Gam star emerging equity citywire nordic final

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  • Handouts available for each step: Step 1: “ 1-5s ” illustrate the bottom-up screening of the universe and highlight the most undervalued and overvalued stocks Step 2: Sample stock template illustrates financial analysis conducted for each stock Step 3: VMR analysis illustrates top down country analysis and Timing Sheet summarises prospects across asset classes. Cockpit summarises the bottom-up and top-down inputs
  • .
  • Handouts available for each step: Step 1: “ 1-5s ” illustrate the bottom-up screening of the universe and highlight the most undervalued and overvalued stocks Step 2: Sample stock template illustrates financial analysis conducted for each stock Step 3: VMR analysis illustrates top down country analysis and Timing Sheet summarises prospects across asset classes. Cockpit summarises the bottom-up and top-down inputs
  • Gam star emerging equity citywire nordic final

    1. 1. GAM Star Emerging EquityCitywire Luxembourg | 26 April 2012 Tim Love Investment Director GAMThis document is confidential and intended solely for the use of the person to whom it is given or sentand may not be reproduced, copied or given, in whole or in part, to any other person.
    2. 2. GAM Star Emerging EquityKey features Seeks to achieve long-term capital appreciation by investing in a diversified Investment objective portfolio of emerging market equities Investment manager Tim Love, GAM Index for comparison iShares MSCI Emerging Markets ETF Fund type Irish-domiciled UCITS Inception date 19 March 2012 Base currency USD Currency classes available* USD, GBP, EUR, CHF, JPY, SEK, SGD, NOK, DKK, CNY Minimum subscription Ordinary shares: USD 10,000 or currency equivalent Subscriptions / Redemptions Daily, no notice required Institutional class: 0.90% pa Investment manager and sponsor fees1 Ordinary class: 1.50% pa Performance fee 10% over iShares MSCI Emerging Markets ETF on a high watermark basis1 Excludes administration and custodian fee - please see Prospectus for further details on fees.Source: GAM. 2* Certain classes may be subject to minimum funding requirements.
    3. 3. GAM Star Emerging EquitySummary ● EM equity valuations are cheap compared to historic level, EM bonds and developed markets The time is right for EM equities ● Potential for EM equities to double in three years supported by structural and cyclical drivers ● Over 40 years’ combined investment experience and over 15 years working together Outstanding EM equities team ● 20+ year track-record of identifying and harnessing mispricings in emerging markets Multi-faceted ● Blends proprietary bottom-up tools, with extensive, unique data set, top-down thematic overlay and investment timing approach ● Repeatable process to capture frequent EM valuation mispricings that arise as markets mature ● GAM’s scale, stability and infrastructure enable team to focus solely on investing Ideal platform for EM equities ● GAM’s performance-driven philosophy and culture fully aligned with team’s approach and strategy ● Long only, UCITS-compliant fund seeking to maximise returns relative to iShares MSCI Emerging Daily dealing Markets ETF UCITS fund ● No front load or exit fees applied by GAM 3
    4. 4. Investment teamOver 40 years’ combined emerging markets expertise working together since 1996 ● Successfully managed both regional and global emerging market funds, long only and long/short for over 20 years (refer to Appendix for detailed track record) ● Unique insights and knowledge garnered from working on both buy and sell side – This experience has driven the inputs into the team’s proprietary VMR model ● Support from GAM’s extensive global infrastructure and resources enables team to focus on investments – Global dealing desk, risk, compliance, operations, sales, marketing and client service – Daily interaction and debate with GAM’s global and regional investment teams Tim Love, Investment Director Irevna Joaquim Nogueira, Investment Manager 26 years’ investment experience Dedicated consulting relationship 15 years’ investment experience ● Buy side includes: since 2003 ● Buy side includes: – CQS/Oceanwood • Excellent analysis of proprietary – CQS/Oceanwood – Cazenove – Cazenove – Mercury/MLIM models at micro and macro levels ● Sell side includes: – HSBC • Consistent data management and – Deutsche Bank ● Sell side includes: robust operational assistance – ING Barings – Deutsche Bank • Alpha generative analytical output – ING BaringsSource: GAM as at 29 February 2012 4
    5. 5. Investment philosophyEmerging markets are now mainstream, not marginal The team believes that EM equities offer Therefore, we… opportunities from… ● Frequent valuation mispricings due to ● Apply a consistent and repetitive process to regulatory, political, geopolitical, credit and identify and exploit opportunities as they structural change as they grow and mature materialise ● Market perception that lags reality regarding the ● Blend experienced qualitative analysis with investment modelling tools within a repeatable, rate of improvement in corporate governance, systematic approach better regulatory reform and EM market liquidity facilitating increasing use of more sophisticated investment tools ● Blend bottom-up and top-down inputs to ● Positive long term tailwinds from both structural identify sector/country thematic drivers and the and cyclical factors stocks best positioned to benefit from them Frequent mispricings in emerging markets and a further narrowing of the discount for corporate governance versus global developed markets 5
