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Gsam citywire emd slides pptx (3) Gsam citywire emd slides pptx (3) Presentation Transcript

  • Goldman Sachs Growth & Emerging Markets Debt Local Portfolio October 2012For professional investors only –Not for public distributionPURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH POOLS AND/OR ACCOUNTS WHOSE PARTICIPANTS ARELIMITED TO QUALIFIED ELIGIBLE PERSONS, AN OFFERING MEMORANDUM FOR THIS POOL AND/OR THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TOBE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN APOOL AND/OR TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF AN OFFERING MEMORANDUM AND/OR COMMODITY TRADING ADVISOR DISCLOSURE.CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS OFFERING OR ANY OFFERING MEMORANDUM FOR THISPOOL AND/OR THIS TRADING PROGRAM OR THIS BROCHURE.
  • Goldman Sachs Asset ManagementBiographies Blair Reid, Global Fixed Income and Currency team, Goldman Sachs Asset Management Blair joined Goldman Sachs Asset Management in 2006 as a member of the Global Fixed Income and Currency team. Prior to joining GSAM, Blair spent five years at Barclays Global Investors. Blair gained a B.Ec. degree in Economics and Actuarial studies from Macquarie University, in Sydney. Blair is a Fellow of the Institute of Actuaries. 2
  • Goldman Sachs Asset ManagementThe big pictureThe worlds changing economic "centre of gravity", 1980 - 2030 1980 Today 2030Source: Danny Quah, London School of Economic (http://econ.lse.ac.uk/~dquah/).This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research orinvestment advice. Please see additional disclosures. 3
  • Goldman Sachs Asset ManagementEM fundamentals show a broad picture of health Government Debt Fiscal Deficit Current Account Balance (% of GDP) (% of GDP) (% of GDP)120 DM EM DM EM 108 0.0 0.8 0.7100 0.6 80 0.4 -1.0 60 -1.1 0.2 40 0.0 34 -2.0 -0.2 20 -0.4 0 -2.6 DM EM -3.0 -0.6 -0.5 DM EMSource: IMF and Haver, Data as at 01-Jan-2012This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research orinvestment advice. Please see additional disclosures. 4
  • Goldman Sachs Asset ManagementEM Central Banks are able to pursue counter cyclicalmonetary policyInflation targeting (IT) in EM Inflation in EM IT policy 100 Emerging and developing economies Countries adopted Central and eastern Europe Israel 1997 90 Commonwealth of Independent States Czech Republic 1998 80 Developing Asia South korea 1998 Latin America and the Caribbean Brazil 1999 70 Middle East and North Africa Poland 1999 Chile 2000 60 Sub-Saharan Africa Colombia 2000 50 South Africa 2000 Thailand 2000 40 Hungary 2001 30 Mexico 2001 Peru 2002 20 Philippines 2002 Guatemala 2005 10 Indonesia 2005 0 Romania 2005 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Slovak Republic 2005Source: IMF WEO, April 2012.This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research orinvestment advice. Please see additional disclosures. 5
  • Goldman Sachs Asset ManagementDM & EM Sovereign credit risk profile converging Canada France Germany Japan Hungary Netherlands Belgium Malaysia UK Italy Poland Mexico Indonesia2000 US Spain Thailand South Africa Brazil Turkey Russia AAA AA A BBB BB B CCCToday UK Belgium Malaysia Brazil Hungary Netherlands US Mexico Turkey Indonesia Germany Japan Poland Russia Downgraded since 2000 Canada France Thailand Italy Upgraded since 2000 South Africa Spain Developed Market Emerging MarketFor illustrative purposes only. Source: Bloomberg, S&P, GSAM. Countries rating reflected is foreign currency long term on Bloomberg. As of Aug 31, 2012.This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as researchor investment advice. Please see additional disclosures. Past performance does not guarantee future results, which may vary. 6
  • Goldman Sachs Asset ManagementLocal EMD remains attractiveNominal yield differentials 10.0 JPM Local Nominal Yield - YTM EM GBI-EM Global Index JPM Nominal Yield DM GBI Global Index - YTM 9.0 8.0 7.0 Bond Yields (%) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: Bloomberg, as of 31-Jul-12Source: JP Morgan, Bloomberg. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should notbe construed as research or investment advice. Past performance is not indicative of future results, which may vary. Please see additional disclosures. 7
  • Goldman Sachs Asset ManagementReasons to consider Local EMD Higher yields and better fundamentals than developed markets Key driver of global growth Potential to benefit from currency appreciation Low correlation to traditional fixed income (~0.4*) and can provide portfolio diversification benefits A typical portfolio curently yields around 6%, exhibits volatility around 13%, and has exposure to 15-30 countries. More than ever, we believe that Local EMD should be a strategic allocation within an overall fixed income portfolio.* From January 2003 to August 2012.For illustrative purposes only. Diversification does not protect an investor from market risk and does not ensure a profit. 8
