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Yale University Presentation March 5, 2003

Yale University Presentation March 5, 2003. EPFR: Company Overview. Brief History: 1994: EPFR founded (Global Investor Publishing, Inc.), Cambridge, Massachusetts USA 1995-99: Launched Russia Portfolio, Central Europe Portfolio, Brazil Portfolio: publications for institutional investors

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Yale University Presentation March 5, 2003

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  1. Yale University PresentationMarch 5, 2003

  2. EPFR: Company Overview Brief History: 1994: EPFR founded (Global Investor Publishing, Inc.), Cambridge, Massachusetts USA 1995-99: Launched Russia Portfolio, Central Europe Portfolio, Brazil Portfolio: publications for institutional investors 2000: Acquired Emerging Market Funds Research, Inc. Principals: Dwight Ingalsbe – Managing Director/Co-Founder Brad Durham – Managing Director/Co-Founder Ian Wilson – Director, Fund Data Cameron Brandt – Director, Global Markets/Sectors Analysis

  3. The Database • 3200 Equity and Fixed Income Funds with $700b in assets • Global Emerging Markets (GEM), Asia ex-Japan, Pacific, LatAm, EMEA Regional, Country funds, International/Global funds, Japan country funds, and developed Europe funds • Assets tracked account for 80-85% of funds in Asia-Pacific ex-Japan region, 90% of fund assets in Africa/Middle East, Emerging Europe, Latin America regions • Includes funds registered in all of the world’s major domiciles: Luxembourg, USA, Ireland, Canada, Guernsey, Jersey, Cayman, Bahamas, France, etc. • Data is obtained through direct relationshipswith fund managers and their administrators developed over more than a decade

  4. The Reports • Equity/BondFund Flows Data: Weekly or Monthly • Country/Regional Weightings Data • Country Flows Data: Equity Fund Net Buying/Selling by Country • Sector Weightings Data: GICS Level II • Regional Data: Asia-Pacific, LatAm, EMEA • Company Holdings Data

  5. EPFR CLIENTS CLIENTS • Clients are leading global investment banks, brokerages and institutional investors. Partial list includes: • • ABN AMRO • Batterymarch Financial • BNP Paribas • Bear Stearns • BV Capital • CLSA Emerging Markets • • CSFB • Deutsche Bank • Goldman Sachs • Hyundai Securities • HSBC • ING Barings • • J.P. Morgan Chase • Fidelity Investments • Merrill Lynch • • Morgan Stanley • Nomura Securities • Pictet Asset Management • • Schroders AM • Salomon Smith Barney • State Street Global Advisors

  6. PM Strategy/Insights • Original, investment oriented research for investment management firms on international/emerging markets

  7. PM Outlook on Emerging Markets: sentiment improving - EMs drawing attention for the right reasons for first time since early 90's - Three years of outperformance of developed markets - Valuations compelling v. developed world: GEMs at forecasted ‘03 p/e of 8.6x - Corporate governance gap narrowed in wake of Enron, WorldCom, et al. - Earnings growth sounder, higher dividend yield than developed markets - Commodities: EM universe a good way to play commodities cycle

  8. Risk Factors to the Rosy Scenario - Double dip recession/deflation scenario - Prolonged war with Iraq: dampening growth forecasts - PMs prefer a bad certainty to uncertainty

  9. General Trends in EM fund management EM Converging into International Asset Allocation - EAFE to ACWI - EPFR fund mergers/liquidations rising - EM portfolio management teams absorbed into international groups - Giving EMs a neutral weighting in a bigger pool of assets ($1 trillion+) good for EMs Country v. Sector in Asset Allocation - Do equity returns depend more on global sector factors or country factors? - In recent years funds have adopted a sector approach due to rising correlation of countries - EMs the exception: Country factors still more important - Low country correlation = higher diversification = lower risk

  10. Trends in the fund data • Investors paying more attention to fund flows • 2002 first year of US mutual fund outflows since year after '87 market crash • Previously taken for granted • Why follow fund flows? • Signal a broadening or contracting of the investor base • Indicate shifts in risk aversion to the asset class • Provide evidence of trend chasing • Show changes in liquidity

  11. 2002: Only Asia ex-Japan equity, EM bonds attract inflows

  12. EM Bond Fund Flows - Last week's EM bond inflows historic high - 2002 first year of positive inflows into bond funds - EM bond funds return + 17% p.a. past 5 years - EM bonds poor reputation: sovereigns safer than you think

  13. Regional Allocation Themes Asia near all-time high in GEM equity fund weightings: 53.7%

  14. Regional Allocation Themes Demise of the LatAm regional fund

  15. Country Allocation Themes • GEM funds enter ’03 with key overweights in Brazil, India, Russia and Thailand • Will these country bets help funds beat their benchmark in the year ahead? • Year to date index returns • Russia: +7.54% • Thailand: +6.83% • Inida: -3.07% • Brazil: -8.02%

  16. Country Allocation Themes

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