BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX · BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX Marketing Communication For professional clients only This document has been prepared

BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX Marketing Communication For professional clients only This document has been prepared for discussion purposes only and does not constitute an offer or a solicitation to engage in any trading strategy or the purchase or sale of any financial instrument.

CORPORATE & INSTITUTIONAL BANKING

GLOBAL MARKETS

OCTOBER 2016

October 2016 | 2

SOLUTION OVERVIEW 1

October 2016 | 3

WHY THE BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX?

A top-down systematic asset allocation across bonds, equities and commodities, based on price action

THE BNP PARIBAS MULTI-ASSET DIVERSIFED FUTURE INDEX IN A NUTSHELL

INVESTING IN CHALLENGING MARKETS

New market conditions - - challenges traditional portfolio allocation:

Zero or negative rates are generalized in developed economies

Equity Markets are difficult to read: expensive in the US but solid in terms of performance, valuations seem more attractive in Europe or Emerging Markets but facing negative momentum

An investment based on tactical positions with extended possibilities (unconstrained, short) and daily execution

A strategy with limited risk (target volatility at: 8%, 4% or 2% depending on the Index version)

A highly liquid strategy 100% invested in futures

The BNP Paribas Multi-Asset Diversified Future Index is based on the successful investment methodology of the BNP Paribas Multi-Asset Diversified Index, created in 2012.

October 2016 | 4

INVESTMENT PHILOSOPHY 2

October 2016 | 5

ECONOMIC FOUNDATION: THE EFFICIENT FRONTIER THEORY

THE KEY POINTS OF THE EFFICIENT FRONTIER

The Efficient Frontier is a well-known concept in modern portfolio theory introduced by Harry Markowitz in 1952

A portfolio is referred to as if it has the best possible expected level of return for its level of risk

The Efficient Frontier is fundamentally based on diversification that will bring added value to the risk/return of the portfolio, independently of any model assumption

Harry Markowitz, 1990 Nobel Memorial Prize in Economic Sciences

October 2016 | 6

-2%

0%

2%

4%

6%

8%

10%

0% 5% 10% 15% 20% 25% 30%

Retu

rn

Risk (volatility)

A FRAMEWORK FOR INVESTING

Source: BNP Paribas computed between December 1994 and April 2016 for illustrative purposes only.

The optimised Efficient Portfolio is determined among numerous simulated portfolios and maximises the return for a given level of risk

The Efficient Frontier calculation is an investment framework combining:

Market anticipations: positive or negative, depending on the views, and called expected return

Risk: measured with anticipated volatility

The relative behavior of assets between them: modelled by the correlation

CLASSIC EFFICIENT FRONTIER BASED ON HISTORICAL DATA

THE EFFICIENT FRONTIER THEORY

Equity Europe

Equity US

Equity Japan Equity Emerging Markets

Classic Efficient Frontier

Govies

Commodities

Gold

October 2016 | 7

INTRODUCING THE BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX

3

October 2016 | 8

THE BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX

THE 4 INVESTMENT PILLARS

BNP Paribas Multi-Asset Diversified Future Index

BEYOND TRADITIONAL PORTFOLIOS

Expanded investment capabilities by the exclusive use of futures

The possibility to use unconstrained allocation and take short positions increases the

strategy agility, especially during crisis periods

I.

ALLOCATION PROCESS

Quantitative allocation based solely on price action

A BNPP innovative approach in the estimation of the expected returns II.

EXECUTION A systematic and transparent execution process

Daily management of allocation and volatility levels in order to ensure high reactivity

and robustness

III.

RISK MANAGEMENT

The Portfolio is actively monitored with different levels of risk control: individual &

global, with an aim to keep volatility at 8%, 4% or 2% (depending on the Index version)

Hedged against foreign exchange risk

IV.

Source: BNP Paribas, October 2016.

October 2016 | 9

BROAD UNIVERSE OF ASSETS

Equity Europe | EURO STOXX 50

Equity US | S&P 500

Equity Japan | Nikkei 225

Equity China | HSCEI

Gov. Bonds Germany | Euro Bund

Gov. Bonds US | US 10Y T-Bills Gov. Bonds Japan | Jap. Gov. Bonds 10Y

Commodities | Bloomberg Commodity ex-Agriculture & Livestock Index Equity Emerging Markets | MSCI EM

BROADLY DIVERSIFIED INVESTMENT UNIVERSE


Eligibility criteria:

Transparent and representative of a market

Possibility of leverage and shorting through futures

Large and daily liquidity

Diversifying

Gold | S&P GSCI Gold

October 2016 | 10

I- BEYOND TRADITIONAL PORTFOLIOS

In a traditional portfolio, 50% Equity and 50% Fixed Income, 90% of the risk (volatility) is coming from Equity

Portfolios with heavier exposure on Fixed income (like Risk Parity Portfolios) often have low volatility which limits their return potential

Leverage allows for a given risk appetite to use different asset classes without being constrained by their inherent risk level

EXPANDING TRADING POSSIBILITIES WITH THE USE OF FUTURES, UNCONSTRAINED ALLOCATION AND SHORT SELLING

Unconstrained Allocation

-levered, highly-diversified portfolio is less risky than an unleveraged, undiversified

Ray Dalio


ENHANCEMENT OF THE EFFICIENT FRONTIER BASED ON HISTORICAL DATA

0%

5%

10%

15%

20%

25%

0% 5% 10% 15% 20% 25% 30%Re

turn

Risk (volatility)

