michel wiskirski -...

Michel Wiskirski

Analyst Emerging Markets EMEA

Carmignac

3

Emerging Markets and Responsible Investment

October 11th 2017 SPEAKER:

Michel WISKIRSKI Emerging Market Analyst, ESG Specialist

P R O F E S S I O N A L S O N LY

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More than 50% of our global flagship equity Fund’s* total net assets were invested in emerging markets

1989 Carmignac invests in Emerging Markets since its inception in 1989

Carmignac, Historic Investor in Emerging Markets

1997 Launch of Carmignac Emergents

2007 Launch of Carmignac Portfolio Emerging Discovery

2011 Launch of Carmignac Portfolio Emerging Patrimoine

2014 RQFII license granted by the Chinese authorities. Carmignac is one of two first French players to obtain this license. Current quota: RMB 6 billion (USD 940M)

Carmignac Investissement Quarterly report extract at 31/03/1989

Source: Carmignac, * Data for Carmignac Investissement

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Our Simple Approach to Invest in EM

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A Simple Approach

UNDERPENETRATION STRONG FCF MACRO + +

COUNTRIES SECTORS STOCKS

Strong macro fundamentals (growth

outlook, balance of payments, currency,

inflation)

Companies with a strong FCF profile i.e capital light

business that can self finance their growth

Underpenetrated sectors with long-term growth

potential

7

Fundamental analysis Cycle analysis

Growth

Inflation

Balance of payment

Exchange rate

Local debt

External debt

1/ What we Look For: Macro Quality Laurent CHEBANIER Country Risk Analyst

Country Risk

Long term Structural trends

Cyclical analysis Country

risk analysis

Charles ZERAH Fund Manager Fixed Income Joseph MOUAWAD EM FI & FX Analyst

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2/ What to Look For: Long-term Secular Growth that can be Found in Underpenetrated Sectors

Sources: Carmignac, Emerging Advisors Group, International Monetary Fund, 30/12/2016

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Bank loans (% of GDP)

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

MSCI EM CE

3/ What to Look For: Self-Financed Growth

Sources: Carmignac, Bloomberg, MSCI, Companies, 31/12/2016

Stock Allocation

MSCI Emerging Markets Carmignac Emergents

Companies generating strong

cash flows and

sound balance sheets

Companies which are either highly

leveraged or unprofitable

Companies generating strong cash

flows and

sound balance sheets

=

Able to self-finance their

growth

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A Rigorous Stock-Picking…

Source: 2016 Forbes.com LLC™ All Rights Reserved, May 17th 2017

FORBES Top 20

1 Bill Gates Software

2 Warren Buffett Insurance

3 Jeff Bezos Internet

4 Amancio Ortega Retail

5 Mark Zuckerberg Internet

6 Carlos Slim Helu Telecoms

7 Larry Ellison Software

8 Charles Koch Industry

9 David Koch Industry

10 Michael Bloomberg Software

11 Bernard Arnault Consumer goods

12 Larry Page Internet

13 Sergey Brin Internet

14 Liliane Bettencourt Consumer goods

15 S. Robson Walton Retail

16 Jim Walton Retail

17 Alice Walton Retail

18 Jianlin Wang Property

19 Ka-Shing Li Consumer goods

20 Sheldon Adelson Property

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Software

Checkpoint

Line Corp

*Carmignac, as of 31/05/2017 Source: 2016 Forbes.com LLC™ All Rights Reserved, May 17th 2017

FORBES Top 20





















…That Has Proven Its Worth in Developed Markets

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Insurance

AIA Group

BB Seguridade

Sul America

Wiz Solucoes

Avivasa


FORBES Top 20






















13


FORBES Top 20






















Internet

Tencent

Baidu

Bitauto

MercadoLibre

58.com

Kakao

Sina

YY

Delivery Hero

Despegar.com

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Quality Financial Ratios, Consequence of Our Stock-Picking

* Consensus estimates ** Net debt at last company publication date and market capitalisation as at 04/08/2017– Net

debt excluding financials Past performance is not necessarily indicative of future performance

Sources: Carmignac, Datastream, Bloomberg, 04/08/2017

EPS Growth(CAGR 2016-18)*

Return On Equity(2017)*

FCF Yield (%)(2018)*

Net debt / Market Cap**

-5%

0%

5%

10%

15%

20%

25%

Carmignac Emergents

MSCI Emerging Markets

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Factoring ESG Criteria in our Investment Process

16 Source: Carmignac, January 2017

Sustainability is Inherent to our Investment Process: A Best-in-Universe Approach

Our commitment to investors

… while contributing to

sustainable development

Generating attractive returns with a low

turnover…

By selecting the right

Countries

Underpenetrated sectors

Capital-light companies

Systematic integration of ESG issues into our decision making process and company analysis

Implementation of an exclusion list, and identification of controversial sectors based on the EM team’s own convictions, that may vary from third party ESG research providers

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Underpenetration Goes Hand In Hand With Sustainability

Offering innovative technologies

Financing sustainable technologies

Improving living standards

Financing the future

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Financing the future

We invest in underleveraged countries where credit penetration is particularly low and where banks finance the real economy and the future development of the country (blue bars on the chart)

We do not like countries where banks support financial engineering and where the high credit leverage endanger financial stability.

