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CAAM Funds Emerging Internal Demand A domestic growth thematic fund

CAAM Funds Emerging Internal Demand A domestic growth thematic fund. Contents. Summary p. 3 Why focus on " Internal Demand " in Emerging Countries now? p. 4 1.1 Historical overview of economic development 1.2 An important contributor to world growth

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CAAM Funds Emerging Internal Demand A domestic growth thematic fund

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  1. CAAM Funds Emerging Internal Demand Adomestic growth thematic fund

  2. Contents • Summary p. 3 • Why focus on " Internal Demand " in Emerging Countriesnow? p. 4 • 1.1 Historical overview of economic development • 1.2 An important contributor to world growth • 1.3 Strong macro-economic fundamentals • 1.4 Decreasing sensitivity of emerging markets to the US economy • The strong drivers of Internal Demand in Emerging Countries p. 12 • 2.1 Household consumption: the emergence of a gigantic middle class • 2.2 Corporate investments: strong support from private investments, infrastructure spending and urbanisation • CAAM Funds Emerging Internal Demand p. 20 • 3.1 CAAM Funds Emerging Internal demand: concept & attractiveness • 3.2 Fund key features • 3.3 Investment philosophy, robust process & risk monitoring • 3.4 Track- record of Global Emerging funds managed by the team • 3.5 Strengths of CAAM expertise

  3. Summary Emerging internal demand: why now? • A winning theme in the current market environment: • Growth engine of the world economy in the years to come • Better economic health of emerging countries should translate into more resilient internal demand than in the past • A way to invest in Emerging Markets with a targeted lower volatility • Some protection from the slowdown of developed economies

  4. Why focus on Internal Demand in Emerging Countries now?

  5. 1.1 Historical overview of economic development Large Emerging countries are entering mass consumption phase Analysis of Rostow in 1960 (updated in 1990), « The Stages of Economic Growth  », economica,3e edition Our vision

  6. 1.2 Internal Demand in Emerging countries: an important contributor to world growth (1/2) Growth in retail sales are already higher in current dollars in China than in the United States Source : CAAM

  7. 1.2 Internal Demand in Emerging countries: an important contributor to world growth (2/2) • GDP growth in emerging countries consistently above the one of developed countries (except for 1998) • Growth looks set to remain strong due to improvement in fundamentals

  8. 1.3 Strong macroeconomics fundamentals (1/2) • Highly positive current accounts... Current account - % GDP • …net creditors vis-à-vis developed countries

  9. 1.3 Strong macroeconomics fundamentals (2/2) • Difference in rating between emerging and developed countries set to tighten further Source : CAAM • 10 years of macroeconomic adjustment and budget discipline: historically low and less volatile spreads

  10. 1.4 Decreasing sensitivity of emerging markets to the US economy (1/2) With GDP weighted at current exchange rates, Emerging market account for more than half of world GDP growth Source : CAAM, EIU

  11. 1.4 Decreasing sensitivity of emerging markets to the US economy (2/2) With GDP weighted at purchasing power parity, Emerging market account for 80% of world GDP growth Source : CAAM, EIU

  12. 2. The strong drivers of Internal Demand in Emerging Countries

  13. 2.1 Household consumption: the emergence of a gigantic middle class (1/3) An accelerator effect beyond a certain level of development… • < 3000$ : low incomes, subsistence consumption (strong share of food and clothing) • > 3000$: decent incomes allowing savings and consumption (cars, white goods, education, etc.) Distribution of urban Chinese income Percentage of households with income higher than 3000$ pa Source : Nomura, July 2007« China consumer – The great Leap Upwards »

  14. Nb of habitants per car United States Canada UK France Germany Italy Nb of cars per 1000 habitants Japan Log scale 2.1 Household consumption: the emergence of a gigantic middle class (2/3) Acceleration effect : for example, the car industry Private car penetration Nb of cars per 1000 habitants Germany US Brazil Japan Russia Korea China India Source : Rostow, Goldman Sachs

  15. 2.1 Household consumption: the emergence of a gigantic middle class (3/3) Massive middle-class population expansion in highly-populated countries • Expansion of a middle-class population : • population size will considerably impact emerging countries • In 10 years time, 800 million people will cross the 3000$ threshold, i.e. a greater population compared to the US, Europe and Japan put together Sources : Goldman Sachs

  16. 2.2 Corporate investments: strong support from private investments • High levels of capacity utilization • Healthy balance sheets should translate into higher capex Source: Merrill Lynch

