Morgan Stanley Wealth Management Due Diligence Meeting

Transcription

1 Morgan Stanley Wealth Management Due Diligence Meeting Emerging Market Debt: The New Investment Grade Alejandro Arevalo, High Yield EM Portfolio Manager April 2013, Milan Page 1 I For broker/dealer use only and not be distributed to the public.

2 Agenda Why Have Emerging Markets Performed? Why Should Emerging Markets Perform Going Forward? What s Changing In 2013? The Case For Fundamental Research Why Pioneer Investments? Page 2 I For broker/dealer use only and not be distributed to the public.

3 1. Emerging Markets Are Growing Faster Than Mature Economies Global GDP Growth IMF Forecast Source: IMP: World Economic Outlook, World Economic Outlook Database, October 2012, Estimates start after 2011 Page 3 I For broker/dealer use only and not be distributed to the public.

4 2. Credit Is Supported By Competitive Macro Fundamentals Average EM Public sector debt ratios to decline to 32.7% of GDP Source: JPMorgan, 13 April 2013 Page 4 I For broker/dealer use only and not be distributed to the public.

5 3. Returns: Positive Carry in a Low Yield World Source: Bloomberg 31 January 2013 Page 5 I For broker/dealer use only and not be distributed to the public.

6 Basis Points 4. Sponsorship: as Risk Declines, Investors Diversify Emerging Markets do not appear much riskier than US equivalents Spread: Emerging Market IG Bonds vs. US IG Page 6 I For broker/dealer use only and not be distributed to the public.

7 Technicals: Strong Inflows Into the Asset Class Over US$250bn since the end of 2008 Source: JPM EM Corporate Weekly Monitor, April 2013 and EPFR Global Page 7 I For broker/dealer use only and not be distributed to the public.

8 Agenda Why Have Emerging Markets Performed? Why Should Emerging Markets Perform Going Forward? What s Changing In 2013? The Case For Fundamental Research Why Pioneer Investments? Page 8 I For broker/dealer use only and not be distributed to the public.

9 1. Sustainable Long Term Growth Drivers The demographic dividend favours Emerging Markets Page 9 I For broker/dealer use only and not be distributed to the public.

10 2. Increased Transparency and Governance Regaining investor confidence via policy initiatives Constitutional amendments aimed at boosting competitiveness New leadership committed to structural reforms Inclusion in EMBI and S&P ratings upgrade due to momentum in reform and policy improvement Page 10 I For broker/dealer use only and not be distributed to the public.

11 3. Growth Attracts More Efficient Sources of Capital Collapse of the EM syndicated loan market as economies evolve Total EM syndicated loan insurance Source: JP Morgan. Data as of August 9, 2012 Page 11 I For broker/dealer use only and not be distributed to the public.

12 Corporates Require More Capital as Economies Expand Emerging corporates catching up with US high yield Source: JP Morgan January 8, 2013 Page 12 I For broker/dealer use only and not be distributed to the public.

13 Sponsorship: Major Players Remain on the Side Lines Foreign ownership has increased: Foreign investor holdings of local bonds, 2007 and 1Q 2012 While US insurance companies allocate 2.7% to Emerging Market Corporates US Life Insurance Company Allocations, 1Q 2012 Source: SNL Financial and JP Morgan Source: JPMorgan, August 2011 Page 13 I For broker/dealer use only and not be distributed to the public.

14 4. Increasing Share Of Global Economy Rising EM Debt issuance should re-balance global aggregates Nearly 43% of world GDP, but only 5% of BarCap Global Aggregate World GDP China (11.1%) BarCap Global Agg Emerging Markets (5%) Brazil, Russia, India (8.5%) Other Emerging 22.7% Developed Markets 57.5% Rest of World (95%) Data source: BarCap, IMF, November 2012 Page 14 I For broker/dealer use only and not be distributed to the public.

15 Interest Rate (%) Spreads (bps) 5. Yield Cushion Lowers Rate Sensitivity Rising Rates in the US do Not Automatically Telegraph to Spread Expansion in Emerging Markets 2 Years EMBI refers to the JPMorgan EMBI Global Diversified Blended Spread Source: Pioneer Investments. Data as of 11 January 2013 Page 15 I For broker/dealer use only and not be distributed to the public.

16 Agenda Why Have Emerging Markets Performed? Why Should Emerging Markets Perform Going Forward? What s Changing In 2013? The Case For Fundamental Research Why Pioneer Investments? Page 16 I For broker/dealer use only and not be distributed to the public.

17 Basis Points What Can We Expect From The Asset Class In 2013? Hard currency spreads are approaching pre-lehman lows JPMorgan EMBI Global and CEMBI Broad Spreads Over US Treasuries EMBIG CEMBI BROAD Source: Bloomberg, 13 April, 2013 Page 17 I For broker/dealer use only and not be distributed to the public.

18 Default Rates Remain Muted Source: J.P. Morgan. April, 2013 Page 18 I For broker/dealer use only and not be distributed to the public.

19 EM Corporates in 2012 Strong returns with lower volatility Source: JPM EM Corporate Weekly Monitor 20 November Page 19 I For broker/dealer use only and not be distributed to the public.