  • Goldman Sachs Asset ManagementGoldman Sachs Growth & EmergingMarkets Debt Local Portfolio
  • Goldman Sachs Asset Management Long history of managing Emerging Markets Debt at GSAM EM USD Sovereign Debt (JPM EMBI Global) EM USD Corporate Debt (JPM CEMBI Broad) EMD Market Size 3,000 (JPM benchmarks, September 2012) EM USD Sovereign Debt (JPM EMBI Global) EM Local Sovereign Debt (JPM GBI-EM Broad) Total: $2.6 trillion EM USD Corporate Debt (JPM CEMBI Broad) GSAM Milestones 3,000 EM Local Sovereign Debt (JPM GBI-EM Broad) EM 2,500 Corp GSAM Milestones $538 First dedicated EM 2,500 MarketMarket(USD, billion) billion) Local debt portfolio (JPM GBI-EM GD) 2,000 EM External EM $555 Local Value Value (USD, 2,000 $1,530 Manage EM corporates 1,500 within portfolios 1,500 GSAM EMD Assets 1,000 Total: $33.4 billion* Including FI portfolios: $40.1 billion EM debt part of First dedicated EM (As of September 2012) Core Fixed Income External debt portfolio 1,000 500 EMD Local EM $8.8 Corp $3.4 500 - EMDDec-93Dec-93 Dec-95Dec-95 Dec-96Dec-96 Dec-98Dec-98 Dec-99Dec-99 Dec-01Dec-01 Dec-02Dec-02 Dec-04Dec-04 Dec-06Dec-06 Dec-07Dec-07 Dec-09Dec-09 Dec-10Dec-10 Dec-94Dec-94 Dec-97Dec-97 Dec-00Dec-00 Dec-03Dec-03 Dec-05Dec-05 Dec-08Dec-08 Dec-11Dec-11 Hard (constr.) - $4.9 EMD Hard EM currency EM Local debt part First dedicated EM Local First dedicated EM $16.3 management of Core FI portfolios debt portfolio (bm agnostic) Corp portfolio Graph as of September 30, 2012. Sources: GSAM, JPMorgan. * Includes approximately $315mn of assets not directly traded by the EMD desk but that are part of EMD portfolios. . This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Please see additional disclosures. 10
  • Goldman Sachs Asset ManagementCross-pollination of ideas between EMD and other FI teams  The Emerging Markets team benefits from synergies with other GSAM FI teams.  The EMD team is seated between the US Corp Credit group and the Global Commodities team.  The Treasury/MBS professionals are close-by to advise on duration and interest rate exposure. Emerging market Currency debt New York Floor Layout US Emerging Global Corporate Market Commodities TSY/MBS Risk Credit (+30) Debt (+8) (+4) (+12) (+4) Duration Commodities Cross Money sector markets Corporates Securitised Global Equity TeamAs of July 31, 2012. 11
  • Goldman Sachs Asset ManagementFully resourced team – specialists across EMD asset classes Head of Emerging Markets Debt Sam Finkelstein (16) Sovereign Economists Lead Portfolio Managers Traders Corporate Analysts Sovereign Analysis Portfolio Monitoring Security Selection EM Corporate Analysis Ricardo Penfold (15) Yacov Arnopolin (13) Vladimir Liberzon (11) Nick Saunders (11) Owi Ruivivar (15) Blair Reid (11) Michael Jalkut (13) Salman Niaz (12) Diego Sasson (5) Jacqueline Leary (4) Hubert Chu (6) Neil Squires (11) Aakash Thombre (5) Sowmya Srinivasan (<1) London Seoul (5-person team)* New York Beijing (3-person team)* Bangalore Vikalp Kumar (4) Singapore Singapore Prashant Bajaj(<1) Krishnan V R (<1)Numbers in parentheses ( ) indicate years of investment experience, as of 1-Oct-2012 *Cities where local teams provide colour. 12
  • Goldman Sachs Asset ManagementInvestment approach Sovereign Economists Local analysts EM traders EM Corp team EM Team Portfolio Decisions EM Team Portfolio Decisions Country Security selection selection  Security selection and  Country selection – a relative value views. Optimal portfolio research-intensive process;  Input on market construction – allocate decisions via dialogue and technicals, flows and risk to best ideas debate within EMD team. liquidity.  Sam Finkelstein acts as arbiter for the discussion.  Portfolio beta positioning Tactical influenced by macro views of positioning GSAM FI risk teams.  Sam Finkelstein has ultimate responsibility for overall portfolio beta decisions. GSAM FI Inputs Country / Jim O’Neill Growth Currency team Macro team Commodities team Peripherals team Markets Team 13