"Unleashed Portfolio": unconstrained allocation and short selling possible

Classic allocation Allowing short positions aims at helping weather shocks on

depressed markets: e.g. Commodities in 2015

It allows as well to increase the index potential exposure to correlated assets by increasing higher performer exposures and shorting bad performer exposures

Short Selling

Futures Having a portfolio 100% based on futures enhances the

liquidity of the strategy

In addition, it increases the potential of having exposure to assets at a reduced cost

Making it the best suited investment vehicle to implement the enhanced Efficient Frontier algorithm

October 2016 | 11

II- AN OPTIMISED ALLOCATION PROCESS (1/2)

Efficient frontier is a robust framework for Portfolio Management

Long term correlations and volatilities are based on historical past data

The difficulty lies in the input of the model for the expected return

A simple monthly allocation using past returns (momentum strategy) already leads to better returns than a static portfolio

Unconstrained allocation and short positions bring forth additional performance (see chart below)

Source: BNP Paribas, performance of baskets based on simulations from December 1994 to April 2016.

x 1.12 1.13 Sharpe Ratio 10.35% p.a.

0.42 Sharpe Ratio 3.61% p.a.



x 1.25

x 1.94

1

Cum

ulat

ive Re

turn

(log

10)

Classic Efficient Frontier UnconstrainedClassic Efficient Frontier based on past returnsRisk Weighted BasketEqual Weighted Basket

CATCHING TRENDS FROM PRICE ACTION

October 2016 | 12

The expected return computation is based on the comparison of current spot levels with all past levels over a one year period, and is linked to 4 simple principles1:

II- AN OPTIMISED ALLOCATION PROCESS (2/2)

Source: BNP Paribas, performance of baskets based on simulations from December 1994 to April 2016. 1 For more details on the computation of the Expected Return, please turn to slides 26 to 32.

1. Averaged signal: to avoid large weight variations from one day to the next

2. Trends versus returns: we only take into account past trends and not past return amplitudes which do not bring any additional information

3. Asymmetry: a downward trend is less stable and riskier than an upward trend due to its less clear patterns. We value upward trends three times more than downward ones

4. Short-term volatility: short-term volatility is often a leading indicator of potential turmoil and will lead to a decrease of exposure

x 1.12





x 1.25

x 1.94

1.53 Sharpe Ratio 11.81% p.a. x 1.35

ESTIMATION OF FORWARD RETURNS

1

Cum

ulat

ive Re

turn

(log

10)

Multi Asset Diversified: Short-term volatility & Asymmetry

Classic Efficient Frontier Unconstrained

Classic Efficient Frontier based on past returns

Risk Weighted Basket

Equal Weighted Basket

October 2016 | 13

III- EXECUTION CAPABILITIES (1/2)

Hypothetical example for illustrative purposes only and not indicative of actual trading results. For more details on the computation of the Expected Return, please turn to slides 26 to 32.

Test all allocations satisfying liquidity and risk management constraints 2

Test 1

Test 8023

Test n

Previous Expected Return: 1.7%

3 Select the combination providing the highest gain (smooth execution to reduce over-trading)

-100%

+100%

Weight

Initial Weights

New Weights

New Expected Return: 2.2%

Compute Parameters based on proprietary methodology 1

Time

Price Action

Expected Return

Volatility

Correlation

Price

Expected Return: -1.5%

-100%

+100%

Weight increment

Eq. EU

Eq. US

Bond DE

Bond US

Eq. EM

Gold Commo.

-100%

+100%

Expected Return: 2.2% Weight increment

Eq. EU

Eq. US

Bond DE

Bond US

Eq. EM

Gold Commo.

-100%

+100%

Weight increment Expected Return: -1%

Eq. EU

Eq. US

Bond DE

Bond US

Commo.

Gold Eq. EM

Eq. EU

Eq. US

Bond DE

Bond US

Commo.

Gold Eq. EM

-100%

+100%

Weight

Eq. EU

Eq. US

Bond DE

Bond US

Commo.

Gold Eq. EM

October 2016 | 14

III- EXECUTION CAPABILITIES (2/2)

Timing has a big impact on performance

For a monthly execution, Sharpe ratio significantly depends on the reshuffle date (+/- 15%)

Daily allocation, on top of removing timing risk, allows for more stable performances

OUR APPROACH: DAILY EXECUTION

Execution cost optimisation: in order to mitigate the impact of sudden strong short-term variations and to minimise execution costs, the weight reallocation is smoothed through a 5-day averaging

IMPACT OF EXECUTION ON SHARPE RATIO

1.45

1.50

1.55

1.60

1.65

1.70

1.75

First Week Second Week Third Week Fourth Week Daily

DAILY EXECUTION IS A REAL PLUS


October 2016 | 15

0%

2%

4%

6%

8%

10%

12%

14%

Dec-95 Dec-99 Dec-03 Dec-07 Dec-11 Dec-15

BNP Paribas Multi-Asset Diversified Vol 8 Future Index

IV- RISK MANAGEMENT

At the component level, by taking into account spikes of short-term volatility, and maximum and minimum exposure

At the portfolio level:

Efficient Frontier 8%, 4% or 2% volatility target (depending on the Index version) to control long-term risk

Volatility control ex-post to control short-term risk

Daily execution allows quick reactivity

FX hedged mechanism: protection against currency risk

For illustrative purposes only.

Deleverage

Higher than Target Volatility

Lower than Target Volatility

150% Exposure

Risk of the portfolio (Realised Volatility)

100% Exposure

Equal to Target Volatility

Volatility under

control

1-YEAR REALISED VOLATILITY

Source: Bloomberg, BNP Paribas, as of 31 October 2016. Past performance is not necessarily a guide to future performance.

