Santander Private Banking International Due Diligence Meetingisd.pioneerinvestments.com/microsite/santander_private... · 2013-05-08 · Santander Private Banking International Due

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Santander Private Banking

International Due Diligence Meeting

Emerging Market Debt: The New Investment Grade

Giles Bedford, Client Portfolio Manager

9-10 May, Miami


WHAT’S IN THE PRICE?


Emerging Markets Are Growing Faster Than Mature Economies

12

10

8

6

4

2

0

-2

-4

-6

Global GDP Growth

An

nu

al R

ea

l G

DP

Gro

wth

%

2000 2002 2004 2006 2008 2010 2012 2014 2016

IMF Forecast

Developing Asia United States Latin America and the Caribbean Euro Area

Source: IMF: World Economic Outlook, World Economic Outlook Database, October 2012, Estimates start after 2011.


Competitive Macro Fundamentals

Average EM Public Sector Debt Ratios to Decline to 32.7% of GDP

Source: JPMorgan, 13 April 2013

60.0

50.0

40.0

30.0

20.0

% of GDP

Latin America EMEA EM Emerging Asia

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013F

Total EM


Source: The Economist, 17 December 2011.

Sustainable Long-Term Growth Drivers

The Demographic Dividend Favours Emerging Markets


REFORM:

Constitutional Amendments Aimed at Boosting Competiveness

POLICY FOCUS:

New leadership committed to structural reforms

RECOGNITION:

Inclusion in EMBI and S&P ratings upgrade due to momentum in reform and policy improvement

Increased Transparency and Governance

Regaining Investor Confidence Via Policy Initiatives


Investor Commitment: As Risk Declines, Buyers Diversify

Emerging Markets Debt May Not Be Much Riskier Than US BBB B

asis

Po

ints

Spread: Emerging Market IG Bonds vs. US IG Bonds


Technicals: Strong Inflows Into The Asset Class

Over US$250bn Since the End of 2008

Source: JPM EM Corporate Weekly Monitor, April 2013 and EPFR Global

120

100

80

60

40

20

0

-20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

97.0

79.9

43.4

46.6

-3.8

24.9

2008 2009 2010 2011 2013 2012


WHAT’S CHANGING?


Growth Attracts More Efficient Sources of Capital

Collapse of the EM Syndicated Loan Market As Economies Evolve

Middle East & Africa Latin America EM Europe Asia

US$ million


Corporate Issuance Exceeds Sovereign Issuance Across Currency

Source: JPMorgan, January 2013

250

200

150

100

50

0

US$ billion

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Corporates Sovereigns


Credit: Supported By Liquid, Underleveraged Balance Sheets

Latin Corporates: Liquidity (Cash / ST Debt, Left) vs. Gross Leverage

(Debt/LTM EBITDA, Right)

3.0x

2.5x

2.0x

1.5x

1.0x

1Q

08

3Q

08

1Q

09

3Q

09

1Q

10

3Q

10

1Q

11

3Q

11

1Q

12

3Q

12

Average: 2.0x 2.6x

2.0x

2.5x

2.0x

1.5x

1.0x

0.5x

1Q

08

3Q

08

1Q

09

3Q

09

1Q

10

3Q

10

1Q

11

3Q

11

1Q

12

3Q

12

Average: 1.6x 2.1x

1.7x

1.5x

V

Source: BaML, January 2013


Critical Mass: Emerging Market Corporate Issuance Approaches US High Yield Issuance

Source: JP Morgan EM Corp 2013 Outlook & Strategy – 6 December 2012.


Wider Sponsorship from Investors

Rising EM Debt Issuance Should Re-balance Global Aggregates

Data source: BarCap, IMF, November 2012

BarCap Global Agg World GDP

Nearly 43% of World GDP, but only 5% of BarCap Global Aggregate

Emerging Markets (5%)

Rest of World (95%) Developed Markets 57.5%

Other Emerging 22.7%

Brazil, Russia, India (8.5%)

China (11.1%)


Reallocation Is A Powerful Performance Driver

US Insurance Companies hold a 2.7%

weighting in Emerging Markets

Corporates…

…And prefer Latin American

Corporate exposure within that

weighting

Source: JPMorgan, August 2012


EM Corporates Performance

Strong Returns With Lower Volatility

Source: JPM EM Corporate Weekly Monitor 20 November 2012.


WHAT ARE THE RISKS?


Source: Pioneer Investments – 11 January 2013

Inte

rest R

ate

(%

)

Sp

rea

ds (

bp

s)

0

100

200

300

400

500

600

700

800

0.0

1.0

2.0

3.0

4.0

5.0

6.0

3M USD LIBOR CEMBI Spread EMBI Spread

2 Years

* EMBI refers to the JPMorgan EMBI Global Diversified Blended Spread

Yield Cushion Lowers Rate Sensitivity


Default Rates Remain Muted

Source: JPMorgan, April 2013

United States

High Yield

Emerging Markets

High Yield


Where Do We Go From Here?