20 EM is Less Correlated with DM Assets, Providing Diversification Benefits Diversification does not guarantee profit or protect against loss Page 20 I For broker/dealer use only and not be distributed to the public.

21 Agenda Why Have Emerging Markets Performed? Why Should Emerging Markets Perform Going Forward? What s Changing In 2013? Why Pioneer Investments? Page 21 I For broker/dealer use only and not be distributed to the public.

22 Partner With An Experienced Team With A Proven Track Record 13 years of experience investing in Emerging Market Credit Team 6 Dedicated portfolio managers 8 Credit research analysts focusing on Emerging Markets Team founded in 2000 by Greg Saichin. Greg has 24 years of experience in dealing with EM Corporates Team averages 15 years of experience Source: Pioneer Investments, as of 31 December 2012 Page 22 I For broker/dealer use only and not be distributed to the public.

23 Freedom To Perform Our Aggregate Strategy remains long corporate, short duration Active Asset Allocation: Pioneer Funds Emerging Markets Bond vs. Benchmark 60% Weight vs. Benchmark 40% 20% 0% -20% -40% -60% -80% Corporate Government Source: Pioneer Investments, 2 April 2013 Benchmark: JPM EMBI Global Div (95%) + JPM Cash 1 Month Euro (5%) Page 23 I For broker/dealer use only and not be distributed to the public.

24 A Strong Track Record Calendar Year Returns Fund % Benchmark % Relative % 2013 (YTD) Source: Pioneer Investments as at 31 March Performance figures are in USD and have been converted from the sub-fund's base currency, the euro. Performance data provided refers to Class A units only, and is based upon NAV net of fees. For details of other unit Classes available, please refer to the prospectus. Page 24 I For broker/dealer use only and not be distributed to the public.

25 and Outperforming Peer Group Average *Source: Morningstar Direct (as at 31 March 2013). Pioneer Funds Emerging Market Bond Class A non-distributing USD dollars, rank returns vs Emerging Market Debt peers. Copyright 2012 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Page 25 I For broker/dealer use only and not be distributed to the public.

26 Appendix Page 26 I For broker/dealer use only and not be distributed to the public.

27 A 6-stage Process Drives Our Investment Decisions Anchored by integrated Risk Management 1. Macro Analysis 6. Portfolio Construction 2. Idea Generation Risk Management 5. Valuation 3. Sector Analysis 4. Credit Analysis Page 27 I For broker/dealer use only and not be distributed to the public.

28 Economic cycle Sector Selection Utilities Export Industry Food Gaming Agencies/ Quasi Sov. Banks More Aggressive Cyclical Subordinated Consumer Consumer Packaging Packaging Retail Industrials Retail Real Estate Industrials Banks Real Estate Banks Cable Utilities Export Industry Food Gaming Banks Agencies/ Quasi Sov. Time More Conservative Non-cyclical Robust business risk Moderate financial risk More sovereign exposure More strategic sectors Sectors with inelastic demand Page 28 I For broker/dealer use only and not be distributed to the public.

29 Portfolio Construction and Risk Management A continuous feedback loop Stock Picking We identify the assets we want to own Risk monitoring We track the performance against the soft target we set when we built the position Risk analysis We analyse the risk profile of the position and its effect on the portfolio Portfolio construction We build the portfolio to include the new strategies within our soft target return budgets Page 29 I For broker/dealer use only and not be distributed to the public.

30 Portfolio Construction and Risk Management A continuous assessment drives our process Position Sizes Driven by: Conviction Risk/Return potential Liquidity score Construction Limits Risk Management: Credit Research Risk Protection Objectives Portfolio construction limits Liquidity score Page 30 I For broker/dealer use only and not be distributed to the public.

31 Pioneer Investments Local Currency Portfolio Allocation Model Minimise Volatility Beta Control Aiming to Maximize Return Alpha Management Benchmark Asia EMEA LatAm Macro Strategy FX Dur FX Forwards, NDF, Options Interest Rate Swaps Credit Default Swap Corporate Hard Currency Trades Eurobonds Off Benchmark Local Currency Bonds Target: Maximise Risk Adjusted Returns Page 31 I For broker/dealer use only and not be distributed to the public.

32 Pioneer Funds - Emerging Markets Bond The Freedom To Perform Key Features Aggregate Emerging Market Bond Strategy Our best ideas, with the ability to invest in: Class subsets (Sovereign, Corporate, LC), Rating spectrum (from senior to junior sub), Hedges by using EMD derivatives, or volatility proxies (e.g. EM equity puts), Flexible approach: risk profile can be adapted to suit the economic cycle and market conditions. Extensive bottom-up fundamental research performed by 8 career analysts. *Note: Unless otherwise stated the investment guidelines referred to in this document are internal guidelines only and may be subject to change over time. They should not be considered as a restriction on the investment process as long as there is a valid investment rationale Holdings Tracking error* Key Details Approx holdings 1-6% ex Ante Corporate limit* Flexible Credit quality* Single corp issuer* Cash holding* Up to 20% Duration* Country* Investment grade &High Yield Max. 5% (IG), Max 3% (HY) +/- 1.5 years relative to benchmark +/- 6% relative to benchmark Local currency* Up to 25% Page 32 I For broker/dealer use only and not be distributed to the public.

