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Know the Flows… Know the Flows…

Know the Flows… - PowerPoint Presentation

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Know the Flows… - PPT Presentation

1 Company Overview EPFR Global delivers a complete and transparent picture of institutional and individual investor flows driving global markets Strategists traders and investors use ID: 286326

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Slide1

Know the Flows…Slide2

1

Company Overview

EPFR Global delivers a complete and transparent picture of institutional and individual investor flows

driving global markets

. Strategists, traders, and investors use EPFR flow and allocation data to gain the most current, global view of changing investor demand and manager positioning. Trading and allocation strategies leverage EPFR historical and current data to improve returns and manage risk.

Series sourced through

direct relationships

with fund managers and administrators

The universe covers over

$

17

trillion

in globally domiciled funds.

EPFR flows are available at either the asset class

aggregate

, fund group, investment manager, individual fund and share class levels to support the most

granular

and informed insights.

Comprehensive

,

transparent

, and

robust

daily, weekly, monthly

updates available

T+1

in addition to historical time series.Slide3

Users of EPFR Data

2

Government/Central Banks

Asset Managers

Hedge Funds

Banking and Brokerage

Strategists

Capital Markets

Research Analysts

Types of usage:

Proprietary trading

Directional calls for clients

Targeting sales efforts

Market analysis

Fund Managers

Portfolio Analysts

Marketing and Product Development

Types of usage: Factor in investment process Competitive analysis, product dev Asset allocation Quantitative analysis

Regulators Monetary AuthoritiesTypes of usage: Cross-border flow analysis Flows impact on currency as well as local equity/debt markets

Global Macro/EM/Discretionary

Quantitative Investors

Types of usage:

Momentum trading

Liquidity analysis

Market timingSlide4

3

Uses of EPFR Global DataSlide5

4

EPFR Global Key Data

Sets

Core Datasets

(based on data sourced directly from managers or administrators)

Derived Datasets

(based on flows and allocations data)

Fund Flows

Fund manager allocations at month-end across the countries or sectors they invest in.

Equity/Bond Fund Flows

Daily/Weekly/Monthly

* also includes AUM, Performance

Country Weightings

Monthly

Sector / Industry Weightings

Monthly

Equity / Bond Fund Holdings

Monthly

+

=

Fund Allocations

Country & Sector Flows

The amount of cash flowing into and out of funds world-wide.

Distribution of fund flows by country or sector. Combines data from fund flows and fund allocations.

Country/Sector/Industry Flows

Daily/Weekly/Monthly

Regional packages available

Daily/Weekly/MonthlySlide6

Fund Flows OverviewLeverage the transparency of the EPFR universe and the granular breakdown of flows

5

Fund Flows

The amount of cash flowing into and out of funds world-wide.

What are Fund Flows?

Calculates “Net Flows” (investor contributions/redemptions) for individual funds and then add these up by asset class

Net Flow calculations exclude portfolio performance and currency fluctuations

Includes funds registered globally not just those domiciled in the US

Updated daily/weekly/monthly

Fund Flows

The amount of cash flowing into and out of funds world-wide. Slide7

Fund Flows: Asset class breakdownHighly granulated flow data for more than 100 country, regional, sector and asset class categories

6

(includes Global & US )Slide8

7

Fund Flows:

Drill down to detail view

……………………………………………………………………………..………………………………………………….………….……

7Slide9

Fund Flows: Investor types differentiation US equity fund flows since January‘10

8

All investor types

US

Institutional Investors

US Retail investors

Non-US investors in US equity

Only

US institutional investors

were the main buyers ‘at the bottom’

US Retail investors

missed the big

US Equity rally between Q2/2010 and Q1/2011.

Non-US investors

(US equity funds domiciled ex US) stayed away in Q2/Q3 2010Slide10

9

Fund Flows:

The Big Picture

Global

cross-asset allocation

Total Aggregate Equity, Fixed Income, and Money Market Fund Flows

Developed vs. Emerging Market Equity Flows

Developed

vs.

