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Neuberger berman

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  • 1. Neuberger BermanEmerging Markets Equity FundJune 2011 For Professional Client Use Only
  • 2. Emerging Markets Equity StrategyThe Emerging Markets Equity strategy has outperformed the benchmark MSCI EM Indexby 2.68%1 annualised over the last 10 years  Portfolio Manager Conrad Saldanha has managed emerging market assets for 18 years Experience  Investment team has an average of 13 years of investment experience in emerging markets  Supported by nearly 40 analysts in the Global Equity Research Department  Established track record  Identify smaller, high quality companies that are under-researched  Focus on companies geared towards local economies Distinctive Approach  $5bn capacity maintains flexibility to invest in smaller companies  Strategy leverages core competencies of the global equity team  Fundamental, bottom-up focus Proven Investment  Sustainable cash flow growth and attractive valuations Process  Identify companies with unique asset opportunities, differentiated business models and attractive growth prospects  UCITS fund launched in October 2010 Investment Vehicles  Also available in customised segregated account___________________________1. Source: Neuberger Berman. As at April 30, 2011. Past performance is not indicative of future returns. Performance figures are net of fees and quoted in US Dollars. 1
  • 3. Longer Term Case for Emerging Market EconomiesDemographics and healthy balance sheets drive the potential for greater global stockmarket representation Emerging Economies as % of Total World Population 82.9% 17.1% Land Mass 75.1% 24.9% Foreign Exchange Reserves 68.6% 31.4% Energy Consumption 56.2% 43.8% GDP at PPP 51.4% 48.6% Exports 46.1% 53.9% GDP at Market Rates 36.1% 63.9% Market Cap (Full Market) 24.9% 75.1% Market Cap (Float Adjusted) 13.0% 87.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Emerging Markets Developed Markets___________________________Source: BofA Merrill Lynch Global Equity Strategy, BP, CIA World Factbook, IMF World Economic Outlook, MSCI. As of March 31, 2010.See Additional Disclosures at the end of this piece, which are an important part of this presentation. 2
  • 4. Growing Significance of Emerging Markets ConsumptionEmerging markets consumption has been growing at faster pace compared to developed EM and US Consumption as Percentage of Global Consumption(1) 40 35 30 (%) 25 20 15 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 US EM EM vs. DM Retail Sales(2) Vehicle Sales(3) 15 25 10 20 7.5 Million 5 15 (%) 4.9 0 10 -5 5 -10 0 Jun 2000 De c 2001 Jun 2003 De c 2004 Jun 2006 Dec 2007 Jun 2009 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010 De velope d Re tail Sales___________________________ Eme rging Re tail Sale s US EU Japan BIC1. Source: JP Morgan.2. Source: JP Morgan economics, January 2010. Dashed horizontal lines are the average 3m/3m saar growth since June 2000.3. Source: JP Morgan, February 2010. Red line is the aggregate for Brazil, India and China. Note: The sales are annualized and are in million units.See Additional Disclosures at the end of this piece, which are an important part of this presentation. 3
  • 5. By Country: Local Opportunities DifferInvestors are willing to pay more for higher returns Price/Earnings to Growth vs Return on Equity (5 Year Historical Average) 1.2 Indonesia 1.1 India 1 Price/Earnings to Growth 0.9 Russia 0.8 Brazil 0.7 0.6 China 0.5 0.4 0.3 0.2 10 15 20 25 30 Return on Equity (5 Year Historical Average)___________________________As of December 31, 2010. Sources: Neuberger Berman, MSCI and FactSet."Global Sectors" for the MSCI Emerging Market Indices includes companies within Energy, Information Technology, and Materials sectors, while “Local Sectors" includes companies within Industrials,Consumer Discretionary, Consumer Staples, Financials, Telecommunication Services and Utilities sectors. Health Care is categorized as a Local Sector for the MSCI Emerging Markets Index since June 1, 2010due to Israels upgrade to developed market status by MSCI. The size of each bubble is represented by the market cap percentage of the Local Sectors. Indexes are unmanaged and are not available for directinvestment. returns include the reinvestment of all dividends and distributions. See Additional Disclosures at the end of this piece, which are an important part of this presentation. 4