  17. Country Investment estimated Sectors targeted Energy, transportation (rail, highways), environment 400bn$ China protection. (12% GDP) 2008 Olympics is a reason for sustained spending 110bn$ India Roads, ports, oil and gas, power generation. (9,7% GDP) Roads, power generation, ports & water treatment 45bn$ Indonesia Has been reduced given slow regulatory reform and efforts to (10,5% GDP) combat corruption 185bn$ Russia Projects to facilitate exports of commodities (pipeline, ports) (15,6% GDP) 25bn$ Spending target trans-European transport network (high Central & Eastern Europe (3,5% GDP) speed motorways, rail lines) Will focus on electricity generation and transportation (rail 60bn$ South Africa freight) (23%) 2010 world cup is the objective Will apply to a wide range of sectors: oil, power generation, 100bn$ Brazil telecommunications, transportation, engineering and (7,7% GDP) construction 60bn$ Mexico Natural gas, electricity, oil, roads, highways, home building (6,8%) Total 985bn$ (10,8% GDP) 2.2 Government spending: strong support from infrastructure • Governments infrastructure spending plans for 2007 to 2009 Source : Merrill Lynch, World Bank

  18. Example: India Infrastructure needs are a major boost to investment • Golden Quadrilateral was a huge success: more roads built in India over the past 5 years than there were over the previous 50 years combined • Road / Highways- Development is two-fold: • Expanding the 4 lane GQ network to 6 lanes • North/South & East/West corridors linking the entire country Source : CAAM Hong Kong

  19. 2.2 Strong support from urbanisation • High demand for goods & services : • Accommodation • Public facilities : water treatment, transport, schools etc • Electricity, energy • Consumer goods • Leisure • Driving force for many of the economic domestic sectors Source :IMF

  20. 3. CAAM Funds Emerging Internal Demand

  21. DOMESTIC DEMAND 3.1 CAAM Funds Emerging Internal demand: concept & attractiveness Internal Demand: an economic concept… Government spending Corporate investments Household consumption = + + Internal Demand in emerging countries: an opportunity for investors… • An important contributor to world growth • Strong fundamentals supportive of a high and stable growth : • Increasing purchasing power and demographics supportive of an increase in consumption • Huge investments requirements compared to developed countries • Should provide investors with some protection from slowing developed economies CAAM Funds Emerging Internal Demand • Focus on companies exposed to emerging domestic demand • Using tested investment philosophy and process

  22. 3.2 CAAM Funds Emerging Internal Demand key features (1/2) • Fund objective: Outperform the MSCI Emerging Markets by benefiting from the growth potential of emerging countries' growing domestic demand • Focus on companies that sell most of their goods and services to Emerging Countries Favor sectors catering to Internal Demand • Consumer Discretionary, Consumer Staples, Finance, Industry, Telecom and Public Utilities Sectors most likely to be underweight are those most linked to developed economies : • Technology, Healthcare, Energy, Materials

  23. 3.2 CAAM Funds Emerging Internal Demand key features (2/2) • CAAM Funds Emerging Internal Demand should be less volatile than other GEM funds Source: CAAM

  24. 3.3 Tested investment philosophy Our convictions • Fundamental analysis and judgemental decisions • Anticipating changes • Arbitraging prospects vs. valuations vs. risks • 3 sources of alpha generation: country selection, sector allocation & stock picking • Exposure to small/mid cap stocks • Risk diversification • Medium term investments • Average 18 months holding

  25. Information ratio 1 year 3 years 5 years Performance 33% 165% 311% Rank 33/328 3/190 8/234 Quartile 1/4 1/4 1/4 3.4 Track- record of Global Emerging funds managed by the team Source: CAAM – December 2007 Currency : EUR • Ranking Source : Lipper (Funds sold in Europe – December 2007) Category : Equities Emerging markets Past performance doesn’t guarantee futur returns.

  26. 3.5 Strengths of CAAM expertise • A team of 7 investment professionnals dedicated to emerging equity management with complementary skills • Latin America managers:Patrice Lemonnier (CFA) and Lionel Bernard • Emerging Asia:Philippe Guigny and Mickaël Tricot (CFA) • Emerging Europe, Middle East and Africa:Nina de Martinis (CFA) • Analysts:Hélène Ecalle and Qian Jang • Recognised for its expertise and good track-record* • Lipper Funds Awards (2008) Award Trophy for CAAM Funds Latin America Equities C Cap (USD)-Equity Emerging Markets Latin America, over 3, 5 and 10 years in Switzerland / Best fund in Spain over 3 years for « Equity Emerging Markets Latin America » : CAAM Funds Latin America Equities C Cap (USD). • Lipper Funds Awards (2007) Best fund over 10 years in the category « Equity Emerging Latin America » in Italy, Spain, France, Austria, North Countries, Germany and Switzerland for CAAM Latin America Equities C Cap • La Tribune-Standard&Poor’s (march 2007) 1st place over 1 year and the 2nd place over 3 and 5 years in the category « emerging countries equities » for a french domiciled fund. • Mieux VivreVotre Argent (march 2007) Excellence Label for a french domiciled fund and Regularity Label for a french domiciled Global Emerging Equity fund. • With a large product range • Global emerging equity funds • Latin America equity fund • Europe emerging equity fund More than €2 billion under management(as at 31/12/2007) * Past performance doesn’t guarantee future returns.

