐ Ratings‐Adjusted Bench Spread Basis to US Corporates 200 800 180 700 160 600 140 0 500Spread (bps) Spread (bps) 120 400 300 100 200 80 S 100 60 0 40 -100 20 -200 200 PDVSA Philippines HY Ukraine HY Brazil HY Colombia HY Kazakhstan HY Argentina HY E. Europe HY LATAM HY Singapore HY Peru HY China HY ASIA HY Indonesia HY Africa HY CA&Carib HY Mexico HY Russia HY India HY M. East HY EMEA HY ALL EM HY 0 Korea HG CAF Thailand HG zakhstan HG Brazil HG Colombia HG E. Europe HG Malaysia HG Peru HG Singapore HG LATAM HG China HG ASIA HG Chile HG Africa HG A&Carib HG Mexico HG Russia HG India HG M. East HG EMEA HG ALL EM HG CA M K T . Kaz Data source: Credit Suisse as at 31 January 2012 11
  • 12. EM Corporates – Investment Case EM Corporates benefit from a strong liquidity position • EM Corporates have close to 3 times the cash to total debt when compared to 5 years ago • They also have ample cash to cover short term liabilities with 1.7 times cash to short term debt US & EM IG. Cash as % of Total Debt US & EM HY. Cash as % of Total Debt 40 35 US IG corporates US HY Corporates EM IG Corporates EM HY Corporates 35 30 Cash as a % of Tota l DebtCash as a % of Tota l Debt 29 30 25 24 25 20 20 20 15 13 C 15C 10 10 5 5 0 0 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 11 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 11 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Data source: Bank of America Merrill Lynch, as at September 2011 12
  • 13. EM Corporate Debt – An asset class that has emerged Fundamentally, EM Corporates are well positioned • Entering the economic downturn, EM Corporates had lower leverage than High Yield and High Grade credits in Developed Markets • The re‐rating process is underway with the upgrades to downgrades ratio reversing sharply since the start of the last year Leverage In EM And Developed Markets, as at 31 Jan 2012  US Upgrades/Downgrades. Total EM, as at 30 December 2011 (Net Debt/EBITDA)  250 7.0 Upgrades 5.0x Downgrades Upgrades to Downgrades ratio 6.0 200 4.0x US 3.6x 5.0 des/downgrades Ratio of up/dow 3.0x 150Le verage (x) EM 4.0 2.5x wngrades Upgrad 2.0x US 3.0 1.6x 100 EM 2.0 1.0x 1.0x 50 1.0 0.0x IG Net Leverage HY Net Leverage 0 0.0 Q07 Q07 Q07 Q07 Q08 Q08 Q08 Q08 Q09 Q09 Q09 Q09 Q10 Q10 Q10 Q10 Q11 Q11 Q11 Q11 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Data source:  Merrill Lynch Data source:  JPMorgan 13
  • 14. EM Corporate Debt – An asset class that has emergedDefault rates are expected to be low• Historically EM Corporate defaults were lower than US High Yield corporate defaults with the exception of 2 years when the defaults were  driven by sovereign crises.  We expect default rates in EM corporates to remain low, supported by improving EM Sovereign fundamentals• EM Corporate fundamentals remain on an improving path, with BlueBay estimates for current year defaults running at 1.9%, this translates  into 0.6% for the asset class Senior Unsecured Recoveries by Region, 2009 (%) Senior Unsecured Recoveries by Region 2009 (%) Historical defaults (as a % of HY bonds outstanding) Historical defaults (as a % of HY bonds outstanding) 24 US Asia EM US Average 20 EM Average 15.4% % EEMEA 16 Default Rates (%) 10.7% 0.3% Europe 12 10 t % 9.1% 1 8.0% 7.3% 6.8% 6.3% US & C anada 8 5.2% 5.0% %** 3% 3.0% % 2.8% 3.3 % 2.3% 1.9% 4 1.7% 1.5% 1.5% 1.1% 1.0% 0.9% Latam 0.8% 0.5% 0.4% 0.2% 0.1% 0.0% 0.0% 0 10 20 30 40 50 0 12F 999 000 001 002 003 004 005 006 007 008 010 011 09* Senior Unsecured Recovery, 2009 201 19 20 20 20 20 20 20 20 20 20 20 20 200 Data source: S&P data for years 2000–2008 inclusive for EM; Data source:  Bank of America Merrill Lynch  J.P. Morgan actual data 2009, and forecasts 2010 & 2011 14 *Figure includes distressed exchanges;  ** Figure excludes BTAS (distressed default) 