  • Goldman Sachs Asset ManagementThree pillars of analyzing sovereign debt  Uniform approach to formulating macroeconomic views on individual countries.  Choose best expression of current views – hard currency vs local debt vs FX vs corporates.  Ensure highest conviction ideas are in all portfolios – “best ideas” approach. Three pillars of analyzing sovereign debt 1 Fiscal 2 Balance of Payments 3 Monetary/Financial  Debt level and its  Structure of the balance  Health of the financial composition of payment sector  Main drivers of fiscal  Capital account and  Credit growth outlook revenue current account  Composition, vulnerability  Political ability to raise  Destination of the and leverage of the taxes or cut expenditures country’s exports and banking sector imports What to watch out for - RED FLAGS  Current account deficit as a % of GDP above 5%  Consistently high fiscal deficit above 4%  High external debt relative to exports & GDP  Excessive credit growthSource: GSAMFor illustrative use only. Please see additional disclosures. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or politicalconditions and should not be construed as research or investment advice. Please see additional disclosures. 14
  • Goldman Sachs Asset ManagementExample of Local Debt AnalysisOverweight Brazil Brazilian Inflation Linked Yield Curves Analysis:  Analysis supported by our research on the ground in 16 2006 2008 2010 2011 Sao Paulo 14  Real yields in Brazil are extremely high compared to all other emerging market yields 12  We attempted to model a ‘Reserve Bank Reaction 10 Function’ which points to the likely behaviour of (%) central banks around the world (Taylor rule). This 8 model is a function of growth, output gap & inflation.  Our analysis suggested the Brazil central bank had 6 scope to cut rates. We believe real interest rates are going to decrease in the future and converge in line 4 with other emerging market economies levels. 2 Positioning: 0 0 5 10 15 20 25 30  Overweight Brazil local debtGSAM computations based on Bloomberg and GSAM data. For illustrative purposes only to demonstrate GSAMs analytical process. Any reference to an individual country does notconstitute a recommendation to buy, hold or sell a security of such country. 15
  • Goldman Sachs Asset ManagementEmerging Market Debt LocalGoldman Sachs Growth & Emerging Markets Debt Local Portfolio performanceas of September 30, 2012 GS Global Emerging Markets Debt Local Portfolio (gross) GS Global Emerging Markets Debt Local Portfolio (net)* JPM GBI-EM Global Diversified Index (%) 20 18.00 15.86 15.68 15.84 14.30 15 12.12 9.48 10 4.08% 5 2.18 0 Prior to 01-Jan-2010 the portfolio was not managed against a benchmark. -2.58 -1.75 -5 For reference the JPM GBI-EM Global -4.40 Diversified Index is shown. -10 Since Inception to Dec-09 2010 2011 2012 (YTD) Gross Excess Return (bps) 232 -83 372As Of September 30, 2012 1-year 3-years, pa Since Inception, paGS Growth & Emerging Markets Debt Local Portfolio (gross), % 17.27 11.14 7.63GS Growth & Emerging Markets Debt Local Portfolio (net), % 15.16 9.11 5.66JP Morgan GBI-EM Global Diversified (1 Day Lag), % 12.62 9.42 9.34Gross Excess Return, bps 465 172 -171Tracking Error (gross), bps 198 210 385Information Ratio (gross) 2.35 0.82 -0.44* Net returns reflect the maximum deductible fees; offshore mutual fund fees are negotiable, based on total mandate size and the level of client servicing required.Base Distribution Share Class: LU0302282511. Past performance is not indicative of future results, which may vary. Fund inception date: 29-Jun-07. 16
  • Goldman Sachs Asset ManagementGoldman Sachs Growth & Emerging Markets Debt Local PortfolioInvestment objectives - set within a risk management framework  Base Distribution Share Class: LU0302282511 Portfolio Targets  Gross excess return target of 2-3% per annum  Target tracking error of 2-4% per annum Benchmark  JP Morgan GBI-EM Global Diversified Index  EM sovereign & quasi-sovereign debt (external or local currency denominated)  EM corporate debt (external or local currency denominated) Permissible Investments  Derivatives (includes US Treasury futures, currency forwards, interest rate swaps, credit default swaps, total return swaps, credit-linked notes)  Max country exposure: 10% vs. index  Max sector exposure: EM corporates 25%, EM external debt 30% Key Internal Guidelines *  Max single issuer exposure to EM corporates: 3%, EM quasi-sovereign : 5%  Max total EM local currency exposure: 50% vs. index  Max exposure to non-USD funding currencies:15%Derivatives are used to access countries where physical bonds are not accessible or high transaction cost and low liquidity exist. Currency forwards are used to optimise our local currency positionsSource: GSAM.* These guidelines refer to our internal principles only and is subject to change without notification. Targets are subject to change and are current as of the date of this presentation. Targets are objectives and do not provide any assurance as to future results. Please see additional disclosures. Past performance is not indicative of future results, which may vary. 17