    6. 6. Investment process overviewStructured and repeatable investment approach Step 1: Step 2: Step 3: Proprietary Stock Top-down overlay and screening analysis portfolio construction ● Conduct weekly regression on ● Complete financial data ● Complete proprietary VMR universe of stocks template for each model (Value, Momentum, – By regional sectors, undervalued company Risk) to rank countries countries and currencies ● Meet companies for in-depth ● Use ‘Timing sheet’ to – Aggregate to global drill down on operating data harness intra-asset class – Relative and absolute and management issues information for optimal metrics entry/exit timing ● Cross reference with sector – ‘Traffic light’ system for ● Consolidate top-down, analyst / cross-capital valuations bottom-up and timing views structure research ● Add to extensive and in ‘Weekly Cockpit’ to guide proprietary EM data set portfolio construction Identifies the 40 most Identifies anomalies and Determines country undervalued and 40 most best risk/ return weights and stock over/ overvalued stocks globally opportunities underweights for portfolio Universe: ~850 companies Data on: ~300 companies Portfolio: ~100 companies 6
    7. 7. Proprietary investment toolsOverview Step 1: Proprietary screens Step 2: Stock analysis Stock templates “1-5” Screens • Valuation multiples, ratios and margins • EM vs Global • Historical statements • Country • Estimates revisions • Currency • Segmentation and credit • Yield ratio • Macro • All charts • Relative valuation vs. peers • Top 40 under-/overvalued • Valuation charts Step 3: Top-down overlay and portfolio construction Qualitative GAM Star input Emerging VMR Scorecard Timing sheet Weekly cockpit and analysis Equity Dashboard as on 28/02/2012 Value+Momentum+Risk Scorecard (VMR) Overall Z-score -0.14 Aggregate Relative VMR Previous Month Z-score Z-score Z-score of Z-score of 1 month 3 month of 1 day of 1 wk 1 month 3 month Combined VMR Deviation Target VMR Indicators Last Price 1 day chg 1 wk chg chg chg chg chg chg chg Z-score Equities Score Rec % ($%) Rec Target MSCI ACWI 332.44 0.48 0.62 4.65 15.51 0.48 0.04 0.73 1.46 0.68 iShares MSCI ETF 41.95 1.21 0.53 4.20 17.64 0.89 0.01 0.54 - 0.48  1 Russia 1.2 Overweight + 82 38.1 Underweight -10.9 iShares FTSE/Xinhua China 25 Index Fund 40.29 1.46 0.90 1.74 16.68 1.01 0.08 0.20 0.59 0.47  2 China 0.9 Overweight + 60 32.5 Overweight 30.7 iShares MSCI Korea 58.93 0.92 -0.39 1.71 14.21 0.76 -0.18 0.04 0.74 0.34 CBOE SPX Volatility Index 17.96 -1.26 -1.26 -3.08 -44.10 -0.23 0.03 -0.19 -1.19 -0.40  3 Colombia 0.4 Overweight + 24 23.4 Neutral 17.7 Currency USD Index 78.27 -0.38 -0.98 -0.80 -1.25 -0.88 -0.81 -0.27 -0.18 -0.54  4 Mexico 0.0 Neutral +2 17.8 Overweight 24.0 Korean WON 1124.43 -0.43 0.15 0.11 -2.59 -1.08 -0.01 0.05 -0.50 -0.38  5 South Africa 0.0 Neutral +1 17.5 Overweight 23.5 Brazilian Real 1.70 -0.64 -1.06 -2.37 -8.57 -1.26 -0.42 -0.42 -0.80 -0.73 AUD/JPY 86.63 -0.10 1.89 5.97 12.15 -0.54 0.62 1.15 1.09 0.58  6 Korea 0.0 Neutral +1 17.5 Underweight 11.0 Credit Generic US Govt 10yr Bond Yield 1.94 0.90 -5.65 2.74 -1.58 0.33 -0.85 0.59 0.10 0.04  7 Hungary -0.1 Modest U/w -7 16.0 Overweight 21.8 XOver CDSI Generic 5Y 567.37 -2.34 -0.58 -6.19 -29.09 -0.67 -0.01 -0.52 -1.19 -0.60  8 Brazil -0.1 Modest U/w -8 15.8 Overweight 21.4 EMBI+ Sovereign Yields 5.30 -0.64 -1.78 -5.76 -11.01 -0.92 -0.63 -1.16 -0.92 -0.91 EMBI+ Sovereign Spread 325.32 -1.25 0.58 -10.42 -17.86 -0.45 0.09 -0.98 -0.76 -0.53  9 India -0.5 Underweight - 38 9.0 Overweight 23.4 Commodities/cyclical 8600.00 0.75 1.79 0.88 14.74 0.48 0.33 -0.04 0.48 0.31  10 Malaysia -0.5 Underweight - 39 8.8 Underweight 7.4 Copper 3 mth Future Gold 1784.23 0.94 1.43 2.60 4.20 1.06 0.45 0.07 -0.10 0.37  11 Indonesia -0.5 Underweight - 40 8.3 Neutral 17.3 Oil Spot 106.55 -1.85 0.67 7.02 8.49 -1.72 -0.10 0.69 0.25 -0.22 BBA USD LIBOR 0.49 -0.33 -1.04 -11.54 -6.80 0.59 -0.91 -0.95 -0.10 -0.34  12 Peru -0.6 Underweight - 43 7.7 Overweight 27.9 Baltic DRY Index 738.00 1.10 4.53 1.65 -59.20 0.55 0.73 0.18 -1.54 -0.02 Korean Exports 41348.94 - - -15.48 -11.29 - - -1.97 -0.96 -1.46  13 Poland -0.6 Underweight - 47 6.4 Underweight 0.3  14 Turkey -0.7 Underweight - 52 4.6 Underweight 11.9 New Indicators (GS) USD SWAP SPREAD ANN 2 YR 28.00 -6.67 -5.08 -13.85 -48.62 -1.47 -0.48 -0.54 -2.06 -1.14  15 Taiwan -0.8 Underweight - 54 3.9 Underweight 12.0 EURUSD 3 Month ATM Implied Volatility 10.79 -0.74 -1.73 -10.77 -33.34 -0.10 -0.15 -0.93 -1.07 -0.56 Goldman Sachs FX Growth Index 101.21 0.09 0.06 0.83 1.49 0.52 0.08 1.12 1.05 0.69 16 Chile -0.9 Underweight - 59 2.0 Overweight 29.4 EUR BASIS SWAP 1YR -57.25 -3.38 -3.21 -7.66 -44.69 -0.92 -0.44 -0.45 -0.65 -0.61 -0.77 0.07 -0.06 -1.12 -0.47  17 Czech Republic -1.3 Underweight - 72 -4.6 Underweight 7.5 342.82 -1.12 1.14 6.00 -2.19 Markit iTraxx SovX Western Europe index Markit CDX Emerging Markets Index 250.69 -0.58 -0.93 -5.59 -24.09 -0.23 -0.08 -0.41 -0.74 -0.36  18 Thailand -1.4 Underweight - 76 -7.4 Underweight 11.1 Markit CDX North America High Yield Index 541.72 -0.73 -5.07 -3.38 -31.66 -0.29 -0.53 -0.29 -1.47 -0.65 Markit CDX North America Investment Grade Index 93.65 -1.86 -4.10 -6.70 -33.64 -0.89 -0.48 -0.62 -1.20 -0.80  19 Philippines -2.2 Underweight - 89 -20.8 Underweight 8.5 US LIBOR OIS Spread 37.12 0.30 -3.23 -19.50 -10.79 0.68 -1.03 -0.82 -0.44 -0.40Source: GAM 7
    8. 8. Why Emerging Market equities now?This document is confidential and intended solely for the use of the person to whom it is given or sentand may not be reproduced, copied or given, in whole or in part, to any other person.