A low global growth environment

Negative real interest rates

EM domestic demand story is improving

Commodity price backdrop

Government incentive spending

Superior demographics

Declining barriers to foreign investment

Higher corporate issuance

-6

-4

-2

0

2

4

6

8

10

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

IMF: GDP Growth & 2013 Forecast

Source: IMF, January 2013.

Data is estimated for 2013-2017

G7 World Emerging


How Are We Positioned?

Source: Pioneer Investments, 2 April 2013

Benchmark: JPM EMBI Global Div (95%) + JPM Cash 1 Month Euro (5%)

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Corporate Government

Active Asset Allocation: Pioneer Emerging Markets Bond Strategy vs. Benchmark

Overweight in the asset class versus benchmark


ACCESSING THE OPPORTUNITY


15 Years Of Investing In Emerging Markets

Source: Pioneer Investments, as 1 January 2013.

JP

Mo

rga

n E

MB

I

Team

• 6 Dedicated portfolio managers

• 8 Credit research analysts focusing on Emerging Markets

• Team founded in 2000 by Greg Saichin, Head of High Yield and Global EM Fixed Income.

Experience

• Greg has 24 years of experience in dealing with Emerging Market Corporates

• Team averages 15 years of experience

• Team has managed corporate Emerging Market exposure since 2002

Why Partner with Pioneer Investments?


Our Investment Capability

Aggregate Product

Pioneer Emerging Markets Bond Strategy

Local Currency Sovereign Corporate IG Credit

Available in SICAV


A 6-Stage Process Drives our Investment Decisions

Anchored by Integrated Risk Management

1. Macro Analysis

2. Idea Generation

3. Sector Analysis

4. Credit Analysis

5. Valuation

6. Portfolio Construction

Risk

Management


Emerging Markets Fixed Income – Team Capabilities

Source: Pioneer Investments 22 April 2013

Emerging Markets

Aggregate Debt

Local Currencies Corporate & High Yield

Strategy Name

Emerging Markets

Aggregate Debt

Emerging Markets

Debt Local

Currencies

Emerging Markets

Corporate Debt

Emerging Markets

Corporate High

Yield Debt

Inception Date 4 July 2000 4 November 2009 11 December 2012 11 July 2012

AUM* €1.52 billion €490 million €11 million €43 million

Investment Universe

Sovereign Hard and

Local Currency plus

Corporate Emerging

Markets Hard and Local

Currency Bonds

EM Debt Instruments

denominated in Local

Currencies

Corporate Emerging

Markets Hard and

Local Currency

Bonds

Max 40% in High

Yield

Corporate Emerging

Markets, High Yield

Bonds

Max 25% in Local

Currency Bonds

Benchmark

JPM EMBI Global

Diversified 95%

JPM Cash 5%

JP Morgan GBI – EM

Broad Diversified EUR

Unhedged

JPMorgan CEMBI

Broad Diversified

JPM CEMBI Broad

Diversified Non–

Investment Grade

*Assets under management represents both funds and segregated accounts as of 22 April 2013

**The funds using the Emerging Markets Corporate Bond buy and hold strategy are closed to new investments.



The Flagship Strategy

• Aggregate Emerging Market Bond Strategy

• Best ideas, with the ability to invest in:

– Class subsets (Sovereign, Corporate, LC),

– Rating spectrum (from senior to junior sub),

– Hedges by using EMD derivatives, or volatility

proxies (e.g. EM equity puts),

• Flexible approach: risk profile can be

adapted to suit the economic cycle and

market conditions

• Extensive bottom-up fundamental research

performed by 8 career analysts

Key Features Key Details

Holdings Approx. 100-130 holdings

Tracking error* 1-6% ex Ante

Corporate limit* Flexible

Credit quality* Investment grade &High Yield

Single corp issuer* Max. 5% (IG), Max 3% (HY)

Cash holding* Up to 20%

Duration* +/- 1.5 years relative to benchmark

Country* +/- 6% relative to benchmark

Local currency* Up to 25%

*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



Key Characteristics

Data Source: Pioneer Investments, 2 April 2013.

