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Schroder ISF* Emerging Markets Debt
Absolute Return October 2016
September 2016 | For professional investors or advisors only.
*Schroder International Selection Fund is referred to as Schroder ISF throughout this presentation
Christopher Wyke| Product Director
Unconstrained Benchmark Relative
Schroder Franchise Absolute / Total Return Local Debt Corporates Multi-Sector
Fund Name EM Debt AR Local Currency Bond EM Corporate Bond EM Bond / EM Multi-
Sector Bond
Return Maximise Return Outperform GBI–EM
Global Div. by 2-3% pa.
Outperform CEMBI
Broad Div. by 2% pa.
Outperform Composite
Benchmark** by
2-3% pa.
Risk Preserve Capital Tracking Error Limit Tracking Error Limit Tracking Error Limit
Investment Universe EM Local / External / Corporate / Currencies EM Rates and
Currencies EM Corporate
EM Local / External /
Corporate / Currencies
Use of Corporates Periodic / Max 25% No Yes Yes
Use of Cash Aggressive use of cash to preserve capital Limited Limited Limited
Inception Date August 1997 July 2012 July 2012 July 2012
Fund Manager A. Guezour + Team J. Barrineau & R. de
Mello R. de Mello
J. Barrineau & R. de
Mello
Schroder Global EMD* Capabilities Product Mapping
1
*Emerging Market Debt is referred to as EMD throughout this presentation **1/3 GBI-EM Diversified, 1/3 EMBI Global Diversified, 1/3 CEMBI Broad Diversified
Objectives
Source: Schroders
EMD Fund Universe Investment styles
2
Source: Schroders
Beta Schroder ISF EMD
Absolute Return Hedge Fund
Assets
External, local debt, sovereigns and
corporates, currencies
Both single and Multi Sector
External and local debt, sovereigns and
corporates, currencies
External, local debt, sovereigns or
corporates, currencies
Style Index-relative Absolute return, unconstrained, long-
only and unleveraged
Hedge Fund
(Long/Short, Leveraged)
Use of Derivatives Yes No Yes
Use of Corporates Heavy Periodic Heavy
Risk Over-concentrated Diversified Variable
Preservation of Capital No Yes No
Liquidity Variable – can be very poor Good Poor
Track Record Variable Long Variable / generally poor
Role in Portfolios
As a low-risk or entry level EMD exposure or combined with standard EMD beta managers
As an absolute return strategy, designed to diversify risk and enhance returns
As a liquid alternative investment
Schroder ISF EMD Absolute Return
3
Source: Schroders
Investment Approach
Broad investment universe including currencies, local and external debt in sovereign and corporate/convertibles in over 50 countries
Long-only, Absolute Return approach based on comprehensive country research
No leverage or complicated derivatives
Risk controlled by liquidity based diversification limits, portfolio stop-loss and use of cash
Objectives
1. No losses in any 12 month period
2. Maximise returns whilst achieving Objective 1
Absolute Return EMD – Your island in the coming bond storm
Source: Original artist: Phil Judd, www.CartoonStock.com
4
0%
2%
4%
6%
8%
10%
12%
0% 2% 4% 6% 8% 10% 12% 14%
Absolute Return
Funds (Lipper)^
Fund Correlations
December 1998 to August 2016
Performance Schroder ISF EMD Absolute Return
5
*Schroder ISF EMD Absolute Return Gross Returns
**Annualised standard deviation of monthly returns †GBI – EM inception July 2001
^Based on average monthly returns of peer group *based on gross composite returns
Source: Bloomberg; Schroders 30 September 2016
EM External Debt
(EMBI+)
EM Currencies
(ELMI+ )
EM Local Debt
(GBI EM) †
Schroder ISF EMD
Absolute Return*
Volatility**
Annualised Return US$
December 1998 to September 2016
Schroder ISF EMD
Absolute Return*
Correlation
Global Bonds 0.52
Global Equities 0.36
US Treasuries 0.20
US Equities 0.26
Global High Yield 0.50
Euro Government Bonds 0.50
Euro Equities 0.39
Commodities 0.28
GBI EM† 0.73
EMBI + 0.60
ELMI + 0.60
-10
40
90
140
190
240
290
340
390
1999 2001 2003 2005 2007 2009 2011 2013 2015
Risk / Reward vs. Lipper Universes
Performance Schroder ISF EMD Absolute Return: December 1998 – September 2016
6
Source: Schroders –30 September 2016
*C NAV Net Returns
†Generated by Schroders from compounded monthly mean peer group returns sourced from the Lipper Universe database
To Oct 2007
1. Brazilian Real crisis 2. End of TMT Bubble 3. Turkish Lira Crisis 4. 9/11 Terrorist Attacks and Argentina default 5. Enron/Worldcom Bankruptcies, US Accounting Scandals and Brazilian Crisis
6. Brazilian Political Crisis 7. Subprime Crisis 8. Money Market Freeze 9. Interbank Market Freeze/Bear Stearns Collapse 10. Lehman Bankruptcy/Global Financial Crisis 11. Eurozone Debt Crisis 12. Taper Tantrum, EM / China slowdown
Lipper EMD†
Lipper AR†
Schroder ISF EMD
Absolute Return NET*
Since 31/12/98 Schroder
ISF EMD
AR*
Lipper
AR
Avg.†
Lipper
EMD
Avg.†