    9. 9. EM equities should follow EM Chart through old highsPL: EMG - Performance Line bondsEM equities currently at c. 20% discount to their previous highs, EM bonds at over 40% premium Price of EM bonds and equities to 29 Feb 2012 $1600 $1400 EM equities are laggards to their peak multiples and $1200 to bond markets $1000 $800 $600 $400 $200 MSCI Emerging Markets Index in USD JP Morgan EMBI Global Composite Index in USD 0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11Source: Bloomberg 9Previous high of MSCI Emerging Markets Index attained on 31 Oct 2007 (USD 1,337.63) based on capital returns only. Price as at 29 Feb 2012 was USD 1079.44. Previous peak price for JP Morgan EMBIwas attained on 31 Aug 2008 (USD 415.73). Price as at 29 Feb 2012 was USD 594.02.
    10. 10. The search for yieldPush and pull drivers for EM equity inflows ● EM equities benefit from – Higher than normal dividend yields – Strong free cash flow yields – Attractive positive carry trade opportunities ● These are driven by a number of factors Push factors Pull factors ● Opportunity cost yield: ● Attractive yields in EM: – QE2 driving down short rates for those – Earnings per share (EPS) yield of looking for low risk annuity returns c. 8.5% and equity cash flow (CF) yields 15.2% ● Bond to equity yield ratios favour equities: – 3.3% EM bond yields vs 15.2% EM ● Equity dividend yield c. 3.0% equity cash flow yield ● Positive carry trades for EM currencies ● Fears of inflation reducing the attraction of – Especially BRL, MXN, HUF, INR, AUD bondsSource: GAM, Bloomberg as at 1 Mar 2012. 10
    11. 11. EM equities climbing a wall of worryDon’t fight the Fed. Attractive Yields to Own history and Bonds. Search for yield supports EM equities EM equities cheap vs. EM bonds MSCI EM EY MSCI ACWI EY 4% US Corp HY EM Sovereign 0% EM Corporates Munis MSCI ACWI DY -4% US 10 Yr Treasury EM Earnings yield at German 10 yr Bund -8% close to 16-year highs Jap 10 Yr JGB vs. EM bond yields US 3 month T bills Jap 2 yr JGB -12% 0.00 2.00 4.00 6.00 8.00 10.00 -16% Annual Yield (%) 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 MSCI EM EPS yield spread to the JPM EMBI bond yield EM equities at early stage of recovery EM dividend yield discount to US 10yr has gone 200% 3% 180% MSCI EM 2004/2006 (Mar-04 to May-06) 2% MSCI EM 2011/2012 (Aug-11 to Mar-12) 1% 160% 0% -1% 140% -2% 120% -3% -4% 100% -5% -6% 80% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 0 50 100 150 200 250 300 350 400 450 500 550 MSCI EM dividend yield less 10-year US Treasury yields DaysSource: GAM, Bloomberg, MSCI as at 1 Mar 2012 11
    12. 12. EM should command a ‘Premium for Growth’Superior prospective real GDP and FX appreciation expectations GS forecasts for GDP growth and currencies (vs. USD): 20-year CAGR 10% 8% 6% 4% 2% 0% -2% -4% Indonesia Thailand South Africa Switzerland India China Russia Korea Hong Kong Singapore France Canada Japan Israel Italy Germany Malaysia Mexico Spain Australia Brazil United Kingdom Philippines Turkey United States FX appreciation Real GDP growth (local currency)Source: IMF, MSCI, Goldman Sachs Global ECS Research estimates, March 2012. 12
    13. 13. Why Emerging Markets equities now?With current tailwinds, many emerging market equity markets have the potential to double by 2015 ● Valuations for EM equities are now cheap relative to… – Historic levels: currently significantly off former highs – Emerging market bonds: equity cash flow yields and dividend yields can satisfy investors’ ‘search for yield’ – Developed market equities: EM GDP growth of ~7%pa vs DM GDP growth of ~1.4%pa, ie a ‘premium for growth’ ● Secular tailwinds will continue regardless of market cycles – Demographics: younger and growing populations vs developed markets – Affluence: rise of new middle and wealthy classes in most key markets – Technological innovation: faster adoption of new architecture and ‘leapfrogging’ accelerate advancement – Improved credit ratings: gives consistent capital access, currency appreciation and carry trade potential – Global distribution: all major GEM countries except Taiwan now members of World Trade Organisation* ● Cyclical drivers will evolve over the medium-term – Sustained capital appreciation: driven by forward-looking real GDP and FX appreciation expectations – Strong source of yield: from high dividends, free cash flow yields, positive carry currencies and bond/ equity yield rates – M&A prospects: based on enviable net income growth on strong balanced sheetsSource: GAM as at 1 Mar 2012. The views are those of the manager at the time of publication and are subject to change. 13* The Russian Federation was approved for membership in December 2011.