  • 15. EM Corporate Debt – An asset class that has emerged EM Corporates are growing in liquidity Daily Average Trade Volume by Value (US$ billion) EM IG Corps vs DM Corps Average Trading Volume  (US$bn) 20 0.55 Q2 2009 Q1 2010 Q2 2010 Q3 2010 EM IG Corps p 18 US BBBs Q4 2010 Q1 2011 0.50 30-day avg trading volum Pct of face US As 16 0.45 14 me, 0.40 12T rade Volume 10 0.35 8 0.30 6 a 0.25 4 2 0.20 0 0.15 IG C orporate HY C orporate EM C orporate EM Sovereign Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 • EM Corporates market is more shallow than the more established  Size of universe (US$bn) • EM Corporates liquidity as  asset classes, but liquidity is improving measured by quarterly  IG Corporate 4,000 turnover as % of universe  • Daily trade volumes have more than doubled since Q2 2009 HY Corporate 1,304 stacks up well compared to US  Investment Grade EM Corporate 834 • There is a clear upward trend in EM Corporate liquidity, and  average daily trade volumes are approaching those of the EM  EM Sovereign 608 Sovereign asset class  Data source: FINRA/TRACE, EMTA Data source: FINRA/TRACE, EMTA 15
  • 16. EM Corporate Debt – An asset class that has emergedCorrelation to Treasuries dependent on spread cushionEM IG corporates correlation with US treasury Index EM HY corporates correlation with US treasury Index• EM IG corporates become highly correlated with Treasuries at spreads of less than 200, but at current levels (around 275bps*) some spread  cushion remains• EM HY corporate are negatively correlated with Treasuries at current levels (around 636bps*) with an implied cushion of around 200bps  before Treasury correlation turns positiveData source: Merrill Lynch    *As at 4th April 2012 16
  • 17. EM Corporate Debt – An asset class that has emergedBe mindful of potential risksTechnical risks• Historically EM corporates have been more volatile compared to other fixed income asset classes given (1) early stage of asset class  development and (2) small dedicated investor baseFundamental risks• Bottom‐up research is key driver of returns in the asset class. Reliance on credit ratings or sovereign support is not enough• Sovereign risks, legal framework and shareholder motivations should also be taken into accountStructural risksSt t l i k• Deal structures are as important as company’s fundamentals. Given the fast growing nature of the asset class and uncertain long  term operating outlook, fundamental profile of a corporate can change rapidly. Investors should demand solid structures to protect  the downside riskMacro risks• EM corporates fundamentals are not affected by sovereign Europe but they are not immune to volatility 17
  • 18. EM Corporate Debt at BlueBayEM Corporate subsectors that offer the best opportunitiesDespite strong performance of the asset class in October, we still believe that both EM IG and HY corporates offer value.  There are also opportunities in the total return products• Good entry point into EM HY credits?  ‐ HY corporates are trading at spread of 647bps implying a 6% default rate versus BlueBay projections of 1.9% default rate.  We feel the  p g p p py g yp j default rate is not justified given high liquidity cushion and low leverage ‐ We see pockets of opportunities in (1) credit re‐rating theme with corporates benefiting from sovereign upgrades; (2) M&A opportunities;  (3) equity like returns for performing HY credits (in particular in Asia)• Where is value in EM IG credits?  ‐ HG corporate are now trading at 289bps and on average still trade close to double the spread of similar rated corps in US. However EM IG  corps have the strongest liquidity historically  and maintain lower leverage then developed markets counterparts ‐ We see pockets of opportunities in (1) new issue market offering substantial premium versus secondary; (2) credit re‐rating theme with  We see pockets of opportunities in ( ) new issue market offering substantial premium versus secondary; ( ) credit re rating theme with corporates benefiting from sovereign upgrades; (3) Strong technicals in particular in EM IG defensive sectors • Opportunities in EM Corporate Total Return products? ‐ Large dispersion of returns due to the early development stage of the EM corporate asset class breadth of the universe and a small Large dispersion of returns due to the early development stage of the EM corporate asset class, breadth of the universe and a small  dedicated investor base. Spread differential between worst and best performers reaching close to 100% this year ‐ Multiple alpha strategies including credit long‐short, event driven, capital structure, special situations and local EM corporates ‐ We expect bottom‐up credit selection to be the main driver of returnsData source:  BlueBay Asset Management, JP Morgan, as at 08 November 2011 18
