Global Emerging Markets Fixed Income - June 2018 - AXA IM España
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Not for Retail distribution: this document is intended exclusively for Professional, Institutional, Qualified or Wholesale Investors / Clients, as defined by applicable local laws and regulation. Circulation must be restricted accordingly Global Emerging Markets Fixed Income June 2018
Agenda Global Emerging Markets Fixed Income at AXA IM Investment Process Emerging Market Strategies AXA WF Emerging Markets Short Duration Bonds AXA WF Global Emerging Markets Bonds Reference material 1
Global Emerging Markets Fixed Income at AXA IM
Our Emerging Markets competitive advantages Differentiated by our philosophy and process PHILOSOPHY 1 We focus on income generation and downside mitigation CARRY FOCUS Invest in liquid names covered by thorough credit research to capture upside and 2 provide risk-mitigation against credit events CREDIT FOCUS 3 Focus more on credit risk management and less on market timing RISK FOCUS PROCESS 1 Translate our macro, sector, and credit views into portfolio positioning TOP-DOWN FRAMEWORK 2 Systematically compare valuations globally across regions and sectors BOTTOM-UP ANALYSIS Capture relative-value and curve opportunities, while taking advantage of market 3 liquidity OPENLY OPPORTUNISTIC Top-down framework supported by bottom-up analysis 3
Our Emerging Markets fixed income fund range Utilising both total return and benchmark-aware approaches Short Duration Benchmark-aware* AXA WF Emerging Markets AXA WF Global Emerging Markets Bonds Short Duration Bonds STRATEGY CHARACTERISTICS • High conviction views – benchmark aware not benchmark-constrained • Consistent income with lower volatility • Aim for consistent returns investing • Capture income and limit downside risk mainly in USD Emerging Market debt • Limit impact of potential rate increases • Ability to implement off-benchmark strategies Managing Emerging Market assets using differing approaches for over 20 years Past performance is not a guide to future performance 4 *The fund does not have a reference index. The JP Morgan EMBI Global Diversified Index is used as a basis for comparison only.
Investment Process • Top-down • Bottom-up • Opportunity set
Macro EM economies have enjoyed stable growth with subdued inflation Growth and inflation • The global macro backdrop remains a positive catalyst for Emerging markets. Growth is expected to remain robust and the EM/DM growth differential is set to stay intact • Coming from a low base, inflation has stabilised and remains within central bank targets. On balance central banks are still expected to keep monetary policy loose • Unconventional developed central bank action and inflation remain concerns, while we are monitoring the implications of trade protectionist policies announced by the US Source: AXA IM, JP Morgan as of November 2017 The above represents our current market views only and does not constitute investment advice 6 Past performance is not a guide to future performance.
Valuation Spreads tight relative to history but still offer value EM vs DM yields Yield close to lows but not as extreme as Euro Credit IG Similar trend on the HY side 12 30 CEMBI Broad IG CEMBI Broad HY 10 JULI 25 US HY Euro HG Euro HY 8 20 Yield (%) Yield (%) 6 15 4 10 2 5 - - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 • Despite spreads reaching levels not seen for several years, EM still offers value relative to other asset classes • Differentiation remains key in positioning with spread compression most visible in high yielding credits. Asia and CEEMEA on the whole still look tight • Relatively high carry continues to help attract investors into Emerging Market sovereign and corporate bonds Source: JP Morgan as of November 2017 The above represents our current market views only and does not constitute investment advice. CEMBI Broad IG is the JP Morgan CEMBI Broad Investment Grade Index. JULI is the JP Morgan US Liquid Index. Euro HG is the JP Morgan Euro Credit Index. CEMBI Broad HY is the JP Morgan Broad High Yield Index. US HY is the JP Morgan Domestic High Yield Index. Euro HY is the JP Morgan Euro High Yield Index. 7 Past performance is not a guide to future performance.
Sentiment Positive path of rating action supports risk sentiment Ratings migration Excluding sovereign-led actions • Approximately 30% of both sovereign and corporate forecast issuance has already been successfully placed into the market. China and MENA region are expected to be the largest issuers going forward • Dedicated investors remain close to market weight and hold average levels of cash allowing room to increase investment • Default rates are expected to remain well below their long-term averages, while rating migration trends in EM corporate credit are at their most positive levels since 2011 Source: AXA IM, JP Morgan as of November 2017 The above represents our current market views only and does not constitute investment advice. 8 Past performance is not a guide to future performance.