    14. 14. EM equities at compelling valuationsCheap historic, cheap relative and with P/E expansion to come Trading at discount to global forward P/Es Trading on low historic absolute multiples 40% EM premium/discount to global P/E Distribution of P/E multiples within EM 100% 20% 80% Today 0% 60% -20% 40% -40% 20% -60% 90 92 94 96 98 00 02 04 06 08 10 12 0% 0-5 5-7 7-9 9-11 11-13 13-15 15-17 17-19 19-21 21-23 23-25 25-27 27-29 MSCI EM premium (forward P/E) to MSCI World P/E Cheap versus EM bonds Equity risk premium reductions fuel P/E re-rating 18% 15% 16% 14% 10% 12% 5% 10% 8% 0% 6% 4% -5% 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 90 92 94 96 98 00 02 04 06 08 10 MSCI EM earnings yield JPM EMBI yield EM equity risk premiumSource: GAM, Bloomberg, MSCI as at 1 Mar 2012 14
    15. 15. EM equities are a recent price laggard to developed marketsEM equities have de-levered and are currently behind global equities EM not burdened by huge levels of debt EM have significantly de-leveraged 140% Ratio of public debt to GDP Net debt /equity ratio 140% 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11e12e Japan Italy France UK US Germany Spain EM Latin America Asia EMEA EM equities have tended to outperform global… …but EM equities currently lagging 40% 80% 60% 30% 40% 20% 20% 10% 0% 0% -20% -10% -40% -60% -20% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 YTD YTD MSCI Emerging Markets Index in USD MSCI World Index in USD MSCI Emerging Markets Index in USD: rolling six-month performance relative to MSCI World Index in USDSource: GAM, Bloomberg, MSCI as at 1 Mar 2012 15
    16. 16. ThemesDiverse growth drivers provide ample opportunity set for investors ● Middle income growth – Housing, brands, automobiles and white goods – Trading software and gaming ● M&A – Surplus of cash and pent up M&A activity leading to consolidation, eg stock exchanges and oil reserve plays ● China – Close to the end of the tightening cycle? – Upcoming elections lead to medium-term soft landing? – Official 7.5% GDP target for 2012 is a floor, not a target ● Oil and oil related complex – Beneficiaries of rising oil price, oil service companies – Uranium, fertiliser ● Frontier markets – Liquidity, valuations opportunitiesThe views are those of the manager at the time of publication and are subject to change. 16
    17. 17. Why GAM Star Emerging Equity?Right time, team, platform and approach ● Long only, UCITS-compliant, daily dealing emerging market equities fund with ~10 currency classes Product ● Seeks to deliver superior long-term outperformance versus the iShares MSCI Emerging Markets ETF ● No front load or exit fees applied by GAM ● Over 40 years’ combined investment experience and over 15 years working together Team ● Successful record of managing EM equities portfolios for 20+ years ● Frequent mispricing opportunities arise as emerging markets grow and mature Philosophy ● EM have superior thematic growth opportunities (demographics, middle income) vs developed markets ● EM have better corporate governance, more liquidity and investment sophistication than often perceived ● Consistent and repeatable blend of fundamental bottom-up and top-down analysis Process ● Proprietary valuation models based on unique and extensive data set ● EM equities have the potential to double over the next three years1 Outlook ● EM equities currently at ~20% discount to old highs; EM bonds are at ~40% premium2 ● Current themes: middle income growth, M&A activity, China, oil/oil related complex, frontier marketsSource: GAM as at 1 Mar 2012. 171 The views expressed are of the manager at the time and are subject to change. There is no guarantee that forecasts will be achieved.2 Previous high of MSCI Emerging Markets Index attained on 31 Oct 2007 (USD 1,337.63) based on capital returns only. Price as at 29 Feb 2012 was USD 1079.44. Previous peak price for JP MorganEMBI was attained on 31 Aug 2008 (USD 415.73). Price as at 29 Feb 2012 was USD 594.02.
    18. 18. AppendixThis document is confidential and intended solely for the use of the person to whom it is given or sentand may not be reproduced, copied or given, in whole or in part, to any other person.
    19. 19. Investment process overviewStructured and repeatable investment approach Step 1: Step 2: Step 3: Proprietary Stock Top-down overlay and screening analysis portfolio construction ● Conduct weekly regression on ● Complete financial data ● Complete proprietary VMR universe of stocks template for each model (Value, Momentum, – By regional sectors, undervalued company Risk) to rank countries countries and currencies ● Meet companies for in-depth ● Use ‘Timing sheet’ to – Aggregate to global drill down on operating data harness intra-asset class – Relative and absolute and management issues information for optimal metrics entry/exit timing ● Cross reference with sector – ‘Traffic light’ system for ● Consolidate top-down, analyst / cross-capital valuations bottom-up and timing views structure research ● Add to extensive and in ‘Weekly Cockpit’ to guide proprietary EM data set portfolio construction Identifies the 40 most Identifies anomalies and Determines country undervalued and 40 most best risk/ return weights and stock over/ overvalued stocks globally opportunities underweights for portfolio Universe: ~850 companies Data on: ~300 companies Portfolio: ~100 companies 19