  • 19. Contents• Emerging Market Corporate Debt – an asset class that has emerged  g g p g• Emerging Market Corporate Debt at BlueBay 19
  • 20. EM Corporate Debt at BlueBayEvolution• BlueBay has one of the longest track records in successfully managing EM Corporate dedicated products:• We have over four years of successful track record in EM Corporate total return products. The Emerging Market Corporate Strategy of the BlueBay Multi‐Strategy Fund  generated a net annualised return of 12.7% from March 2007 to 14 October 2011(1)• We launched the long‐only BlueBay Emerging Market Corporate Bond Fund in March 2008 which has grown from US$20mm to US$2bn by mid 2011 ‐ Generated an annualised gross alpha of 6.1% since inception to 30 December 2011 ‐ Citywire recently stated the BlueBay Emerging Market Corporate Bond Fund is the best performing fund on a 3 year cumulative total return basis by 6.4%(2), and one of  9 EM funds in the EM universe (including total return products) that has generated a positive return in 2011(3)• The BlueBay Emerging Market Corporate Alpha Fund was launched on 1st November 2011 and generated 3.08% net return to 30 December 2011(4)• BlueBay Emerging Market Corporate Bond won Best Fund over 3 Years in the Bond Emerging Markets Global category at the Lipper UK Fund Awards 2012 BlueBay Emerging Market Corporate Bond won Best Fund over 3 Years in the Bond Emerging Markets Global category at the Lipper UK Fund Awards 2012 BlueBay Emerging Market Strategy Assets Under Management to December 2011 (US$bn) Dec 2010 US$476mn Segregated  Mandate Nov 2011 Aug 2010 Launch of  US$90mn EMCA Fund  Segregated  Mandate March 2011 US$42mn EM Corp  IG USD April 2008 April 2008 April 2007 US$40mn  June 2009 US$21mn  Added to  US$55mn Added to  EM Corp  Segregated  EM Corp Strategy Bond Fund Mandate within MSFPlease refer to the Disclaimer located at the back of this presentation for important information regarding the performance and calculation methodology shown above.  Data source: BlueBay Asset Management        (1) The Emerging Market Corporate Strategy within the BlueBay Multi‐Strategy Fund was wound up on 14 October 2011         (2) CityWire, August 2011        (3) CityWire Article: “Who made money in EM debt over the past 12 months?” November 2011       (4) The Emerging Market Corporate Alpha Fund was launched on 1st November 2011 and seeded with internal capital within the Class D GBP management shares. D shares are not subject to standard management and performance fees. Therefore to provide representative comparison for a typical investor, the performance above represents the actual performance of the Fund since  20inception, but calculated net of fees assuming the standard terms of the Class A shares which carry a 2% management fee and 20% performance fee
  • 21. EM Corporate Debt at BlueBayBlueBay EM Corporate Product OfferingDetails BlueBay EM Corporate Fund BlueBay EM IG Corporate Fund BlueBay EM HY Corporate Fund BlueBay EM Corporate Alpha FundLaunch Date 31 March 2008 15 March 2011 17 January 2012 01 November 2011Type /Regulation UCITS/ Part 1 SICAV UCITS/ Part 1 SICAV UCITS/ Part 1 SICAV Cayman Master Fund Achieve  a total return in excess of  h l f Achieve  a total return in excess of  h l f Achieve  a total return in excess of  h l f Achieve absolute risk‐adjusted return  h b l k d dInvestment Objective CEMBI Diversified from portfolio of EM  CEMBI IG Diversified from portfolio of  CEMBI HY Diversified from portfolio of  through long and short exposures mainly  Corporate Issuers EM IG Corporate Issuers EM HY Corporate Issuers in EM corproate fixed income instrumentsBenchmark CEMBI Div CEMBI IG Div CEMBI HY Div noneTarget Alpha 300bps per annum, gross of fees 200bps per annum, gross of fees 300bps per annum, gross of fees 12%‐15% net absolute returnTarget Tracking Error 0‐6% relative to index 0‐4% relative to index 0‐6% relative to index N/ATarget Information RatioTarget Information Ratio >0.5 >0 5 >0.5 >0 5 >0.5 >0 5 N/A At least two thirds of net assets  Invested mainly in EM corporates in Hard  At least two thirds of net assets  At least two thirds of net assets Principal Investments