Perspectives 03.2010 EN

perspectives March 2010

Macro Analysis exit strategiesAsset Allocation euro zone: the piGs problemExpertise Focus inflation: which asset classes should be favored?

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Publishing Director: F. LenoirEditorial Committee: T. Benoist, S. de Quelen,Ph. Le Mée, R. Monclar, F. Nicolas, Ch. Point,Ch. Lacoste, JP. Snel, B. Thiery, Ph. WaechterCoordination - Writing: N. ClémotHead of design: F. DupertuysContributors: B. Boulay-Mégard

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3March 2010www.am.natixis.com

PhiliPPe zaouatiHead of Business Development

The first quarter of 2010 has been subject to many doubts and concerns. After equities rose sharply and the first tangible signs of a recovery appeared, the markets have seen fresh turmoil due to the (re)emergence of numerous uncertainties, such as the fears linked to a possible upsurge in inflation, doubts over the solvency of certain countries (e.g. Greece) or on a broader scale, the viability of the euro-zone...

This month, Franck Nicolas, Head of Global Asset Allocation & ALM, provides us with an analysis of the issues relating to the huge public deficits of the PIGS countries (Portugal, Ireland, Greece, Spain). While bankruptcy does not appear a likely outcome, doubts over the ability of these countries to meet their debt repayments is fueling speculation on the markets.

The March issue of the Expertise Focus is devoted to inflation. It sets out three inflation scenarios – an inflation rate of around 2% with reflation of high-risk assts, zero or negative inflation, and a higher rate of around 4% – and in each case identifies the asset classes to favor.

Although the macroeconomic environment remains uncertain, the central banks are now looking to scale back the exceptional measures introduced in the most acute phase of the crisis, according to Philippe Waechter, Chief Economist. Having taken on a large chunk of risk, they are looking to free themselves from the burdens that are tying them down and reducing their room for maneuver, but without harming activity and the return of growth.

As usual you can also find the summary of Natixis Asset Management’s international offer [pages 8 to 10 of this edition].

Enjoy reading it,

Editorial

Grands Prix Le MondeEurofonds-FunclassNatixis Asset Management, best French asset manager

In the 2010 edition of the Grands Prix Eurofonds-Fundclass awarded by Le Monde, Natixis Asset Management is the best French management company in the category for major European companies managing more than 101 funds* for the third year running.

*Companies with more than 101 funds registered for sale in Europe and rated by Fundclass for at least four years as of 31/12/2009.

(Source: Le Monde Argent of 13/03/2010.)

Past performance or reference to any rankings or awards cannot be interpreted as indicating the future performance of a fund or its manager.

AwArds

Read more on page 13

4 March 2010 www.am.natixis.com

n A brief overview For central banks, the breakpoint followed the collapse of Lehman Brothers in mid-September 2008. The money market had abruptly ceased to function in a climate of extreme mistrust in which banks no longer lent. Central bank intervention was necessary to enable the money market to continue playing its part and prevent the economy from being too badly affected. That is the task given to central banks.

Considerable resources were thus brought to bear. Central banks provided liquidity on the back of assets held by the banks. The most basic measurement of the level of central bank intervention is the spectacular expansion of their balance sheets. Assuming a base of 100 for their respective balance sheets in the first half of 2008, the Fed was at 255 at end 2008, the ECB at 152 and the Bank of England at 245.

The challenge facing governments was of a different kind. The global economic shock resulted in a swift rise in uncertainty that, by clouding economic visibility, resulted in a more wait and see type attitude. This upheaval caused trade and economic activity to plunge. To offset this sharp fall in corporate demand, governments allowed public deficits to run at rarely seen levels with, in return, an immediate and sharp rise in public debt.

n The issues raised by central banksThe response from central banks was very different.

In the US, the Federal Reserve initially put in place a whole series of measures designed to inject liquidity into institutions in difficulty.

These programs were progressively scaled back, in particular from summer 2009, as the state of the banking and financial system so allowed. The increase in the discount rate in mid-February 2010 is a continuation of these measures. This phase of saving the banking system thus seems to be drawing to a close.