    20. 20. Proprietary investment toolsOverview Step 1: Proprietary screens Step 2: Stock analysis Stock templates “1-5” Screens • Valuation multiples, ratios and margins • EM vs Global • Historical statements • Country • Estimates revisions • Currency • Segmentation and credit • Yield ratio • Macro • All charts • Relative valuation vs. peers • Top 40 under-/overvalued • Valuation charts Step 3: Top-down overlay and portfolio construction Qualitative GAM Star input Emerging VMR Scorecard Timing sheet Weekly cockpit and analysis Equity Dashboard as on 28/02/2012 Value+Momentum+Risk Scorecard (VMR) Overall Z-score -0.14 Aggregate Relative VMR Previous Month Z-score Z-score Z-score of Z-score of 1 month 3 month of 1 day of 1 wk 1 month 3 month Combined VMR Deviation Target VMR Indicators Last Price 1 day chg 1 wk chg chg chg chg chg chg chg Z-score Equities Score Rec % ($%) Rec Target MSCI ACWI 332.44 0.48 0.62 4.65 15.51 0.48 0.04 0.73 1.46 0.68 iShares MSCI ETF 41.95 1.21 0.53 4.20 17.64 0.89 0.01 0.54 - 0.48  1 Russia 1.2 Overweight + 82 38.1 Underweight -10.9 iShares FTSE/Xinhua China 25 Index Fund 40.29 1.46 0.90 1.74 16.68 1.01 0.08 0.20 0.59 0.47  2 China 0.9 Overweight + 60 32.5 Overweight 30.7 iShares MSCI Korea 58.93 0.92 -0.39 1.71 14.21 0.76 -0.18 0.04 0.74 0.34 CBOE SPX Volatility Index 17.96 -1.26 -1.26 -3.08 -44.10 -0.23 0.03 -0.19 -1.19 -0.40  3 Colombia 0.4 Overweight + 24 23.4 Neutral 17.7 Currency USD Index 78.27 -0.38 -0.98 -0.80 -1.25 -0.88 -0.81 -0.27 -0.18 -0.54  4 Mexico 0.0 Neutral +2 17.8 Overweight 24.0 Korean WON 1124.43 -0.43 0.15 0.11 -2.59 -1.08 -0.01 0.05 -0.50 -0.38  5 South Africa 0.0 Neutral +1 17.5 Overweight 23.5 Brazilian Real 1.70 -0.64 -1.06 -2.37 -8.57 -1.26 -0.42 -0.42 -0.80 -0.73 AUD/JPY 86.63 -0.10 1.89 5.97 12.15 -0.54 0.62 1.15 1.09 0.58  6 Korea 0.0 Neutral +1 17.5 Underweight 11.0 Credit Generic US Govt 10yr Bond Yield 1.94 0.90 -5.65 2.74 -1.58 0.33 -0.85 0.59 0.10 0.04  7 Hungary -0.1 Modest U/w -7 16.0 Overweight 21.8 XOver CDSI Generic 5Y 567.37 -2.34 -0.58 -6.19 -29.09 -0.67 -0.01 -0.52 -1.19 -0.60  8 Brazil -0.1 Modest U/w -8 15.8 Overweight 21.4 EMBI+ Sovereign Yields 5.30 -0.64 -1.78 -5.76 -11.01 -0.92 -0.63 -1.16 -0.92 -0.91 EMBI+ Sovereign Spread 325.32 -1.25 0.58 -10.42 -17.86 -0.45 0.09 -0.98 -0.76 -0.53  9 India -0.5 Underweight - 38 9.0 Overweight 23.4 Commodities/cyclical 8600.00 0.75 1.79 0.88 14.74 0.48 0.33 -0.04 0.48 0.31  10 Malaysia -0.5 Underweight - 39 8.8 Underweight 7.4 Copper 3 mth Future Gold 1784.23 0.94 1.43 2.60 4.20 1.06 0.45 0.07 -0.10 0.37  11 Indonesia -0.5 Underweight - 40 8.3 Neutral 17.3 Oil Spot 106.55 -1.85 0.67 7.02 8.49 -1.72 -0.10 0.69 0.25 -0.22 BBA USD LIBOR 0.49 -0.33 -1.04 -11.54 -6.80 0.59 -0.91 -0.95 -0.10 -0.34  12 Peru -0.6 Underweight - 43 7.7 Overweight 27.9 Baltic DRY Index 738.00 1.10 4.53 1.65 -59.20 0.55 0.73 0.18 -1.54 -0.02 Korean Exports 41348.94 - - -15.48 -11.29 - - -1.97 -0.96 -1.46  13 Poland -0.6 Underweight - 47 6.4 Underweight 0.3  14 Turkey -0.7 Underweight - 52 4.6 Underweight 11.9 New Indicators (GS) USD SWAP SPREAD ANN 2 YR 28.00 -6.67 -5.08 -13.85 -48.62 -1.47 -0.48 -0.54 -2.06 -1.14  15 Taiwan -0.8 Underweight - 54 3.9 Underweight 12.0 EURUSD 3 Month ATM Implied Volatility 10.79 -0.74 -1.73 -10.77 -33.34 -0.10 -0.15 -0.93 -1.07 -0.56 Goldman Sachs FX Growth Index 101.21 0.09 0.06 0.83 1.49 0.52 0.08 1.12 1.05 0.69 16 Chile -0.9 Underweight - 59 2.0 Overweight 29.4 EUR BASIS SWAP 1YR -57.25 -3.38 -3.21 -7.66 -44.69 -0.92 -0.44 -0.45 -0.65 -0.61 -0.77 0.07 -0.06 -1.12 -0.47  17 Czech Republic -1.3 Underweight - 72 -4.6 Underweight 7.5 342.82 -1.12 1.14 6.00 -2.19 Markit iTraxx SovX Western Europe index Markit CDX Emerging Markets Index 250.69 -0.58 -0.93 -5.59 -24.09 -0.23 -0.08 -0.41 -0.74 -0.36  18 Thailand -1.4 Underweight - 76 -7.4 Underweight 11.1 Markit CDX North America High Yield Index 541.72 -0.73 -5.07 -3.38 -31.66 -0.29 -0.53 -0.29 -1.47 -0.65 Markit CDX North America Investment Grade Index 93.65 -1.86 -4.10 -6.70 -33.64 -0.89 -0.48 -0.62 -1.20 -0.80  19 Philippines -2.2 Underweight - 89 -20.8 Underweight 8.5 US LIBOR OIS Spread 37.12 0.30 -3.23 -19.50 -10.79 0.68 -1.03 -0.82 -0.44 -0.40Source: GAM 20
    21. 21. Step 1: Proprietary screeningBottom-up regression analysis focuses team on most undervalued stocks ● Analyse data using extensive, proprietary database with over 15 years’ history – Specialist external company cleans accounting data – extension of team, working together since 2003 – Cleansed data enriches quality and consistency of company information – Database predates MSCI Emerging Markets by five years Overweight stocks ‘in the lower tail’ and underweight ● Fundamental filter on universe of ~850 stocks in MSCI Emerging Markets Index weekly stocks ‘in upper tail’ – Apply multiple perspectives, ie regional sectors, global sectors, countries etc – Assess each view on absolute basis, and relative to current and long-term Most Most historical levels undervalued overvalued stocks stocks – Summarise key valuation metrics using traffic light system (red, amber, green) Frequency – Price/Earnings – Price/Sales – Price/Book – Dividend Yield – Price/Cashflow – ROE Valuations ● Results in ranked universe of stocks according to proprietary valuation score (Z-score) – Scores based on comparison to GEM average and stock’s own 3-year historic average – Identifies top 40 overvalued and top 40 undervalued stocks globally – Incorporate yield ratio, currency (Real Effective Exchange Rate) and third party momentum analysis ● Consider opportunistic positions from outside the benchmark eg attractive IPOs, small caps Maximises focus, time efficiency and quality of output 21