Sources: Carmignac, Emerging Advisors Group, International Monetary Fund, 30/10/2015

Underpenetration: Bedrock Of Our Investment Process

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Ch

ina

S. K

ore

a

Taiw

an

Mal

aysi

a

Thai

lan

d

Ch

ile

Sou

th A

fric

a

Ru

ssia

Po

lan

d

Cze

ch R

ep

Bra

zil

Ind

ia

Co

lom

bia

Hu

nga

ry

Pe

ru

Ph

ilip

pin

es

Ind

on

esia

Mex

ico

Arg

enti

na

Bank loans (% of GDP)

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The Case For Argentina

*Countries in the MSCI Emerging Market index Source: Carmignac, EM Advisors Group, Bloomberg, July 2016

48%

76%

30%

37%

11% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Public debt Corporate debt Household debt

Emerging Market average* Argentina

Debt as % of GDP

% G

DP

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Financing sustainable technologies

Companies developing, providing and promoting sustainable technologies

Clean energy vehicles and buses benefiting from increasing demand

Supported by a favorable regulatory framework and anti pollution initiatives

0%

10%

20%

30%

40%

50%

60%

2013 2014 2015E 2016E 2017E 2018E 2019E 2020E


Sources: Carmignac, Deutsche Bank, Macquarie Bank, Bloomberg, 31/12/2015

Electric bus penetration in public transport in

China (% of total buses)

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Sources: Carmignac, Company data 2017


Taesa (Brazil): Current and future electricity

networks Improving living standards

Companies improving the quality of life and promoting a sustainable way of living by providing critical public and private infrastructure in

• Transportation

• Housing

• Telecommunications

• Electricity

Supported by a favorable regulatory framework

For example, we invest in a transmission company in Brazil enabling the expansion of electricity networks to all parts of Brazil, including remote places.

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ESG Investment Steps

Step 1 – Idea Generation All companies eligible to our investment universe must meet both our country, sector and company criteria as well as our ESG standards and exclusion policy.

Step 2 – ESG analysis The team carries out a detailed ESG evaluation. Companies are screened for controversies using the MSCI ESG Business Involvement Screener and stock selection is made through a best in class approach to sustainability using the MSCI ESG Rating Research

Step 3 – Company visits We complete our analysis with very regular on site visits, one on one meetings with company management in order to understand the companies’ strategy as well as their long term engagements

Step 4 – Monitoring Consideration of ESG issues does not end when the investment decision is made. The whole EM team discusses on an on-going basis the investment case of companies they invest in, including a review of different sustainability aspects.

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Carmignac Emergents Screening

INVESTMENT UNIVERSE

COUNTRY SELECTION

SECTOR SELECTION

STOCK SELECTION

FUND

≈200 companies

40-60 companies

≈400 companies

≈600 companies

Embedded

ESG Filter & analysis

using MSCI ESG rating

Research

SOE / non-SOE

Underpenetrated sectors

Balance sheet quality

Profitability

Long term growth

Stock daily liquidity

External vulnerability

Wealth / cash flow generation

Company ESG analysis

≈1000 companies

Investable Universe

Source: Carmignac, January 2017

24 Source: Carmignac, January 2017

Carmignac Emergents Screening

MSCI EM

67% 33%

Carmignac Emergents Investable Universe

Unprofitable companies, SOEs, overleveraged companies, saturated sectors, etc.

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Exclusion Policy

Source: Carmignac, 2017

Carmignac exclusion list

EM team’s own company exclusions

Controversial Sectors analysis

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EM team’s own company

exclusions

EM Equity Team’s Extended Exclusion List


TEAM’S RESTRICTIONS

Tobacco companies that derived any turnover from the production of tobacco products

Thermal coal companies which have more than 5% of their revenues from coal extraction

Oil sands companies who derived more than 1% of total production from oil sands

Adult entertainment companies involved in the production of pornographic materials

Meat processing companies that derived any turnover from the production of cattle, pork, lamb or poultry

Companies in the PETA (People for Ethical Treatment of Animals) exclusion list

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EM team’s own company

exclusions

Case study: Exclusion of meat companies

TEAM’S RESTRICTIONS

Meat processing companies that derived any turnover from the production of cattle, pork, lamb or poultry:

Slaughterhouses and a livestock confinement companies are responsible of the slaughter of over 100 billion animals globally each year It is estimated to account for 16% of all greenhouse emissions worldwide

23% of global fresh water supplies, 33% of global arable land and 45% of global land are devoted to livestock feed, and cattle ranching accounts for 70% of the deforestation in the Amazon rainforest.