invested in EM IG Corporates. Max HY  Currency,Local Currency and through  invested in EM Corporates invested in EM  HY Corporates limit of 15% derivatives Monthly (60 days notice period on Liquidity Weekly Daily Weekly redemptions) 0‐4x maximum gross leverage, 2x LeverageL None  N None  N None  N maximum short leverage, 2x maximum  i h tl 2 i long leverage Uncovered short positions not  Uncovered short positions not  Uncovered short positions not  Short positions permitted via cash bonds, Short Selling permitted, short positions only via  permitted, short positions only via  permitted, short positions only via  derivatives and CDS derivatives and CDS derivatives and CDS derivatives and CDS Must invest at least 2/3 of its net assets  Must invest at least 2/3 of its net assets  Must invest at least 2/3 of its total net  (excluding ancillary liquid assets) in  (excluding ancillary liquid assets) in  assets excuding ancillary liquid assets  assets excuding ancillary liquid assets fixed income securities rated  fixed income securities rated below  directly or indirectly issues by emerging Core Investment Restriction investment grade and issued by  investment grade and issued by  market corporate issuers and in  corporate issuers which are domiciled corporate issuers which are domiciled  unrated debt securities and distreseed  or have significant operations in an  or have significant operations in an  debt securities.  Emerging Market Country. Emerging Market Country. Exposure limited to 5% of any one  Exposure limited to 5% of any one  Exposure limited to 5% of any one  issuer, this may be increased to 10%  , y issuer, this may be increased to 10%  , y issuer, this may be increased to 10%  , yKey Concentration GuidelinesKey Concentration Guidelines 20% issuer limit 20% i li it provided that exposures over 5% in  provided that exposures over 5% in  provided that exposures over 5% in  aggregate do not exceed 40% aggregate do not exceed 40% aggregate do not exceed 40% Max country exposure of 40% of NAV (if  rated Investment Grade), Max country Internal Country Guidelines Max country exposure of 20% of NAV Max country exposure of 20% of NAV Max country exposure of 20% of NAV exposure of 20% of NAV (if rated High  Yield) VAR not to exceed 200% of VAR of the  VAR not to exceed 200% of VAR of the  VAR not to exceed 200% of VAR of the  Controlled within the 0 4x maximum  VAR not to exceed 200% of VAR of the VAR not to exceed 200% of VAR of the VAR not to exceed 200% of VAR of the Controlled within the 0‐4x maximumDerivative limits i i li i benchmark benchmark benchmark leverage bandData source:  BlueBay Asset Management 21
  • 22. EM Corporate Debt at BlueBayA dedicated team of 27 investment professionals Risk Management,  Compliance & Legal Dominique Kobler Dominique Kobler (Head of Risk & Performance) Steve Thomas (Global Head of Compliance)  EM Investment Team James Brace  (General Counsel) 7 Portfolio Managers David Dowsett (Senior) Lucien Orlovius Neil Phillips (Senior) (Head of Transactional Legal) (Head of Transactional Legal) Polina Kurdyavko (Senior ‐ C P li K d k (S i Corporates) t ) • Experience: The team has an average investment  p g Adam Borneleit (Corporates) experience of 12 years Nick Shearn Jonathan Fayman Steven Murphy • Participation at Investment Committee: Senior  4 Assistant Portfolio Managers Christian Libralato investment professionals across all product areas are  Anthony Kettle (Corporates) A h K l (C ) members of the Investment Committee, chaired by  Colin Read Matthew Garnett the CIO 10 Analysts Jo Morris • Dedicated research: Supported by a dedicated unit of  Rodrigo da Fonseca (Economist) Stanislav Gelfer (Economist) Emerging Market analysts with range of expertise  Trade Execution Shikeb Farooqui (Economist) Lucy Miller (Corporates) including sovereign, local currency and corporate debt John Orrock Kaushik Rambhiya (Corporates) (Head of Trade Execution) Amanda Gray (Corporates)  Jane Lewis  Sven Scholtze (Corporates) (Execution Trader – EM) Alan Siow (Corporates) Nicholas Wood  Magashlin Chetty (Corporates) (Execution Trader – EM) Investment Committee Investment Committee* Mark Harrison  Desk Assistant (Execution Trader – EM) Adrian Hall Mark Poole (CIO) Mike McGill +18 additional members (Execution Trader – EM) Vanessa Fleming (Execution Product  Specialist – EM)Data as at 31 March 2012 22