    22. 22. Step 2: Stock analysisIntensive analysis based on company financials and meetings with management ● Conduct intensive company due diligence on top 40 undervalued stocks using comprehensive analytical template – Completed on approximately 300 names to date – Comparing companies on like for like basis to highlight anomalies ● Complemented with over 400 management meetings per year – Approximately 50% conducted in the region where company is based Analysis of company templates focuses on: Management meetings focus on: ● Reviewing historic and prospective balance ● Corporate governance sheet, income and cashflow statements ● Top line growth and inventory/sales ● Comparing absolute and historic valuation ● Operating margins multiples to their own history and peer group ● Operating and financial leverage ● Monitoring recent consensus revisions of ● Earnings per share growth financial statements ● CAPEX / EBITDA ● Examining recent credit ratings ● Dividend payouts and free cash flow yields ● Barriers to entry ● Analysis of debt schedules ● Expected catalysts/regulatory news 22
    23. 23. Step 3: Top down analysis and portfolio constructionProprietary overlay to optimise country allocations ● Team has developed and evolved a proprietary VMR (Value, Momentum, Risk) framework in line with EM market evolution: 1980s 1990s 2000s 2015(e) Value Momentum Risk EM liquidity flows ● Quant model ● Liquidity ● Implied volatility ● Domestic EM pension ● 12mth forward multiples ● Real Effective Exchange ● Earnings volatility fund flows ● Cash return on capital Rate (REER) ● Cash return on capital invested (CROCI) ● Yield ratio invested (CROCI) ● Technicals ● RAI ● Earnings revisions ● Economics ● Cash return on capital invested (CROCI) momentum ● Exogenous factors ● Consider in context of country-specific macro factors (credit ratings, currency, GDP factors, bond yields, inflation, etc) ● Bring together bottom-up stock views with in top-down analysis in ‘Weekly Cockpit’ to size positions and country exposures – Positive stock + negative VMR = overweight stock, hedge currency – Negative stock + positive VMR = underweight/zero stock, overweight currency 23
    24. 24. Step 3: Top-down overlay and portfolio constructionWeekly ‘timing sheet’: an intra-asset class indicator aids timing, sizing and currency overlay Dashboard as on 28/02/2012 Overall Z-score -0.14 Z-score Z-score Z-score of Z-score of 1 month 3 month of 1 day of 1 wk 1 month 3 month Combined Indicators Last Price 1 day chg 1 wk chg chg chg chg chg chg chg Z-score Equities MSCI ACWI 332.44 0.48 0.62 4.65 15.51 0.48 0.04 0.73 1.46 0.68 iShares MSCI ETF 41.95 1.21 0.53 4.20 17.64 0.89 0.01 0.54 - 0.48 iShares FTSE/Xinhua China 25 Index Fund 40.29 1.46 0.90 1.74 16.68 1.01 0.08 0.20 0.59 0.47 iShares MSCI Korea 58.93 0.92 -0.39 1.71 14.21 0.76 -0.18 0.04 0.74 0.34 CBOE SPX Volatility Index 17.96 -1.26 -1.26 -3.08 -44.10 -0.23 0.03 -0.19 -1.19 -0.40 Currency USD Index 78.27 -0.38 -0.98 -0.80 -1.25 -0.88 -0.81 -0.27 -0.18 -0.54 Korean WON 1124.43 -0.43 0.15 0.11 -2.59 -1.08 -0.01 0.05 -0.50 -0.38 Brazilian Real 1.70 -0.64 -1.06 -2.37 -8.57 -1.26 -0.42 -0.42 -0.80 -0.73 AUD/JPY 86.63 -0.10 1.89 5.97 12.15 -0.54 0.62 1.15 1.09 0.58 Credit Generic US Govt 10yr Bond Yield 1.94 0.90 -5.65 2.74 -1.58 0.33 -0.85 0.59 0.10 0.04 XOver CDSI Generic 5Y 567.37 -2.34 -0.58 -6.19 -29.09 -0.67 -0.01 -0.52 -1.19 -0.60 EMBI+ Sovereign Yields 5.30 -0.64 -1.78 -5.76 -11.01 -0.92 -0.63 -1.16 -0.92 -0.91 EMBI+ Sovereign Spread 325.32 -1.25 0.58 -10.42 -17.86 -0.45 0.09 -0.98 -0.76 -0.53 Commodities/cyclical Copper 3 mth Future 8600.00 0.75 1.79 0.88 14.74 0.48 0.33 -0.04 0.48 0.31 Gold 1784.23 0.94 1.43 2.60 4.20 1.06 0.45 0.07 -0.10 0.37 Oil Spot 106.55 -1.85 0.67 7.02 8.49 -1.72 -0.10 0.69 0.25 -0.22 BBA USD LIBOR 0.49 -0.33 -1.04 -11.54 -6.80 0.59 -0.91 -0.95 -0.10 -0.34 Baltic DRY Index 738.00 1.10 4.53 1.65 -59.20 0.55 0.73 0.18 -1.54 -0.02 Korean Exports 41348.94 - - -15.48 -11.29 - - -1.97 -0.96 -1.46 New Indicators (GS) USD SWAP SPREAD ANN 2 YR 28.00 -6.67 -5.08 -13.85 -48.62 -1.47 -0.48 -0.54 -2.06 -1.14 EURUSD 3 Month ATM Implied Volatility 10.79 -0.74 -1.73 -10.77 -33.34 -0.10 -0.15 -0.93 -1.07 -0.56 Goldman Sachs FX Growth Index 101.21 0.09 0.06 0.83 1.49 0.52 0.08 1.12 1.05 0.69 EUR BASIS SWAP 1YR -57.25 -3.38 -3.21 -7.66 -44.69 -0.92 -0.44 -0.45 -0.65 -0.61 Markit iTraxx SovX Western Europe index 342.82 -1.12 1.14 6.00 -2.19 -0.77 0.07 -0.06 -1.12 -0.47 Markit CDX Emerging Markets Index 250.69 -0.58 -0.93 -5.59 -24.09 -0.23 -0.08 -0.41 -0.74 -0.36 Markit CDX North America High Yield Index 541.72 -0.73 -5.07 -3.38 -31.66 -0.29 -0.53 -0.29 -1.47 -0.65 Markit CDX North America Investment Grade Index 93.65 -1.86 -4.10 -6.70 -33.64 -0.89 -0.48 -0.62 -1.20 -0.80 US LIBOR OIS Spread 37.12 0.30 -3.23 -19.50 -10.79 0.68 -1.03 -0.82 -0.44 -0.40 24