Technicals Historically high inflows for the asset class EM fund flows AUM benchmarked against the major JPM EM indices CEMBI Indices 400 Local Market Debt 350 External Debt USD 300 250 $bn 200 150 100 50 - 2012 2013 2014 2015 2016 2017 • Fund flows remain robust in 2018, driven by strategic inflows into the asset class • Institutional investors are structurally under-invested in Emerging Markets and continue to reduce this underweight • Despite recent market volatility, EM spreads have remained relatively immune from the rise in US rates since end 2017 Source: AXA IM, JP Morgan. Flow data as of end April 2018. AUM data as of December 2017 The above represents our current market views only and does not constitute investment advice. 9 Past performance is not a guide to future performance.
Credit analysis process Credits assessed across the MVST* framework • Initial screening to identify long-term prospects Fundamentals • Credits assigned a12-month fundamental outlook • Identify where our views on fundamentals differ from the market’s • Delayed market reactions, or unexplained price moves may represent Relative Value opportunities • Market sentiment, supply and demand dynamics influence the skew to high or low-beta names Sentiment/Technicals • Focus on liquidity, screen for the most attractive securities Investment ideas and trades Implementation 10 *MVST: Macro, Valuation, Sentiment, Technicals.
Credit analysis process Sovereign vs Corporate analysis Our credit analysis process incorporates both quantitative and qualitative analysis to form robust views Sovereign analysis Corporate analysis Macro Fiscal Quantitative Qualitative • Growth • Revenues • Budget balances • Economic and political • EBITDA stability • Structure and • Market positioning sustainability of debt • Leverage • Policy coherence and • Geographical distribution credibility • Financing prospects • Cash Flow • Economic prospects • Debt levels • Ratings External finances Ratings • Capex • Margins • Sustainability and financing of current • Credit rating outlook account • Migration history • External debt dynamics A robust and thorough credit analysis framework 11
Credit analysis process Trade example – Brazil; ahead of the curve 110 Brazilian pulp & paper manufacturer Bond purchased at Tender offer Suzano 5.875% 23/01/2021 from Suzano to buy the an average price of 101 108 ⅝ bonds back at 109 106 104 102 Price subsequently rises 100 Price initially falls as the market buys into as a result of political the Brazil recovery story situation and 98 government corruption scandal 96 Nov Dec Jan Feb Mar Apr May Jun Jul 16 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 17 Aug Sep Oct Nov 15 15 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17 17 17 17 Bottom-up analysis within top-down context led to a positive outcome Source: AXA IM / Bloomberg as at the dates shown. Past examples shown for illustrative purposes only; this should not be considered as advice or a recommendation. 12 Past performance is not a guide to future performance.
Credit analysis process Trade example – Petrobras; extracting value 1 4.9 Originally owned Brazilian petroleum the 8 ⅜ 2021 bond since May 2016, driven by our positive view of Brazil 4.7 company Petrobras 3 Yield to maturity (%) 4.5 2 Identified value in the 6 ⅛ 2022 bond, which was 4.3 trading wider than historically to the NEW BOND 4 1 2021 bond, splitting the Petrobras 4.1 position between the two issues 3.9 3 Switched position 3.7 Into the 6 ⅛ 2022 bond, which at the 2 OLD BOND time had a yield pickup of c50bps 3.5 4 Positive outcome as the spread of the 2022 bond has compressed by c30bps since (3), while Petbras 8.375% 5/23/21 Petbras 6.125% 1/17/22 the spread of the 2021 bond has widened Identification of relative value across bonds led to yield pickup Source: AXA IM / Bloomberg as at the dates shown. Past examples shown for illustrative purposes only; this should not be considered as advice or a recommendation. 13 Past performance is not a guide to future performance.
Credit analysis process Trade example – taking advantage of Euro denominated bonds 10% 9% • Due to the high costs of EGYPT 8.65% hedging, EUR- BTUN 8% 8.08% SENEGL denominated issues can IVYCST BUENOS 7.74% 7% $ 7.28% receive a significant yield 7.07% $ ROMANI 6.51% boost when hedged back 6.43% Yield to Worst 6% $ $ € to USD 5% € $ 4.78% € € 4% € 3% • We have taken advantage 2% of this in countries that 1% have a natural EUR revenue base or have 0% Tunisia Ivory Coast Argentina Egypt Romania Senegal their currency pegged to EUR EUR USD EUR hedged to USD Using the pickup from FX hedging to boost yields Source: AXA IM / Bloomberg as at 30/04/2018 14 Past performance is not a guide to future performance.