Emerging Market

Fixed Income

Flows

Recent flows

are still largely in favor of Fixed Income funds, although the

overall flight

from equities has temporarily reversed course

Until the recent rally, investors have shown a lack of confidence in equity markets, as flows continue to remain in the red over the past year

Demand for Emerging vs. Developed Market debt has skyrocketed this year as investors search for favorable yieldsSlide11

10

Fund Flows:

Practitioner examples and investment signals

Global

cross-asset allocationSlide12

Practitioner Example: Global risk indicator

11

Best call:

On May 6th 2010 – BofA backtesting

indicates that GFSI would have flashed

"sell.” Risk assets sold off over the next 30 days, as equities corrected 5.5%,

commodities fell 8.1% and HY bonds lost 2.6%

Chart 4 shows a backtested chart of the GFSI sell indicator and the performance of major asset classes. The GFSI would have warned of a major correction in risk assets on 6th May 2010.

Source: BofA Merrill Lynch Global Research, EPFR Global, Bloomberg; indexed to 100 in Oct’09Slide13

Practitioner Example: Global cross-asset allocation

12

Chart 10 shows that the results of the monthly ‘best-of-two’ strategy for global equities and global bonds are similarly convincing. The strategy would have generated an excess return of roughly 8pp per year before costs, and total return was more than twice the benchmark return with lower volatility. The strategy therefore clearly dominates the equally-weighted benchmark.

Using money market returns as risk-free rate, the strategy has had a Sharpe ratio of 1.3 since 2004, while the benchmark only had a Sharpe ratio of 0.2. On average, funds would have to be switched between global equities and global bonds three times per year; so even including transaction costs, a significant excess return would have been earned.

These results clearly suggest that the direction of flows into or out of risk assets and into or out of money market funds contains information about future performance of equities versus bonds.

Source: EPFR, Datastream, Commerzbank Corporates & Markets

Chart 10: End-of-month ‘best-of-two’ strategy for global equities vs global bonds based on the four-week average fund flows as a percentage of AuM into risk assets and money market fundsSlide14

Practitioner Example: Credit research analysis 13

US Credit Outlook

Support from the deep

The ‘hidden force’ supporting asset prices is, of course, the flood of liquidity from the Fed. In his most recent testimony and elsewhere, Bernanke has deemed the fact that “equity prices have risen significantly, volatility in the equity market has fallen, [and] corporate bond spreads have narrowed” as evidence “that the Federal Reserve’s recent actions have been effective.”

By holding interest rates on cash at zero even as the economy has continued to recover, the Fed has left investors scrambling for return wherever they can find it. Much of the rally has been justified by the recovery in the economy, of course. Yet the fall in yields to their lowest levels since the 1960s, the simultaneous rally in gold and recent sell-off in the dollar, leave us thinking that this is about more than just fundamentals. In some ways the fund flows speak louder than the actual market movements: investors have been selling cash assets to buy almost anything else. In 2010, much of this liquidity was making its way into EM; now that investors are growing nervous about political stability, it has again been channeled into US and developed markets (Figure 5). Even IG at 3% starts to look interesting when cash deposits and money market funds are yielding virtually nothing.

Source: Citi Investment Research and Analysis, EPFR Slide15

14

Fund Allocations

Fund manager allocations at month-end across the countries or sectors they invest in.

What are Fund Allocations?

Monthly data reported by managers or administrators (based on holdings, fund factsheets)

Fund level detail includes total fund assets, % weight in cash, % weight by country

Includes funds registered globally

not just US

Country & Sector Allocations OverviewSlide16

15

Actual country and regional weightings (in % of AUM)

Country Allocations:

Overview

15Slide17

Country Allocations: Relative Country Weights

16

Non-ETF Global Equity Fund Active Weights vs. MSCI ACWI ETF

Pacific

Europe & Middle East

Americas

Latin America

EMEA

AsiaSlide18

Country & Sector Flows Overview

17

Fund Allocations

Fund manager allocations at month-end across the countries or sectors they invest in.

What are Country Flows/Sector Flows ?

EPFR multiplies the most recently available Fund group allocations (to a country or sector) x Flows into that Fund Group - to estimate overall flows at a country or sector level.