  • Goldman Sachs Asset ManagementInvestment Universe – EM Local Debt Middle East / Latin America: 27% Europe: 35% Africa: 10% Asia: 28% 12% JPM GBI-EM Global Diversified Index, % 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10% 9.3% 8% 7.3% 6.3% 6% 4.1% 4% 2.3% 2% 0.5% 0.2% 0% Turkey Philippines Peru Hungary Brazil Mexico Russia South Africa Poland Chile Indonesia Thailand Colombia Malaysia JPM GBI-EM Global Diversified Countries Average Credit Rating Yield (%) Duration (yrs) Index Characteristics: 14 Baa2 (Moodys), BBB+ (S&P) 5.87 4.63As of September 30, 2012 for benchmark characteristics. Source: JP Morgan, Bloomberg, GSAM. The source of average credit rating is JP Morgan. This information discusses generalmarket activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Please seeadditional disclosures. Any reference to a specific company or country does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. It shouldnot be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document. Past performance is notindicative of future results, which may vary. JPMorgan Government Bond Index – Emerging Markets Global Diversified Index is an unmanaged index of debt instruments of EmergingCountries. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index. Duration shown is spread duration. 18
  • Goldman Sachs Asset ManagementDecomposition of rates vs. currency for the JPM GBI-EMGlobal Diversified Index 25% Rates Currencies 20% 15% Ann. Return 10% 5% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 -5% (YTD) -10% -15%Region Breakdown of Cumulative Return Risk Decomposition Correlation Region Return (Ann.) Volatility (Ann.) Rates Currency Rates Currency Rates Currency Rates CurrencyGBI-EM Global Diversified 52% 48% 28% 71% 0.51 GBI-EM Global Diversified 6.5% 5.7% 4.5% 9.0% Asia 69% 31% 62% 38% 0.57 Asia 6.5% 2.8% 6.7% 4.7% Europe 40% 60% 20% 79% 0.53 Europe 4.9% 6.5% 4.6% 13.4% Latam 58% 42% 29% 71% 0.35 Latam 9.6% 6.4% 5.3% 9.8% Middle East/Africa 37% 63% 19% 80% 0.38 Middle East/Africa 5.0% 7.2% 6.4% 17.5%FX (currency) is calculated as the JPM GBI-EM Global USD-unhedged Index minus the JPM GBI-EM Global USD- hedged Index.As of September 30, 2012. Source: JP Morgan, Bloomberg, GSAM. Cumulative returns. This information discusses general market activity, industry or sector trends, or other broad-basedeconomic, market or political conditions and should not be construed as research or investment advice. Past performance is not indicative of future results, which may vary. Please seeadditional disclosures. Return data are shown since 31-Dec-2002. 19
  • Goldman Sachs Asset ManagementGoldman Sachs Growth & Emerging Markets Debt Local PortfolioPortfolio characteristicsGS Growth & Emerging Markets Debt Local Portfolio vs. JPMorgan GBI-EM Global Diversified index Top Level Statistics Credit Rating Allocation* Portfolio Benchmark Difference Portfolio Benchmark DifferenceMarket value (MM) 2,530.98 937,198.63 AAA 0.00% 0.00% 0.00%Number of Holdings 278 168 110 AA 0.78% 0.19% 0.59%Number of Countries 32 14 18 A 46.82% 57.27% -10.45%Average Credit Quality BBB- BBB+ BBB 28.22% 25.77% 2.45%Average Country Weight %) 3.13% 7.14% -4.02% BB 2.78% 16.77% -14.00%Coupon (%) 8.56 6.92 1.64 B 2.33% 0.00% 2.33%Yield To Maturity (%) 6.10 5.87 0.24 CCC 0.00% 0.00% 0.00%Yield To Worst (%) 6.03 5.86 0.17 CC 0.00% 0.00% 0.00%Credit Adjusted Duration (years) 0.01 0.04 (0.04) C 0.00% 0.00% 0.00%Option Adjusted Duration (years) 4.00 4.15 (0.15) D 0.00% 0.00% 0.00%Option Adjusted Spread Duration (years) 4.88 4.63 0.25 NR1 14.40% 0.00% 14.40%Convexity 0.33 0.36 (0.03) Cash2 4.35% 0.00% 4.35%Maturity (years) 6.41 6.74 (0.33) Interest Rate Swaps3 0.32% 0.00% 0.32%LIBOR OAS (bps) 40 1 39 Total 100.00% 100.00% 0.00%As of 30 September 2012Source: GSAM, JPMorgan. Holdings are subject to change and should not be construed as research or investment advice.1 Non-Rated (NR) includes holdings of securities not rated by any major rating agency. Unrated securities held in the fund may be of higher, lower, or comparable credit quality to securities that have a credit rating from a Nationally Recognized Statistical Rating Organization (NRSRO). Therefore, investors should not assume that the unrated securities in the fund increase or decrease the fund’s overall credit quality.2 Cash may include local currency, foreign currency, short-term investment funds, bank acceptances, commercial paper, margin, repurchase agreements, time deposits, variable-rate demand notes, and/or money market mutual funds. The Cash category may show a negative market value percentage as a result of a) the timing of trade date versus settlement date transactions and/or b) the portfolio’s derivative investments, which are collateralized by the portfolio’s available cash and securities. Such securities are AAA rated by an independent rating agency, have durations between -2 and 1 years, and are limited to the following sectors: governments, agencies, supranationals, corporates, and agency-backed adjustable-rate mortgages. These securities are not reclassified under the Cash category; rather, they remain classified under their proper descriptions (e.g., rating, sector, etc.).3 Swaps may be used for hedging purposes and/or to express outright investment views. The table’s market value percentage total for derivatives reflects aggregated unrealized gains or losses on positions. 20