  • 23. EM Corporate Debt at BlueBayFocus on bottom‐up credit research• Our research process is based on thorough bottom‐up credit work while factoring in the macro environment. Our investment has an emphasis on alpha  generation and the preservation of capital  Other Investment Factors Company Analysis Covenants & Structure • Identifiable catalyst (PM, EM Corp Analyst) (PM, EM Corp Analyst, Transactional and External  • Downside valuation • Strategy Legal Counsel) • Sustainable competitive advantage Sustainable competitive advantage • Covenants • Management and owners • Collateral, security package ‐ size relative  • Cash flow generating ability to debt and ease of realization • Legal jurisdiction considerations • Leverage • Business and asset valuation ‘Bottom‐Up’ Factors Investment Opportunity ‘Top‐Down’ Factors Global Macro Outlook Industry Dynamics Country Factors (Global Macro Team,  (Gl b l M T (IG, HY, EM sector analysts) (IG HY EM l ) (EM Sovereign team) (EM S i ) Investment Committee) • Cyclical / defensive • GDP growth • Global growth • Nature of competition • Inflation • Market technicals • Business and legal environment • Credit conditions • Political riskData source: BlueBay Asset Management 23
  • 24. EM Corporate Debt at BlueBay Long Only Products – BlueBay Emerging Market Corporate Bond Fund Performance (US$ gross of fees to 30 March 2012) 1M 3M YTD 1YR 2YR* 3YR* Ann. SI* Ann SI* BlueBay Funds ‐ BlueBay Emerging Market Corporate Bond Fund 0.24% 5.75% 5.75% 8.17% 10.73% 22.55% 15.35% JP Morgan Corporate Emerging Market Bond Index (CEMBI) Diversified 0.11% 5.62% 5.62% 7.51% 8.68% 17.95% 9.60% Alpha 0.13% 0.13% 0.13% 0.66% 2.05% 4.60% 5.75% Cumulative Gross Relative Performance (to 30 March 2012) Risk/Return Characteristics – Actual Annualised SI100% BlueBay Funds ‐ BlueBay Emerging Market Corporate Bond Fund Characteristic Target JP Morgan Corporate Emerging Market Bond Index Diversified80% 3.0% p.a p Alpha  Al h 5.75% 5 75% gross of fees60% Beta 0.66 ‐40% Tracking Error 5.33 0‐6% Information Ratio 1.08 >0.520% Standard Deviation – Fund 8.09 ‐ 0% Standard Deviation – I d S d dD i i Index 10.76 10 76 ‐‐20%‐40% Jan‐09 Jan‐11 Jun‐09 g‐08 g‐10 y‐11 Oct‐09 Oct‐11 Mar‐08 Mar‐10 Mar‐12 Aug Aug May Data source: BlueBay Asset Management      Fund Type: UCITS IV Fund (Part I SICAV)           *Annualised return. Fund inception date: 31 March 2008 24 Please refer to the Disclaimer located at the back of this presentation for important information regarding the performance shown above
  • 25. EM Corporate Debt at BlueBayLong Only Products – BlueBay Emerging Market Corporate Bond Fund Weekly Performance Since Inception to 21 Feb 2012: BlueBay Emerging Market Corporate Bond Fund vs Index Weekly Performance Since Inception* to 21 Feb 2012: BlueBay Emerging Market Corporate Bond Fund vs Index** 100% Weeks when index rose Weeks when index fell 80% Percentage of  60% weeks outperformed since inception 40% 83.6% 56.6% 20% 0% 16.4% 20% 43.4% Percentage of  weeks underperformed weeks underperformed since inception 40% 60% BlueBay Emerging Market Corporate Bond Fund ahead of Index 80% BlueBay Emerging Market Corporate Bond Fund behind Index 100% • Demonstrates value of issuer selection and use of selective risk management instrumentsData source: BlueBay Asset Management.      *Fund inception date: 31 March 2008      25**Index =  JP Morgan Corporate Emerging Market Bond Index Diversified in USD
  • 26. EM Corporate Debt at BlueBay Long Only Products – BlueBay Emerging Market Investment Grade Corporate Bond Fund Performance (US$ gross of fees to 30 March 2012) 1M 3M YTD Cum. SI* Cum SI* BlueBay Funds ‐ BlueBay Emerging Market Investment Grade Corporate Bond Fund 0.48% 4.97% 4.97% 11.05% JP Morgan Corporate Emerging Market Diversified High Grade Index 0.13% 4.23% 4.23% 8.61% Alpha 0.35% 0.74% 0.74% 2.44% Cumulative Gross Relative Performance (to 30 March 2012) Risk/Return Characteristics14.0% BlueBay Emerging Market Investment Grade Corporate Bond Fund JP Morgan CEMBI Diversified High Grade Index12.0% 2.44% Alpha 2.0% p.a. gross of 10.0% fees8.0% 1.68 1 68 Information Actual Cumulative SI6.0% Ratio >0.5 Target4.0%2.0% 1.47% Tracking  Error0.0% 0‐4%‐2.0% ‐11 ‐11 ‐12 ‐12 ‐11 ‐11 ‐11 ‐11 ‐11 ‐11 ‐11 Mar‐11 Mar‐12 0 1 2 3 4 5 Jul‐ Sep‐ Feb‐ Jan‐ Dec‐ Jun‐ Aug‐ May‐ Oct‐ Nov‐ Apr‐ Data source: BlueBay Asset Management      Fund Type: UCITS IV Fund (Part I SICAV)   *Cumulative return. Fund inception 15 March 2011 26 Please refer to the Disclaimer located at the back of this presentation for important information regarding the performance shown above