    25. 25. Step 3: Top-down overlay and portfolio constructionDiversification is the only free lunch ● Diversified portfolio of c. 100 stocks Example: Weekly cockpit portfolio construction tool – Top 20 stocks typically c 50% of the portfolio – Position sizes driven by conviction and liquidity – Subject to UCITS 5/10/40 rule ● Invests in best ideas across EMEA, Asia and Latin America ● Target tracking error c. 5-8% pa ● Limited currency hedging ● Derivatives typically used for efficient portfolio management only ● Highly liquid: ~90% of portfolio could be unwound in 2-3 days with little price impact ● Turnover: ~300%, use of program trades and discount brokersThere is no guarantee that targets will be achieved.Source: GAM 25Allocations and holdings are subject to change.
    26. 26. Fund and selective stock analysisThis document is confidential and intended solely for the use of the person to whom it is given or sentand may not be reproduced, copied or given, in whole or in part, to any other person.
    27. 27. GAM Star - Top Ten + ExposureCC: SEEI Emerging Equity InvestmentsTop 10 holdings (of 128) as at 30 Mar 2012 Name % of Fund China Mobile 3.4 Gazprom 3.0 Samsung Electronics 2.8 Petrobras Petroleo Brasileiro 2.4 America Movil 2.2 Vale 2.1 Lukoil 1.9 Sberbank 1.7 Hyundai Mobis 1.7 CNOOC 1.7 Total 22.9Source: GAM 27Allocations and holdings are subject to change.
    28. 28. GAM Star - Industry Analysis (Pie)CC: SEEI Emerging Equity InvestmentsIndustry breakdown as at 30 Mar 2012 Other 1.8% Net Current Assets 1.7% Industrials 5.5% Financials 19.3% Consumer Staples 7.7% Consumer Disc 9.9% Energy 18.1% Telecom Services 9.9% Information Technology 12.0% Materials 14.2%Source: GAM 28Allocations and holdings are subject to change.
    29. 29. GAM Star - Geographic Analysis (Pie)CC: SEEI Emerging Equity InvestmentsGeographic allocation as at 30 Mar 2012 Other 12.4% China 18.8% Net Current Assets 1.7% Indonesia 3.8% Mexico 6.4% Brazil 16.1% Taiwan 7.6% South Africa 8.0% Korea, Republic of 14.7% Russian Federation 10.7%Source: GAM 29Allocations and holdings are subject to change.
    30. 30. GAM Star Emerging EquityPL:Stock Example: Parkson Retail Group Ltd (1.00% in the portfolio; 0.05% in MSCI Emerging Markets index)* Share price performance (HKD) Ticker 3368 HK 30 Dec 2005 to 29 Feb 2012 18 Industry Retail Initial purchase 16 March 2012 Headquarters Beijing, China 14 Parkson Retail Group Ltd operates a Key activities national network of department stores 12 in the Peoples Republic of China 10 8 Investment Case ● Play on global and domestic brands with high end 6 department store and distribution in China 4 ● Exposure to the rising Chinese consumer sector and middle class wealth effect 2 2006 2007 2008 2009 2010 2011 ● Good entrance point at attractive valuations Parkson Retail Group Ltd ● Favoured by changes in tax and regulatory environmentsSource: Thomson Reuters Datastream 30Reference to a security is not a recommendation to buy or sell that security.* Stock holding weight as at 20 Mar 2012
    31. 31. GAM Star Emerging EquityPL:Stock Example: AngloGold Ashanti Limited (1.16% in the portfolio; 0.39% in MSCI Emerging Markets index)* Share price performance (ZAr) Ticker ANG SJ 30 Dec 2005 to 29 Feb 2012 Industry Mining 35000 Headquarters Johannesburg, South Africa AngloGold Ashanti Limited is a holding company for a group of companies 30000 Key activities which explore for and mine gold internationally Investment Case 25000 Initial purchase March 2012 ● Natural South African hedge against inflation and further systemic risk ● Strong operational, financial and credit rating strength 20000 ● Exceptional entrance point at depressed valuations 2006 2007 2008 2009 2010 2011 AngloGold Ashanti LimitedSource: Thomson Reuters Datastream 31Reference to a security is not a recommendation to buy or sell that security.* Stock holding weight as at 20 Mar 2012
    32. 32. GAM Star Emerging EquityPL:Stock Example: America Movil SAB de C.V. (2.20% in the portfolio; 1.28% in MSCI Emerging Markets index)* Share price performance (MXN) Ticker AMXL MM 18 30 Dec 2005 to 29 Feb 2012 Industry Telecommunication Services 16 Headquarters Mexico City, Mexico America Movil provides wireless 14 communications in 18 countries across Key activities Latin America. It also offers fixed-line phone, Internet and pay-TV services 12 Investment Case Initial purchase 10 March 2012 ● Capitalising on strong Mexican broadband and pay-TV growth ● Strong balance sheet for capex and 4G rollout 8 ● Strong buy-back programme support and reasonable 2006 2007 2008 2009 2010 2011 yield America Movil SAB de C.V.Source: Thomson Reuters Datastream 32Reference to a security is not a recommendation to buy or sell that security.* Stock holding weight as at 20 Mar 2012
    33. 33. Why Emerging Markets now?This document is confidential and intended solely for the use of the person to whom it is given or sentand may not be reproduced, copied or given, in whole or in part, to any other person.