  • Goldman Sachs Asset ManagementGoldman Sachs Growth & Emerging Markets Debt Local PortfolioSector and currency distributionSector Allocation (market value, %) Active Currency Exposure (market value, %) Poland (PLN), 7.86% Bulgaria (BGN), - Local Quasi- Local Corporate Cash, 4.4% External India (INR), 6.28% 2.25%Sovereign Debt, Debt, 2.1% Sovereign Debt, Hungary (HUF), 4.24% 3.1% 2.3%External Quasi- Taiwan (TWD), -1.98% United StatesSovereign Debt, (USD), -19.51% 0.2% Mexico (MXN), Czech Republic (CZK), 16.09% -1.77% Japan (JPY), -1.71% Russia (RUB), Various (EUR), -1.13% 14.81% Singapore (SGD), - 1.01% Malaysia (MYR), South Africa (ZAR), 13.57% 9.84% Brazil (BRL), 12.12% Philippines (PHP), 2.33% Local Sovereign Indonesia (IDR), 9.94% Debt, 88.0% Nigeria (NGN), 1.69% Thailand (THB), 7.32% Turkey (TRY), 11.49% Argentina (ARS), Peru (PEN), 3.80% 0.21% Colombia (COP), Dominican Republic Israel (ILS), 1.42% 4.63% (DOP), 0.50% China (CNY), 0.98%As of 30 September 2012Source: GSAM, JPMorgan. * Cash includes cash-backed derivatives exposure such as currency forwards and the unrealized profit and loss from those derivatives exposures.Holdings are subject to change and should not be construed as research or investment advice. 21
  • Goldman Sachs Asset ManagementGoldman Sachs Growth & Emerging Markets Debt Local PortfolioCountry distributionGS Growth & Emerging Markets Debt Local Portfolio vs. JPMorgan GBI-EM Global Diversified Index (market value, %) 20.0% External Sovereign Debt Local Sovereign Debt External Quasi-Sovereign Debt Local Quasi-Sovereign Debt External Corporate Debt Local Corporate Debt Currency Forward (FX) Cash Other Benchmark Total 15.0% 10.0% 5.0%Market vaule (%) 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% Dominican Republic Colombia Philippines Bulgaria Thailand Nigeria Indonesia Japan Taiwan Hungary Venezuela Singapore United States United Kingdom Malaysia European Union Argentina Peru Israel Chile China Poland South Africa Czech Republic Mexico Brazil India Turkey Sri Lanka Russia Cote dIvoire South KoreaAs of 30 September 2012Source: GSAM, JPMorgan. The data shown is of a representative account, is for informational purposes only, and is not indicative of future portfolio characteristics/returns. Actual resultsmay vary for each client due to specific client guidelines and other factors. Holdings are subject to change and should not be construed as research or investment advice. This chart isintended to show key positions and does not show every position in the portfolio. 22
  • Goldman Sachs Asset ManagementGoldman Sachs Growth & Emerging Markets Debt Local PortfolioCountry distributionGS Growth & Emerging Markets Debt Local Portfolio vs. JPMorgan GBI-EM Global Diversified Index (spread duration, years) 1.20 External Sovereign Debt Local Sovereign Debt External Quasi-Sovereign Debt Local Quasi-Sovereign Debt External Corporate Debt Local Corporate Debt Benchmark Total 1.00 0.80 0.60Spread duration (years) 0.40 0.20 0.00 -0.20 -0.40 Dominican Republic Colombia Thailand Philippines Nigeria Indonesia Taiwan Venezuela Hungary Israel Peru Argentina Chile China Poland Malaysia South Africa United States Brazil Mexico Turkey Sri Lanka Cote dIvoire Russia South KoreaAs of 30 September 2012Source: GSAM, JPMorgan. The data shown is of a representative account, is for informational purposes only, and is not indicative of future portfolio characteristics/returns. Actual resultsmay vary for each client due to specific client guidelines and other factors. Holdings are subject to change and should not be construed as research or investment advice. This chart isintended to show key positions and does not show every position in the portfolio. 23
  • Goldman Sachs Asset ManagementGSAM EMD Advantages Characteristics Features Potential Benefits Experienced and Specialist  Core of the EMD team together for 10 years Deep knowledge of emerging team  Minimum turnover since inception of the strategy in 2000 markets Access to Multiple Resources  Sam Finkelstein facilitates GSAM macro strategy discussions Robust idea generation  Access to broader GSAM & GS systems & resources  Presence on 3 continents and 4 countries Enhanced ability to identify Global Presence  Continuous monitoring of global markets opportunities globally  Risk managed at multiple levels: EMD team, GSAM FI, IMD Minimizes the probability of Risk Managed Approach  Proprietary factor risk model used for risk analysis and budgeting taking unintended riskAs of 31 July 2012Past performance is not indicative of future results, which may vary. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply lowrisk. GSAM leverages the resources of Goldman Sachs & Co. subject to Chinese Wall restrictions. 24