Nevertheless, in order to support institutions at the heart of real-estate financing such as Fannie Mae and Freddie Mac, the Fed bought up considerable amounts of their securities, mainly securitization but also debt. Over the recent past it is the ramp-up in such purchases that has ballooned the Fed’s balance sheet with, as a result, an unusual upsurge in bank reserves with the Fed. These reserves bear interest at 0.25%.

For Ben Bernanke, Fed Chairman, the issue is withdrawing this liquidity so as to prevent it from serving as a basis for an excessive credit expansion in the future. This could in effect have an impact on inflation rates and prevent the US central bank from managing its monetary policy in the manner it would like.

Bank reserves with the US central bank stand at around $1,100 billion. Recent comments from Ben Bernanke were designed to lay out the vision for withdrawing this liquidity. A first option is increasing rates on reserves. The second option being looked at is trading securities held by the Fed for this liquidity (reverse repo for example). This would take time as the Federal Reserve does not want to reduce the stature of these assets by selling them.

The ECB’s response was different. The European authorities in fact acted on the basis of a pre-existing framework although broadening the range of quick assets and extending maximum maturity to 12 months. This action made it possible to absorb the shocks generated by the financial and banking crisis.

Unlike the Fed, the ECB only bought up a limited amount of specific securities. Purchases of covered bonds only amounted to €60 billion. The goal was to get this market back up running and not to underpin the real-estate market as was the case across the Atlantic. Given the amount involved, under what was mobilized in the US, the ECB will not be constrained long-term by this action.

As regards the emergency action taken, returning to normality is much easier. 12-month liquidity provision was withdrawn in mid-December and the 6-month equivalent will

exit Strategies

Macro Analysis

For the past number of weeks, governments and central banks have been raising the prospect of the putting in place of exit strategies. Having exposed themselves to a large chunk of risk during the peak of the financial and banking crisis, they are looking to free themselves from the burdens that are tying them down and reducing their room for maneuver.

PhiliPPe WaechterChief Economist of Natixis Asset Management


follow at the end of March. These strategic changes were sufficiently well trailed by the ECB so as not to trigger failures or lasting problems.

These exit actions are necessary. They make it possible to normalize monetary policy following an extraordinary period. This does not mean, however, that they should be interpreted as an imminent sign of a change in direction on monetary policy.

n Government challengesThe explosion in public debt is severely restricting government room for maneuver and is acting as a drag on economic activity. In fact, borrowing costs are rising and financing needs are up. Moreover, government solvency has been affected, particularly given that, in the relatively near-term, new expenditure will likely be required to deal with an ageing population. In order words, high debt limits what governments can do and their room for maneuver in the face of a negative shock to economic activity.

Governments have thus published plans to rebalance their public finances. Their top goal? Stabilizing the ratio of public debt to

GDP and then bringing it down. This will require expenditure to be cut and taxes to be raised. At a European level, public finance stability plans have been in place since 2010 and are targeting a deficit of around 3% of GDP by 2013-2014 for each member state: a major effort. Public finance deficits, excluding debt servicing, will go from –5.5% of GDP in 2010 to balanced in 2013. But the ratio of public debt to GDP will only have been stabilized, whereas it needs to be curbed. This must be the overarching government aim.

The problem for budgetary authorities is the two-headed nature of their goal. In the short-term, they can not be overly restrictive in order to underpin economic activity, but over the long-term they must stabilize public finances in order to bring down the ratio of public debt to GDP. This is a long-term task and it will be a good number of years before French public debt is back down to levels in line with the Maastricht criteria.

n ConclusionThe immediate negative impact of the economic, financial and banking crisis has been headed off by the authorities.

Interventions that made it possible to quickly neutralize the shock because within a few short quarters growth figures were again back in the black.

Unwinding these strategies raises two major challenges:

• it will be necessary to act without overly dragging down economic activity, even through the adjustment of public finances will take time and will of necessity require a shrinkage of available income;

• the opportune moment for action will have to be determined. While the ECB has already started rebalancing its balance sheet, the Fed is more cautious. Governments are similarly fence sitting: they do not want to hit economic activity by acting too quickly, thereby pushing back the timing for a real recovery in growth.