  • 6. Investment TeamDedicated and experienced investment team supported by a centralized researchdepartment Emerging Markets Investment Team Conrad Saldanha, CFA Marco Spinar, CFA Portfolio Manager Associate Portfolio Manager 18 Years Industry Experience 10 Years Industry Experience International Equity Investment Team Benjamin Segal, CFA Portfolio Manager 18 Years Industry Experience Dedicated Investment Team Gretchen Amidon, CFA David Bunan, CEFA Elias Cohen, CFA Brian Faleiro, CFA Maria Llerena, CFA Product Specialist Industrials, Materials, Consumer Discretionary, Product Specialist Healthcare, Construction, 12 Years Industry Experience Exchanges Telecom/Tel. Equip., Technology 14 Years Industry Experience Oil Services 13 Years Industry Experience 10 Years Industry Experience 14 Years Industry Experience John Nadell, CFA Saurin D. Shah Steve Lieberman Frank V. Powers Financials, Consumer Staples Energy, Mining, Autos, Auto Related Product Coordinator Portfolio Administrator 21 Years Industry Experience 22 Years Industry Experience 5 Years Industry Experience 5 Years Industry Experience Neuberger Berman Global Equity Research Department Gregory Francfort Director of Global Equity Research 28 Years Industry Experience___________________________ 26 Analysts and 12 AssociatesNote: Staffing is subject to change without notice.As of March 31, 2011. The Global Equity Team consists of the international and emerging markets teams. 5
  • 7. Investment Philosophy and Approach Investment Philosophy Sustainable cash flow growth at attractive valuations can drive performance over the long term Domestically focused smaller cap companies have attractive growth and diversification potential Benchmarks not always reflective of domestic economies Approach Fundamental, bottom-up approach focusing on high return businesses Experienced global sector analysts focused on under-research stocks All cap strategy opportunistically investing in frontier markets Identify companies with unique asset opportunities, differentiated business models and attractive growth prospects___________________________This material is intended as a broad overview of the Portfolio Managers style, philosophy and investment process and is subject to change without notice. Portfolio Managers views may differ from those of otherPortfolio Managers as well as the views of Neuberger Berman. Of course, all accounts are managed based upon each client’s needs and objectives. See Additional Disclosures at the end of this presentation, whichare an important part of this presentation. 6
  • 8. Investment Process OverviewFundamental, bottom up driven process Quantitative Strategic Portfolio Investment Universe Valuation Screening Analysis Construction 12,000 + stocks 200+ stocks 900+ stocks 400+ stocks 70-100 stocks Companies with  Profitable: ROE >  Competitive positioning  Proprietary cash  Measure risk at the principal businesses 15% and industry analysis flow models security and portfolio in Emerging and/or level Frontier markets  Financially strong:  Company management  Analyze sensitivity with market caps Debt/EBITA <2.5x  Minimum upside meetings: to core assumption >$200M and >$1M potential of 50% over 3  Attractively valued:  250 onsite meetings1 years for security daily liquidity  Establish price Price/Cash Flow < 3  400 off-site targets for security year cash flow meetings1  Position size based on growth  Meet with competitors, level of conviction suppliers and clients  Assess corporate governance, regulatory, political and macroeconomic risk Growth and Quality Reasonable Price Risk Managed___________________________1. Meetings during 2009.This material is intended as a broad overview of the Portfolio Managers style, philosophy and investment process and is subject to change without notice. Portfolio Managers views may differ from those of otherPortfolio Managers as well as the views of Neuberger Berman. Of course, all accounts are managed based upon each client’s needs and objectives. See Additional Disclosures at the end of this presentation, whichare an important part of this presentation. 7
  • 9. Investment Process – ExampleOverweight holding example Quantitative Strategic Portfolio Investment Universe Valuation Screening** Analysis Construction Market Cap: $1,704  Profitable: ROE  High barriers to entry  Proprietary cash  Initiated at 50 bps in million. $700 17% flow model June 2009, based on million at initiation  Scale and cost control liquidity  Financially strong: drives margin expansion  Analyzed potential Net Debt/EBITA: for margin  Added to position 1.17  Highly correlated to expansion as strategically domestic consumption capacity utilization  Attractively valued: improves Price/Cash Flow:  On-site meetings in 9.3x vs. cash flow Philippines as well as  Price target growth of 21.1% several management established meetings over last 2 years___________________________** Based on 2011 estimated values.The Example represents the #1 overweight position in the Portfolio as of December 31, 2010. This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subjectto change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman LLC. This holding was selected based on the fact that it is one ofthe largest overweight holding in the portfolio managers’ portfolio. It was not selected based on performance. Representative portfolio information (characteristics, holdings, weightings, etc.) is subject to changewithout notice. Client accounts are individually managed and may vary significantly from composite performance and representative portfolio information. Specific securities identified and described do notrepresent all of the securities purchased, sold or recommended for advisory clients. It should not be assumed that any investments in securities identified and described were or will be profitable. Investing entailsrisks, including possible loss of principal. Past performance is no guarantee of future results. See Additional Disclosures at the end of this presentation, which are an important part of this presentation. 8