Annual Rate of Return % 7.57 4.18 8.51
Annual Volatility % 6.23 9.91 10.98
Sharpe Ratio 0.94 0.28 0.65
Sortino Ratio 1.88 0.39 0.78
Correlation 0.62 0.70
Negative Quarters % 29.58 39.44 29.58
Maximum Drawdown % -9.89 -27.23 -27.56
Best Month % 8.78 8.45 9.19
Worst Month % -3.77 -12.81 -19.31
Max 12M Rolling Return % 32.39 31.11 45.26
Min 12M Rolling Return % -8.28 -24.80 -25.00
Cum
ula
tive t
ota
l re
turn
US
$%
1 2 3 4 5 6 7 8 9 10 11 12
** Remove from final presentation **
13
18
23
28
33
38
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-9.9%
-8.9%
Drawdowns remain under control
7
Source: Schroders; Bloomberg – 30 September 2016
* Gross I shares performance
Performance Schroder ISF EMD Absolute Return
Sch
roder
ISF
EM
D A
R I S
ha
re P
rice
*
2008
US credit crisis
2015
EM / China crisis
Current Strategy Schroder ISF EMD Absolute Return 30 September 2016
8
Source: Schroders – 30 September 2016
Fund Duration 2.63 years
Corporate Exposure 2.6%
Average Credit Rating A
Yield to Maturity 2.94%
Cash 32.3
EM External
8.2 Mexico
13,0
Brazil 9,7
Poland 6,0
Indonesia 4,4
Hungary 3,7
South Africa 4,4
Russia 4,1
Chile 2,9
EUR 2,8
Malaysia 2,7
Argentina 2,7
Colombia 2,2
India 2,2 Korea
2,1 Peru 2,0
Ecuador 1,7
Thailand 1,0
Kazakhstan 0,2
Local Debt
59.5
Bond Exposure % Currency Exposure % Regional Exposure %
US 57,2
Brazil 5,3
Poland ^ 4,0
Hungary 3,7
Indonesia ^ 3,6
Russia 3,1
Chile 2,9
Malaysia 2,7
Mexico 2,6
South Africa ^ 2,5
Colombia 2,2
Euro 2,8
Korea 2,1
Peru 2,0 India ^
2,0
Thailand 1,0 Kazakhstan
0,2 Africa /
Middle East 4,4 Europe
14,0
Asia 12,3
Latin America
34,2
G7 2,8
Cash 32,3
^ partially hedged
CREDIT SCORE CURRENCY SCORE DURATION SCORE TOTAL RISK SCORE
0
1
2
3
4
5
6
7
8
9
10
0
1
2
3
4
5
6
7
8
9
10
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EMBI+ Risk Score
Risk Exposure Scores Schroder ISF EMD Absolute Return 1998 - 2016
9
Source: Bloomberg; Schroders – 30 September 2016
Long Term Average
Credit Risk
0% of Nav => Score 0
100% of Nav => Score 5
Currency Risk
0% of Nav => Score 0
100% of Nav => Score 5
Duration Risk
0 years => Score 0
9 years => Score 5
Fund overall risk positioning score can vary from 0 to 10
Current Score: 4.1 – as at 30 September 2016 Risk Score Risk Score
GBI EM Risk Score
Emerging Markets Debt
Absolute Return
Investment Outlook
Investment outlook Summary
11
Source: Schroders
Hard Currency Debt
Expensive valuations
Over-owned
Poor liquidity (especially for Corporates)
Very vulnerable to the continuation of the US monetary normalisation process
Maintain minimal exposure
Local Debt
A significant monetary tightening has already occurred in a number of countries
Yields are still high in Brazil, Colombia, Russia, South Africa, Indonesia and India
Inflation has peaked in these countries…
…and their central banks have regained the ability to ease
Core exposure to selected markets
Currencies
EM Currencies are broadly undervalued. Trade competitiveness has been restored
Most currencies reached extreme oversold levels and are subsequently reversing
(eg. BRL, CLP, COP, RUB, ZAR, MYR).
Currencies of India, Indonesia and Central Europe are likely to be supported by
recovering growth and stronger balance of payments
Reinstate large exposures once the recent correction has run its course
Investment outlook
12
Source: Google; Schroders – May 2016
Emerging Markets Fundamental Analysis
Crisis brings change
India Indonesia Argentina Brazil South Africa
Prime Minister
N. Modi
President
J. Widodo
President
M. Macri President
D. Rousseff
President
J. Zuma
Investment outlook
13
Source: Schroders; Thomson DataStream; Bank of Indonesia – 31 August 2016
Country Analysis Fundamental Analysis
-20
-10
0
10
20
30
40
50
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Indonesia – Back to external trade surplus Trade Balance in $billion - 12 month rolling sum
Crisis brings change
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
2
4
6
8
10
12
14
16
18
20
2001 2003 2005 2007 2009 2011 2013 2015 2017
Indonesia – Inflation back to target
CPI yoy
CB CPI Target
Investment outlook
14
Country Analysis Quantitative Analysis
Source: Schroders – September 2016 = Key changes from previous quarterly
Investment outlook
15
Country Analysis Chart Analysis
Brazil local bond yield – the recent topping process
Source: Schroders; Bloomberg – 7 October 2016
60
65
70
75
80
85
90
95
100
105
110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-25%
-24%
-40%
The collapse in EM Currencies appears overdone
16
Source: JP Morgan; Bloomberg – 30 September 2016
Investment Outlook
JP Morgan EM Currency Index 2000 - 2016
Emerging Markets Fundamental Analysis
** Remove from final presentation **
50
70
90
110
130
150
170
190
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
17
