Morgan Stanley Wealth Management Due Diligence Meeting Industry Trends in Product & Asset Management Hugh Prendergast, Head of Strategic Product and Marketing, Western Europe and International 24 26 April 2013, Milan Page 1 I For broker/dealer use only and not be distributed to the public.
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Agenda Industry Trends Income In The Deep Freeze Page 3 I For broker/dealer use only and not be distributed to the public.
Global AUM Up 11.3% in 2012, Mainly Through Performance Effect Fixed Income increases its share of the asset mix Worldwide Mutual Fund AUM Trend (ETF & FoF excl.) ( tln.) 18 16 14 12 10 8 6 4 2 12.9 13.8 4% 24,7% 18,2% 54,8% 11.0 12.7 14.3 14.1 0 2006 2007 2008 2009 2010 2011 1Q 2012 14.7 15.4 15.6 15.7 2Q 2012 Equity/Mixed Bond Money Market Other 3Q 2012 4% 21,4% 27,1% 47,4% 4Q 2012 2012 AUM 11.3% of which: Performance effect* 8.0% Sales effect 3.3% AUM by Area 6.9% 57% US 57.3% Europe local 19% 17% 7% 35.8% Cross Border Asia local Source: Pioneer Global Asset Management Economic & Market Research team as at 31 December 2012. Data includes Western & Eastern Europe, US and Asia. Europe includes also cross border and offshore funds. Exchange Traded Funds and Funds of Funds excluded. In US also variable annuities excluded. Other includes Total Return, Flexible, RE and Alternatives. Local currency figures converted using eoy exchange rate. *Including also some exchange rate effects. Page 4 I For broker/dealer use only and not be distributed to the public.
A Year of Recovery for Overall Market After the Lows of 2011, International sales rebound significantly Net Sales Split by Market 2006 2012 (EUR m) International Austria France Germany Italy Poland Spain Switzerland UK 300,000 200,000 100,000 0-100,000-200,000-300,000-400,000 2006 2007 2008 2009 2010 2011 2012 International net sales back to positive territory in 2012 Contrasting fortunes at an individual country level Redemptions in Spain on the back of economic difficulties Pioneer Global Asset Management Economic & Market Research team as at 31 December 2012 Page 5 I For broker/dealer use only and not be distributed to the public.
2012 Will Be Remembered as the Year of the Bond Boom Monthly Cumulative Net Sales To December 2012 Bonds, Equities, Money Market, Mixed (EUR M) 250,000 200,000 150,000 100,000 50,000 0-50,000 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 Jun'12 Jul'12 Aug'12 Sep'12 Oct'12 Nov'12 Dec'12 Equity Bond Money Market Mixed Total See next slide Fixed Income flows reached new heights in 2012, supported by search for yield Equities saw a strong turnaround in the final four months Money market funds struggled Pioneer Global Asset Management Economic & Market Research team as at 31 December 2012 Page 6 I For broker/dealer use only and not be distributed to the public.
Equities Fortunes Improve in Final Third Driven by Global & EM Flows Monthly Cumulative Net Sales to December 2012 Selected Strategic Insight Equity Sectors (EUR m) 20,000 15,000 10,000 5,000 0-5,000-10,000-15,000-20,000-25,000-30,000 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 Jun'12 Jul'12 Aug'12 Sep'12 Oct'12 Nov'12 Dec'12 Overall Asia Pacific Emerging Markets Europe Global North America European equities sharply sold off in H1, but flows stabilized towards year-end Renewed momentum in Global & EM equity, overall asset class recovered significant ground, from September onwards Pioneer Global Asset Management Economic & Market Research team as at 31 December 2012 Page 7 I For broker/dealer use only and not be distributed to the public.
Higher Yielding And Global Bonds Favoured Net Sales Per Asset Class Split 2006 2012 (EUR m) Hot Sectors 2012 (EUR M) 400,000 300,000 200,000 100,000 0-100,000-200,000-300,000-400,000-500,000 2006 2007 2008 2009 2010 2011 2012 Bond High Yield 53,953 Bond Global 52,725 Bond Emerging Markets 43,639 Bond Europe 31,195 Bond USD 29,579 Cold Sectors 2012 (EUR M) Money Market -31,124 Guaranteed/Protected -20,391 Equity Europe -19,294 Equity Bond Mixed Money Mkt Real Estate Guaranteed Other Equity Sector/ Other -3,390 Equity North America -1,815 Fixed Income dominates, with High Yield and Global bonds leading the way Several equity sectors suffered significant outflows, Global equity was in strong demand Money Market and Guaranteed funds suffered as search for yield continued Pioneer Global Asset Management Economic & Market Research team as at 31 December 2012 Page 8 I For broker/dealer use only and not be distributed to the public.
2013 YTD Net Sales: Migration, Not Rotation YTD flows to end February very strong Momentum slowed in February - net sales for the month fell by 30% Fixed Income remains top: Global Emerging Markets Bond Local Currency and USD Flexible Bond funds in demand Equities gain further traction Sales encouraging, but no evidence yet of any Great Rotation out of Bonds and into Equities. Mixed, or Multi Asset funds had excellent start to the year YTD February 2013 Asset Class Net Sales ( m) 22,292 31,175 6,558-5,646 Equity Bond Mixed Money Mkt Source: Simfund as at 28 February 2013 (ex - Exchange Traded Funds and Funds of Funds) Page 9 I For broker/dealer use only and not be distributed to the public.