Written on 23/02/2010

Central bank balance sheets

0

50

100

150

200

250

300

350

jan 07 may 07 sep 07 jan 08 may 08 sep 08 jan 09 may 09 sep 09 jan 10

Federal ReserveEuropean Central BankBank of England

The collapse of Lehman BrothersBase: June, 2008 = 100

Source: Datastream - Calculations: Natixis Asset Management


euro zone: the PiGS problem

Asset Allocation

In February, the markets were largely concerned with issues surrounding the solvency of certain euro zone countries. These countries, known PIGS (Portugal, Ireland, Greece, Spain) by analysts and the financial markets, are considered to be the weakest links in the euro zone. It would seem unlikely that they will go bankrupt but doubts surrounding their ability to pay down their debts and the scale of their public deficits are feeding market speculation.

The uncertainty mainly stems from the attitude of other countries (mainly France and Germany) and what the others will do to help these States get out of jail. In Greece, draconian cuts in public spending seem inevitable with all the attendant social unrest that this implies, whereas in Spain, household spending and economic activity have been flat since the bursting of the real-estate bubble. Despite various government plans stimulating employment and consumption, unemployment in Spain is the highest of the 16 euro zone countries at close to 20%. Spain must moreover face up to a formidable public deficit, representing 11.4% of its gross domestic product in 2009. Ultimately, the country risks having difficulties borrowing in the market.

Franck nicolaSHead of Global Asset Allocation & ALM

n Fixed incomeAgainst this background, German and French government debt acted as safe havens during the month. Natixis Asset Management is for the moment still negative on bonds in 2010. Nevertheless, until euro zone visibility reco-vers, switching to the strongest countries (generally with the highest weighting in bond indices) could well drive up the bond market.

n EquitiesThis crisis, which only the future will tell if it was short-lived, also affected the equity markets by pushing up risk aversion. Once again, the position of Natixis Asset Management remains unchanged this year. The allocation teams expect a slight albeit positive movement in the equity markets. They thus took advantage of this “dip in the market” to add somewhat to equity positions.

n CurrenciesThe euro was clearly the main loser during the Greece solvency issues, which created a veritable climate of mistrust around the

currency. The Natixis Asset Management Strategic Investment Committee did not expect the dollar to recover as quickly, more expecting it to take place over the course of the summer.

Over the year, the Natixis Asset Management position remains bearish on the yen and neutral on the dollar, which should remain relatively firm from here on out. Nevertheless, a resolving of the Greek crisis would temporarily strengthen the euro and the Fed’s view could soften during the year, progressively raising the prospect of the start of a monetary tightening cycle in 2011 should the recovery be confirmed.

n CommoditiesWith this rise in risk aversion, commodities were also stopped in their tracks, but it would seem that for industrial metals at least, the rise driven by growth in emerging countries will soon be on the march again.

Written on 22/02/2010

(1) Investment committee on 16/12/2009.(2) Investment committee on 03/02/2010.

Risk categories Risk subcategories

Tacticalallocation*

12/09(1) 01/10(2)

Fixed income = =

equities + +

Fixed income United states = =

euro zone = =UK = =emerging markets = =

Japan = =

euro issuers Corporate Invest.Grade + +

equities United states + +euro zone + +

UK + +

Japan = =

Currencies dollar = =

(against the euro)

Yen = =

sterling = =

Commodities Oil = =

Gold = =

*weighting gap vs. strategic allocation of an investor

Scale from -- to ++


The Federal Reserve raised its discount rate from 0.5% to 0.75% re-establishing a 50 basis point spread above the high end of the fed funds rate range [0; 0.25%]. This change took effect on February 19. Maximum maturity has been reduced to one day from 90 days at the height of the crisis. This maturity had already been cut to 28 days (decision of November 17, 2009 effective January 14, 2010).