Source: Bloomberg; Schroders – 22 September 2016
Investment outlook Country Analysis Fundamental Analysis
-44%
-35% -35%
South Africa: Real Effective Exchange Rate Cheap and Oversold
REER: still at
historically
depressed levels
50
60
70
80
90
100
110
1200
100
200
300
400
500
600
700
800
900
1.000
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
Spreads in 5 year range
18
Source: Schroders; Bloomberg – 30 September 2016
Investment outlook
EM sovereign and corporate credits remain broadly unattractive
External Debt Spread (EMBI+ Index) vs. EM Currencies (JPM EM Currency Spot Index)
EM
BI+
Spre
ad in b
ps
JP
M E
M C
urre
ncy S
pot In
dex
EMBI+ Spread
Inverted Scale - LHS
JPM EM Currency
Spot Index - RHS
Emerging Markets Fundamental Analysis
** Remove from final presentation **
0
200
400
600
800
1000
1200
1400
1600
1800-4
-2
0
2
4
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
19
Source: Schroders – July 2016
Investment outlook Emerging Markets Quantitative Analysis
Emerging Markets Risk: Improving but spreads are still too low
Sch
rod
er
Coun
try R
isk S
co
re
Weak Fundamentals
Debt Restructurings
I II III
Reforms
Improving Fundamentals
Deteriorating
Fundamentals but
required re-pricing
prevented by easy money
EM
Bond S
pre
ad
EM Bond Spread (RHS) Inverted Scale
Schroder EM Average Country Risk Score (LHS)
IV
Improving
Fundamentals but
spreads already
too low
EMBI+ Monthly: 1998 – 2016
Investment outlook
Source: Updata; Bloomberg; Schroders – 7 October 2016
Emerging Markets Chart Analysis
20
** Remove from final presentation **
-10
-8
-6
-4
-2
0
2
4
6
8
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3
Country Risk Score before and after crisis
Investment outlook
Source: Schroders; Thomson Datastream
21
Global Environment Quantitative Analysis
Russia 98
Argentina 01 Uruguay 01 USA 08 Thailand 97
Ireland 10 Mexico 94 Estonia 08
Romania 08 Hungary 08
Spain 10
Greece 10
Score
Years from/to Crisis
** Remove from final presentation **
Investment outlook
22
Source: Schroders – September 2016
-12.00
-8.00
-4.00
0.00
4.00
8.00
12.00
Tu
rke
yC
hin
aS
ing
apo
reK
enya
Au
str
alia
jord
an
Can
ada
Luxe
mb
ou
rgP
eru
Tu
nis
iaM
oro
cco
Ind
on
esia
Colo
mbia
Po
lan
dK
uw
ait
Ind
iaB
razil
Ire
lan
dU
kra
ine
Be
lgiu
mJa
maic
aD
om
inic
an
Rep
ublic
Chile
New
Zea
lan
dB
ots
wan
aN
ige
ria
Qa
tar
Vie
tna
mS
lova
kia
Leb
ano
nT
ha
iland
Ba
hra
inU
rug
uay
Latv
iaM
exic
oP
ana
ma
Ma
laysia
Fin
lan
dU
AE
Bu
lga
ria
Sa
ud
i A
rabia
Lithu
ania
Eg
ypt
Fra
nce
Au
str
iaS
witzerl
and
Ka
zakh
sta
nV
ene
zu
ela
Rom
an
iaR
ussia
Gre
ece
Czech
Re
pu
blic
Sp
ain
Esto
nia
Ivo
ry C
oast
Ecu
ad
or
Norw
ay
US
AP
akis
tan
Ira
nO
ma
nC
roa
tia
Ja
pa
nA
lge
ria
Hon
g K
ong
Ph
ilipp
ine
sP
ort
uga
lS
wed
en
So
uth
Afr
ica
Isra
el
Ta
iwa
nIt
aly
UK
Neth
erl
an
ds
Arg
en
tin
aE
uro
zo
ne
Hun
gary
So
uth
Kore
aG
erm
any
Growth Dynamics Sovereign External Liquidity Hot Money Indicator Bank External Liquidity Competitiveness Economic Leverage Total Risk Score
Country Risk Score – September 2016
Global Environment Quantitative Analysis
Original chart with spreadsheet – delete if no longer required
Investment outlook
23
Country Analysis Quantitative Analysis
Source: Schroders – September 2016
Investment outlook
24
Source: Schroders – September 2016
Country Analysis Quantitative Analysis
** Remove from final presentation **
Investment outlook
25
Country Analysis Quantitative Analysis
Source: Schroders – September 2016
Investment outlook
26
Source: Schroders – September 2016
Country Analysis Quantitative Analysis
= Key changes from previous quarterly
Appendix
People
28
Source: Schroders
Americas
Guillermo Besaccia
Quantitative Analysis
Oscar Agra
Technical and Sentiment Analysis
Malcolm Melville
Product Management and Support
Christopher Wyke Matthew Michael Nichola Bellini Fiona Petrie Lucy Connolly
Geoff Blanning
Head of EMD and Commodities Group
31 years experience
24 years experience
Asia (Head of EMD)
Abdallah Guezour
21 years experience
EEMEA
Nick Brown
21 years experience
Implementation and Trading
Simon Hodges Chris Smith Lee Clapton Katie Tutcher
Bios
29
Source: Schroders
Geoff Blanning
Head of EMD and Commodities Group
Head of Commodities; Energy Fund Manager
Head of Emerging Markets Debt and Commodity Group since
December 1998, member of the Schroders Group Management
Committee
Geoff conceived and developed Schroders Commodity
businesses from 2003
Investment career commenced in 1985 at NM Rothschild
Abdallah Guezour
Head of EMD
Fund manager for Emerging Markets Debt Absolute Return,
Global Managed Currency and Wealth Preservation
Joined Schroders in 2000 and is responsible for Asian country
analysis and Quantitative Analysis
Abdallah is also responsible for creating quantitative models.