MULTIPLE RISK MANAGEMENT LAYERS

October 2016 | 16

PERFORMANCE OF THE INDICES 4

October 2016 | 17

Source: Bloomberg, BNP Paribas, as of 31 October 2016. Performance simulations based on historical data from 31 December 1994 to 18 May 2016, historical performance thereafter. Past performance or simulated performance is not an indicator of future performance. No company of the BNP Paribas Group will be liable for any direct or indirect loss resulting from the use of the contents of this document. These simulations are the result of estimates made by BNP Paribas at a given moment on the basis of the parameters selected by BNP Paribas, of market conditions at this given moment and of historical data, which should not be used as guidance, in any way, of the future results of the BNP Paribas Multi-Asset Diversified Vol 8 Future Index. Consequently the figures and prices indicated in this document have an indicative value only and do not constitute in any way an offer on behalf of BNP Paribas. * Benchmark is composed of 50% Equities (MSCI World Index) + 50% Bonds US (TY1 Commodity from 3 January 1995 to 3 January 2007, BNPIFU10 Index since).

PERFORMANCE AND STATISTICS OF THE BNP PARIBAS MULTI-ASSET DIVERSIFIED VOL 8 FUTURE INDEX (SIMULATIONS UNTIL 18 MAY 2016)

PERFORMANCE ANALYSIS | SIMULATIONS (1/8)

BNP Paribas Multi-Asset Diversified Vol 8

Future Index

Static Diversified Basket 1 *

YTD Performance 4.73% 3.17%

1Y Performance 4.70% 1.40%


Global Performance p.a. 11.69% 4.09%

Volatility p.a. 7.86% 7.82%

Sharpe ratio 1.49 0.52

Max Drawdown -10.31% -28.88%

0

200

400

600

800

1000

1200BNP Paribas Multi-Asset Diversified Vol 8 Future Index

Static Diversified Basket 1*

Index live since 19 May 2016

October 2016 | 18

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

January 5.27% 1.05% 4.22% 4.38% 1.82% -0.43% 0.59% 0.49% 4.03% -0.17% 0.11% 2.76% -0.59% 2.49% -2.59% -0.99% -1.08% 3.33% -0.05% -0.87% 0.52% 1.64%

February 1.90% -4.29% 0.47% 2.20% -5.00% 2.21% 1.34% 0.77% 2.44% 2.60% 0.19% -1.29% 0.03% 4.74% 0.47% 1.83% 1.61% 1.29% 2.78% 1.31% 1.74% 2.36%

March 4.56% 2.49% -3.10% 3.10% 0.58% -0.93% 0.15% -2.13% -2.97% 0.82% 0.15% 1.73% -1.29% -0.62% -0.54% 2.30% -2.99% 2.55% 3.28% -0.48% 1.99% 0.20%

April 1.92% 3.71% 1.26% 0.44% 2.30% -1.85% -2.33% 1.66% 1.60% -4.23% -1.30% 3.17% 1.26% -2.34% -1.51% 1.28% 2.88% 0.01% 7.29% 1.19% -0.44% -1.46%

May 5.58% 0.35% 0.07% 2.06% -2.97% -0.72% -1.71% 2.46% 9.50% -1.79% 3.45% -2.32% 1.65% -1.41% -0.65% -1.29% 0.49% 1.39% -0.24% 4.16% 0.14% -0.39%

June -0.22% 0.60% 3.10% 3.34% 5.88% 0.87% -1.09% -1.23% -1.29% 0.47% 2.03% -1.93% -0.27% 3.50% -0.89% 1.20% -2.79% -0.74% -2.65% 0.61% -2.63% 5.65%

July 0.42% -7.47% 7.78% 1.31% 0.69% -1.77% 2.20% 0.38% -2.31% 0.03% 0.81% 0.47% -1.36% -3.73% 2.68% -0.84% 4.71% 2.38% 2.07% -0.70% 3.58% 1.87%

August 0.20% 0.28% -1.21% 4.41% 0.93% 2.85% 1.03% 3.26% 2.17% -0.30% 2.83% 0.70% 1.31% -1.73% 0.41% 6.92% 3.49% 1.02% -2.84% 3.54% -4.26% -1.90%

September 1.88% 5.99% 0.90% 4.81% -2.17% -1.36% 4.38% 3.68% 0.45% 3.27% 2.42% 0.91% 2.38% -0.60% 2.16% 0.08% 0.13% -0.69% 3.38% 0.27% 0.01% 0.08%

October 0.35% 1.21% 0.88% -1.26% -1.17% 0.30% 3.00% -1.37% 1.80% 2.25% -4.04% 0.91% 3.11% 0.98% -0.52% 0.99% 0.74% -0.61% 3.91% 0.72% 0.52% -3.13%

November 5.55% 8.78% 0.07% 0.86% 1.86% 5.49% -4.16% -1.50% 0.53% 2.27% 3.32% 2.15% 0.03% 3.69% 4.68% -2.51% 0.15% 1.53% 2.17% 3.27% 2.63%

December 4.25% -0.92% 2.32% 0.49% 5.41% 3.38% -1.92% 6.49% 6.35% 0.21% 3.30% 1.06% 0.07% 3.48% -2.63% -0.62% 1.21% 2.27% -2.36% 2.05% -2.59%

Yearly 36.33% 11.34% 17.63% 29.28% 7.86% 8.02% 1.14% 13.38% 23.94% 5.33% 13.79% 8.47% 6.40% 8.33% 0.83% 8.34% 8.57% 14.51% 17.50% 15.98% 0.91% 4.73%