We have thus moved into a new phase on the path to normalization of monetary policy. The Fed is no longer afraid to bring an end to extraordinary measures put in place during the financial crisis. It clearly feels that the financial situation has improved. We are seeing the return of a more traditional monetary policy: it is a first step. Nevertheless, fed funds rate levels are more dependent on macroeconomic activity and in fact will not move quickly. The Fed still has some room, but it will nevertheless be interesting to see if it indicates its intention to keep rates very low over the medium term in the next series of minutes of meetings of the Federal Open Market Committee (FOMC).

The monthly Index

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010

Discount rate

Fed funds rate

Source: Datastream - Calculations: Natixis AM

Les taux d'intérêt en zone euroFed interest rate Increase of the Fed interest rate

Value 1 year 2010 CAC 40 3 708.80 37.24 % -5.78 %CAC Mid 100 6 057.50 49.69 % -0.60 %IT CAC 20 3 324.20 30.80 % -1.35 %SBF 120 2 721.50 39.10 % -4.82 %SBF 250 2 657.74 39.20 % -4.72 %

Value 1 year 2010 MSCI Europe 85.37 41.26 % -3.29 %Euro Stoxx 50 2 728.47 38.06 % -7.98 %DAX 3 377.82 39.62 % -6.28 %Footsie 5 354.52 39.80 % -1.08 %

Value 1 year 2010 Dow Jones 10 325.26 46.19 % -0.99 %S&P 500 1 104.49 50.25 % -0.95 %Nasdaq 2 238.26 62.45 % -1.36 %Brent Crude Future 77.59 67.40 % -0.44 %

Value 1 year 2010 Nikkeï 10 126.03 33.79 % -3.99 %Hong Kong 20 608.70 60.86 % -5.78 %Singapore 2 750.86 72.48 % -5.06 %Shanghaï 254.06 93.34 % 0.66 %

Value 1 year 2010 MSCI World 1 133.35 50.94 % -3.01 %

Rate 1 year 2010Eonia 0.319 % -1.055 -0.091Euribor 3 months 0.656 % -1.169 -0.044Euribor 6 months 0.958 % -0.975 -0.036Euribor 1 year 1.215 % -0.818 -0.033Fed Funds 0.130 % -0.09 0.08

Rate 1 year 2010 5 years French Treasury Bond 2.278 % -0.458 -0.2015 years USTN 2.284 % 0.3 -0.40210 years French Treasury Bond 3.403 % -0.258 -0.1910 years USTN 3.592 % 0.574 -0.24130 years French Treasury Bond 4.039 % -0.091 -0.22130 years USTN 4.530 % 0.819 -0.1

Value 1 year 2010 Euro/Dollar 1.365 7.45 % -4.88 %Euro/Yen (100) 121.274 -2.41 % -9.20 %Euro/Sterling 0.897 0.61 % 0.90 %Dollar/Yen 88.865 -9.18 % -4.54 %

Money Market

Fixed income

Currencies

France

Europe

United-States

Asia

World

Market DataAs of 28/02/2010


These 7 sub funds of the Natixis International Funds (Lux) I SICAV reflect the key expertise of Natixis Asset Management

I, A EUR LU0161120547I, D EUR LU0391146155R, A EUR LU0161121271R, D EUR LU0390502184

H-I, A USD LU0390502267H-I, D USD LU0390502341I, A EUR LU0255251166I, D EUR LU0255251596R, A EUR LU0255251679R, D EUR LU0255251752


• Investment universe: Mainly Euro denominated government or private issuers rated Investment / Diversifying fixed income assets

• Benchmark: Barclays Capital Euro Aggregate• Minimum recommended investment period: 3 years

• Investment universe: International inflation-linked bonds • Benchmark: Barclays World Government Inflation linked all

maturities Index hedged in euro• Minimum recommended investment period: 2 years• Risk Indicator: Target tracking-error ex ante of 2% (maximum)

• Investment universe: Mainly Euro-denominated investment grade debt securities issued by OECD as well as cash, money market instruments or other securities

• Benchmark: Barclays Euro Aggregate Corporate Index• Minimum recommended investment period: 3 years

Isabelle Delannée-Méric

Sophie Potard

Christine Barbier

Benefit from a broad range of fixed income investment opportunities

Get the most out of diversification in inflation-indexed bonds in a global universe

Benefiting from the SRI expertise of Natixis Asset Management through a socially responsible portfolio of

investment grade corporate bonds

Natixis Euro Aggregate Plus Fund

Natixis Global Inflation Fund

Natixis Impact Euro Corporate Bond Fund

See the full prospectus which is the only legally binding document. See the Legal Information on page 2 for important information about the funds.