Investment career commenced in 1995 when he joined Fortis
Investment Management
Nick Brown
Fund Manager
Fund manager for Emerging Markets Debt Absolute Return,
Global Managed Currency and Wealth Preservation
Joined Schroders in 1998 and is responsible for Eastern
European and MENA country analysis and selection
Investment career commenced in 1995 when he joined
Garban Gilts
Guillermo Besaccia
Fund Manager
Fund manager for Emerging Markets Debt Absolute Return
Joined Schroders in 1998 and is responsible for LATAM country
analysis and selection
Investment career commenced at Mildesa Servicios Busatilse
in 1992
Malcolm Melville
Fund Manager and Chart and Sentiment Analyst
Fund manager for the Wealth Preservation fund
Joined Schroders in 2010 and is responsible for Chart Analysis
and Sentiment Analysis
Investment career commenced in 1997 at Norwich Union
Investment Management
Oscar Agra
Quantitative Analyst
Investment career commenced in 2010 when he joined the
EMD, Currencies and Commodities team
Bios
30
Simon Hodges
Head of Trading and Implementation, EMD, Currencies and
Commodities
Joined Schroders in 2000
Investment career commenced in 1995 at Prolific
Asset Management
Chris Smith
EMD Trader
Joined Schroders in 1997, investment career started in 1987
Lee Clapton
Fund Manager’s Assistant
Joined Schroders in 2008, investment career started in 2002 at
UBS Global Asset Management
Katie Tutcher
Fund Manager’s Assistant
Joined Schroders in 2014, investment career started in 2012
Source: Schroders
Bios
31
Christopher Wyke
Product Manager
Joined Schroders in 2000 and is responsible for
the product management of EMD, Currencies
and Commodities
Investment career commenced in 1981 when he joined
Rothschild Asset Management
Matthew Michael
Product Manager
Joined Schroders in 2004 and is responsible for the
product management of EMD, Currencies
and Commodities
Investment career commenced in 2000 at The Royal Bank
of Scotland
Nichola Bellini
Product Executive
Joined Schroders in 2006 and assists in the product
management of EMD, Currencies and Commodities
Investment career commenced in 2005 at Schroders
Fiona Petrie
Product Assistant
Joined Schroder’s in 2008 and assists in the product
management of EMD, Currencies and Commodities
Lucy Connolly
Product Assistant
Joined Schroder’s in 2010 and assists in the product
management of EMD, Currencies and Commodities
Source: Schroders
Investment Process
Source: Schroders
Fundamental
Quantitative
Technical
Sentiment
Global Review Quarterly
Country Reviews Weekly
Limits
Buy Discipline
Fund Stop-Loss
Asset Allocation
Decision-Making Risk Control Research
32
Investment Process Country analysis: Quantitative
33
Source: Schroders
Sovereign Risk Model
6 Factors scored for
each Country:
-2 to +2
Growth Dynamics
Sovereign External Liquidity
Hot Money Indicator
Domestic Banking System:
External Liquidity
Credit Cycle
Competitiveness
Total of Scores on all Factors = Global Risk Score
Investment Process Country analysis: Quantitative
34
Source: Schroders
Argentina: the “Growth Dynamics” cycle
Adjustment Score: +1
Crisis Score: -2
Blind Run Score: -1
Equilibrium Score: +2
Real GDP Growth
C/A
Bala
nce %
GD
P
07
05
06
03
02
01
00 99
98
97
95
94
93
96
92
90
89
88
87
91
08
09
08 04
10
15(F) 11
14
13
12
-12
-6
0
6
12
-12 -6 0 6 1215
Investment Process
Country analysis: Technical
Source: Schroders
PATTERN
MOMENTUM
MACD
Coppock
Elliott Wave
Candle Stick
Point & Figure
TREND
Moving Averages
Trendlines
TAM
Technical Analysis Model + =
35
Investment Process
Country analysis: Sentiment
Source: Schroders. The pie chart illustrates our view of the sentiment cycle and is purely hypothetical.
Consensus Forecast Model
Fund Manager Risk Index
Short Term Sentiment Index STSI
Flow Analysis
Ratings Agency
Sentiment Indicators
Long Term Sentiment Cycle
36
Economics
Investment process Research: Country Analysis
Source: Schroders. The country research report shown is an example of the research output from the Schroders Emerging Market Debt team. The report contains historical
information, including forecasted data, it is not offered to reflect our current views or current economic data and should not be considered an investment recommendation.
Fundamentals
Quantitative
Technical
Sentiment
Forecasts
Conclusions
Country Risk Model
Trend, Momentum
and Pattern
Consensus Forecasts
and Investor Positioning
12 month expected Return:
Currency, Bonds, Stocks
Investment Decision
37
Politics
For Professional Investors or Advisors Only February 2016
Schroders Alternative Investments Group – Emerging Markets Debt
Indonesia – Investment Summary
– Investment Summary
– Investment Summary
– Investment Summary
1. Fundamental Analysis
The beginning of Joko Widodo’s presidency has not led to the widely anticipated impetus and urgency to reforms. However,
expectations have now become more realistic. Moreover, the president has recently regained initiative with a cabinet reshuffle, an
increased majority and the announcement of a promising package of reforms.
The country is well positioned to experience an investment led recovery. Infrastructure investment has recently accelerated and the
central bank has regained the right to withdraw a large part of the emergency tightening implemented in 2013. Indeed, inflation and
balance of payments vulnerabilities are now under control.
The current easing cycle has further to go and all Indonesian assets (especially local bonds) are expected to benefit handsomely.
2. Quantitative Analysis
The Country Risk Score remains in negative territory but it has improved during the course of the last 2 years thus putting Indonesia
out of the danger zone. They key vulnerabilities which have improved are: (i) Hot Money with lower reliance on short-term foreign
capital; and (ii) Competitiveness, which has improved thanks to the devaluation of the last 2-3 years and the drop in inflation.
Despite these encouraging improvements, the continued negative reading given by the Country Risk Score combined with the Long-
Term Asset Valuation Model show the following results:
Currency Fairly Valued External Debt Fairly Valued
Local Debt Fairly Valued Stock Market Fairly Valued
3. Chart Analysis
Currency: Positive – Long-term Pattern Analysis suggests that some caution remains warranted as the recent depreciation led to a
break of multi-year ranges. A return back into these ranges (2-3% appreciation) would be positive. Other elements of Analysis
(Trend and Momentum indicators) have already turned convincingly bullish for IDR.