MONTHLY PERFORMANCES OF THE BNP PARIBAS MULTI-ASSET DIVERSIFIED VOL 8 FUTURE INDEX

69% positive months Consistently positive annual returns regardless of market conditions Source : Bloomberg, BNP Paribas, as of 31 October 2016. Performance simulations based on historical data from 31 December 1994 to 18 May 2016. Past performance or simulated performance is not an indicator of future performance. No company of the BNP Paribas Group will be liable for any direct or indirect loss resulting from the use of the contents of this document. These simulations are the result of estimates made by BNP Paribas at a given moment on the basis of the parameters selected by BNP Paribas, of market conditions at this given moment and of historical data, which should not be used as guidance, in any way, of the future results of the BNP Paribas Multi-Asset Diversified Vol 8 Future Index. Consequently the figures and prices indicated in this document have an indicative value only and do not constitute in any way an offer on behalf of BNP Paribas.

October 2016 | 19

0

50

100

150

200

250

300

350


Static Diversified Basket 2*

Index live since 20 June 2016

PERFORMANCE AND STATISTICS OF THE BNP PARIBAS MULTI-ASSET DIVERSIFIED VOL 4 FUTURE INDEX (SIMULATIONS UNTIL 19 JUNE 2016)


BNP Paribas Multi-Asset Diversified Vol 4

Future Index

Static Diversified Basket 2 *

YTD Performance 2.38% 3.61%



Global Performance p.a. 5.73% 3.60%

Volatility p.a. 3.93% 5.84%

Sharpe ratio 1.46 0.62

Max Drawdown -5.27% -16.08%

Source: Bloomberg, BNP Paribas, as of 31 October 2016. Performance simulations based on historical data from 31 December 1994 to 19 June 2016, historical performance thereafter. Past performance or simulated performance is not an indicator of future performance. No company of the BNP Paribas Group will be liable for any direct or indirect loss resulting from the use of the contents of this document. These simulations are the result of estimates made by BNP Paribas at a given moment on the basis of the parameters selected by BNP Paribas, of market conditions at this given moment and of historical data, which should not be used as guidance, in any way, of the future results of the BNP Paribas Multi-Asset Diversified Vol 4 Future Index. Consequently the figures and prices indicated in this document have an indicative value only and do not constitute in any way an offer on behalf of BNP Paribas. * Benchmark is composed of 30% Equities (MSCI World Index) + 70% Bonds US (TY1 Commodity from 3 January 1995 to 3 January 2007, BNPIFU10 Index since).

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

January 2.61% 0.53% 2.10% 2.19% 0.91% -0.20% 0.29% 0.24% 2.00% -0.07% 0.05% 1.38% -0.29% 1.25% -1.30% -0.49% -0.54% 1.65% -0.03% -0.44% 0.26% 0.82%

February 0.95% -2.17% 0.23% 1.10% -2.52% 1.11% 0.66% 0.39% 1.22% 1.30% 0.10% -0.64% 0.02% 2.35% 0.25% 0.91% 0.80% 0.64% 1.39% 0.65% 0.86% 1.18%

March 2.27% 1.25% -1.56% 1.55% 0.29% -0.46% 0.08% -1.07% -1.47% 0.40% 0.07% 0.86% -0.63% -0.29% -0.28% 1.14% -1.49% 1.27% 1.63% -0.24% 0.99% 0.10%

April 0.96% 1.84% 0.63% 0.23% 1.14% -0.93% -1.17% 0.83% 0.80% -2.14% -0.65% 1.58% 0.63% -1.18% -0.76% 0.64% 1.43% 0.00% 3.60% 0.60% -0.21% -0.73%

May 2.75% 0.18% 0.04% 1.03% -1.49% -0.36% -0.86% 1.22% 4.68% -0.89% 1.71% -1.15% 0.82% -0.70% -0.33% -0.65% 0.24% 0.70% -0.11% 2.06% 0.07% -0.20%

June -0.10% 0.30% 1.54% 1.66% 2.91% 0.43% -0.55% -0.61% -0.63% 0.23% 1.01% -0.96% -0.12% 1.74% -0.44% 0.59% -1.41% -0.38% -1.32% 0.30% -1.32% 2.80%

July 0.21% -3.76% 3.83% 0.65% 0.36% -0.90% 1.09% 0.19% -1.16% 0.01% 0.40% 0.23% -0.67% -1.87% 1.33% -0.42% 2.34% 1.19% 1.03% -0.35% 1.78% 0.94%

August 0.10% 0.14% -0.61% 2.19% 0.47% 1.41% 0.52% 1.62% 1.08% -0.16% 1.41% 0.35% 0.66% -0.87% 0.20% 3.42% 1.73% 0.50% -1.43% 1.76% -2.13% -0.96%

September 0.95% 2.96% 0.45% 2.38% -1.07% -0.68% 2.18% 1.82% 0.22% 1.63% 1.20% 0.46% 1.18% -0.29% 1.07% 0.04% 0.07% -0.35% 1.68% 0.14% 0.00% 0.05%

October 0.17% 0.60% 0.45% -0.61% -0.59% 0.15% 1.49% -0.68% 0.89% 1.12% -2.04% 0.45% 1.54% 0.49% -0.26% 0.49% 0.37% -0.30% 1.95% 0.36% 0.26% -1.57%

November 2.75% 4.32% 0.03% 0.43% 0.93% 2.71% -2.08% -0.76% 0.27% 1.13% 1.65% 1.07% 0.01% 1.83% 2.31% -1.24% 0.08% 0.76% 1.08% 1.62% 1.31%