  • 10. Emerging Markets Equity Strategy PerformanceAs of April 30, 2011 Annualized Rates of ReturnReturns1 Value Added(Gross of Fees) Emerging Markets Equity2 MSCI EM IndexTM (%)YTD 2.97% 5.29% -2.32%1 Year 22.19% 21.00% 1.19%3 Years 3.46% 2.98% 0.48%5 Years 11.93% 10.17% 1.76%10 Years 19.60% 16.92% 2.68%___________________________1. Periods less than 1 year are not annualized.2. Please see attached additional notes and disclosures, which are a required part of this presentation. Past performance does not predict or guarantee future results. 9
  • 11. Neuberger Berman Emerging Markets Equity Fund As of April 30, 2011 Top 10 Holdings1 Vale Adr 3.06% Samsung Electronics Co. Ltd. 2.79% Hyundai Mobis Co. Ltd. 2.45% Bank of China Ltd. 2.10% Sberbank GDR 2.00% MTN Group Ltd. 1.89% LG Chem Ltd. 1.73% Diagnosticos da America S/A 1.61% Axiata Group Berhad 1.59% Lukoil Holdings ADS 1.55% International Container Terminal Services Inc. 1.49%___________________________Source: FactSet. Neuberger Berman LLC.Holdings are as of the date indicated and are subject to change without notice. ETF’s such as iShares MSCI Taiwan (4.99% of total holdings) and Power Shares India (1.76% of total holdings) are held whenlocal-market equity securities are not accessible. 10
  • 12. Sector/Country WeightingsAs of April 30, 2011 Sector Breakdown (%)30 24.532520 15.15 15.17 15.0015 12.67 13.46 12.68 12.00 9.8310 7.69 7.24 8.86 7.23 7.45 7.28 6.58 5.48 5 4.03 3.45 2.59 0.89 0.75 0.00 0.00 0 Consumer Consumer Staples Energy Financials Health Care Industrials Information Materials T elecommunication Utilities Unassigned Cash Discretionary T echnology Services Fund Benchmark Country Breakdown (%) 20 16 .8 15.8 14 .9 15.8 15.5 15 14 .2 11.3 10 6 .7 7.1 7.6 7.1 6 .3 6 .1 5.9 4 .4 4 .8 5 4 .1 3 .1 2 .4 2 .9 3 .4 2 .7 2 .9 2 .3 2 .6 1.8 1.5 1.5 1.8 1.3 1.3 1.6 1.2 1.1 0 .0 0 .6 0 .0 0 .0 0 .0 0.0 0 ea an a om ico ia a ey a el d sia er si a il nd h s na le di ad ic ne ne as az ra s or rk hi th iw ex hi us ne fr la ay In gd an C pi sig Br Is C K O Tu ai C Ta A R M do al p in C Th s il i h M na K In ut Ph U d So te ni U Emerging Markets Fund MS CI Emerging Markets___________________________Sources: Neuberger Berman, MSCI; FactSet. Neuberger Berman LLC. 11
  • 13. Emerging Markets Equity StrategyThe Emerging Markets Equity strategy has outperformed the benchmark MSCI EM Indexby 2.68%1 annualised over the last 10 years  Portfolio Manager Conrad Saldanha has managed emerging market assets for 18 years Experience  Investment team has an average of 13 years of investment experience in emerging markets  Supported by nearly 40 analysts in the Global Equity Research Department  Established track record  Identify smaller, high quality companies that are under-researched  Focus on companies geared towards local economies Distinctive Approach  $5bn capacity maintains flexibility to invest in smaller companies  Strategy leverages core competencies of the global equity team  Fundamental, bottom-up focus Proven Investment  Sustainable cash flow growth and attractive valuations Process  Identify companies with unique asset opportunities, differentiated business models and attractive growth prospects  UCITS fund launched in October 2010 Investment Vehicles  Also available in customised segregated account___________________________1. Source: Neuberger Berman. As at April 30, 2011. Past performance is not indicative of future returns. Performance figures are net of fees and quoted in US Dollars. 12
  • 14. Appendices
  • 15. Neuberger Berman Emerging Markets Equity Fund Key CharacteristicsFund Family: A sub-fund of the Neuberger Berman Investment Funds plcInception Date: October 4, 2010Base Currency: USDBenchmark: MSCI EM IndexFund Structure: UCITSDomicile: DublinFund Charges1:  Institutional Class “I” 1.00%  Adviser Class “A” 2.00%Valuation: DailySettlement: T+3Trading Deadline: 2.00 p.m. Dublin timeRegulator: Central Bank of IrelandInvestment Manager: Conrad Saldanha___________________________1. Fees as latest available Prospectus. Please check with your Neuberger Berman representative to see if these share classes are available at this time. 13