Overwiew of our international Product rangeSub funds of the natixis international F unds (lux) i SicaV managed by natixis aM


I, A EUR LU0147917792I, A USD LU0095830922I, D USD LU0095831060R, A EUR LU0147918923R, A USD LU0084288595R, D USD LU0084288678

I, C EUR LU0095828512I, D EUR LU0095828785R, C EUR LU0066549592R, D EUR LU0066549832



• Investment universe: Emerging Europe Equities• Benchmark: None (MSCI Emerging Europe Index: indicative only)• Minimum recommended investment period: 5 years• Risk Indicator: Target tracking-error ex ante between

6 and 10

• Investment universe: European Small and Mid Equities• Benchmark: None (MSCI Europe Small Caps NDR: indicative only)• Minimum recommended investment period: 5 years• Risk Indicator: Target tracking-error ex ante between 4 and 7

(indicative)

• Investment universe: Eurozone Equities• Benchmark: None (MSCI EMU NDR: indicative only)• Minimum recommended investment period: 5 years

• Investment universe: European equities• Benchmark: None (MSCI Europe: indicative only)• Minimum recommended investment period: 3 years

Matthieu Belondrade François Théret

Thierry Cuypers

Olivier Lefèvre

Christine Lebreton

Get the most out of the growth in the emerging European zone as part of a conviction management strategy

Benefiting from the potential of European Small & Midcaps within the scope of a

conviction-based strategy

Tapping the potential of Eurozone value equities within the scope of a conviction-based strategy

Active and responsible investing to maximise SRI value added

Natixis Europe Smaller Companies Fund

Natixis Euro Value Fund

Natixis Impact Europe Equities Fund

See the full prospectus which is the only legally binding document. See the Legal Information on page 2 for important information about the funds.

Natixis Emerging Europe Fund


Overwiew of our international Product rangenatixis asset Management's funds offer a range of expertise and innovation

28 complementary funds covering all asset classes. This quarterly reviewed list of funds aims to highlight Natixis Asset Management's most innovative products and its wide range of expertise.

Alte

rn.

Natixis Constellation European Event IC, $: LU0161071237 IC, €: LU0161073951

Abso

lute

re

turn Natixis Absolute Quant Bond 18 M I: FR0010232348 R: FR0010249219

Natixis Absolute Swap Arbitrage IC: FR0010654921 RC: FR0010657924

Bala

n-ce

d Natixis Absolute Multistratégies IC: FR0010688812

Mo

ney

Mar

ket

Natixis Cash Première C: FR0010157834

Natixis Cash A1P1 C: FR0010322438

Natixis Impact Cash C: FR0010008003

Natixis Cash Eonia I: FR0010298943 R: FR0007084926

Natixis Tréso Euribor 3 Mois FR0000293714

Natixis Tréso Plus 3 Mois FR0007075122

Natixis Dollar Reserve FR0007003348

These funds are authorized for sale in France and possibly in other country(ies) where their sale is not contrary to local legislation. Please refer to legal information of this material.