2013 YTD Net Sales: Emerging Markets To The Fore Emerging Markets the main theme YTD Top-selling Morningstar categories: Global Emerging Markets Equity and Global Emerging Markets Bond Local Currency Fixed Income dominates: Bond Categories occupy the top three positions. EM Equity only Equity category in the top five. YTD February 2013: Top Selling Morningstar Categories ( m) 6,907 5,310 4,454 3,906 3,778 Global Emerging Markets Equity Global Emerging Markets Bond - Local Currency Source: Simfund as at 28 February 2013 (ex - Exchange Traded Funds and Funds of Funds) USD Flexible Bond Global Bond EUR Flexible Allocation Page 10 I For broker/dealer use only and not be distributed to the public.
Agenda Industry Trends Income In The Deep Freeze Page 11 I For broker/dealer use only and not be distributed to the public.
Income From Where? Real Annualized 10-Year Expected Returns 12% 10% 8% 6% 4% 2% 0% -2% US HY EU HY US IG EU IG Treasury Bund US Equity Europe EM Equity Equity Source. Pioneer Investments simulations, Data as of 30 December 2012. Market returns are obtained by the aggregation of the projected contributions to total returns from earnings growth, valuation re-rating and dividends (share buy backs are considered where meaningful), considering inflation effect. Earnings growth is calculated as the combination of sales growth and margin changes, valuations changes imposes a long run mean reversion on long term CAPE, while dividends are calculated on constant pay-out ratios. Government returns are obtained by the aggregation of the projected contributions of inflation and of mean and trend reversion assumptions. Credit returns to total returns are obtained by the aggregation of the projected contributions of interest rates curve and default rate. Page 12 I For broker/dealer use only and not be distributed to the public.
Providing the opportunities, balancing the risks Income and Risk Finding the Right Balance For illustrative purposes only Page 13 I For broker/dealer use only and not be distributed to the public.
Targeting Fixed Income Distribution Levels Target Fixed Income Distribution (gross of fees) 8.00% 7.00% 7.00% 6.00% 5.25% 5.45% 5.45% 5.85% 5.00% 4.00% 3.50% 3.00% 2.00% 1.40% 1.00% 0.00% Cash Plus Investment Grade Flexible Fixed Income Emerging Market Debt High Yield - European High Yield - EM Corporate High Yield - Global Target Income figures are gross of all fees and represent calculations based only on a Target Distribution unit class in a fund which represents the relevant income/risk positioning. Other funds and other fund unit classes are available for investment, which do not feature the discussed target income distributions. These income targets can be exceeded or undershot and should not be construed as an assurance or guarantee. Page 14 I For broker/dealer use only and not be distributed to the public.
EM Corporate Issuance In Context External EM Corporate Market Size Approaches the Size of US High Yield Source: JPMorgan, August 2012 Page 15 I For broker/dealer use only and not be distributed to the public.
Yield In EM Corporate Debt EM Corporate Debt EM High Yield Debt High Yield 29% High Yield 100% Investment Grade 71% YTM: 4.8% YTM: 6.8% Source: JPMorgan, Pioneer Investments 15 February 2013 Page 16 I For broker/dealer use only and not be distributed to the public.
Percentage Low-Growth Environment Can Favour Dividend Stocks Dividends have been main driver of equity returns Source: SG Cross Asset Research as at 31 December 2012 Page 17 I For broker/dealer use only and not be distributed to the public.
Dividend Growing Same Company Higher Yield: Which is more attractive to the income investor? Example: A US Health Care company Company Credit Rating AAA Dividend Yield 3.16% 5-Year Bond Current Yield 1.30% Bond Yield Falling Dividends are not guaranteed Source: Bloomberg 15 February 2013 Page 18 I For broker/dealer use only and not be distributed to the public.
Disciplined Covered Call Writing Process Aims to Increase Income Without Sacrificing Too Much Upside S H A R E P R I C E Sell Call Option Sell Call Exercise Price Option Expires worthless No Call Option Writing Expectation of Sharp Rally Sell Call Option Sell Call Exercise Price Option Expires Worthless TIME For illustrative purposes only Source: Bloomberg November 2012, Gross Calculation of yields Page 19 I For broker/dealer use only and not be distributed to the public.
Conclusions Income is major part of total return How to survive the deep freeze? Actively Managed Fixed Income Emerging Market Corporate Debt Extracting Income from Equity Page 20 I For broker/dealer use only and not be distributed to the public.
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Important Information Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 31/03/2013. Pioneer Funds European Equity Target Income 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. 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 +353 1 480 2000 Fax +353 1 449 5000. 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 1933. 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 02109 ( 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 Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. For Broker/Dealer use only and not to be distributed to the public. Date of First Use 24 April 2013 Page 22 I For broker/dealer use only and not be distributed to the public.