  • 27. EM Corporate Debt at BlueBay Long Only Products – BlueBay Emerging Market High Yield Corporate Bond Fund Performance (US$ gross of fees to 30 March 2012) 1M Cum. SI* Cum SI* BlueBay Funds – BlueBay Emerging Market High Yield Corporate Bond Fund 0.55% 7.49% JP Morgan Corporate Emerging Market Diversified High Yield Index, USD unhedged 0.03% 7.28% Alpha 0.52% 0.21% Cumulative Gross Relative Performance (to 30 March 2012) Risk/Return Characteristics**10.0% BlueBay Emerging Market High Yield Corporate Bond Fund JP Morgan Corporate Emerging Market Diversified High Yield Index, USD unhedged 0.21% Alpha8.0% 3.0% p.a. gross of  fees6.0% N/A Information Actual Cumulative SI Actual Cumulative SI Ratio >0.54.0% Target2.0% N/A Tracking  Error 0‐6%0.0% Feb‐12 Mar‐12 Jan‐12 0 2 4 6 8 Data source: BlueBay Asset Management      Fund Type: UCITS IV Fund (Part I SICAV)   *Cumulative return. Fund inception 17 January 2012      **Risk statistics will be produced once there are 3 complete months of data available; for meaningful results a minimum sample of 36 data points is recommended and where history is less than 3 years caution should  27 be taken with the interpretation and representation of this data         Please refer to the Disclaimer located at the back of this presentation for important information regarding the performance shown above
  • 28. EM Corporate Debt at BlueBay Performance of BlueBay Emerging Market Corporate Alpha Fund • EM corporate alpha fund seeks to achieve total return though taking long and short exposures mainly in EM corporate fixed income instruments (both USD and Local currency) exploiting the high levels of dispersion in this asset class • The Fund’s positioning is based on idiosyncratic, bottom-up fundamental credit views on single name EM Corporates using any of credit long/short, event driven, capital structure, opportunistic and special situation opportunities • Corporate Alpha f C fund leverages credit expertise of BlueBay’s market-leading EM debt investment team, including what we believe is the largest dedicated EM corporate debt group f ’ Cumulative Net Performance (to 30 March 2012) 12.0% BlueBay Emerging Market Corporate Alpha Fund 10.0% 10 0% 8.0%% Return 6.0% 4.0% 2.0% 0.0% 01‐Nov‐11 01‐Dec‐11 31‐Dec‐11 30‐Jan‐12 29‐Feb‐12 30‐Mar‐12 Performance (%) Net of Fees (USD) of BlueBay Emerging Market Corporate Alpha Fund* Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec  YTD  2012 3.39 2.65 1.20 7.40 2011 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ 1.59 0.59 2.19 *The BlueBay Emerging Market Corporate Alpha Fund was launched and seeded with internal capital within the Class D GBP management shares. D shares are not subject to standard management and performance fees.  e ue ay e g g a e o po a e p a u d as au c ed a d seeded e a cap a e ass G a age e s a es s a es a e o subjec o s a da d a age e a d pe o a ce ees Therefore to provide representative comparison for a typical investor, the performance above represents the actual performance of the Fund since inception, but hedged in USD and calculated net of fees assuming the standard  terms of the Class A shares which carry a 2% management fee and 20% performance fee. Please refer to the Disclaimer located at the back of this presentation for important information regarding the performance and calculation methodology shown above 28 Data Source: BlueBay Asset Management
  • 29. Contact InformationFor further information please contact the following:Jane De La Haye Partner, Head of Marketing & Client Service  Tel: +44 20 7389 3773Mattias Højmark‐Jensen Partner, Head of Sales – Europe, Middle East and Africa  Tel: +44 20 7389 3724Roberto Valsecchi OlivaRoberto Valsecchi Oliva Head of Sales  Central & Southern Europe  Head of Sales – Central & Southern Europe Tel:  44 20 7389 3686 Tel: +44 20 7389 3686Pierre Giannini Sales Manager  Tel: +44 20 7389 3333 29