Asset class Fund name Share and ISIN code

Fixe

d in

com

e

Natixis Souverains Euro 1-3 I: FR0010208421

Natixis Souverains Euro 3-5 FR0010036400



Natixis Souverains Euro RC: FR0000003196

Natixis Inflation Euro I: FR0007475413 R: FR0010170944

Natixis Obli Opportunités 12 Mois I : FR0010796391 R : FR0007493226

Natixis Crédit Euro I: FR0010171108 R: FR0010690966

Natixis Convertibles Euro I: FR0010658963 R: FR0010660142

Natixis Convertibles Europe C: FR0010171678

Eq

uiti

es

Natixis Actions Europe Dividende IC: FR0010582478 RC: FR0010573782

Natixis Impact Life Quality C: FR0010410274 E: FR0010458539

Natixis Actions Europe Convictions C: FR0010346429

Natixis Actions US Value I: FR0010256412 R: FR0010236893

Natixis Actions US Growth I: FR0010256404 R: FR0010236877

Sonic Monde I: FR0010555797 RC: FR0000993446

Natixis Actions Global Emergents I: FR0010711051 R: FR0010706960


Expertise Focus

inflation: which asset classes should be favoredIn the current economic environment, despite some progress made in moving towards an end to the crisis, the conditions are not in place for a linear recovery. The issue of inflation remains at the heart of many investors’ concerns.

Inflation in France: outlook for 2010-2011

Three possible scenarios

1. Natixis AM’s base scenario for 2010-2011: a return to an inflation rate remaining at around 2%, with reflation of high-risk assets

As the US economy gradually returns to its potential growth rate , in the absence of a clear and rapid recovery – unlike in the previous cycle – the extent of the recent financial crisis has forced developed and emerging economies to restructure. Emerging economies, like China, will develop their domestic markets so as to be less dependent on foreign trade.

Consequently, if prices of high-risk assets increase, it would seem preferable to limit government bonds. Real interest rates should not rise significantly, whereas convertible bonds could be boosted by a rise in equity prices, corporate bonds could benefit from narrower spreads and indexed bonds (often longer than nominal bonds) could be helped by a slight rise in inflation.Moreover, as is commonly the case, growth stocks tend to perform well when the economy is faltering, while value stocks do less well. Conversely, when the economy improves, value stocks come to the fore, unless investors lack confidence in the recovery.

(1) Medium to long term.(2) Variable-rate bonds perform in a similar way to cash – return depends on Eonia.

Since 1960, two distinct trends have emerged:

1. low inflation (2 - 3%) in the early 1960s and since the mid-1980s;

2. higher inflation in the 1970s, caused by three factors that no longer apply – central banks were not independent of governments, indexation mechanisms led to persistence in price formation and interest rates did not change as quickly as they do today because markets were less developed. In effect, real interest rates could remain negative for a long time, taking the sting out of inflation and making its persistence more likely.

Following the sharp falls in 2009, can we expect inflation to return to around 2%, or will the rate be much lower, or higher than this?

Inflation rate in France

Scenario 1: Theoretical allocation (2)

Cash +

Government bonds -

Inflation-indexed bonds =

Credit spread +

emerging market bonds +

Convertible bonds +Growth stocks +Value stocks -emerging market equities +Commodities +

Precious metals -

real estate +Source: Natixis Asset Management


Low inflation scenario:inflation zero or negative, focus on nominal bonds

Conversely, in a context of lackluster growth that remains below potential without converging, the economies of the industrialized countries are not managing to adjust, nor adapt to the dynamism of the emerging countries. Growth is sluggish and the labor market is not finding its equilibrium. Against this backdrop, policy rates are still very low, but governments can no longer resort to stimulus spending because debt levels are too high and have reached a critical threshold.

It is therefore reasonable to favor government bonds, as nominal bonds are the big winners in this scenario, where long yields have remained consistently low and all high-risk asset classes are suffering ongoing stress.While the decoupling of developed and emerging economies is accentuating, the latter (excluding the debt issue) continue to be hit by capital withdrawals.

High inflation scenario:inflation around 4%, favoring cash, emerging market equities and commodities

Our third scenario rests on the assumption that the recovery becomes unexpectedly robust, with investment picking up rapidly and productivity improving, and the commitment to avoid inflation becoming less rigorous. Underlying this would be an implicit agreement on the part of industrialized countries, given that a slightly higher inflation rate would facilitate adjustments.

In this scenario, it would be better to avoid government bonds, as these are the first victims of any rise in nominal rates reflecting a rise in inflation. Essentially, 10-year bonds yielding 4% are no longer attractive when other 10-year bonds with the same risk characteristics on the same market are offering 5%. On the other hand, convertible bonds (with a rise in volatility) seem well positioned, although equities are always penalized in the end by the emergence of inflation fears, which generally limits their short-term upside potential.