10-year Local Debt: Positive – The break higher of the 5-year range for yields has been quickly rejected invalidating our recent
bearish stance on this market. Yields are now resuming their downtrend trajectory and indicators of Trend, Momentum and Pattern
suggest that the decline in yields has further to go. Point & Figure Charts have recently activated a target of 6.4% for 10-year
government bond yield.
External Debt: Neutral - Chart indicators are currently mixed. However, a small move higher in prices could turn the outlook more
convincingly bullish (e.g. for 2035 USD bond, currently at 126, a break above 127 would open the possibility for a rally to 134 and
possibly beyond).
Stock Market: Positive – The recent break lower of various long-term uptrends is worrisome from a Pattern Analysis standpoint.
However, many other technical indicators have recently turned so convincingly bullish that the recent correction seems to be over. A
resumption of the long-term uptrend is expected.
4. Sentiment Analysis
Currency: Neutral – Investors’ positioning is now neutral after a large reduction in overweight exposures in H2 2015.
10-year Local Debt: Neutral – Investors in EM continue to favour this segment. Renewed buying has recently resumed.
10-year External Debt: Neutral – Continued overweight by investors but no convincing sign of reduction in exposure.
Stock Market: Neutral – Analyst recommendations measured by “Buy Percentage” are improving (bullish signal) but Equity Fund
Flows remain negative.
5. Final Forecasts
Current Forecasts
3 month 12 month 12 M Price Range 12M $ T. Return %
IDR versus USD 13 500 13 000 12 800 12 000 – 14 200
1 year Local IDR Gov. bond (ytm) 7.15 6.5 6 5.8 – 7.5 + 13%
10-year Local IDR Gov. Bond (ytm) 7.95 7 6.5 6.2 – 8.5 + 23%
10-year External USD Gov. Bond (spread) 253 200 200 180 - 295 + 8%
Jakarta Stock Exchange (JCI) 4 778 5 000 5 500 4 300 – 6 000 + 21%
Abdallah Guezour – February 2016
Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish
23/03/2016 -2 0 2 -1 0 1 -1 0 1 -1 0 1 -5 -4 -3 -2 -1 0 1 2 3 4 5
Developed CountriesEuro Bearish Neutral Neutral Bullish -1
Yen Bearish Neutral Neutral Bullish -1
Sterling Bearish Neutral Neutral Bullish -1
USD Neutral Bearish Neutral Neutral -1
Latin AmericaArgentina Bullish 2
Brazil Bullish Bullish Bullish Bullish 5
Chile Bullish Neutral Neutral Neutral 2
Colombia Bullish Neutral Bearish Neutral 1
Mexico Neutral Bullish Neutral Neutral 1
Peru Neutral Neutral Bearish Neutral -1
AsiaChina Neutral Bearish Neutral Bearish -2
Hong Kong Neutral Neutral Neutral Neutral 0
India Bullish Neutral Neutral Bearish 1
Indonesia Bullish Neutral Bullish Neutral 3
Korea Neutral Neutral Bullish Neutral 1
Malaysia Neutral Bearish Bullish Neutral 0
Pakistan Neutral Bullish 1
Philippines Neutral Bullish Neutral Neutral 1
Singapore Neutral Neutral Bullish Neutral 1
Taiwan Neutral Neutral Bullish Neutral 1
Thailand Bullish Neutral Bullish Neutral 3
Vietnam Neutral Neutral Bearish Bearish -2
EuropeCroatia Bearish Bullish -1
Czech Rep. Bearish Neutral Neutral Neutral -2
Hungary Bearish Neutral Neutral Neutral -2
Poland Bearish Neutral Bearish Neutral -3
Romania Bearish Bullish Neutral Neutral -1
Russia Bullish Neutral Bullish Bearish 2
Serbia Neutral Neutral Bearish -1
Turkey Bearish Bearish Neutral Bearish -4
Middle-East & AfricaSouth Africa Neutral Bullish Neutral Bearish 0
Local Bonds Overall ScoreFundamentals Quantitative Charts Sentiment
Investment process Decision Making: The Scorecard
38
Source: Schroders
Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish
23/03/2016 -2 0 2 -1 0 1 -1 0 1 -1 0 1 -5 -4 -3 -2 -1 0 1 2 3 4 5
Developed CountriesEuro Neutral Bullish Bullish Bullish 3
Yen Neutral Bullish Bullish Bullish 3
Sterling Bearish Neutral Bearish Bearish -4
Latin AmericaArgentina Neutral Neutral Bullish Neutral 1
Brazil Neutral Bullish Bullish Neutral 2
Chile Bullish Bullish Bullish Bullish 5
Colombia Neutral Bullish Bullish Neutral 2
Mexico Bullish Bullish Bullish Bearish 3
Peru Neutral Neutral Bullish Bullish 2
Uruguay Neutral Bearish Bearish -2
AsiaChina Bearish Bearish Neutral Neutral -3
Hong Kong Bearish Neutral -2
India Bullish Neutral Neutral Bearish 1
Indonesia Bullish Neutral Bullish Neutral 3
Korea Neutral Neutral Neutral Bullish 1
Malaysia Bullish Neutral Bullish Neutral 3
Pakistan Neutral Neutral Neutral Neutral 0
Philippines Neutral Neutral Neutral Neutral 0
Singapore Bearish Bearish Neutral Neutral -3
Taiwan Bearish Bullish Neutral Neutral -1
Thailand Bullish Neutral Bullish Bullish 4
Vietnam Neutral Bearish Neutral Neutral -1
EuropeCroatia Neutral Bullish 1
Czech Rep. Neutral Bullish Bullish Bullish 3
Hungary Neutral Bullish Bullish Neutral 2