    34. 34. Global balance accelerates shift towards emerging marketsEM GDP will soon overtake the developed world Economies share of world GDP (%) Emerging economies world share At market exchange rates 2010 (%) 0 25 50 75 100 100 Forecast Population Mobile-phone subs 90 Developed Forex reserves Steel consumption 80 Copper consumption CO2 emissions 70 Motor-car sales Oil consumption 60 GDP at PPP¹ Inward FDI² 50 Exports Fixed Investment 40 Imports Retail sales 30 GDP at market rates Stockmarket cap. 20 Consumer spending Emerging Outward FDI² 10 Financial assets Fortune Global 500 0 Public sector debt 1990 1995 2000 2005 2010 2015 2020Source: AT Kearney, Bloomberg, BP, dotMobi, Fortune, IMF, UBS, UN, World Bank, World Steel Association, WTO 34¹ Purchasing power parity² Foreign direct investment
    35. 35. Why Emerging Market equities?EM equities are still under-represented in global equity indices ● EM equities are still under-represented in global equity indices against their GDP weights. ● EM equities could represent 55% of global market cap by 2030. Presently they are 13% of Global Equity Indexes (within the MSCI ACWI) on a free float basis. Ex free float it would be 33% presently. 70% 60% 59% 50% 55% 49% EM share of world 40% 44% 37% 30% 31% 2010 20% 2020 (e) 10% 2030 (e) 0% GDP Market CapSource: IMF, MSCI, Goldman Sachs Global ECS Research estimates, September 2010 35
    36. 36. EM equities climbing a wall of worryDon’t fight the Fed EM equities at early stage of recovery EM equities cheap vs. EM bonds 200% 4% 180% MSCI EM 2004/2006 (Mar-04 to May-06) MSCI EM 2011/2012 (Aug-11 to Mar-12) 0% 160% -4% 140% EM Earnings yield at -8% close to 16-year highs 120% vs. EM bond yields 100% -12% 80% -16% 0 50 100 150 200 250 300 350 400 450 500 550 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Days MSCI EM EPS yield spread to the JPM EMBI bond yield Search for yield supports EM equities EM dividend yield discount to US 10yr has gone MSCI EM EY 3% MSCI ACWI EY 2% US Corp HY 1% EM Sovereign EM Corporates 0% Munis -1% MSCI ACWI DY -2% US 10 Yr Treasury -3% German 10 yr Bund Jap 10 Yr JGB -4% US 3 month T bills -5% Jap 2 yr JGB -6% 0.00 2.00 4.00 6.00 8.00 10.00 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Annual Yield (%) MSCI EM dividend yield less 10-year US Treasury yieldsSource: GAM, Bloomberg, MSCI as at 1 Mar 2012 36
    37. 37. Urbanisation – 100 more cities the size of ‘New York or London’ within 20 yearsPositive secular tailwinds Distribution of world population 2010 Distribution of world market cap 2010 Developed Emerging 14% 13% Developed Emerging 87% 86% 2030 Pop Urban Pop Added Number of 10m Total Urban Cities based on 34% assuming 75% Pop Cities Population Population Urban Pop % >10m Growth urbanization Equivalent US 304 246.2 81% 2 407 59 6 Mexico 110 84.4 77% 1 147 26 3 Brazil 191 162.6 85% 2 256 30 3 Argentina 40 35.6 90% 1 53 4 0 UK 60 54 90% 1 80 6 1 Russia 142 103.6 73% 1 190 39 4 Turkey 75 51.1 68% 1 101 24 2 Egypt 77 33.1 43% 1 103 44 4 Iran 71 48.3 68% 1 95 23 2 Nigeria 114 68.6 60% 1 153 46 5 China 1,331 559.2 42% 3 1,784 779 78 India 1,136 329.3 29% 3 1,522 812 81 Pakistan 165 59.3 36% 1 221 106 11 Bangladesh 147 38.2 26% 1 197 109 11 Japan 128 84.7 66% 2 172 44 4 S Korea 48 39 81% 1 65 9 1 Philippines 86 55 64% 1 115 31 3 Indonesia 228 114.1 50% 1 306 115 12 25 2,007 201Source: IMF, assuming 1.5% annual population growth for the 2030 Population extrapolation in column 5 above, Oct 2010. 37
    38. 38. Large EM countries will underpin commodity demand for some timeGiven population sizes, steel intensity in China and India indicates explosive growth potentialSource: Global Insight, IMF, OECD, IISI, USGS, JFK. 38

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