0.0%

5.0%

10.0%

15.0%

20.0%

AA

A

AA

-

A+

A A-

BB

B+

BB

B

BB

B-

BB

+

BB

BB

-

B+

B B-

CC

C+

CC

C

CC

C-

CC

C+

C Cash

NR

German Rating Allocation Weight

0.0%

10.0%

20.0%

30.0%

40.0%

Liq

Cash

FR

N

1-3

3-7

7-1

1

11-2

0

20-3

5

35+

Oth

er

Term Exposure Weight

0.0%

50.0%

100.0%

AR

S

BR

L

CLP

CN

Y

CO

P

EU

R

GB

P

NG

N

PH

P

RU

B

TH

B

TR

Y

US

D

Currency Exposure Weight

Regional Allocation

Asia EMEA Latin America Other

Key Details

Yield To Maturity 6.43%

Spread Duration 3.84

Effective Duration 4.97

Average Quality B+


A Competitive Track Record…

Calendar Year Returns 2009 - 2013

2011 1.84 6.88 -5.04

2010 16.03 11.31 4.72

2009 78.35 28.45 49.89

2012 20.16 16.63 3.53

2013 (YTD) 1.11 -2.27 3.38

Fund % Benchmark % Relative %

Source: Pioneer Investments as at 31 March 2013. Performance figures are in USD and have been converted from the sub-fund's base currency, the euro. Performance data

provided refers to Class A units only, and is based upon NAV net of fees. The benchmark of the fund is JPM EMBI Global Diversified 95% andJPM Cash 5%. For details of other unit

Classes available, please refer to the prospectus.


…And Outperforming Peer Group Average

*Source: Morningstar Direct as at 31 March 2013. Pioneer Funds – Emerging Market Bond Class A non-distributing USD dollars, rank returns vs Emerging Market Debt peers.

Copyright © 2012 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate,

complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

34

Pioneer Emerging Markets Bond Strategy Morningstar Peer Category


Recapping Our Investment Case:

• Macro Growth outpaces Mature Markets Growth:

• Emerging Market corporates enjoy lower leverage and higher liquidity vs. historic averages Quality:

• Emerging Market Corporate High Yield currently offers higher yields than US High Yield Potential Income:

• Emerging Market Corporate High Yield spreads are wider than US corporates, while offering defensive fundamentals

Spreads:


APPENDIX


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 Fixed Income 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 2011 .

• 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 1986.

Yerlan Syzdykov Senior Portfolio Manager, Emerging Markets and High Yield Fixed Income, Vice President • Yerlan Syzdykov is a senior Portfolio Manager, Emerging Markets and High Yield Fixed Income at Pioneer Investments. 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 1997.

Hakan Aksoy Portfolio Manager, Global Emerging Markets and High Yield • Hakan Aksoy is a Global Emerging Markets & High Yield Portfolio Manager who works primarily on Pioneer Funds – Emerging Markets Bond Local

Currencies. He also covers the local currency bond and the emerging markets FX trades with the other funds at the desk as well as the Emerging Markets Bond Local Currencies portfolio.

• He joined the company in 2005 as an analyst in the Multi Asset Management Team. In August 2007, he became a member of the Global Emerging Markets and High Yield 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.


Emerging Markets Fixed Income Team

Biographies

Colm D‘Rosario Portfolio Manager • Colm is a Portfolio Manager who has worked on various products on the desk since 2007. 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 (2004-2007), where he was primarily responsible for the research and analysis of Asset-Backed Securities and Banks.

• Colm has an MA in Economics and Finance, an MSc in Mathematics and a BA in Double Mathematics/Economics. He was awarded the Financial Risk Manager (FRM®) designation by the Global Association of Risk Professionals (GARP) in April 2007

Alejandro Arevalo Portfolio Manger • Alejandro is a High Yield EM Portfolio Manager for Pioneer Investments with 14 years’ experience in the financial services industry.

• Before joining Pioneer Investments, Alejandro held the position of Senior Credit Analyst for The International Bank of Miami from 1999 to 2003, when he moved to Gibraltar Bank and took the position of Senior Credit Analyst/Credit Manager.

• In 2005 joined Standard Bank Asset Management as Senior EM Fixed Income Analyst, becoming EM Corporate Portfolio Manager in 2011 where he was given responsibility for marketing, structuring and managing new Emerging Markets, focusing in regions such as Latin America, CIS and Asia.

• Alejandro has an MBA with concentration in Finance from Florida International University, Miami.

Giles Bedford Client Portfolio Manger • Giles is a Client Portfolio Manager with 18 years of experience in the financial services industry.

• Before joining Pioneer Investments, Giles was the managing partner of Beltone Financial UK, the European arm of a leading Egyptian investment bank. Previous to this, he was a partner at E2 Research, an independent research boutique, having held positions at Morgan Stanley, Goldman Sachs and Robert Fleming.


Important Information

Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 31 March 2013.

Pioneer Funds – Emerging Markets Bond is a sub-fund (the “Sub-Fund”) of Pioneer Funds (the “Fund”), a fonds commun de placement with several separate sub-funds established

under the laws of the Grand Duchy of Luxembourg.

Past performance does not guarantee and is not indicative of future results. Unless otherwise stated, all views expressed are those of 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 +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 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.

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.

For Broker/Dealer Use Only and Not to be Distributed to the Public.

Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies.

Date of First Use 9 May 2013

Documents

Santander Private Banking International Due Diligence Meetingisd.pioneerinvestments.com/microsite/santander_private... · 2013-05-08 · Santander Private Banking International Due