  • Goldman Sachs Asset ManagementAppendix
  • Goldman Sachs Asset ManagementInvestment universe - EM external debt Latin America: 38% Europe: 29% Asia: 23% 7.0 6.4 6.0JPM EMBI Global Diversified Index, % 5.8 5.9 5.8 Middle East / Africa: 10% 6.0 5.7 5.0 4.4 4.3 4.0 3.7 3.6 3.6 3.1 3.1 3.2 3.2 2.9 2.8 3.0 2.6 2.4 2.4 2.3 1.9 2.0 2.0 1.4 1.4 1.0 0.8 0.8 0.8 0.7 0.6 0.6 0.5 0.6 0.6 0.4 0.5 0.4 0.3 0.3 0.2 0.2 0.3 0.3 0.2 0.2 0.2 0.2 0.1 0.2 0.2 0.0 Dominican… Azerbaijan Belize Jamaica Nigeria Brazil Namibia Russia Malaysia Panama Romania Gabon Vietnam Peru Ghana Jordan Pakistan Guatemala Turkey Bulgaria Uruguay Chile Ukraine Hungary Costa Rica Georgia Argentina Mongolia Senegal Iraq Kazakhstan Colombia Serbia Venezuela Belarus Mexico Ecuador Poland El Salvador Lithuania Egypt Latvia Lebanon Philippines South Africa Indonesia Croatia China Sri Lanka Cote DIvoire JPM EMBI Global Diversified Countries Average Credit Rating Yield (%) Spread (bps) Duration (yrs) Index Characteristics: 50 Baa3 (Moodys) / BBB- (S&P) 4.23 282 7.09As of September 30 2012 for benchmark characteristics. Source: JP Morgan, Bloomberg, GSAM. The source of average credit rating is JP Morgan. This information discusses general marketactivity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Please see additionaldisclosures. Any reference to a specific company or country does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. It should not beassumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document. Past performance is not indicative of futureresults, which may vary. The J.P. Morgan Emerging Markets Bond Index Global Diversified is an unmanaged market capitalization Index that tracks total returns for U.S. dollar denominateddebt instruments issued by emerging market sovereign and quasi-sovereign issuers. The index does not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly inan unmanaged index. Duration shown is spread duration. 26
  • Goldman Sachs Asset ManagementJP Morgan EMBI Index – Sovereign Ratings and Spreads Investment Grade BB B Credit Sovereign Sovereign Credit SovereignCountry Rating Spread (bps) Country Credit Rating Spread (bps) Country Rating Spread (bps)Bulgaria BBB 124 Philippines BB+ 144 Nigeria B+ 345Peru BBB 125 Indonesia BB+ 204 Sri Lanka B+ 352Malaysia A- 131 Turkey BB 236 Ghana B 374Colombia BBB- 132 Gabon BB- 265 Dom Rep B+ 418Uruguay BBB- 139 Guatemala BB 273 Lebanon B 420Chile A+ 143 Vietnam BB- 352 Senegal B+ 421Poland A- 144 Romania BB+ 362 Egypt B 444Panama BBB 148 Mongolia BB- 376 Jamaica B- 662Brazil BBB 162 Hungary BB+ 383 Ukraine B+ 722China AA- 171 Georgia BB- 389 Ecuador B 743Mexico BBB 172 Costa Rica BB+ 393 Belarus B- 831South Africa BBB+ 176 Jordan BB 405 Argentina Bu 897Russia BBB 208 El Salvador* BB 426 Venezuela B+ 956Lithuania BBB 209 Serbia BB- 523 Pakistan B- 976Latvia BBB- 218Namibia* BBB- 237 NRKazakhstan BBB+ 247 Credit SovereignAzerbaijan BBB- 309 Country Rating Spread (bps)Croatia BBB- 349 Iraq NR 504 Cote DIvoire NR 563 Belize SD 2399* Denotes Fitch Rating used as country is rated NR by S&P.S&P Long Term Foreign Currencies rating shown as at 10-Oct-12. Source: BloombergSovereign spreads are as at 28-Sep-12. Source: JP Morgan
  • Goldman Sachs Asset ManagementEmerging Market DebtGoldman Sachs Growth & Emerging Markets Debt Portfolio performance as ofSeptember 30, 2012 GS Global Emerging Markets Debt Portfolio (gross) GS Global Emerging Markets Debt Portfolio (net)* JPMorgan EMBI Global Diversified (1-Day Lag) 50% 40.4 38.4 35% 29.9 25.6 23.6 22.5 16.1 14.2 17.2 17.0 20% 15.7 13.8 15.3 15.9 14.0 15.0 13.2 14.9 14.2 13.0 11.6 13.1 11.5 12.2 9.6 8.4 9.1 10.0 10.3 10.0 7.8 7.0 7.4 5.4 3.9 6.0 5% -10% -12.0 -25% -19.6 -20.8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (YTD) Partial Gross Excess Return (bps) 52 604 268 315 564 556 314 -58 -754 1,057 278 45 279As Of September 30, 2012 1-year 3-years, pa 5-years, pa Since Inception, paGS Growth & Emerging Markets Debt Portfolio (gross), % 23.30 14.24 10.72 13.66GS Growth & Emerging Markets Debt Portfolio (net), % 21.45 12.54 9.08 11.91JPM EMBI Global Diversified Index (1 Day Lag), % 19.04 11.96 10.03 11.22Gross Excess Return, bps 426 229 69 244Tracking Error (gross), bps 171 166 377 283Information Ratio (gross) 2.50 1.38 0.18 0.86* Net returns reflect the maximum deductible fees; offshore mutual fund fees are negotiable, based on total mandate size and the level of client servicing required.Base Distribution Share Class: LU0110449138. Past performance is not indicative of future results, which may vary. Fund inception date: 03-May-00. 28
