Merrill Lynch Due Diligence Meeting October 2012, Boston

Transcription

1 Merrill Lynch Due Diligence Meeting October 2012, Boston Emerging Markets: Corporate Bonds Stealing the Show Greg Saichin, Head of Emerging Markets & High Yield Fixed Income Portfolio Management, Senior Vice President For 2012 Merrill Lynch Due Diligence Meeting Attendees Only and Not to be Distributed to the Public

2 All You Need Is (A Little) Growth Growth Margins Debt Service Yield Emerging Markets have shown positive GDP growth versus mature markets in recent years. Positive growth allows corporates to sustain margins. Margins allow corporates to service outstanding debt. Better servicing means lower default rates. Lower default rates drive positive performance. For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 2

3 ...And A Great Team With A Proven Track Record Years Of Investment Experience In Emerging Market Debt Sovereign Debt Corporate HY/IG Debt Local Currency Debt Team 5 Dedicated Portfolio Managers 8 Credit research analysts Team founded in 2000 by Greg Saichin, Head of High Yield and Global EM Fixed Income Portfolio Management Experience Greg has 23 years of experience in Emerging Market investing Team has an average 14 years of experience Team is managing corporate Emerging Market exposure since 2002 Source: Pioneer Investments as of 28 September For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 3

4 Sovereign Convergence has Reached its Peak Are Corporates Next in Line? Source: JP Morgan as at 31 March For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 4

5 The Asset Class is Underinvested Search for yield to drive rebalancing Source: JPMorgan as at 31 December For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 5

6 Agenda Why Emerging Markets Debt? Pioneer Funds Emerging Markets Bond For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 6

7 EM High Yield: Return Profile Compares Favourably with Equity 10-Year Performance of JPM EM HY Corporate Bond Index vs. MSCI Emerging Markets Index EM High Yield MSCI EM All Performance in USD, Gross, Annualised Source: FactSet, September For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 7

8 Emerging Markets Are Growing Faster Than Mature Economies IMF Forecast GDP Growth Source: IMF as at 31 December For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 8

9 Better Macro Growth Contributes to Better Quality Balance Sheets Lower leverage than US High Yield Net Leverage (Net Debt/LTM EBITDA, x) Cash to Total Debt, % EM HY Net Leverage With more liquid balance sheets US HY Net Leverage EM HY Cash as a Pct of total debt US HY Cash as a Pct of total debt Source: JPMorgan as at 31 December For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 9

10 Despite Attractive Fundamentals, Spreads Remain Wide JPM CEMBI Broad Diversified HY vs. JPM EMBI Global IG Source: Bloomberg, weekly data to 11 October For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 10

11 Credit is Supported by Competitive Macro Fundamentals Better Balances and Lower Debt Levels vs. Mature Markets Percentage Source: JPM, Charts on left - Corp outlook & Strategy Presentation January 2012, data in text October Graphs on right from IMF April 2012 For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 11

12 Better Quality: Emerging Market Default Rates Below Mature For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 12

13 Corporate Health - Into the Fourth Year of an Improving Trend Quarterly revenues increased over 50% since 2Q09 EBITDA margins have recovered to pre-crisis levels (US$ mln) (US$ mln) Source: JPM, Corp outlook & Strategy Presentation as at January For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 13

14 The Improving Trend In Corporate Credit Quality is Getting Noticed Number of Upgrades and Downgrades in EM Sovereign Upgrades Downgrades Number of Upgrades/Downgrades E Source: JPM, Corp outlook & Strategy Presentation January 2012 and BoAML EM Outlook and Strategy 5 January Data for 2012 is estimated (from 1 January 2012 to 31 December 2012). For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 14

15 Growing Issuance: Emerging Market Corporate Debt Stealing the Show Increased Issuance Leads to Liquidity and Higher Quality EM External Debt Issuance (US$bn) Sovereign Corporate US$ bn F Source: JPM as at 30 April F refers to a forecast for calendar year For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 15

16 Rising EM Debt Issuance Should Rebalance Global Aggregates Nearly 40% of World GDP, but only 3% of BarCap Global World GDP BarCap Global Agg Data source: BarCap, FactSet, World Federation of Exchanges, Goldman Sachs Global ECS Research estimates, as at 31 October For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 16

17 Markets Discounting Worst Case Scenario For EM High Yield Implied EM High Yield Default Rates Higher Than Historical Averages Five-Year Default Rates Implied Default Rate: Actual: JPM EMBI Global Div. (Emerging Market Sovereign Debt) JPM CEMBI Broad Div. (Emerging Market Corporate Debt) JPM CEMBI Broad Div. IG (Emerging Market Corporate Investment Grade Debt) JPM CEMBI Broad Div. HY (Emerging Market Corporate High Yield Debt) Spread 30% Recovery Zero Recovery Worst Average % 12.5% 31.0% 19.3% % 15.7% 31.0% 19.3% % 11.9% 31.0% 19.3% % 27.1% 31.0% 19.3% Source: Bloomberg, Pioneer Investments as at 15 October Deutsche Bank 2012 Default Study for worst & average actual defaults since 1970, & Pioneer Investments for implied calculations. For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 17

18 Recapping Our Investment Case: Growth: Economic growth remains strong and outpaces developed markets Timing: Still occupies a relatively small space in the Debt Universe; Spreads remain wide against EM Investment Grade Market Depth: The asset class is attracting more issuance, more investors, and therefore providing greater liquidity Issuer Quality: Emerging Market corporates have lower leverage and higher cash levels than US peers; credit upgrades and lower default rates Income: Emerging Market Corp orate High Yield currently offers higher yields than US High Yield Spreads: Emerging Market Corporate High Yield trades at wider spreads than developed market, while offering defensive fundamentals For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 18