33 Pioneer Funds Emerging Markets Bond Key Characteristics Key Details Yield To Maturity 6.43% Spread Duration % 30.0% Term Exposure Weight Effective Duration 4.97 Average Quality BB- 0.0% Liq Cash FRN Other Regional Allocation Rating Allocation 20.0% Weight 10.0% Asia EMEA 0.0% AAA A+ A A- BBB+ BBB BB+ BB B+ B B- CCC+ CCC AA- BBB- BB- CCC- CC C+ C Cash NR Latin America Other Currency Exposure 90.0% 60.0% 30.0% 0.0% Weight USD TRY THB RUB PHP NGN GBP EUR COP CNY CLP BRL ARS *Note: these are internal guidelines and not prospectus limits and may be subject to change over time. Data Source: Pioneer Investments, 2 April 2013 Page 33 I For broker/dealer use only and not be distributed to the public.

34 EM Fixed Income Team Biographies Colm D Rosario, Portfolio Manager Colm is a Portfolio Manager who has worked on various products on the desk since In January 2011 he was appointed co-manager of Pioneer Obbligazionario Paesi Emergenti a distribuzione. Before joining Pioneer Investments, Colm worked as a Credit Analyst with WGZ Bank ( ), where he was primarily responsible for the research and analysis of Asset-Backed Securities and Banks. Colm has an MA in Economics and Finance, an MSc in Mathematics and a BA in Double Mathematics/Economics. He was awarded the Financial Risk Manager (FRM ) designation by the Global Association of Risk Professionals (GARP) in April 2007 Alejandro Arevalo, Portfolio Manager Alejandro is a High Yield EM Portfolio Manager for Pioneer Investments with fourteen years experience in the financial services industry. Before joining Pioneer Investments, Alejandro held the position of Senior Credit Analyst for The International Bank of Miami from 1999 to 2003, when he moved to Gibraltar Bank and took the position of Senior Credit Analyst/Credit Manager. In 2005 joined Standard Bank Asset Management as Senior EM Fixed Income Analyst, becoming EM Corporate Portfolio Manager in 2011 where he was given responsibility for marketing, structuring and managing new Emerging Markets, focusing in regions such as Latin America, CIS and Asia. Alejandro has an MBA with concentration in Finance from Florida International University, Miami. Giles Bedford, Client Portfolio Manager Giles is a Client Portfolio manager with 18 years of experience in the financial services industry. Before joining Pioneer Investments, Giles was the managing partner of Beltone Financial UK, the European arm of a leading Egyptian investment bank. Previous to this, he was a partner at E2 Research, an independent research boutique, having held positions at Morgan Stanley, Goldman Sachs and Robert Fleming. Page 34 I For broker/dealer use only and not be distributed to the public.

35 Important Information Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 31/03/2013. Pioneer Funds Emerging Markets Bond is a sub-fund (the Sub-Fund ) of Pioneer Funds (the Fund ), a fonds commun de placement with several separate sub-funds established under the laws of the Grand Duchy of Luxembourg. Past performance does not guarantee and is not indicative of future results. Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. More recent returns may be different than those shown. Please contact your local sales representative for more current performance results. In the event this Sub-Fund holds derivatives, portfolio breakdown and allocation slides reflect such derivative exposure only where specifically noted. This material is not a prospectus and does not constitute an offer to buy or a solicitation to sell any units of the Fund or any services, by or to anyone in any jurisdiction in which such offer or solicitation would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. For additional information on the Fund, a free prospectus should be requested from Pioneer Global Investments Limited ( PGIL ), 1 George s Quay Plaza, George s Quay, Dublin 2, Ireland. Call Fax This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any United States person (being residents and citizens of the United States or partnerships or corporations organized under United States laws). The Fund has not been registered in the United States under the Investment Company Act of 1940 and units of the Fund are not registered in the United States under the Securities Act of This document is not intended for and no reliance can be placed on this document by retail clients, to whom the document should not be provided. The content of this document is approved by PGIL. In the UK, it is directed at professional clients and not at retail clients and it is approved for distribution by Pioneer Global Investments Limited (London Branch), Portland House, Bressenden Place, London, SW1E 5BH, authorised by the Central Bank of Ireland and regulated by the Financial Services Authority for the conduct of UK business. The Fund is an unregulated collective investment scheme under the UK Financial Services and Markets Act 2000 and therefore does not carry the protection provided by the UK regulatory system. Pioneer Funds Distributor, Inc., 60 State Street, Boston, MA ( PFD ), a U.S.-registered broker-dealer, provides marketing services in connection with the distribution of Pioneer Investments products. PFD markets these products to financial intermediaries, both within and outside of the U.S. (in jurisdictions where permitted to do so) for sale to clients who are not United States persons For Broker/Dealer Use Only and Not to be Distributed to the Public. Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. Date of First Use 21/04/2013 Page 35 I For broker/dealer use only and not be distributed to the public.