Kazakhstan Bullish Bearish Bullish Neutral 2
Poland Neutral Neutral Neutral Neutral 0
Romania Neutral Neutral Bullish Bullish 2
Russia Bullish Bullish Bullish Bullish 5
Serbia Neutral Neutral Neutral Neutral * 0
Turkey Bearish Neutral Bullish Neutral -1
Ukraine Bearish Neutral Neutral Neutral -2
Middle-East & AfricaEgypt Bearish Bearish Bearish Neutral -4
Kuwait Neutral Bearish Neutral * -1
Morocco Neutral Neutral Bullish 1
Nigeria Bearish Neutral Bearish Neutral -3
Qatar Neutral Bearish -1
Saudi Arabia Neutral Bearish -1
South Africa Neutral Bullish Bullish Bullish 3
U.A.E Neutral Bearish -1
CurrencyOverall ScoreFundamentals Quantitative Charts Sentiment
Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish
23/03/2016 -2 0 2 -1 0 1 -1 0 1 -1 0 1 -5 -4 -3 -2 -1 0 1 2 3 4 5
Latin AmericaArgentina Neutral Bullish Neutral Neutral 1
Brazil Bullish Bullish Neutral Neutral 3
Chile Neutral Neutral 0
Colombia Bullish Bullish Neutral Neutral 3
Ecuador Bullish Neutral Neutral 2
Mexico Neutral Neutral Bullish Neutral 1
Panama Neutral Bearish -1
Peru Neutral Bearish Neutral Neutral -1
Uruguay Neutral Bearish Neutral Neutral -1
Venezuela Bearish Neutral Bullish Neutral -1
AsiaChina Neutral Bearish Neutral Neutral -1
Indonesia Neutral Bearish Bullish Neutral 0
Korea Neutral Neutral 0
Malaysia Bearish Bearish -3
Pakistan Neutral Bullish Bearish Neutral 0
Philippines Neutral Neutral Neutral Neutral 0
Vietnam Neutral Neutral Neutral Neutral 0
EuropeBulgaria Bearish Neutral -2
Croatia Neutral Bullish Neutral Neutral 1
Czech Rep. Bearish Neutral * -2
Greece Neutral Bullish Neutral Neutral * 1
Hungary Neutral Neutral Neutral Neutral 0
Kazakhstan Neutral 0
Poland Neutral Bearish Bullish Neutral 0
Romania Neutral Neutral Neutral Neutral 0
Russia Bullish Bullish Bullish Neutral 4
Serbia Neutral Neutral Neutral 0
Slovakia Neutral 0
Turkey Bearish Neutral Bullish Neutral -1
Ukraine Neutral Neutral Neutral Neutral 0
Middle-East & AfricaRep of Congo Bearish -2
Egypt Bearish Neutral Bearish Neutral -3
Iraq Neutral Neutral Neutral 0
Ivory Coast Bearish Bullish Bearish Neutral -2
Morocco Neutral Neutral 0
Nigeria Bearish Neutral Bearish Neutral -3
Qatar Neutral Bearish -1
South Africa Neutral Bullish Bullish Neutral 2
U.A.E Neutral Bearish -1
External DebtOverall ScoreFundamentals Quantitative Charts Sentiment
All elements of the Process are summarised in the Scorecard to facilitate decisions
Max
Region
Latin American 75%
Asia 75%
Eastern Europe 50%
Africa/Middle East 25%
Countries Any Country TOTAL
Tier I 20% 100%
Tier II 10% 50%
Tier III 5% 25%
Corporate Any Corporate * TOTAL
2.5% 25%
Security Any Security
10% NAV/per issue
CASH 40%
Risk Control – Diversification Rules
39
Source: Schroders – March 2016. Please note that such limits are internal and may be subject to change without notice
*The Fund will not have exposure to Tobacco or Munitions related investments.
COUNTRY LIMITS
Tier I (max 20%) Tier II (max 10%) Tier III (max 5%)
Brazil Argentina Bulgaria
China Chile Ecuador
Hong Kong Colombia Egypt
Hungary Croatia Gabon
India Czech Republic Iraq
Korea Greece Ivory Coast
Mexico Indonesia Jordan
Philippines Kazakhstan Kuwait
Poland Malaysia Latvia
Russia Peru Lithuania
Singapore Romania Morocco
South Africa Saudi Arabia Nigeria
Taiwan Slovakia Pakistan
Thailand United Arab Emirates Panama
Turkey Venezuela Qatar
Rep. of Congo
Serbia
Ukraine
Uruguay
Vietnam
ANY OTHER
TOTAL Tier I: 100% TOTAL Tier II: 50% TOTAL Tier III: 25%
Historical sector allocation Schroder ISF EMD Absolute Return: December 1998 – September 2016
0%
20%
40%
60%
80%
100%
de
z/9
8
jul/9
9
fev/0
0
se
t/00
abr/
01
no
v/0
1
jun/0
2
jan/0
3
ag
o/0
3
ma
r/0
4
ou
t/0
4
ma
i/0
5
de
z/0
5
jul/0
6
fev/0
7
se
t/07
abr/
08
no
v/0
8
jun/0
9
jan/1
0
ag
o/1
0
ma
r/1
1
ou
t/1
1
ma
i/1
2
de
z/1
2
jul/1
3
fev/1
4
se
t/14
abr/
15
no
v/1
5
jun/1
6
40
Source: Schroders – 30 September 2016
Cash EM Local Currency Debt EM External (US$) Debt Net US% Exposure
Exposure %
Historical duration Schroder ISF EMD Absolute Return: December 1998 – September 2016
0
1
2
3
4
5
6
7
8
9
dez/98 dez/99 dez/00 dez/01 dez/02 dez/03 dez/04 dez/05 dez/06 dez/07 dez/08 dez/09 dez/10 dez/11 dez/12 dez/13 dez/14 dez/15
41
Source: Schroders; JP Morgan – 30 September 2016
JP Morgan EMBI+ Index
Schroders
Typical EMD fund carries extreme
interest-rate/ credit risk
Minimal interest rate risk
Duration/years
Research, Reporting and Communication Regular in-depth reporting and research
42
Source: Schroders, May 2016
Weekly strategy updates
Quarterly investment outlook
In-depth country analysis
Flagship quant analysis
Schroder EMD Absolute Return Performance in USD – August 2016
USD % 1995† 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Schroder