  27. CAAM Funds Emerging Internal Demand – Fund information Not all share classes and, as the case may be, share categories are registered for sales in all countries * Only for distributors authorised by Board of Directors.** Or equivalent in another currency.*** Or, as the case may be, an earlier cut off time applicable by the relevant distributor.

  28. Disclaimer This document which is not contractual and not part of documents usually certified by statutory auditors, is provided solely for information purposes by Crédit Agricole Asset Management, based on sources that we consider to be reliable. Crédit Agricole Asset Management can in no way be held responsible for any decision made on the basis of information contained in this document. The information contained in this document doesn’t constitute a recommendation, a request for proposal or an invitation to purchase, sell or switch shares in the funds (Organismes de Placement Collectif en Valeurs Mobilières or OPCVM, UCITS) described herein, and should in no case be interpreted as such. The information contained in this document may be modified without prior notice. Additional information is available upon request. The information contained in this document is disclosed to you on a confidential basis and you agree it shall not be copied, reproduced, or distributed to a third party without our prior written approval. The information contained in this document is not intended for all categories of customers. Your attention is drawn to the fact that units or shares in these UCITS may not be purchased if the regulations of your country of origin or any other applicable regulation forbid such purchase. As a consequence, it is your responsibility, prior to subscribing to any shares, to ensure that such purchase is permitted by applicable laws and regulations, as well as to inform yourself as to the fiscal consequences of such investment. It is also your responsibility to read the legal documents in force for each UCITS, in particular the prospectus as approved by the AMF (French Regulatory Authority) and the CSSF (Luxembourg Regulatory Authority) which are available upon request. Past performance does not prejudge future results, nor is it a guarantee of future returns. The value of units or shares in UCITS may fluctuate according to market conditions and as a result the value of initial investments may rise as well as fall. Document issued by Crédit Agricole Asset Management , a limited company ( “ French société anonyme”) with a registered capital of € 546 162 915, head office : 90 Boulevard Pasteur, 75 015 PARIS, 437 574 452 RCS Paris. Crédit Agricole Asset Management is a portfolio management company approved by the AMF (Autorité des Marchés Financiers), the French Securities Regulator under n° GP 04000036 www.caam.com This document contains information about CAAM Funds Emerging Internal Demand (the “Sub-Funds”), a sub-fund of CAAM Funds (the “Sicav”), an undertaking for collective investment in transferable securities existing under Part I of the Luxembourg law of 20 December 2002, organised as a société d’investissement à capital variable and registered with the Luxembourg Trade and Companies Register under number B68.806. The Sicav has its registered office at 5, Allée Scheffer, l-2520 Luxembourg. The Sub-Fund has been authorised for public sale by the Commision de Surveillance du Secteur Financier in Luxembourg. The Sicav comprises other sub-funds which are described in the Sicav’s full and simplified prospectus. Not all sub-funds will be necessarily be registered or authorised for sales in all jurisdictions or be available to all investors. Subscriptions in the Sub-Funds will only be accepted on the basis of the Sicav’s latest complete and simplified prospectuses and its latest annual and semi-annual reports that may be obtained, at the registered office of the Sicav or at its local representative. The name of the local representative may be obtained at the Sicav's registered office. Consideration should be given to whether the risks attached to an investment in the Sub-Funds are suitable for prospective investors who should ensure that they fully understand the contents of this document. In case of doubt, it is advised to consult a professional advisor to determine whether an investment in the Sub-Funds is suitable. The value of, and any income from, an investment in the Sub-Funds can decrease as well as increase. The Sub-Funds have no guaranteed performance. Further, past performance is not a guarantee or a reliable indicator for future returns. This document does not constitute an offer to buy nor a solicitation to sell in any country where it might be considered as unlawful, nor does it constitute public advertising or investment advice. This document is solely for the attention of institutional, professional or sophisticated investors and is not to be distributed to the general public.

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