santander private banking international due diligence...
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Page 1 I For broker/dealer use only and not be distributed to the public.
Santander Private Banking
International Due Diligence Meeting
Emerging Market Debt: The New Investment Grade
Giles Bedford, Client Portfolio Manager
9-10 May, Miami
Page 3 I For broker/dealer use only and not be distributed to the public.
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.
Page 4 I For broker/dealer use only and not be distributed to the public.
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
Page 5 I For broker/dealer use only and not be distributed to the public.
Source: The Economist, 17 December 2011.
Sustainable Long-Term Growth Drivers
The Demographic Dividend Favours Emerging Markets
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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
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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
Page 8 I For broker/dealer use only and not be distributed to the public.
Technicals: Strong Inflows Into The Asset Class
Over US$250bn Since the End of 2008
Source: JPM EM Corporate Weekly Monitor, April 2013 and EPFR Global
120
100
80
60
40
20
0
-20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
97.0
79.9
43.4
46.6
-3.8
24.9
2008 2009 2010 2011 2013 2012
Page 10 I For broker/dealer use only and not be distributed to the public.
Growth Attracts More Efficient Sources of Capital
Collapse of the EM Syndicated Loan Market As Economies Evolve
Middle East & Africa Latin America EM Europe Asia
US$ million
Page 11 I For broker/dealer use only and not be distributed to the public.
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
Page 12 I For broker/dealer use only and not be distributed to the public.
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
Page 13 I For broker/dealer use only and not be distributed to the public.
Critical Mass: Emerging Market Corporate Issuance Approaches US High Yield Issuance
Source: JP Morgan EM Corp 2013 Outlook & Strategy – 6 December 2012.
Page 14 I For broker/dealer use only and not be distributed to the public.
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%)
Page 15 I For broker/dealer use only and not be distributed to the public.
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
Page 16 I For broker/dealer use only and not be distributed to the public.
EM Corporates Performance
Strong Returns With Lower Volatility
Source: JPM EM Corporate Weekly Monitor 20 November 2012.
Page 18 I For broker/dealer use only and not be distributed to the public.
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
Page 19 I For broker/dealer use only and not be distributed to the public.
Default Rates Remain Muted
Source: JPMorgan, April 2013
United States
High Yield
Emerging Markets
High Yield
Page 20 I For broker/dealer use only and not be distributed to the public.
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
Page 21 I For broker/dealer use only and not be distributed to the public.
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
Page 22 I For broker/dealer use only and not be distributed to the public.
ACCESSING THE OPPORTUNITY
Page 23 I For broker/dealer use only and not be distributed to the public.
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?
Page 24 I For broker/dealer use only and not be distributed to the public.
Our Investment Capability
Aggregate Product
Pioneer Emerging Markets Bond Strategy
Local Currency Sovereign Corporate IG Credit
Available in SICAV
Page 25 I For broker/dealer use only and not be distributed to the public.
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
Page 26 I For broker/dealer use only and not be distributed to the public.
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.
Page 27 I For broker/dealer use only and not be distributed to the public.
Pioneer Emerging Markets Bond Strategy
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
Page 28 I For broker/dealer use only and not be distributed to the public.
Pioneer Emerging Markets Bond Strategy
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+
Page 29 I For broker/dealer use only and not be distributed to the public.
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.
Page 30 I For broker/dealer use only and not be distributed to the public.
…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
Page 31 I For broker/dealer use only and not be distributed to the public.
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:
Page 33 I For broker/dealer use only and not be distributed to the public.
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.
Page 34 I For broker/dealer use only and not be distributed to the public.
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.
Page 35 I For broker/dealer use only and not be distributed to the public.
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