Opportunity set Our short duration fund places a larger focus on corporates Composition of the AXA WF Emerging Notable sector deviations Markets Short Duration Bonds portfolio 25% 0% 20% 23% 15% 10% Cash & Other 5% HC Corporates 0% HC Sovereigns 77% AXA WF Emerging Markets Short Duration Bonds Index* • Our Emerging Market debt strategies allocate a significant amount of capital to corporate debt. This provides a broader opportunity to diversify the portfolio and extract alpha • The AXA WF Emerging Markets Short Duration Bonds fund employs a total return approach, which means we are not constrained by index allocations to can fully express our investment views Access to a broad opportunity set Source: JP Morgan, AXA IM as of 31/05/2018 15 *ICE BofA Merrill Lynch Emerging Markets Corporate Plus Index.
Opportunity set Corporate fundamentals are improving with benign default levels forecasted Gross leverage declining Default rates expected to stay low 3,5x 2018 EM Corps Global 3,0x 3,0x 2,9x 2016 2017 YTD 3,0x (forecast) 2,6x 2,5x 2,5x 2,4x 2,4x Asia 1.0% 0.9% 1.1% 2,1x Gross Leverage 2,0x EM Europe 3.6% 2.7% 1.5% 2,0x 1,6x 1,5x Latin America 9.2% 1.5% 2.9% 1,0x Middle East & 5.7% 3.2% 3.8% Africa 0,5x % EM HY bonds (ex 0,0x 5.1% 1.7% 2.0% 100% quasis) 2008 2009 2010 2011 2012 2013 2014 2015 2016 LTM • Continuing the strong rebound in 2H16, EM corporate fundamentals strengthened further in 2017 with leverage levels ticking down both on a gross and net basis • Default levels are expected to remain below the long-term average, with still improving profitability and steady growth leading to a default forecast of 2.0% in 2018 A fundamentally strong asset class 16 Source: JP Morgan as of November 2017
Opportunity set EM External Corporate Debt has grown to be a significant part of the investment universe EM external corporates are a A rapidly expanding universe 2.069 meaningful asset class 16 High yield & NR 13,9 1.814 Investment grade 1.6341.692 11,1 12 1.379 $trn 8 1.106 5,9 5,6 860 3,8 4 709 2,0 2.0 1,7 1,6 548 561 605 1,0 0,9 0,7 0,5 0,5 0,3 436 0 denominated… 340 267 Treasuries Munis Euro HG Euro HY EM ext corp Agency MBS ABS CLOs CMBS USD HG USD HY Agency Debt DM Sovereigns Covered Euro EM ext sov • EM external corporate debt has grown to over $2 trillion, almost doubling in size over the last five years. The number of issuers had also greatly increased, representing excellent diversification opportunities • The asset class represents a meaningful part of the global fixed income opportunity set for investors An increasingly important part of the investment universe 17 Source: JP Morgan as of November 2017
AXA WF Emerging Markets Short Duration Bonds Portfolio characteristics and performance
Why invest in AXA WF Emerging Markets Short Duration Bonds? Investment concept ATTRACTIVE RISK-RETURN LARGE OPPORTUNITY SET PROFILE • Exposure to sovereign and corporate credits across • A “Total Return” strategy aiming to deliver an optimal the credit quality spectrum risk-return profile throughout the market cycle • Use of entire Emerging Market credit spectrum • Low volatility from short duration positioning allows us to monitor default correlation risk ANALYSIS & RISK CLEAR PERFORMANCE DRIVERS MANAGEMENT • A set of clear and transparent Internal Investment • Portfolio performance is mostly driven by carry and Guidelines reinvestment of coupons • Fundamental-based credit research process across sovereigns and corporates Source: AXA IM. The description set forth above represents investment and risk objectives only. 19 No representation is made that the Fund will achieve such objectives.