  • Goldman Sachs Asset ManagementCorrelation across asset classesLast 10 years EM External EM Local EM Global US HY Corp US IG Corp Global Debt Debt Currency EM Equity Bonds Bonds Bonds US Equity Equity Commodities EM External Debt 1.00 EM Local Debt 0.70 1.00 EM Currency 0.65 0.94 1.00 EM Equity 0.66 0.78 0.80 1.00 Global Bonds 0.54 0.62 0.62 0.33 1.00 US HY Corp Bonds 0.74 0.60 0.57 0.70 0.28 1.00 US IG Corp Bonds 0.74 0.51 0.44 0.38 0.68 0.58 1.00 US Equity 0.60 0.64 0.69 0.82 0.22 0.70 0.28 1.00 Global Equity 0.64 0.72 0.78 0.90 0.31 0.73 0.35 0.97 1.00 Commodities 0.26 0.43 0.50 0.50 0.26 0.33 0.22 0.34 0.43 1.00Last 5 years EM External EM Local EM Global US HY Corp US IG Corp Global Debt Debt Currency EM Equity Bonds Bonds Bonds US Equity Equity Commodities EM External Debt 1.00 EM Local Debt 0.81 1.00 EM Currency 0.72 0.95 1.00 EM Equity 0.75 0.86 0.84 1.00 Global Bonds 0.64 0.70 0.70 0.49 1.00 US HY Corp Bonds 0.80 0.67 0.60 0.77 0.36 1.00 US IG Corp Bonds 0.82 0.60 0.50 0.56 0.66 0.67 1.00 US Equity 0.67 0.76 0.74 0.84 0.40 0.76 0.46 1.00 Global Equity 0.73 0.83 0.82 0.91 0.49 0.79 0.53 0.98 1.00 Commodities 0.45 0.64 0.71 0.72 0.31 0.50 0.29 0.62 0.68 1.00As of May 31, 2012. Source: GSAM, Bloomberg. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditionsand should not be construed as research or investment advice. Please see additional disclosures. 29
  • Goldman Sachs Asset ManagementWe believe EM inflation will stay contained despiteincrease in food priceWhile corn, wheat and soy have climbed, rice prices have been steady. Food represents ~25-30% of EM inflation baskets. Corn (LHS) $/bu Wheat (LHS) $/bu 50% Share of food related items in CPI basket10 Soybeans (RHS) $/bu Rice (RHS) $/cwt 18 16 40% 9 14 8 12 30% 10 7 8 20% 6 6 4 10% 5 2 15/06/2… 29/06/2… 30/12/2… 13/01/2… 27/01/2… 10/02/2… 24/02/2… 09/03/2… 23/03/2… 06/04/2… 20/04/2… 04/05/2… 18/05/2… 01/06/2… 13/07/2… 4 0 0% Colombia Poland Chile Peru Thailand Hungary Brazil Korea Malaysia Mexico South Indonesia Israel Turkey AfricaSource: Bloomberg. As of July 26, 2012 Source: Haver Analytics, GSAM. As of June 30, 2012EM import prices never fully baked in the recent drop in agricultural The recent upturn in food prices is more likely to curb the recent drop inprices. EM inflation rather than reversing the 12-month downward trend. 6.5 *all simple averages except EM 6.0 aggregate 5.5 5.0 4.5 4.0 3.5 3.0 2.5 Latam 4 Asia CEEMEA GDP weighted EM average 2.0 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12Source: Citi Global Macro Strategy Research. As of June 30, 2012 Source: Citi Global Macro Strategy Research. As of June 30, 2012This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research orinvestment advice. Please see additional disclosures. 30
  • Goldman Sachs Asset ManagementProprietary SystemsZephyr – The Taylor RuleFor illustrative purposes only. 31
  • Goldman Sachs Asset ManagementProprietary SystemsZephyr – What’s priced in?For illustrative purposes only. 32
  • Goldman Sachs Asset ManagementProprietary SystemsZephyr – Valuation modelFor illustrative purposes only. 33
  • Goldman Sachs Asset ManagementProprietary SystemsGRM – Global Risk ManagementFor illustrative purposes only. 34
  • Goldman Sachs Asset ManagementGeneral disclosuresThis material is provided at your request for informational purposes only and does not constitute a solicitation in any jurisdiction in which such a solicitation is unlawful or to any person to whom it is unlawful. Moreover, itneither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement. References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results.The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviatefrom those of the benchmark.Opinions expressed are current opinions as of the date appearing in this material only. The strategy may include the use of derivatives. Derivatives often involve a high degree of financial risk because a relatively small movement in the price of the underlying security or benchmark may result in adisproportionately large movement in the price of the derivative and are not suitable for all investors. No representation regarding the suitability of these instruments and strategies for a particular investor is made. High-yield, lower-rated securities involve greater price volatility and present greater credit risks than higher-rated fixed income securities. Emerging markets securities may be less liquid and more volatile