If 45% of corn and 80% of soybeans grown globally were fed directly to humans instead of animals, around 70% more food would be added to the world’s supply, enough to feed 4 billion additional people

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Controversial Sectors analysis

Controversial Sectors: An Exercise Of Best In Class


Taking into account the social impact and conduct of the companies Specific considerations and scrutiny Examples in our portfolio

Official and legal gambling companies that are run through a licensed company as opposed to unofficial gambling mostly run by

criminal and terrorist organizations

Kangwon Land (Korean gambling company) Official casino revenues at $1bn vs. unofficial gambling market at $50bn per year.

Alcoholic beverages producers run through a licensed company offering formal and high quality products, encouraging those who consume alcohol to do

so safely as opposed to informal alcohol

United Spirits (Indian spirits company). In India, unofficial spirits accounts for 50% of the total spirits liquor market

Mining companies supporting communities making efforts to reduce the environment impact of their activities

Grupo Mexico (Mexican copper producer) addressing the needs of local communities by investing in education and reforestation projects

Controversial Sectors

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* Excluding warrants/ P-Notes and preference shares


Our Internal ESG Guidelines

Portfolio construction objective

Minimum 40% of the Fund invested in companies rated A or above by MSCI ESG

Maximum 25% of fund invested in companies rated below BB by MSCI ESG

Program of engagement with companies

We commit to a strengthened engagement dialogue with companies to improve their approach to ESG issues

Voting Policy engagement

A participation rate of 80% or above*

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Conclusion

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Sources: Bloomberg as of 31/08/2017, base 100 as of 28/09/2007

FT, « Investors in companies that do good do better », James Kynge, 20/07/2017

The Value Added of ESG to Invest in Emerging Markets Starts to be Recognised Financial Times on the 20th of July 2017

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Sources: Bloomberg as of 31/08/2017, base 100 as of 28/09/2007

FT, « Investors in companies that do good do better », James Kynge, 20/07/2017

Good Governance Outperforms in Emerging Markets

40

60

80

100

120

140

160MSCI Emerging Markets ESG Index

MSCI Emerging Markets Index

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Conclusion: A Socially Conscious Fund

Sustainability Score as of 30/06/2016. Sustainability Rating as of 31/07/2017. Above Average. Sustainalytics provides company-level analysis used in the calculation of Morningstar’s Sustainability Score. © 2017. All rights reserved. The information contained herein:

(1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) 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. Past performance is no guarantee of future results.

Carmignac Emergents is identified as a socially conscious Fund by Morningstar

Carmignac Emergents has a high sustainability score

Morningstar Sustainability Globes

‘Socially Conscious’ Tag

A strong recognition of our ESG strengths by Morningstar and MSCI ESG

Morningstar Sustainability Globes rating is a way to evaluate how well the companies in a fund’s portfolio are managing the environmental, social, and governance—or ESG—investing factors relevant to their industries.

Out of 470 Global Emerging Market Equity funds as of 31/07/2017. Based on 74% of AUM. 4,13

4,60

3,6

3,8

4,0

4,2

4,4

4,6

4,8

MSCI EM Carmignac Emergents

Overall MSCI ESG score* - Carmignac Emergents vs MSCI EM

Carmignac Emergents

Due to its rigorous investment process,

Carmignac Emergents has a higher

MSCI ESG rating than the MSCI EM Index

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Conclusion: A Rigorous Approach that Works over the Long Term

Carmignac

Emergents

A EUR Acc

+64.6% Reference

Indicator**

+49.0%

Past performance is not necessarily indicative of future performance. Management fees are included in performance.

**MSCI Emerging Markets (EUR), (Reinvested net dividends, rebalanced quarterly) Source: Carmignac, 29/09/2017; Base 100: 31/12/2009

Carmignac Emergents

Ref. Indicator*

2010

+30.9%

+24.5%

2012

+17.3%

+13.4%

2011

-12.1%

-17.8%

2013

-6.2%

-6.8%

2014

+5.8%

+11.4%

2015

+5.2%

-5.2%

2016

+1.4%

+14.5%

2017 (YTD)

+15.2%

+14.0%

90

100

110

120

130

140

150

160

170

180

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Source: Carmignac, 31/07/2017; Base 100: 30/07/2012; Morningstar Direct. © 2017 Morningstar, Inc - All rights reserved. Monthly returns in Euro, net of fees, as of 31/07/2017. Category composed of all shares of all funds in the Global Emerging Markets Equity Morningstar category. Share class used for Carmignac Emergents: FR0010149302 ((1) Reference indicator: MSCI EM. Management fees are included in performance.)