  • 30. DisclaimerThis document is issued by BlueBay Asset Management LLP, which is authorised and regulated by the UK Financial Services Authority (FSA) and registered with the US Securities and Exchange Commission (SEC) as an InvestmentAdviser. BlueBay Asset Management USA LLC is a subsidiary of BlueBay Asset Management (Services) Ltd.The document is intended for “professional clients” and “eligible counterparties” (as defined by the FSA handbook of rules and guidance) only and should not be relied upon by any other category of customer. This documentdoes not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product in any jurisdiction. Any such offer or solicitation may only be made by means of delivery of an approvedconfidential Prospectus. This document is confidential and may not be distributed without the express written consent of BlueBay Asset Management LLP.No BlueBay Fund will be offered, except pursuant and subject to the offering memorandum and subscription materials (the "Offering Materials"), which may be provided to Canadian permitted clients only, and not to any othercategory of investor. This document is for general information only and is not a complete description of an investment in any BlueBay Fund. If there is an inconsistency between this document and the Offering Materials for theBlueBay Fund, the provisions in the Offering Materials shall prevail.Information herein is believed to be reliable but BlueBay Asset Management LLP does not warrant its completeness or accuracy. The opinions expressed within are entirely those of BlueBay and do not constitute an offer ofinvestment advice. All information provided in this document is for informational purposes only and should not be deemed as a guide to investing or a recommendation to buy the securities mentioned. BlueBay closelymonitors the markets and may make changes to BlueBay’s investment strategy or outlook when warranted by changing market conditions. There is no guarantee that the opinions expressed herein will be valid beyond the dateof this document.Any indices shown are presented only to allow for comparison of the BlueBay funds performance to that of certain widely recognised indices. The volatility of the indices may be materially different from the individual y p y p y p y g y y yperformance attained by a specific fund or investor. In addition, the BlueBay fund holdings may differ significantly from the securities that comprise the indices shown. Investors cannot invest directly in an index.Gross performance figures reflect the reinvestment of all dividends and earnings, but do not reflect the deduction of investment management and performance fees. An investor’s return will be reduced by the deduction of theapplicable fees, which will vary with the rate of return on the fund. For example, the compounding effect of a 0.60% management fee and a 0.20% performance fee would reduce annualised returns from 10% to 9.32% over a 5year period. In addition, the typical fees and expenses charged to a fund will offset the funds trading profits. A description of the specific fee structure for each BlueBay fund is contained in the fund’s Prospectus.Net performance figures reflect the reinvestment of all dividends and earnings, and the deduction of investment management and performance fees. In addition, the typical fees and expenses charged to a fund will offset thefunds trading profits. A description of the specific fee structure for each BlueBay fund is contained in the fund’s Prospectus. Figures may not sum due to rounding.Hypothetical/forecast performance figures are based on the stated facts and assumptions. No representation is being made that BlueBay Funds will or are likely to achieve profits or losses similar to those shown. There are yp p g p p g y y pfrequently sharp differences between hypothetical/forecast performance results and the actual results subsequently achieved by any particular investment or trading strategy. There are numerous other factors related to themarkets in general or to the implementation of any specific investment or trading strategy which cannot be fully accounted for in the preparation