Lastly, exponential emerging market growth increases intentions to speed up infrastructure spending in these regions. As a result, commodities provide the best cover in this scenario.

(3) Variable-rate bonds perform in a similar way to cash – return depends on Eonia.

Written on 24.02.2010

Scenario 2: Theoretical allocation (3)

Cash -

Government bonds ++

Inflation-indexed bonds -

Credit spread -

emerging market bonds =

Convertible bonds -

Growth stocks --

Value stocks =

emerging market equities -

Commodities -

Precious metals +

real estate --

Scenario 3: Theoretical allocatione (3)

Cash ++

Government bonds --

Inflation-indexed bonds +

Credit spread +

emerging market bonds =

Convertible bonds +

Growth stocks =

Value stocks +

emerging market equities ++

Commodities ++

Precious metals -

real estate ++Source: Natixis Asset Management

Source: Natixis Asset Management

For more information on the investment solutions offered by Natixis Asset Management for different inflation scenarios, please contact your relationship manager.


News

Awards

Natixis Asset Management performed strongly in le Palmarès des sociétés de Gestion 2010 d’Amadeis(1) (the 2010 Asset Manager League Table) through its no.1 spot in SRI and its improved ranking overall. This annual League Table ranks French asset managers on a range of themes in accordance with the views of a panel of investors.

n How is the ranking worked out?The 2010 Asset Manager League Table was drawn up by Amadeis over the course of December 2009 and January 2010 on the basis of the views of a panel of 58 French investors comprised of institutionals (pension funds and provident societies, mutual insurance companies, banks, insurance companies, foundations, associations…) and of distributors (distribution platforms, multi-managers, private banks…).

These investors were asked to indicate which of the 68 asset managers listed seemed to them to offer a competitive advantage in 8 themes(2).

For each theme, asset managers were ranked on the basis of the number of positive views expressed by all the investors on the panel. The asset managers are basically assessed on the basis of management quality, expertise and stability of management teams, rigor of the investment process, effectiveness of risk control, performance levels and consistency.

n Natixis AM: no. 1 asset manager in SRI and responsible management

Natixis Asset Management achieved no.1 spot in the “SRI and responsible management” theme.

Via this League Table, Natixis Asset Management reaffirmed also its strong positioning in SRI: recognized as a pioneer with 25 years experience, Natixis Asset Management is one of the leaders in SRI in France and in Europe in terms of AUM. Its offering is one of the most comprehensive in the market, an offering that it recently enhanced with the development of expertise in the area of Climate Change, with an investment strategy that takes into account the main challenges of climate change.

n Moving up the overall rankings

In the Overall League Table, Natixis Asset Management moved up to 5th spot out of the 68 asset managers ranked: a great improvement on the 8th place in 2008 and only 11th in 2007.

This Overall League Table is drawn up on the basis of the average ranking achieved by asset managers in each of the 8 themes(2).

Consult the Markets Flash on the Greece’s issue on www.am.natixis.com

Markets: Greece’s issue Why has Greece been in the news since the end of 2009? Why was the market reaction so strong? Would it be in Greece’s interest to leave the eurozone?

The Fixed Income department of Natixis Asset Management addresses some of the most frequently asked questions arising out of the Greek situation...

"Spreads on Greek debt have widened dramatically since the fall, with the movement intensifying from the beginning of the year. This followed a significant narrowing of spreads between March and September 2009 on credit instruments in general and the debt of peripheral eurozone countries in the wake of the resolution of the financial crisis..."

Lipper Fund Awards 2010: Natixis Asset Management among the winners

*Lipper trophies and certificates are awarded to funds authorized for distribution in France with a track record of at least three years as at December 31, 2009, which post the best performances in their category over one or more periods (depending on universe). The currency used in the calculations is that of the country in which the awards are given (the euro in the case of the Lipper Fund Awards France).

(1) Amadeis is an independent asset management advisory firm that supports institutional investors with their investment strategy.