  • 16. Strategic Analysis and Valuation AssessmentTeam maintains approximately 350 emerging markets financial models to perform in-depth security analysis Strategic Analysis Financials Valuations  Return Analysis:  Cash flow analysis  Cash PEG ratio – Breaks down Return on Equity into – (Price/Cash Earning Per Share)/ three major components: (Growth + Yield)  Balance sheet strength profitability, financial leverage, asset use efficiency  Discounted cash flow  Income statement  Competitive Positioning:  Other: – Assess barriers to entry, power of Price/Earnings, Price/Sales, Price/  Sensitivity analysis to assumptions – suppliers, power of buyers, Book Value, Enterprise substitutes, industry rivals and Value/EBITDA regulatory risks  Competitor valuations___________________________This material is intended as a broad overview of the Portfolio Managers style, philosophy and investment process and is subject to change without notice. Portfolio Managers views may differ from those of otherPortfolio Managers as well as the views of Neuberger Berman. Of course, all accounts are managed based upon each client’s needs and objectives. The use of tools, such as model based programs, cannotguarantee performance. Investing entails risks, including possible loss of principal. See Additional Disclosures at the end of this presentation, which are an important part of this presentation. 14
  • 17. Risk ManagementDisciplined risk parameters are used to help manage risk at the portfolio and securitylevel Security Level  Continuously modify cash flow models and target prices  Automatic review if stock price underperforms by 15%  Team meetings twice a week to discuss stocks and share ideas Portfolio Level Risk Limits Individual stock, sector and country limits  5% Stock limit Barra tracking error of 4% to 7%  10% Country and Sector Limits  Max 10% counterparty limit  No currency hedging  Max 5% issuer Independent Monitoring  Central compliance oversight  Risk monitoring by independent risk committee___________________________This material is intended as a broad overview of the Portfolio Managers style, philosophy and investment process and is subject to change without notice. Portfolio Managers views may differ from those of otherPortfolio Managers as well as the views of Neuberger Berman. Of course, all accounts are managed based upon each client’s needs and objectives. See Additional Disclosures at the end of this presentation, whichare an important part of this presentation. 15
  • 18. Investment Performance Disclosure StatementEmerging Markets Equity Composite (Inception 02/01/97) Composite Composite Benchmarks Composite MSCI EM (Emerging Asset Weighted Composite Return Composite Return Markets) No. of Total Firm Standard SM (Gross of Fees) (Net of Fees) Index Accounts Market Value Assets Deviation % % % (millions) (billions) YTD 2011 -1.67% -1.92% 2.10% 10 $758.3 N/A N/A 2010 23.40 22.18 19.20 9 616.4 102.3 N/A 2009 86.99 85.14 79.02 ≤5 172.3 91.4 N/A 2008 -56.91 -57.31 -53.18 ≤5 108.7 79.2 N/A 2007 52.25 50.98 39.78 ≤5 17.4 148.5 N/A 2006 44.05 42.85 32.59 ≤5 13.9 127.0 N/A 2005 33.41 32.30 34.54 ≤5 18.2 105.9 N/A 2004 25.93 24.89 25.95 ≤5 19.3 82.9 N/A 2003 70.45 69.03 56.28 ≤5 21.3 70.5 N/A 2002 -3.42 -4.22 -6.00 ≤5 14.0 56.1 N/A 2001 -3.91 -4.72 -2.37 ≤5 7.4 59.0 N/A Fee Schedule: First $25 million: 1.00% - Next $25 million: 0.90% - Next $150 million: 0.85% - Balance: 0.75%Firm Compliance Statement Composite Description (continued) Neuberger Berman LLC (“NB”) claims compliance with the Global Investment Performance  The Composite represents the performance of all Institutional Emerging Market fee-paying, Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS discretionary equity accounts, regardless of asset size. The Composite was initiated and created in standards. Neuberger Berman has been independently verified for the periods January 1, 1997 to February 1997. A complete list of composite descriptions is available upon request. December 31, 2008. Verification assesses whether (1) the firm has complied with all the composite Benchmark Description construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and  The benchmark is the MSCI Emerging Markets index, which is designed to measure the emerging procedures are designed to calculate and present performance in compliance with the GIPS countries equity market performance,. The benchmark is calculated on a total return basis and is free standards. The Emerging Markets Equity composite has been examined for the periods February 1, float-adjusted market cap weighted and unmanaged. A complete list of composite benchmark 1997 to December 31, 2008. The verification and performance examination reports are available descriptions is available upon request. upon request. Reporting CurrencyDefinition of the Firm  Valuations are computed and performance is reported in U.S. dollars Neuberger Berman LLC ("NB") founded in 1939, is a Registered Investment Adviser and Broker- Fees Dealer. As of May 4, 2009, the firm is an indirect, wholly-owned subsidiary of Neuberger Berman  Gross of fees returns are presented before management and custodial fees but after all trading Group LLC. From October 31, 2003 until May 4, 2009, the firm was called Neuberger Berman, expenses. Net of fees returns are calculated by deducting the highest fee from the monthly gross LLC and was a wholly-owned subsidiary of Lehman Brothers Holdings Inc. Policies for valuing composite return which is expressed above in the stated fee schedule. portfolios, calculating performance, and preparing compliant presentations are available upon Internal Dispersion request.  