Why invest in short duration Emerging Market bonds? Income stream drives long-term returns in short duration Emerging Markets Income Return * 10% 8% 6% Historical market annualised return* (31/12/ 2001 to 31/12/2016) 4% 2% 0% Price Return -0.02% Income Return 6.87% Price Return* 20% 15% Total Return 6.85% 10% 5% 0% -5% -10% -15% -20% Strong focus on maximising income and monitoring downside risk Source: AXA IM / JP Morgan as at 31/12/2016. *Composite of 1-5 year maturity buckets for 60% CEMBI Broad and 40% EMBIG Diversified. Past performance is not a guide to future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred. The AXA WF Emerging Markets Short Duration Bonds fund does not have a reference index. The index referenced above is given as a basis for comparison only. The index’s 20 performance is calculated on the basis of gross dividend.
Why invest in AXA WF Emerging Markets Short Duration Bonds Maintain yield with reduced volatility and shorter duration Duration vs the market Yield to worst vs the market 3yr volatility vs the market 8.0 7% 8% 6% 6.0 5% 6% 4% 4.0 4% 3% 2.0 2% 2% 1% 0.0 0% 0% AXA WF Emerging Markets Short Duration Bonds AXA WF Emerging Markets Short Duration Bonds AXA WF Emerging Markets Short Duration Bonds HC Sovereigns HC Corporates HC Sovereigns HC Corporates HC Sovereigns HC Corporates • Duration target of less than three years • Fund has not given up yield despite • Yield captured without taking duration restriction additional risk • Less sensitivity to interest rate movements • Focus on capturing carry from • Lower volatility compared to the fundamentally strong credits overall market • Clearer visibility of cashflows Capturing yield with interest rate protection and lower volatility Source: JP Morgan, AXA IM as of 31/05/2018. HC Sovereigns is represented by the JP Morgan EMBI Global Diversified Index. HC Corporates is represented by the JP Morgan CEMBI Broad Diversified Index. Past performance is not a guide to future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred 21 Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield.
Portfolio performance AXA WF Emerging Markets Short Duration Bonds Since inception the fund has achieved steady returns while exhibiting low volatility Gross performance* Annual performance* Cumulative net performance* Fund Fund 124 Base = 100 Sept 2012 1 month -0.37% 2013 3.66% 122 3 months -0.68% 2014 0.92% 120 6 months -0.85% 2015 0.43% 118 YTD -1.15% 2016 8.52% 116 1 year 1.40% 2017 6.09% Value of $100 investment 114 3 years 11.09% 112 Since launch 24.74% 110 108 Volatility* 106 Fund 104 1 month 2.52% 102 3 months 1.83% 100 6 months 1.54% 98 YTD 1.66% 1 year 1.37% 3 years 2.72% Since launch 3.29% A historically resilient investment proposal Source: AXA IM as at 31/05/2018. *Performance is calculated using close prices, rebased to 100, for I Accumulation USD shareclass since launch on 06/09/2012. The figures presented are gross of fees. An investor’s return will be reduced by the management fees and other expenses. Past performance is not a guide to future performance. Performance basis is gross 22 of tax. The deduction of fees reduces the level of return; The client's return will be reduced by the management fees and other expenses.
An Emerging Markets offering with a short duration bias AXA WF Emerging Markets Short Duration Bonds Fund breakdown by sector2 Key characteristics Fund 25% 20,3% AUM ($mn) 1,431 20% 16,8% Yield (%)1 5.07 15% 11,9% 11,8% Modified duration1 2.80 10% 6,4% 5,0% 4,9% 4,0% 3,9% 5% 2,9% 2,4% 1,7% 1,6% 1,4% 1,2% Average coupon (%) 5.08 0% Average maturity (yrs) 3.37 Banking Sovereign & Quasi Financial Services Capital Goods Retail Consumer Goods Real Estate cash Energy Basic Industry Utility Telecommunications Agency Transportation Automotive Average rating3 BB+ Sovereign Cash position (%) 1.2 Number of holdings 134 Fund breakdown by ratings3 40% 35,4% 29,1% 30% 17,2% 20% 12,2% 10% 2,5% 1,5% 0,9% 1,2% 0% AA A BBB BB B CCC NR cash A fully diversified portfolio Source: AXA IM as at 31/05/2018. Data is unaudited and sourced from our front office portfolio management system. Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield. Yield figures are not guaranteed and will change in the future. Cash figure includes equivalents. 1. Yield and duration calculations include cash held within the portfolio, use the next-call method for all Financials in the portfolio and duration/yield-to- 23 worst for all other holdings. 2. ML Lvl 2 breakdown, excludes FX positions. 3. Average rating of securities’ available ratings using scores from the linear scale.