19 Agenda Why Emerging Markets Debt? Pioneer Funds Emerging Markets Bond For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 19

20 Pioneer Funds Emerging Markets Bond Overview Key Features Aggregated strategy Multiple performance drivers with different time horizons Risk profile can be adapted to suit the economic cycle and market conditions Flexible approach 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) Off-benchmark instruments e.g. high-yield bonds-subject to prospectus limitations Extensive bottom-up fundamental research performed by career analysts Key Facts Fund Inception 4 July 2000 AUM Benchmark $904.7m* Tracking Error limit** 1-6% 95% JPM EMBI Global Diversified 5% JPM Cash 1 Month Euro Issuer limit** IG: Max 5% Country limit** +/- 6% Non IG: Max 3% *Source: Pioneer Investments as at 28 September **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. For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 20

21 Outperforming Both Corporate and Aggregate Bond Index 3-Year Performance Key Driver of Performance: Active exposure to Corporate Bonds PF - EMB Pioneer Funds Emerging Markets Bond Source: Morningstar as at 30 June Morningstar Ratings: 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. Performance is based on the A USD Non-Distributing share class. Pioneer Funds Emerging Markets Bond, the benchmark of which is the JPM EMBI Global Diversified 95% + JPM Cash 1Month Euro. Performance is shown the A nondistributing units in Euro, net of fees. For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 21

22 Summary 1 We believe the outlook for EM assets is bright Corporate and Local Currency asset stock is expanding and taking centre stage 2 One of the longest performance track records in the industry Investment team have been through many interest rate and credit cycles Team have an average of 14 years experience 3 Extensive corporate credit research capabilities 5 EM Portfolio Managers supported by 8 credit analysts 4 A strong emphasis on portfolio construction Strong risk analysis framework For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 22

23 Appendix For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 23

24 Emerging Markets Fixed Income Team Biographies Greg Saichin, Head of Emerging Markets & High Yield Fixed Income Portfolio Management Greg Saichin is Head of Emerging Market & High Yield Portfolio Management. He is also a Senior Portfolio Manager responsible for all dedicated emerging-market bond funds. He has held this role since January 2000, spending more than 10 years working in our Dublin office before relocating to London in Greg has worked on emerging markets throughout his career. His area of expertise has expanded since 2000 to cover the sub-investment-grade universe, with the advent of European High Yield as an asset class. Greg joined Pioneer Investments in 2000 from Deutsche Morgan Grenfell in London where he had been working in emerging markets fixed-income sales. Before this, he worked in the same field with Chemical Bank for three years. Greg began his career as a corporate banker with Citibank N.A s international division in Mexico upon completion of his MBA in Yerlan Syzdykov, Senior Portfolio Manager, Emerging Markets and High Yield Fixed Income Yerlan Syzdykov is an emerging markets Portfolio Manager at Pioneer Investments Dublin. He manages Pioneer Obbligazionario Paesi Emergenti and Pioneer Funds Emerging Markets Bond. Before beginning his portfolio management role in 2004 he was responsible for emerging markets analysis for all dedicated emerging markets funds. Yerlan has worked on emerging markets throughout his career. He joined Pioneer Investments in 2000 from Bancroft in Paris where he had been working as an Investment Analyst. Before this he was employed by various companies in London and Paris within the emerging markets area. Yerlan started his career as an Equity Analyst with Renaissance Capital in Moscow upon completion of his MBA in Hakan Aksoy, Portfolio Manager, Global Emerging Markets and High Yield Hakan works primarily on Pioneer Funds Emerging Markets Bond Local Currencies. He also covers the local currency bond and the EM FX trades with the other funds at the desk. He joined Pioneer Investments in 2005 as an analyst in the Multi Asset Management team. In August 2007, he became a member of the High Yield & Global EM Fixed Income team. Prior to joining Pioneer Investments, Hakan held the position of Senior Fund Manager for five years in Koc Portfolio Management, Turkey. Before this, Hakan worked as a Portfolio Manager in Iktisat Asset Management and as an Economist in Iktisat Investment Securities. Hakan achieved a BS in Electrical Engineering (Control Theory) and a subsequent Masters in the same subject. He also holds a Masters degree in Economics from Bilkent University, and in 2004 he received a PhD in Finance from Bogazici University. For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 24

25 Emerging Markets Fixed Income Team Biographies Colm D Rosario, Portfolio Manager, European High Yield and Emerging Markets Debt 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 Alejandro Arevalo, High Yield EM 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. For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 25

26 Important Information Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 28 September Pioneer Funds Emerging Markets Bond is a sub-fund (individually the Sub-Fund and collectively the Sub-Funds ) 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 the investment professional. These views do not necessarily reflect the views of Pioneer Investments or others in the Pioneer Investments organization. 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. 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 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. 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 8th Floor, 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. For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distrubuted 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 24 October 2012 For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 26

27 Important Information References to the Barcap Global Agg, JPM EMBI Global Diversified, JPM CEMBI Global Diversified, JPM CEMBI Investment Grade, Barclays Capital HY 2% Constrained, JP Morgan GBI-EM Local Markets, Barclays Capital US Agg, Barclays Capital US Credit, JPM EMBI Global Below IG, JPM EMBI Global IG, Barclays Capital US IG Corporate and JPM ELMI + are provided for illustrative purposes only. They are not the benchmarks of the Funds and do not represent the holdings of the Funds. They are not meant as a direct comparison in terms of Fund performance and no reliance should be placed on it in this respect. Date of First Use 24 October 2012 For 2012 Merrill Lynch Due Diligence Attendees Only and Not to be Distributed to the Public Page 27