The European Fund Classification Peter De Proft, EFAMA Bernard Delbecque, EFAMA

1. The European Fund Classification Peter De Proft, EFAMA Bernard Delbecque, EFAMA Cora Gibbons, Allianz Global Investors 23 June 2008

2. Part I Background

3. Three main motivations • Current classification sectors too broad  Wrong star ranking and questionable awards • Product development outpaced development of fund categorization  Differing views on fund classification between fund providers and data vendors • Cross-border fund sales on the rise in Europe  Need for a pan-European approach to sector / peer group classification Creation of the European Fund Categorization Forum in 2002

4. Product creation in EuropeFund launches in % of number of funds Source: Lipper Hindsight

5. Terms of reference of the EFCF • Composition: Cross-border fund managers and data vendors only • Purpose: To adopt a pan-European investment fund classification to enable investors and fund companies to truly compare like with like. • Strategy: To Review fund categories with a view to proposing clear new categories Win-win “business model” • Pooling of expertise from the business • Mutual understanding of difficulties involved • Collaborative approach to resolving challenges • Data vendors’ support to bring the EFCF work to a wide audience

6. A step-by-step process • July 2003: EFAMA joins the EFCF • June 2004: EFCF adopts Version 1 of fixed-income funds classification • June 2005: EFCF becomes an EFAMA Working Group • Summer 2005: EFCF hires « Classification Administrator » • April 2007: Adoption of EFC beta version, covering equity, bond, money market and mixed funds • Fall/Winter 2007: Testing of EFC version by Classification Administrator and EFCF members • Spring 2008: Finalization of the EFC

7. EFCF current membership Fund Managers Allianz Global Investors BlackRock Investment Management BNP Paribas Investment Partners Credit Suisse Asset Management DWS Fidelity International Franklin Templeton Goldman Sachs HSBC Asset Management Limited ING Investment Management Invesco JPMorgan Asset Management KBC Asset Management Mellon Global Investments Morgan Stanley Investment Management Pioneer Investments Robeco Schroders UBS Global Asset Management Union Asset Management Data Vendors Bloomberg Feri Rating Research AG Lipper Morningstar  Trade Associations Assogestioni BVI EFAMA EFCF Classification Administrator FundConnect & CCLux EFCF Chairman Robert Higginbotham, President – Europe for Fidelity International

8. EFCF current membership (1) International funds only include funds that source at least 80% of their assets from more than one market. Source: Lipper Feri

9. Part II The European Fund Classification

10. Three key principles • Transparency: high thresholds define fund categories to ensure transparency for investors and fund management companies and enable like with like comparison of funds • Investor protection: well delimitated fund categories, subjected to robust criteria, and effective monitoring based on the portfolio holding of the funds, will help investors buying funds knowing their inherent qualities • Independence: compliance with the classification criteria will be monitored by a neutral Classification Administrator

11. The benefits • Benefits to investors • They will know what they buy when they invest in EFC compliant funds • Comparison of funds from different countries will be easier • Benefits to fund providers • Sector/peer group classification will be more transparent • More consistent marketing of funds on a cross-border basis will be possible • Benefits to data vendors • They will get the classification results free-of-charge • They will be able to spend less resources on classification issues, more on fund comparison

12. EFC general structure

13. EFC main fund categories’ shares in UCITS market Source: EFAMA Quarterly Statistical Release June 2008, N°33

14. EFC classification criteriaDescription

15. EFC classification criteria Illustration for bond funds

16. Other fund categories covered • Absolute return • Total return • Convertibles • Open-ended & closed ended real estate funds • REITS • Guaranteed • Capital protected • Lifecycle/Target maturity • ABS • Commodities

17. Part III First Classification Results

18. Main fund categories

19. EFC classified equity funds

20. EFC classified bond funds

21. EFC classified money market funds

22. EFC classified mixed funds

23. Part IV Concluding Remarks

24. Converging towards a pan-European fund classification is an ambitious goal … • National associations cannot give orders; they can try to convince their members of the importance of a pan-European standard • Local market characteristics and national regulation may impose limits to convergence

25. … but success is a realistic possibility • Finding a consensus on a pan-European classification was possible within the EFCF • Flexible implementation at national level will facilitate dissemination • Not all categories should necessarily be adopted in national versions of the EFC • Funds not yet classified by the EFC could be included in local versions of the EFC • Cohabitation of the EFC with local classification should be possible, at least initially • The completion of the European Single Market for investment funds heightens the need for a pan-European approach to fund classification

26. For more information about the EFC, please visit EFAMA website. Thank you for your attention.