EMD* 24.69 22.43 3.68 0.31 30.00 17.64 3.25 28.11 10.99 12.41 0.72 14.60 8.31 -0.31 19.75 3.04 0.77 5.46 0.93 0.64 -4.79 11.33
43
Since December 1998*
Schroders** EMBI+ ELMI+
Annual Rate of Return 8.80 10.52 5.37
Volatility 6.24 9.87 7.51
Negative Quarters 16 19 23
Sharpe Ratio 1.13 0.91 0.50
Correlation vs. Schroders 1 0.61 0.61
USD %
Since Inception† *^
Cumulative
Total Return
Annual
Rate of
Return
Volatility -ve Qs Sharpe
Ratio
Schroder EMD* 604.98 9.49 7.32 19 0.98
EMBI+ 995.23 11.76 12.60 22 0.80
ELMI+ 248.69 5.97 8.49 27 0.45
Source: Schroders; JP Morgan
†Inception February 23, 1995
*Composite gross NAV to NAV
**Schroders refers to the Schroder Emerging Market Debt Composite (the “Composite”), gross of fees.
% External Debt Local Debt and Currency Fund Return* Fund Volatility
2016 2.45 8.65 11.34 **
2015 0.34 -4.91 -4.78 2.98%
2014 0.61 -0.12 0.65 4.65%
2013 2.31 -0.97 0.92 3.04%
2012 3.23 2.38 5.44 3.73%
2011 0.04 0.60 0.79 3.70%
2010 0.03 3.43 3.01 3.63%
2009 8.30 10.25 19.72 8.71%
2008 1.18 -0.53 -0.25 7.19%
2007 1.25 7.18 8.32 3.72%
2006 1.78 12.07 14.60 3.91%
2005 -1.32 2.02 0.72 3.23%
2004 1.82 11.02 12.41 5.57%
2003 3.83 10.93 11.19 4.49%
2002 2.69 20.26 28.23 5.27%
2001 0.50 7.79 3.21 7.91%
2000 10.07 7.59 17.62 8.39%
1999 29.11 0.90 29.19 10.48%
Schroder ISF EMD AR performance attribution Schroder ISF EMD Absolute Return: Contribution to return by sector
44
Source: Schroders – 31 August 2016 * The Fund Return does not always equal the sum of the previous two columns. The difference is due to the residual in the attribution calculations, which is primarily due to the time difference between the NAV declaration and the
pricing of the underlying holdings.
** Standard Deviation returns is not shown on a less than 12 month basis
Schroder Emerging Market Debt Composite Composite Disclosures as of 31 March 2016
45
Definition of the Firm
The Firm is defined as all accounts managed by Schroder Investment Management in the UK and
US, by wholly owned subsidiaries of Schroders PLC. Prior to 1st January 2007 SIM London &
SIM North America existed as two separate Firms which were compliant & verified as separate
entities until 31st December 2006. The consolidation of these two Firms was made as part of a
move towards creating one global Firm. Composite and Firm assets reported prior to 1st January
2007 represent those of the legacy firm which managed the product. Prior to 1st January 2011 the
SPrIM (Schroder Property Investment Management) Firm existed separate to the Schroder
Investment Management UK and US Firm, from 1st January 2011 these Firms have been
combined into a single firm.
On April 2, 2013, Schroder U.S. Holdings Inc., a subsidiary of Schroders plc, purchased STW
Fixed Income Management LLC (STW) and on July 2, 2013, Schroders plc, purchased Cazenove
Capital Holdings; assets managed by STW and Cazenove are included in the Firm from 1st
January 2014. Assets Managed against a liability driven mandate are excluded from the GIPS
Firm.
A complete list and description of the Firm's composites and performance results is available
upon request.
Composite Definition
The Schroder Emerging Market Debt Composite (the "Composite") is comprised of all Schroder
Investment Management UK & US, fully discretionary accounts managed according to the
Schroder Emerging Market Debt Composite strategy. The Strategy has no defined benchmark as
it aims to provide an absolute return of capital growth and income primarily through investment in
a portfolio of bonds and other fixed and floating rate securities issued by governments,
government agencies, supra-national and corporate issuers in emerging markets. Derivatives may
be used to manage currency risk
Composite Construction
New accounts are included from the beginning of the first full month of management on a
discretionary basis. Terminated accounts are excluded from the end of the last full month of
discretionary management. This Composite has no minimum asset level for inclusion.
The composite currency is US Dollar
Composite Inception Date: 1995-12-31
Composite Creation Date: 2008-06-04
Calculation Methodology
The portfolio returns are time-weighted rates of return that are adjusted for cash flows. Portfolio
returns are combined using beginning of period asset weights to produce the composite return.
Periodic returns are geometrically linked to produce annual returns.
Dividends on equities are recognised net of irrecoverable withholding tax. Since January 1999
dividends have been recognised as of the ex-dividend date having previously been recognised on
a cash basis. Performance results are presented before the deduction of management fees and
custodian fees but after trading expenses.