(2) SRI-Responsible management, money markets, euro bonds, diversified management, euro equities, international equities, alternative management. Past performance or reference to any rankings or awards cannot be interpreted as indicating the future performance of a fund or its manager.

markets flash

www.am.natixis.com

February 2010

Greek government bonds

As seen by the Fixed Income department

spreads on Greek debt have widened dramatically since the fall, with the movement intensifying from

the beginning of the year. this followed a significant narrowing of spreads between march and septem-

ber 2009 on credit instruments in general and the debt of peripheral eurozone countries in the wake of

the resolution of the financial crisis. at the end of January 2010, spreads with German debt reached their

widest levels since 1998, at 396 basis points on 10-year bonds and 476 points on 2-year bonds. these

levels are markedly higher than those recorded before Greece adopted the euro. they can only be explai-

ned by an expectation that Greece will default on its debt and/or leave the eurozone.

Below, we address some of the most frequently asked questions arising out of the current situation...

n Why has Greece been in the

news since the end of 2009?

after the country’s elections in October 2009, the new

government revealed that Greece’s deficit was far higher

than expected, at close to 13 % of GDP, rather than the

6 % announced previously. as a result, the country's credit

rating was downgraded to BBB+ with negative outlook

by fitch Ratings in November 2009, and then by s&P in

December. Greece has therefore become the only country

in the eurozone with a rating lower than a-.

The downgrades triggered a lively reaction on the markets.

further market turmoil followed when the Bank of Greece

told commercial banks to limit their use of ECB refinancing

arrangements. This generated strong concerns and some

confusion over the ability of Greek banks to obtain funding

on the markets.

n Why was the market reaction so

strong?Greek securities are far less liquid than German or french

instruments. While liquidity had returned to the money

markets, it remained very limited on the bond markets.

following the collapse of lehman Brothers, banks generally

reduced their exposure, while hedge fund activity contracted

sharply. Under these pressures, spreads widened and

pricing ranges increased markedly (40-50 bp on Greece's

10-year sovereign debt).

We are seeing waves of forced sales due to:

• a downgrade in securities ratings to BBB;

• an increase in volatility on positions on Greece that

increase VaR consumption;

• potential losses generated by spread widening.

lastly, the market reaction was exacerbated by the

derivatives markets, where investors (hedge funds)

massively played the sovereign spread against the credit

spread (leading to a convergence of the sovX and Itraxx

indices), as well as the risk of the eurozone imploding.

In this context, the question marks over the real level of

demand for the previous issue of Greek 5-year bonds,

added to a number of alarmist press articles comparing

Greece to argentina and the denial of a EUR 25 billion

private placement with China, have intensified market

wariness.

n Would it be in Greece’s interest

to leave the eurozone?

When asked this question, Jean-Claude Trichet replied that

he doesn’t comment on "absurd hypotheses". The rating

Amadeis league table: Natixis AM performs strongly

IN BRIEF

For further information: www.am.natixis.com

Natixis Asset Management was again among the winners of the Lipper Fund Awards (France) in 2010, thanks to its high-quality

management and ability to deliver consistent results with its 2 funds: CNP Assur France and Natixis Horizon 2015.

The first one was awarded a Lipper Trophy* for its performance over 3 years in the “Mixed Asset EUR Balanced – Eurozone” category and two Lipper certificates over 5 and 10 years. The second one was also awarded a Lipper certificate in the “Target Maturity Mixed Asset EUR 2015” category over 3 years.

nAtixiS ASSEt MAnAgEMEntlimited liability companyshare capital 50 434 604,76 €rcs number 329 450 738 parisregulated by aMF under n°Gp 90-009registered office: 21 quai d’austerlitz75 634 paris, cedex 13 - tel. +33 1 78 40 80 00

www.am.natixis.com

nAtixiS MultiMAnAgErsubsidiary of natixis asset Managementa French simplified joint-stock companyshare capital of 7 536 452 eurosrcs number 438 284 192 parisregulated by aMF under n°Gp 01-054registered office: 21 quai d’austerlitz75 634 paris, cedex 13 - tel. +33 1 78 40 32 00

www.multimanager.natixis.com

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Documents

Perspectives 03.2010 EN