of hypothetical/forecast performance results and all which can adversely affecttrading results.The performance track record may include a named fund manager’s activity for and on behalf of their previous firm in their capacity as the named fund manager of a named fund. Investors should be aware that anyperformance should not be attributed solely to that named fund manager as it derived from their previous firm’s investment process and support functions.Risk statistics are annualized and calculated using weekly data points since inception. Risk statistics will be produced once there are 3 complete months of data available; for meaningful results a minimum sample of 36 datapoints is recommended and where history is less than 3 years caution should be taken with the interpretation and representation of this data. Returns for periods of less than 1 year have not been annualized in accordance withcurrent industry standard reporting practices.Past performance will not necessarily be repeated and is not indicative of future results. The investments discussed may fluctuate in value and you may not get back the amount invested. There is no guarantee that theobjectives shown will be achieved. Changes in rates of exchange may have an adverse effect on the value of investments. Investment in derivatives may involve a high degree of gearing or leverage, so that a relatively smallmovement in the price of the underlying investment results in a much larger movement in the price of the instrument, as a result of which prices are more volatile. The BlueBay funds are subject to various other risk factors andconflicts of interest. For further information regarding the risk factors and conflicts of interest with respect to each BlueBay fund please refer to the fund’s Prospectus.Any investor who proposes to subscribe for an investment in any of the BlueBay funds must be able to bear the risks involved and must meet the respective fund’s suitability requirements. No assurance can be given that afund’s investment objectives will be achieved. BlueBay fund investments may be speculative and involve a substantial degree of risk. The funds may be leveraged and engage in other speculative investment practices that mayincrease the risk of investment loss. An investor must realise that he or she could lose all or a substantial amount of his or her investment in a BlueBay fund. The investments and strategies discussed here may not be suitablefor all investors; if you have any doubts you should consult your investment adviser.Investments in the BlueBay funds may be highly illiquid and there may not be a secondary market for an investor’s interest in the funds, in which case none should be expected to develop. There are restrictions on transferringinterests in the funds. The fees and expenses charged to a fund may offset the funds trading profits. The instruments in which the funds invest may involve complex tax structures and there may be delays in distributingimportant tax information. The funds are not required to provide periodic pricing or valuation information to investors with respect to its individual investments.BlueBay is not registered under securities laws in Canada and is relying on the international dealer exemption under applicable provincial securities legislation, which permit BlueBay to carry out certain specified dealer activitiesfor those Canadian residents that qualify as "a Canadian permitted client”, as such term is defined under applicable securities legislation in Canada.® Registered trademark of Royal Bank of Canada. RBC Global Asset Management is a trademark of Royal Bank of Canada.No part of this document may be reproduced in any manner without the prior written permission of BlueBay Asset Management LLP. Copyright 2012 © BlueBay, the investment manager, advisor and global distributor of theBlueBay Funds, is a wholly‐owned subsidiary of Royal Bank of Canada and the BlueBay Funds may be considered to be related and/or connected issuers to Royal Bank of Canada and its other affiliates. BlueBay AssetManagement LLP, registered office 77 Grosvenor Street, London W1K 3JR, England, registered in England and Wales number OC370085. All rights reserved.V1 – Data end Mar 2012. Published 25 April 2012 30