Portfolio characteristics AXA WF Emerging Markets Short Duration Bonds Description Coupon Maturity date Current yield Country of risk Rating² % Israel Electric Corp Ltd 5.625% 21/06/2018 7.72% Israel BBB 1.36% Global Bank Corp 5.125% 30/10/2019 4.24% Panama BBB- 1.30% Petrobras Global Finance BV 6.125% 17/01/2022 5.14% Brazil BB- 1.28% YPF SA 8.500% 23/03/2021 6.72% Argentina B 1.25% Gold Fields Orogen Holdings BVI Ltd 4.875% 07/10/2020 5.31% South Africa BB+ 1.24% VEON Holdings BV 3.950% 16/06/2021 5.31% Netherlands BB 1.22% Nemak SAB de CV 3.250% 15/03/2024 3.14% Mexico BB+ 1.18% Russian Lukoil International Finance BV 6.125% 09/11/2020 4.10% BBB 1.16% Federation Qatari Diar Finance Co 5.000% 21/07/2020 3.74% Qatar AA- 1.15% United Arab Emirates NBD PJSC 3.250% 19/11/2019 3.58% A 1.13% Emirates • We manage an extremely well diversified portfolio across credit ratings, sectors and issuers to monitor correlation risk • The portfolio is also diversified geographically, with allocations across all regions. This allows us to add value via our top-down country selection Source: AXA IM as at 31/05/2018. Top 10 Holdings: Include only corporate bonds as defined by the level 1 of BofA ML Index and exclude cash and mutual funds. 1. Average rating of securities’ available S&P, Moody's and Fitch ratings using scores from the linear scale. Data is unaudited and sourced from our front office portfolio management system. The above 24 mentioned stock is shown for illustrative purposes only and should not be considered as advice or a recommendation
Portfolio country risk exposure Current portfolio sovereign and corporate positioning 11% Hard Currency Sovereign & Quasi Sovereign 10% Hard Currency Corporates 9% Cash 8% 7% 6% 5% 4% 3% 2% 1% 0% Peru Argentina Cyprus Qatar India Nigeria Turkey Israel Cote D ivoire Macedonia Indonesia Morocco Mexico Hong Kong Tunisia Brazil South Africa Kuwait China Solomon Islands Colombia Mauritius Iraq Cash Kenya Bermuda Kazakhstan Chile Ukraine Lebanon Spain Dominican Republic Senegal Bangladesh Russian Federation Croatia Costa Rica Panama Egypt Angola Singapore Mongolia Honduras Zambia Azerbaijan Cayman Islands United Arab Emirates ME Investment across over 40 countries with the aim to monitor default correlation risk 25 Source: AXA IM as at 31/05/2018 Data is unaudited and sourced from our front office portfolio management system. Cash figure includes equivalents.
26 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% -3,0% -2,0% -1,0% Angola Argentina Azerbaijan Bangladesh Brazil Chile China Colombia Costa Rica Cote D ivoire Croatia Dominican Republic Ecuador Egypt France Honduras Hong Kong Hungary India Indonesia Iraq Israel AXA WF Emerging Markets Short Duration Bonds Kazakhstan Kenya Kuwait Latvia Lebanon Lithuania Luxembourg Macedonia Mexico Mongolia Morocco Netherlands Nigeria Pakistan Change in country risk exposure over the last 12 months Panama Peru Philippines Poland Qatar Romania Russian Federation Source: AXA IM as at 31/05/2018 Data is unaudited and sourced from our front office portfolio management system. Cash figure includes equivalents. Senegal Serbia South Africa Spain Sri Lanka Supranational Switzerland Tunisia Turkey Ukraine United Arab Emirates Zambia Dynamic management of country risk to capture opportunities and avoid downside Cash
AXA WF Global Emerging Markets Bonds Portfolio characteristics and performance
Why invest in AXA WF Global Emerging Markets Bonds? Investment concept FLEXIBLE PORTFOLIO HIGHLY EXPERIENCED TEAM MANAGEMENT • A globally team supported by credit research and • Ability to allocate off-index towards corporate and investment strategy teams local markets to generate returns • A long history and track record of managing both • Total return philosophy encourages active portfolio benchmarked and total return portfolios management ANALYSIS & RISK CONVICTION-BASED APPROACH MANAGEMENT • Aim to generate performance through careful strategic positioning, as well as exploiting tactical and • A set of clear and transparent Internal Investment relative value opportunities Guidelines • Fundamental-based credit research process across • A strong total return and trading background within sovereigns and corporates the team Source: AXA IM. The description set forth above represents investment and risk objectives only. 28 No representation is made that the Fund will achieve such objectives.
