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Investor Due Diligence, Manager Selection and Asset Flows Panel 13 th October 2011

Nothing herein should be construed as legal advice or as a legal opinion for any particular situation. Information is provided for general guidance and should not be substituted for formal legal advice from an experienced securities attorney.

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Investor Due Diligence, Manager Selection and Asset Flows Panel 13 th October 2011

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  1. Nothing herein should be construed as legal advice or as a legal opinion for any particular situation. Information is provided for general guidance and should not be substituted for formal legal advice from an experienced securities attorney. Investor Due Diligence, Manager Selection and Asset Flows Panel 13th October 2011

  2. Panelists: Angela Borrett, Albourne Partners LtdCharles Ashwanden, eVestment AllianceJustin Guthrie, ACA Compliance Group

  3. Institutional Asset Flow Trends Global Canada United Kingdom Japan Emerging Markets United States Europe ex-UK Asia-Pac ex-Japan EAFE Australia All percentages are of cumulative quarterly net institutional asset flows over 2010, 1Q 2011 and MRQ as a percentage of original institutional AUM at the start of the period.

  4. Hedge Fund Asset Flow Trends Canada Emerging Markets & Diversified / Multi-Region Europe Japan United States Middle East / N. Africa Asia-Pac ex-Japan All percentages are of cumulative quarterly net asset flows from eVestment|HFN over 2010, 1Q 2011 and MRQ as a percentage of original AUM at the start of the period.

  5. The Future: What we are seeing • There has been a renewed push to more diversified asset classes: • Global Balanced / TAA is seeing high levels of flow. Our database is seeing a high quantity of searches in the Global Balanced / TAA space. Over the past 1.5 years, PIMCO, Bridgewater, AQR, Newton and Wellington were all large winners in this space. • Absolute Return is seeing high levels of flow. The concept of “unconstrained” products emerges regularly in our discussions with Pension Funds and, plan sponsors and consultants. PIMCO’s Unconstrained Bond was the big winner over the past 1.5 years. Standard Life, Wellington and Amundi also saw significant gains. • All cap equity products have seen consistently more flows in nearly all geographies than any of the other more-specific cap styles. • The outflows that plagued US equity appear to have slowed. US Equity is currently operating with flat institutional asset flows. This is a significant change as the category consistently lost assets for the prior 4 years. • We continue to see the trend that account domicile has a significant impact on flows. Plan Sponsors and Consultants are allocating away from the domicile in which they reside. • Emerging markets appeared to slow in early 2011, but took off again during 2Q 2011. Both EM debt and equity were operating in lock step throughout 2010. EM equity flows have slowed in 2011 while EM debt flows remained strong. • Sovereign Wealth Funds appear to be leading the market in many instances. SWFs were some of the first client types into EM debt. SWFs began reallocating to US equity during 2010, before other client types. Today, SWFs are increasing exposure to global equity. • ACWI ex-US flows turned negative as more consultants and plan sponsors allocated assets to global equity during early 2011. Our database is still seeing a significant number of searches for ACWI ex-US universes. • For Fixed Income, our database is seeing significant searches in the Emerging Markets, Global Multi-Sector, US Core and US Core Plus universes.

  6. What is on the Horizon? • ACWI-ex US is one of the top reviewed universes in the Analytics Platform • YTD product reviews have focused heavily on the Value style. 40% of the top 10 reviewed categories are of the Value style • Global Balanced products have had a significant increase in product reviews during the second half of 2011 • Even though EAFE net flows have been generally negative, the EAFE equity class remains one of the most popular classes for product reviews • Emerging Markets Fixed Income remains in the top 10 as eVestment has seen significant manager replacements in the EM Debt asset class

  7. Any Questions? Nothing herein should be construed as legal advice or as a legal opinion for any particular situation. Information is provided for general guidance and should not be substituted for formal legal advice from an experienced securities attorney. Angela Borrett, Albourne Partners LtdCharles Ashwanden, eVestment AllianceJustin Guthrie, ACA Compliance Group 13th October 2011

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