December 2.11% -0.44% 1.15% 0.24% 2.68% 1.68% -0.97% 3.21% 3.14% 0.10% 1.64% 0.53% 0.04% 1.74% -1.32% -0.31% 0.60% 1.13% -1.17% 1.03% -1.30%

Yearly 16.82% 5.66% 8.49% 13.79% 3.94% 3.96% 0.61% 6.51% 11.42% 2.64% 6.70% 4.19% 3.20% 4.15% 0.43% 4.10% 4.23% 7.01% 8.48% 7.72% 0.51% 2.38%



69% positive months Consistently positive annual returns regardless of market conditions Source : Bloomberg, BNP Paribas, as of 31 October 2016. Performance simulations based on historical data from 31 December 1994 to 19 June 2016. Past performance or simulated performance is not an indicator of future performance. No company of the BNP Paribas Group will be liable for any direct or indirect loss resulting from the use of the contents of this document. These simulations are the result of estimates made by BNP Paribas at a given moment on the basis of the parameters selected by BNP Paribas, of market conditions at this given moment and of historical data, which should not be used as guidance, in any way, of the future results of the BNP Paribas Multi-Asset Diversified Vol 4 Future Index. Consequently the figures and prices indicated in this document have an indicative value only and do not constitute in any way an offer on behalf of BNP Paribas.

October 2016 | 20

October 2016 | 21

PERFORMANCE AND STATISTICS OF THE BNP PARIBAS MULTI-ASSET DIVERSIFIED VOL 2 FUTURE INDEX INDEX (SIMULATIONS UNTIL 19 JUNE 2016)



YTD Performance 1.28%

1Y Performance 1.20%

3Y Performance 5.63%

Global Performance p.a. 2.80%

Volatility p.a. 1.96%

Sharpe ratio 1.42

Max Drawdown -2.68%

Source: Bloomberg, BNP Paribas, as of 31 October 2016. Performance simulations based on historical data from 31 December 1994 to 19 June 2016, historical performance thereafter. Past performance or simulated performance is not an indicator of future performance. No company of the BNP Paribas Group will be liable for any direct or indirect loss resulting from the use of the contents of this document. These simulations are the result of estimates made by BNP Paribas at a given moment on the basis of the parameters selected by BNP Paribas, of market conditions at this given moment and of historical data, which should not be used as guidance, in any way, of the future results of the BNP Paribas Multi-Asset Diversified Vol 2 Future Index. Consequently the figures and prices indicated in this document have an indicative value only and do not constitute in any way an offer on behalf of BNP Paribas.

70

90

110

130

150

170


Cash Capitalised

Index live since 20 June 2016

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

January 1.30% 0.28% 1.04% 1.09% 0.45% -0.10% 0.14% 0.12% 0.99% -0.03% 0.03% 0.69% -0.15% 0.62% -0.65% -0.25% -0.28% 0.82% -0.05% -0.22% 0.42% 0.41%

February 0.47% -1.07% 0.11% 0.54% -1.27% 0.55% 0.33% 0.19% 0.60% 0.64% 0.04% -0.32% 0.01% 1.17% 0.13% 0.45% 0.40% 0.32% 0.70% 0.34% 0.42% 0.60%

March 1.13% 0.62% -0.78% 0.77% 0.14% -0.23% 0.03% -0.54% -0.73% 0.20% 0.03% 0.43% -0.35% -0.15% -0.15% 0.56% -0.75% 0.63% 0.82% -0.11% 0.48% 0.07%

April 0.47% 0.92% 0.31% 0.11% 0.57% -0.47% -0.59% 0.41% 0.39% -1.08% -0.30% 0.79% 0.31% -0.59% -0.38% 0.31% 0.71% 0.00% 1.64% 0.29% -0.08% -0.38%

May 1.36% 0.09% 0.01% 0.51% -0.75% -0.19% -0.43% 0.60% 2.32% -0.45% 0.90% -0.57% 0.41% -0.36% -0.17% -0.33% 0.12% 0.35% -0.22% 1.14% -0.05% -0.09%

June -0.05% 0.15% 0.76% 0.82% 1.44% 0.21% -0.28% -0.31% -0.31% 0.11% 0.56% -0.48% -0.06% 0.86% -0.22% 0.29% -0.71% -0.19% -0.66% 0.22% -0.70% 1.44%

July 0.10% -1.89% 1.90% 0.32% 0.18% -0.45% 0.54% 0.09% -0.58% 0.00% 0.13% 0.11% -0.34% -0.94% 0.66% -0.22% 1.16% 0.63% 0.51% -0.20% 0.88% 0.49%

August 0.04% 0.07% -0.31% 1.09% 0.23% 0.70% 0.26% 0.80% 0.54% -0.08% 0.71% 0.17% 0.33% -0.44% 0.10% 1.69% 0.86% 0.22% -0.72% 0.97% -1.07% -0.49%

September 0.47% 1.47% 0.22% 1.23% -0.54% -0.34% 1.08% 0.91% 0.11% 0.78% 0.52% 0.23% 0.59% -0.15% 0.53% 0.01% 0.03% -0.19% 0.83% -0.01% 0.00% 0.05%

October 0.08% 0.30% 0.20% -0.44% -0.30% 0.07% 0.74% -0.34% 0.44% 0.55% -1.03% 0.22% 0.76% 0.24% -0.13% 0.24% 0.18% -0.17% 0.97% 0.29% 0.08% -0.79%