Allows users to analyze flows by fund group, ETF

vs

MF, and by domicile

Includes funds registered globally not just those domiciled in the US

EPFR also tracks flows to dedicated Sector Funds, as an alternative measure of demand for individual sectors

Country or Sector Flows

Distribution of fund flows by country or sector. Combines data from fund flows and fund allocationsSlide19

Practitioner Examples: Sector Flows

18

Cumulative Sector Flows are still in the red for the most part, with the Materials sector being the only exception

Consumer Discretionary

Consumer Stapes

EnergyHealthcareIT

Telecom

Financials

Industrials

Materials

Utilities

Cumulative

52 Week

Flows

Weekly Flows

(%

AuM

)Slide20

Practitioner Examples:

Global Country Allocation Model

19

Utilizing Flows in Multi-Factor Asset Allocation

Global Country Selection Model

In this report, we demonstrate how utilizing EPFR Country Flows alongside standard investment factors add value to country allocation strategies

Backtests

using EPFR Fund Allocations and Fund Flows as factors in a global country selection model yield convincing results

Investment factors

Active Country

Flow

compares

one

country to the cross sectional average

Active Investor Spread

uses EPFR country allocations data to measure active, speculative investor activity in emerging markets

Model Features

Provides an interactive environment for portfolio managers to

backtest

strategies with EPFR Fund Flow & Allocations data

Create custom country portfolios

Adjustable factor weightings and strategy parameters allow for a high level of adaptability

 Slide21

New research based on EPFR Global data

20Slide22

Sample Clients

21

"The flow data from EPFR has proved to be a useful source of added value in some quantitative models of equity markets we have constructed. It provides an extra dimension of information to that available from the typical equity market databases used by quants and so affords an edge in performance over much of the competition."

Dr. Stephen Rees

Head of Investment Process Research

Schroders, London

“Emerging market mutual funds' country allocations appear to contain information on future equity returns beyond that contained in standard valuation and momentum indicators.”

Analyst

Global Asset Allocation Research Team

Salomon Smith Barney

“I find the EPFR Global Country Weightings Report to be an invaluable tool in helping me track my competitors' regional and country allocations on a monthly basis. The Report is timely and very comprehensive.“

Brad Aham

Portfolio Manager

State Street Global Advisors

Sell Side

Buy Side

Government/MediaSlide23

Company History

22Slide24

Key Contacts

23

Dwight Ingalsbe

Managing Director/Co-Founder

Tel: (+1-617) 864-4999 ext. 26

Email: ingalsbe@epfr.com

Brad Durham

Managing Director/Co-Founder

Tel: (+1-617) 864-4999 ext. 24

Email: durham@epfr.com

Ian Wilson

Managing Director, Fund Data

Tel: (+1-804) 217-8653

Email: ian.wilson@epfr.com

Simon Ringrose

Managing Director, Sales

Tel: (+1-617) 864-4999 ext. 30

Email: simon.ringrose@epfr.com

Cameron Brandt

Director, Research

Tel: (+1-617) 864-4999 ext. 22

Email: brandt@epfr.com

Patrick Paradiso

Sales (Latin America)

Tel: (+1-917) 543-6181

Email: patrick.paradiso@epfr.com

Jean-Claude Moos

Sales Executive

Tel: (+1-212) 907-5814

Email: jcmoos@epfr.com

Rikolv Hatlehol-Desai

Sales Director (EMEA)

Tel: (+44) 7766 805657

Email: rikolv@epfr.com

Bin Peng

Sales Director (North China)

Tel:

(+86) 10 6562 5321

Email: bin.peng@epfr.com

Robert Sheridan

Business Development Manager, Asia

Tel: (+65) 8484 1094

Email: robert.sheridan@epfr.com

Young-

il

Sunwoo

Sales (Korea)

Tel:

(+821) 9608-0101

Email: yisunwoo@dreamwiz.com

Todd Willits

Manager, Client Services

Tel: (+1-617) 864-4999 ext. 27

Email: todd@epfr.com