Internal dispersion is calculated using the asset weighted standard deviation of annual gross returnsPolicies of those portfolios that were included in the composite for the entire year. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.Composite Description The Emerging Markets Equity strategy (the “Composite”) is designed for investors who seek broad participation in the equity markets of emerging economies. The portfolios in the Composite are managed with a goal to exceed the return of the MSCI EM (Emerging Markets) IndexSM. 16
  • 19. DisclaimerThis document is for distribution to Professional Clients and should not be relied upon by any other person.The fund mentioned in this document may not be eligible for sale in some countries and it may not be suitable for all types of investors. Past performance is not indicative of future results.For details of the investment risks, see the current prospectus.The Neuberger Berman Investment Funds plc is registered in the following jurisdictions: Austria, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Spain, Sweden,Switzerland, and the United Kingdom. Please note, not all of the sub funds are registered in all jurisdictions. Please consult your Neuberger Berman representative for further details. Thesub funds of the Neuberger Berman Investment Funds plc are not available to investors in the United States.We do not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. Opinions expressed herein reflect theopinion of Neuberger Berman Europe Limited (“NB Europe”) and are subject to change without notice.Neuberger Berman Investment Funds plc (the “Fund”) is authorised by the Central Bank of Ireland (the “Central Bank”) as an Undertaking for Collective Investment in TransferableSecurities under the European Communities (“UCITS”) Regulations 2003 (S.I. 211 of 2003) of Ireland, as amended.This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other instruments mentioned herein. Nopart of this document may be reproduced in any manner without the written permission of NB Europe. Shares in the Fund are offered only on the basis of the information contained in theprospectus, simplified prospectus and the latest audited annual accounts and any subsequent half-yearly accounts of the Fund.Please note that any dividends which the Fund may receive are subject to a 30% withholding tax in the US. The benchmark does not take into account the effects of tax and the deduction istherefore not reflected in the benchmark return illustrated herein.The investment objective and performance benchmark is a target only and not a guarantee of the Fund performance. Adverse movements in currency exchange rates can result in a decreasein return and a loss of capital. Investments of each portfolio may be fully hedged into its base currency potentially reducing currency risks but may expose the portfolio to other risks suchas a default of a counterparty.High Yield Bonds carry a higher level of default risk and can be less liquid than government bonds and investment grade corporate bonds.Economies in Emerging Markets are generally less well regulated and may be adversely affected by trade barriers, exchange controls, protectionist measures and political / social instability.There is a risk of volatility due to lower liquidity and the availability of reliable information.Real estate investments are subject to greater potential risks and volatility than a more diversified portfolio, and the share values may decline due to events affecting the real estate industry.The properties held by REITs could fall in value for a variety of reasons, such as declines in rental income, poor property management, environmental liabilities, uninsured damage,increased competition, or changes in real estate tax laws. There is also a risk that REIT stock prices overall will decline over short or even long periods because of rising interest rates.This document is issued by NB Europe which is authorised and regulated by the UK Financial Services Authority (“FSA”) and is registered in England and Wales at Lansdowne House, 57Berkeley Square, London, W1J 6ER. Neuberger Berman is a registered trademark. © 2011 Neuberger Berman. 17