November 1.36% 2.14% 0.01% 0.21% 0.46% 1.35% -1.05% -0.38% 0.13% 0.56% 0.82% 0.53% 0.00% 0.91% 1.15% -0.62% 0.04% 0.48% 0.54% 0.80% 0.58%

December 1.05% -0.22% 0.57% 0.12% 1.33% 0.83% -0.49% 1.58% 1.55% 0.05% 0.82% 0.19% 0.02% 0.86% -0.67% -0.16% 0.30% 0.47% -0.59% 0.47% -0.65%

Yearly 8.06% 2.82% 4.11% 6.56% 1.93% 1.93% 0.27% 3.16% 5.54% 1.25% 3.26% 1.98% 1.53% 2.03% 0.18% 1.99% 2.06% 3.42% 3.81% 4.05% 0.30% 1.28%



67% positive months Consistently positive annual returns regardless of market conditions Source : Bloomberg, BNP Paribas, as of 31 October 2016. Performance simulations based on historical data from 31 December 1994 to 19 June 2016. Past performance or simulated performance is not an indicator of future performance. No company of the BNP Paribas Group will be liable for any direct or indirect loss resulting from the use of the contents of this document. These simulations are the result of estimates made by BNP Paribas at a given moment on the basis of the parameters selected by BNP Paribas, of market conditions at this given moment and of historical data, which should not be used as guidance, in any way, of the future results of the BNP Paribas Multi-Asset Diversified Vol 2 Future Index. Consequently the figures and prices indicated in this document have an indicative value only and do not constitute in any way an offer on behalf of BNP Paribas.

October 2016 | 22

October 2016 | 23

Equity Europe

Equity US Equity Japan Equity China Equity

Emerging German Gov.

Bonds US Gov. Bonds

Japan Gov. Bonds

Gold Commodities Net Exposure

End of Oct. 2016 7.13% 9.72% 6.18% 7.93% 4.24% 50.88% 45.64% 17.74% 18.18% 2.32% 169.95%

Source: Bloomberg, BNP Paribas, as of 31 October 2016. Simulations of end-of-month allocation over the September 2015 to October 2016 period.


ALLOCATION IN THE DIFFERENT ASSET CLASSES IN THE LAST 12 MONTHS


-50%

0%

50%

100%

150%

200%

250%

300%

Equity Europe

Equity US

Equity Japan

Equity China

Equity Emerging

German Gov. Bonds

US Gov. Bonds

Japan Gov. Bonds

Gold

Commodities

October 2016 | 24

Strong diversification allows the BNP Paribas Multi-Asset Diversified Vol 8 Future Index to:

Achieve a higher risk to return ratio than traditional assets

Minimise losses compared to traditional assets

A low correlation with other assets: 0.42 max

A lower maximum loss historically

A much higher higher risk/return ratio: 1.49

In EUR MA Diversified Equity Europe Equity US Equity EM German Gov. Bonds US Gov. Bonds Commodities Gold

Returns 11.69% 4.75% 6.15% 1.28% 4.97% 4.33% 0.57% 2.89%

Volatility 7.86% 23.30% 18.84% 26.55% 5.43% 6.12% 19.00% 17.10%

Sharpe Ratio 1.49 0.20 0.33 0.05 0.91 0.71 0.03 0.17

In EUR Equity Europe Equity US Equity EM German Gov. Bonds US Gov. Bonds Commodities Gold

Correlation 0.10 0.12 0.12 0.42 0.42 0.18 0.23

In EUR MA Diversified Equity Europe Equity US Equity EM German Gov. Bonds US Gov. Bonds Commodities Gold

Max drawdown -10.31% -68.39% -62.36% -67.39% -11.01% -13.98% -77.40% -50.43%


HIGHER AND MORE STABLE SIMULATED PERFORMANCE THAN TRADITIONAL ASSETS

Source : Bloomberg, BNP Paribas, as of 31 October 2016. Performance simulations based on historical data from December 1994 to May 2016. Past performance or simulated performance is not an indicator of future performance. No company of the BNP Paribas Group will be liable for any direct or indirect loss resulting from the use of the contents of this document. These simulations are the result of estimates made by BNP Paribas at a given moment on the basis of the parameters selected by BNP Paribas, of market conditions at this given moment and of historical data, which should not be used as guidance, in any way, of the future results of the BNP Paribas Multi-Asset Diversified Vol 8 Future Index. Consequently the figures and prices indicated in this document have an indicative value only and do not constitute in any way an offer on behalf of BNP Paribas.

October 2016 | 25

APPENDIX 7

October 2016 | 26

EXPECTED RETURN COMPUTATION

The expected return is based on the comparison of current spot levels with all past levels over a one year period and is linked to 5 simple ideas (including enhancement of execution):

1. Smooth signal: to avoid large weight variations from one day to the next

2. Trends vs amplitudes: we only take into account past return trends and not past return amplitudes, as past amplitudes do not bring any additional information

3. Asymmetry: a downward trend is less stable and riskier than an upward trend due to its less clear patterns. We use a coefficient that applies three times more weight to long positions over short positions

4. Short-term volatility: we use a coefficient that monitors short-term volatility spikes. It measures the strength of a trend as the ratio between long-term and short-term volatility. The lower the coefficient, the weaker the trend

5. Markets tend to display short-term mean reversion: in order to mitigate the impact of sudden strong short-term variations and to minimise execution costs, the asset weights reallocation is smoothed through a 5-day averaging. This reduces the strategy's turn over as well

FORECASTING RETURNS

October 2016 | 27

HOW TO DETERMINE THE EXPECTED RETURN ? (1/6)