Past performance is not a reliable indicator of future performance

Conclusion: A Rigorous Approach That Works over the Long Term

Carmignac Emergents is 1st quartile for its volatility and down capture ratio over 5 years 1st

5-year volatility Quartile in its Morningstar category

5-year Down Capture Ratio Quartile in its Morningstar category

1st quartile

4th quartile

Low down capture

High down capture

0

25

50

75

100 MSCI EM

Carmignac Emergents

Morningstar category

1er quartile

4th quartile

Low volatility

High volatility

0

25

50

75

100

MSCI EM

Carmignac Emergents

Morningstar category

36

Q&A

Emerging Market Analyst, ESG Specialist

Michel Wiskirski

T H A N K Y O U F O R A T T E N D I N G !

F O L L O W O U R E X P E R T S O N O U R W E B S I T E w w w. c a r m i g n a c . c o m

L I N K E D I N

P R O F E S S I O N A L S O N LY

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Disclaimer This presentation is intended for professional clients and has not been submitted for FSMA validation. This presentation may not be reproduced, disseminated or communicated, in whole or in part, without prior authorisation from the management company. This presentation does not constitute a subscription offer, nor does it constitute investment advice. The information contained in this presentation may be partial information, and may be modified without prior notice. Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor). Net investment returns are calculated after deducting the charges and taxes applicable to an average retail client who is an individual resident in Belgium. The analysis of financial instruments in this presentation, was not prepared in accordance with applicable regulatory provisions regarding the independence of financial analysts. The Management Company is not subject to the prohibition of entering into transactions in connection with the relevant instruments before the presentation of this material. This material is presented for illustrative purposes only to point out certain instruments which are (or which were) in the portfolios of certain Carmignac funds, and it is does not aim to promote a direct investment in the instruments mentioned herein. The portfolios of Carmignac funds may change without previous notice. To find out the actual fees charged by each distributor, please refer to each distributor's respective fee schedule. Annual maintenance costs (custody fees) may be charged. They may vary from one institution to another, please liaise with your contact for further information. The Funds present a risk of loss of capital. Any contractual information relating to the Funds entered in this publication figures in the respective prospectuses of said Funds. The prospectuses, KIIDs, the net asset values and the latest (semi-) annual management reports may be obtained, free of charge, in French or in Dutch, from the management company (tel. +352 46 70 60 1). These documents may also be obtained via the website www.carmignac.be or from Caceis Belgium S.A., the financial service provider in Belgium, at the following address: avenue du port, 86c b320, B-1000 Brussels. The KIIDs must be made available to the subscriber prior to each subscription. It is recommended that the subscriber read the KIID before each subscription. The minimum subscription amount for A EUR acc units is 1 unit. The Fund may not be offered or sold, directly or indirectly, for the benefit or on behalf of a "U.S. person", according to the definition of the US Regulation S and FATCA. If you subscribe to a French investment fund (fonds commun de placement or FCP), you must declare on your tax form, each year, your share of the dividends (and interest, if applicable) received by the Fund. You can perform a detailed calculation at www.carmignac.be. This tool does not constitute tax advice and is intended to serve solely as a calculation aid. This does not exempt you from having to perform the procedures and verifications incumbent upon you as a taxpayer. The results indicated are obtained using data that you provide, and under no circumstances shall Carmignac be held responsible in the event of error or omission on your part. Pursuant to Article 19bis of the Belgian Income Tax Code (CIR92), in the case of subscription to a Fund that is subject to the Savings Taxation Directive, the investor will have to pay, upon redemption of his or her shares, a withholding tax of 27% on the income (in the form of interest, or capital gains or losses) derived from the return on assets invested in debt claims. Distributions are subject to withholding tax of 27% without income distinction. Copyright: The data published in this presentation are the exclusive property of their owners, as mentioned on each page. Any complaint may be referred to [email protected] or CARMIGNAC GESTION - Compliance department - 24 place Vendôme Paris France.

Non contractual document, completion achieved on 09/10/2017

CARMIGNAC GESTION – Asset management company (AMF authorisation no. GP 97-08 of 13/03/1997) Limited company (société anonyme or SA) with capital of €15,000,000 – Registration no.: RCS Paris B 349 501 676 24 Place Vendôme – 75001 Paris – Tel: +33 1 42 86 53 35 CARMIGNAC GESTION LUXEMBOURG – Subsidiary of Carmignac Gestion UCITS management company (CSSF authorisation of 10/06/2013) Limited company (SA) with capital of €23,000,000 - Registration no.: RC Luxembourg B67549 City Link -7, rue de la Chapelle L-1325 Luxembourg – Tel: +352 46 70 60 1
http://www.carmignac.be/http://www.carmignac.be/mailto:[email protected]

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