and are subject to a number of additional risks, including but not limited to currency fluctuations and political instability. CORESM is a registered service mark of Goldman, Sachs & Co. Indices are unmanaged. The figures for the index reflect the reinvestment of dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices. This material has been prepared by GSAM and is not a product of the Goldman Sachs Global Investment Research Division. The views and opinions expressed may differ from the views and opinions expressed by theGlobal Investment Research Division or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. Thisinformation should not be relied upon in making an investment decision. GSAM has no obligation to provide any updates or changes. Holdings may change by the time you receive this report. The securities discussed do not represent all of the portfolios holdings and may represent only a small percentage of the strategy’s portfolio holdings. Acomplete list of holdings is available upon request. Future portfolio holdings may not be profitable. The information should not be deemed representative of future characteristics for the strategy. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk. Tracking Error (TE) is one possible measurement of the dispersion of a portfolio’s returns from its stated benchmark. More specifically, it is the standard deviation of such excess returns. TE figures are representationsof statistical expectations falling within “normal” distributions of return patterns. Normal statistical distributions of returns suggests that approximately two thirds of the time the annual gross returns of the accounts will liein a range equal to the benchmark return plus or minus the TE if the market behaves in a manner suggested by historical returns. Targeted TE therefore applies statistical probabilities (and the language of uncertainty)and so cannot be predictive of actual results. In addition, past tracking error is not indicative of future TE and there can be no assurance that the TE actually reflected in your accounts will be at levels either specified inthe investment objectives or suggested by our forecasts.Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, theaccuracy and completeness of all information available from public sources. No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient, withoutGSAM’s prior written consent. In the United Kingdom, this material is a financial promotion and has been approved by Goldman Sachs International, which is authorized and regulated in the United Kingdom by the Financial Services Authority.This marketing material has been issued by Goldman Sachs International, which is authorised and regulated by the United Kingdom Financial Services Authority (FSA). It only contains selected information on this fund and does not constitute an offer to buy shares in the fund. Prior to an investment, prospective investors should carefully read the latest offering documentation, includingbut not limited to the fund’s prospectus which contains inter alia a comprehensive disclosure of applicable risks. The relevant articles of incorporation, prospectus, simplified prospectus/key investor information documentas applicable and latest annual/semi-annual report are available free of charge from the fund’s paying and information agent (■■■), and/or from your financial advisor. Financial advisers generally suggest a diversified portfolio of investments. The fund described herein does not represent a diversified investment by itself. An investor should only invest if he/she has the necessaryfinancial resources to bear a complete loss of this investment. This information must not be misconstrued as investment or tax advice. Prospective investors should consult their financial and tax adviser before investing in order to determine whether an investment would besuitable for them. Furthermore, this information must neither be misconstrued as financial research. It was not prepared in compliance with applicable provisions of law designed to promote the independence of financialanalysis and is not subject to a prohibition on trading following the distribution of financial research. The information contained herein is only intended as a product description and is not prepared by the Goldman Sachs Global Investment Research (GIR) Department. The views and opinions expressed herein are validas of the date of this publication only and may differ from the views and opinions expressed by the GIR Department or other departments or divisions of Goldman Sachs and its affiliates. Goldman Sachs Internationalhas no obligation to provide any updates or changes.© 2012 Goldman Sachs. All rights reserved.Ref: 83870.OSF.OTU Compliance code 83891.OSF.OTU 35