Long-term MA do not capture a sudden and sharp market fall, i.e. their reactivity is poor (e.g. 1-year MA)

Shorter-term MA are more reactive, but tend to overreact when market starts decreasing

E.g. on 28th July 2011 (just before the market crash, e.g. chart above), the 6-month MA was higher than the spot price, whereas the 1-year MA was below: contradictory signal (resulting in very different PNL for the two strategies)

INSTABILITY OF MOVING AVERAGES

NEED FOR A SMOOTHER INDICATOR

MA send mixed signals, depending on the timeframe they capture (e.g. chart below)

1100

1150

1200

1250

1300

1350

1400S&P 500 Index 6-month MA 1-year MA

SMOOTHING INDICATORS: THE CASE OF MOVING AVERAGES (MA) 1

Source: BNP Paribas, Bloomberg, computed between June 2011 and August 2011 for illustrative purposes only.

October 2016 | 28


There is no linear relationship between the amplitude of the past 1-year return and of the 1-month forward return of an index (e.g. chart above)

Historically, past important movements have not lead to the highest future performances, on the contrary (mean-reversion phenomenon). You cannot predict the amplitude of a movement, only the trend

UNPREDICTABILITY OF AMPLITUDE OF RETURNS

NEED FOR A TREND INDICATOR

TRENDS VS AMPLITUDES OF RETURNS: THE CASE OF MONTHLY FORWARD RETURNS FOR POSITIVE 1 YEAR PAST RET URN 2

The past performance of an underlying is not a reliable indicator of the amplitude of its future returns

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

0% 10% 20% 30% 40% 50% 60% 70%

1-M

onth

Forw

ard

Ret

urn

1-Year Past Return

Source: BNP Paribas, Bloomberg, computed between December 1993 and March 2013 for illustrative purposes only.

October 2016 | 29


A downward trend is more difficult to predict and more risky than an upper trend (less clear patterns) asymmetry between long and short positions

3 times more weight given to long positions

CONDITIONAL SHARPE RATIO OF UPWARD / DOWNWARD TRENDS (INDEX UNDE RLYINGS)

UNDERWEIGHT SHORT VS. LONG POSITIONS

ASYMMETRY OF TRENDS: UPWARD VERSUS DOWNWARD TRENDS 3

Betting on an upward trend will, on average, bring a significantly higher Sharpe ratio than a downward trend (e.g. chart below)

-0.90

-0.60

-0.30

0.00

0.30

0.60

0.90

1.20

1.50Trend Up Trend Down


October 2016 | 30


The Trend strength of an underlying is reflected by the amplitude of its Sharpe ratio

The lower the volatility ratio (meaning short-term volatility is high compared to long-term volatility), the lower the Trend strength and the lower the conviction

TREND STRENGTH VS VOLATILITY RATIO

POOR PREDICTABILITY WHEN VOLATILITY SPIKES

TREND STRENGTH VERSUS VOLATILITY RATIO 4

When short-term volatility spikes, predictability is blurred

1.0

1.5

2.0

2.5

3.0

3.5

0% 20% 40% 60% 80% 100% 120%

Tre

nd S

tren

ghth

Volatility Ratio


October 2016 | 31


Generally, daily returns are negatively auto-correlated within a week: short-term mean reversion tendency

A strategy betting on mean reversion over a one-week period has a significantly positive Sharpe ratio (e.g. chart above): long position when the market has decreased on the short-term, short position when the market has increased on the short-term

MEAN REVERSION TENDENCY

TAKING ADVANTAGE OF MEAN REVERSION TENDENCY

MEAN REVERSION (1/2): - 5

A historical evidence: market moves over a week are usually less volatile than over one day

80

90

100

110

120

130

140

150

160

170

180daily weekly


October 2016 | 32


High reactivity of the weight allocation process results in a high cost, whereas an asianing over a longer period reduces the overall cost (providing the index follows a mean reverting pattern)

Smooth weight allocation process to monetise the negative impact of the short-term mean reversion phenomenon

-1% cost -0.2% cost

THE BENEFITS OF ASIANING (ONE WEEK PERIOD)

A WEEKLY AVERAGING OF THE ESTIMATED SHARPE RATIO TO ENHANCE THE DAILY REBALANCING OF THE INDEX

MEAN REVERSION (2/2): THE IMPACT OF SMOOTHING DELTA CHANGES 5

A 5-day asianing mitigates the impact of short-term variations (e.g. charts below) Case of a classic trend strategy where delta is adjusted according to underlying spot evolution 1

84%

86%

88%

90%

92%

94%

96%

98%

100%

102%

84

86

88

90

92

94

96

98

100

102

1 2 3 4 5Spot Strategy Delta

84%

86%

88%

90%

92%

94%

96%

98%

100%

102%

84

86

88

90

92

94

96

98

100

102

1 2 3 4 5Spot Strategy Delta


October 2016 | 33

WEIGHT CAPS AND FLOORS

Individual Asset Class Minimum/Maximum weights

Equity Europe -50% 50%

Equity US -50% 50%

Equity Japan -50% 50%

Equity China -10% 10%

Equity Emerging Markets -5% 5%

Gov. Bonds Germany -100% 100%

Gov. Bonds US -100% 100%

Gov. Bonds Japan -25% 25%

Commodities -25% 25%

Gold -25% 25%

Sum of weights

BNP PARIBAS MULTI-ASSET DIVERSIFIED VOL 8 FUTURE INDEX



At the time of daily rebalancing the following weight constraints, designed to take into account liquidity, risk and nature of the underlying, are implemented:


October 2016 | 34

DETAILS OF THE BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX

Asset classes Underlying index Bloomberg Code Rolled Futures on the:

Equity Europe BNP Paribas Eurozone Equity Futures Index BNPIFEU Index EURO STOXX 50

Equity US BNP Paribas US Equity Futures Index BNPIFUS Index S&P 500

Equity Japan BNP Paribas Japan Equity Futures Index BNPIFJP Index Nikkei 225

Equity China BNP Paribas China Equity Futures Index BNPIFCN Index HSCEI

Equity Emerging Markets BNP Paribas Emerging Equities Futures Index BNPIFEM Index MSCI Emerging Markets

Gov. Bonds Germany BNP Paribas EUR 10Y Futures Index BNPIFE10 Index Euro Bund

Gov. Bonds US BNPP Paribas USD 10Y Futures Index BNPIFU10 Index US 10Y T-Bill

Gov. Bonds Japan BNP Paribas JPY 10Y Futures Index BNPIFJ10 Index Japanese 10Y Bond

Commodities Bloomberg Commodity ex- Agriculture & Livestock Index BBUXALC Index -

Gold S&P GSCI Gold Index ER SPGSGCP Index -

Name Currency Type of index Bloomberg code Reuters code BNP Paribas Multi-Asset Diversified vol 8 Future Index EUR Excess Return BNPIMD8F Index .BNPIMD8F

BNP Paribas Multi-Asset Diversified vol 4 Future Index EUR Excess Return BNPIMD4F Index .BNPIMD4F

BNP Paribas Multi-Asset Diversified vol 2 Future Index EUR Excess Return BNPIMD2F Index .BNPIMD2F

INDEX DETAILS

INDEX COMPONENTS


October 2016 | 35

DISCLAIMER This document is CONFIDENTIAL AND FOR DISCUSSION PURPOSES ONLY; it constitutes a marketing communication and has been prepared by a Sales and Marketing function within BNP Paribas for, and is directed at, (a) Professional Clients and Eligible Counterparties as defined by the European Union Markets in Financial Instruments Directive (2004/39/EC) and (b) where relevant, persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, and at other persons to whom it may lawfully be communicated (together . Any investment or investment activity to which this document relates is available only to and will be engaged in only with Relevant Persons. This document is not intended for Retail Clients as defined by MiFID and should not be passed on to any such persons. Any person who is not a Relevant Person should not act or rely on this document or its content. As a confidential document it is submitted to selected recipients only and may not be reproduced (in whole or in part) to any other person without written consent. This document does not constitute an offer or a solicitation to engage in any trading strategy, to purchase or sell any financial instruments or to enter into any transaction. Given its general nature, the information included in this document does not purport to contain all the elements that may be relevant for a recipient to make an informed decision in relation to any strategy, financial product or transaction discussed herein. To the extent that any transaction is subsequently entered into between the recipient and BNP Paribas, such transaction will be entered into upon such terms as may be agreed by the parties in the relevant documentation. The information contained in this document has been obtained from sources believed to be reliable, but BNP Paribas makes no representation, express or implied, that such information, or any opinions based thereon and contained in this document, are accurate or complete and they should not be relied on as such. Other financial institutions or persons may have different opinions or draw different conclusions from the facts or ideas relevant to this document. Any scenarios, assumptions, historical or simulated performances, indicative prices or examples of potential transactions or returns are included for illustrative purposes only. Past performance is not necessarily indicative of future results. BNP Paribas gives no assurance that any favourable scenarios described are likely to happen, that it is possible to trade on the terms described herein or that any potential returns illustrated can be achieved. BNP Paribas is further under no obligation to update or keep current the information contained in this document. In providing this document, BNP Paribas offers no investment, financial, legal, tax or any other type of advice to, nor has any fiduciary duties towards, recipients. Certain strategies and/or potential transactions discussed in this document may involve the use of derivatives which may be complex in nature and may give rise to substantial risks, including the risk of total or partial loss of any investment or losses without limitation and which should only be undertaken by those with the requisite knowledge and experience. BNP Paribas makes no representation nor gives any warranty as to the results to be obtained from any investment, strategy or transaction, nor as to whether any strategy, security or transaction discussed herein may be suitable for financial needs, circumstances or requirements. Recipients must make their own assessment of such strategies, securities and/or potential transactions detailed herein, using such professional advisors as they may require. BNP Paribas accepts no liability for any direct or consequential losses arising from any action taken in connection with or reliance on the information contained in this document even where advised of the possibility of such losses. As an investment bank with a wide range of activities BNP Paribas may face conflicts of interest, which are resolved under legal provisions and internal guidelines. You should be aware, however, that BNP Paribas may be long or short, for its own account or as agent, in investments, transactions or strategies referred to in this document or related products before the material is published to clients and that it may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the account of its clients. Additionally, BNP Paribas within the previous twelve months may have acted as an investment banker or may have provided significant advice or investment services to companies or in relation to investments mentioned in this document. Laws and regulations of countries may restrict the distribution of this document. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly.

BNP Paribas London Branch, 10 Harewood Avenue, London NW1 6AA; tel: +44 (0)20 7595 2000; fax: +44 (0)20 7595 2555 (www.bnpparibas.com). Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens,75009 Paris, France. 662 042 449 RCS Paris. BNP Paribas London Branch is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas London Branch is authorised by the ECB, the ACPR and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. BNP Paribas London Branch is registered in England and Wales under no. FC13447.

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BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX · BNP PARIBAS MULTI-ASSET DIVERSIFIED FUTURE INDEX Marketing Communication For professional clients only This document has been prepared