Dispersion
The dispersion of annual returns is measured by the asset weighted standard deviation of
portfolio returns represented within the composite for the full year provided a minimum of 5
portfolios are available.
Fee Schedule
The following fee scale has been applied to the composite:
0.9% p.a. from inception to 31/12/06
1% p.a. from 31/12/06 to 30/06/10
1.15% p.a. thereafter
GIPS Compliance and Verification
Schroder Investment Management (UK & US) claims compliance with the Global Investment
Performance Standards GIPS® and has prepared and presented this report in compliance with
the GIPS standards. Schroder Investment Management (UK & US) has been independently
verified for the periods 1 January 1996 to 31 December 2014.
Verification assesses whether (1) the Firm has complied with all the composite construction
requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and
procedures are designed to calculate and present performance in compliance with the GIPS
standards. The Schroder Emerging Market Debt Composite (the "composite") has been examined
for the periods 1 January 2008 to 31 December 2014. The verification and performance
examination reports are available upon request.
Additional Information
The exchange rates used are provided by WM. Each currency is valued at 4 pm on the last
business day of the month.
Additional information regarding policies for valuing portfolios, calculating and reporting returns
and a description of all composites are available on request.
Important Information
This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the “Company”). Nothing in this presentation
should be construed as advice and is therefore not a recommendation to buy or sell shares.
Subscriptions for shares of the Company can only be made on the basis of its latest Key Investor Information presentation and prospectus, together with the latest audited annual report (and
subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management (Luxembourg) S.A.
An investment in the Company entails risks, which are fully described in the prospectus.
Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get the amount originally invested.
Schroders has expressed its own views and opinions in this presentation and these may change.
This presentation is issued by Schroder Investment Management 31 Gresham Street, London, EC2V 7QA. For your security, communications may be taped or monitored.
Important information
46
Risk Considerations
The capital is not guaranteed.
In order to access restricted markets, the fund may invest in structured products. Should the counterparty default, the value of these structured products may be nil.
Non-investment grade securities will generally pay higher yields than more highly rated securities but will be subject to greater market, credit and default risk.
A security issuer may not be able to meet its obligations to make timely payments of interest and principal. This will affect the credit rating of those securities.
Investments in money market instruments and deposits with financial institutions may be subject to price fluctuation or default by the issuer. Some of the amounts deposited may not be returned to
the fund.
Currency derivative instruments are subject to the default risk of the counterparty. The unrealised gain and some of the desired market exposure may be lost.
Investments denominated in a currency other than that of the share-class may not be hedged. The market movements between those currencies will impact the share-class.
Investment in bonds and other debt instruments including related derivatives is subject to interest rate risk. The value of the fund may go down if interest rate rise and vice versa.
Emerging markets will generally be subject to greater political, legal, counterparty and operational risk.
Forecasts
The forecasts stated in the presentation are the result of statistical modelling, based on a number of assumptions. Forecasts are subject to a high level of uncertainty regarding future economic
and market factors that may affect actual future performance. The forecasts are provided to you for information purposes as at today’s date. Our assumptions may change materially with changes
in underlying assumptions that may occur, among other things, as economic and market conditions change. We assume no obligation to provide you with updates or changes to this data as
assumptions, economic and market conditions, models or other matters change.
This document does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder Alternative Solutions (the “Company”). Nothing in this document should
be construed as advice and is therefore not a recommendation to buy or sell shares.
The Company qualifies as a Société d’Investissement à Caiptal Variable (“SICAV”) and as an alternative investment fund within the meaning of article 1(39) of the 2013 Law.
Subscriptions for shares of the Company can only be made on the basis of its (latest Key Investor Information Document and – this is only to be inserted for jurisdictions where a KIID is
available) prospectus together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from
Schroder Investment Management (Luxembourg) S.A.
The distribution and promotion of the Company's units is restricted for the purpose of the 2013 Law, to professional investors who are supposed to have sufficient experience to judge
themselves the concept of risk-spreading and the information they need to form their opinion. Accordingly, this material is targeted to institutional; professional; existing investors and newly
accepted clients of the Schroder Group where reasonable steps have been taken to ensure that investment in the Company is suitable. This material should not be relied upon by persons of
any other description.
Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount
originally invested.
An investment in the company entails risks, which are fully described in the prospectus.
Schroders has expressed its own views and opinions in this document and these may change.
This document is issued by Schroder Investment Management (insert the name & address of the office producing the document).
This document may not be distributed to any unauthorised persons. For your security, communications may be taped or monitored.
This material was prepared by Schroder Investment Management, in response to a request from the client sent to Schroder and should not be understood as an
analysis of any securities, advertising material, offer to purchase or sell, offer or recommendation of any financial assets or investment. The purpose of this
material is exclusively informative and does not include investment objectives, financial conditions or the particular and specific needs of any shareholders or other
investors. The opinions stated in this material pertain to Schroder and may change at any time. The opinions are based on the date of their submission and do not
encompass any fact that may have arisen after this date, hence, Schroder is not compelled to update this material to reflect such provisions after the submission
of the same. This material is for exclusive Financial Intermediary, Institutional and Consultant and should not be used as support material by other individuals.
THIS MATERIAL IS HIGHLY CONFIDENTIAL AND SHOULD NOT BE REPRODUCED OR DISTRIBUTED, ENTIRELY OR PARTIALLY, TO PERSONS
OTHER THAN THE ORIGINAL RECIPIENTS. The Fund and the distribution of the shares of the same are not registered at the Brazilian Securities Commission
"CVM", and therefore do not meet certain requirements and procedures usually observed in public offerings of securities registered with the CVM, with which
investors in Brazilian capital markets may be familiar. For this reason, the access of the investors to certain information regarding the Fund may be restricted.
SCHRODER DOES NOT GUARANTEE PERFORMANCE.
Important information
47