29 0% 1% 2% 3% 4% 5% 6% MEXICO CHINA INDONESIA TURKEY RUSSIA PHILIPPINES BRAZIL ARGENTINA COLOMBIA PERU PANAMA CHILE KAZAKHSTAN SOUTH AFRICA UKRAINE HUNGARY MALAYSIA EGYPT OMAN ECUADOR Source: JP Morgan EMBI Global Diversified Index as of 31/05/2018 POLAND URUGUAY Fixed Income Emerging Markets LEBANON DOMINICAN… SRI LANKA CROATIA NIGERIA ROMANIA AZERBAIJAN An investable universe spanning across 67 countries EL SALVADOR PAKISTAN VENEZUELA COSTA RICA JAMAICA LITHUANIA INDIA ANGOLA COTE D'IVOIRE KENYA SERBIA IRAQ MONGOLIA PARAGUAY TRINIDAD AND… JORDAN ZAMBIA GUATEMALA SENEGAL MOROCCO GABON GHANA A rapidly expanding and diversified investable universe BELARUS BOLIVIA HONDURAS VIETNAM SLOVAK REPUBLIC NAMIBIA GEORGIA ARMENIA ETHIOPIA TUNISIA CAMEROON LATVIA MOZAMBIQUE SURINAME TAJIKISTAN BELIZE
Portfolio performance AXA WF Global Emerging Markets Bonds Gross performance* Cumulative gross performance* Fund Benchmark Relative 220 1 month -1.44% -0.94% -0.50% 3 months -2.62% -2.10% -0.52% 200 6 months -3.50% -3.38% -0.12% YTD -4.31% -4.08% -0.23% 1 year -0.15% -0.56% +0.41% 180 3 years 16.20% 14.13% +2.07% Value of $100 investment 5 years 24.44% 23.68% +0.76% 160 Annual performance* Fund Benchmark Relative 140 2013 -5.99% -5.25% -0.74% 2014 6.79% 7.43% -0.64% 120 2015 1.78% 1.18% +0.60% 2016 10.86% 10.15% +0.71% 100 2017 11.25% 10.25% +1.00% Risk* 80 Information Volatility Tracking error ratio 60 1 month 8.31% 2.69% -1.91 Apr-09 Apr-11 Apr-13 Apr-15 Apr-17 Dec-09 Dec-11 Dec-13 Dec-15 Dec-17 Aug-08 Aug-10 Aug-12 Aug-14 Aug-16 3 months 5.28% 2.01% -0.96 6 months 4.70% 2.15% -0.11 YTD 5.04% 2.30% -0l22 AXA WF Global Emerging Markets Bonds I USD 1 year 4.55% 1.14% +0.36 JPMorgan EMBI Global Diversified TR USD 3 years 5.61% 0.80% +0.79 5 years 6.27% 1.05% +0.12 Source: AXA IM as at 31/05/2018. *Performance is calculated using close prices, rebased to 100, for I Accumulation USD shareclass since its launch on 25/08/2008. The fund was launched on 13/09/2005. The figures presented are gross of fees. An investor’s return will be reduced by the management fees and other expenses. Past results are not necessarily indicative of future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred. The gross returns do not reflect the deduction of investment advisory fees. Your returns will be reduced by fees and any other expenses. The fund does not have a reference index. JP Morgan EMBI Global Diversified TR USD, is 30 given as a basis for comparison only.
Portfolio analysis AXA WF Global Emerging Markets Bonds Spread duration contribution Key characteristics Fund Market by maturity bucket AUM ($mn) 135.6 - 3,0 2,4 Yield (%) 5.50 5.64 2,5 2,1 Modified duration 6.50 6.33 2,0 1,7 1,5 1,5 Years Spread to government (bps) 327 289 1,5 Number of issuers 90 152 0,9 1,0 0,7 0,7 0,6 Average rating* BB- BB+ 0,4 0,5 0,3 0,1 Cash position (%) 1.4 - 0,0 1-3 Years 3-5 Years 5-7 Years 7-10 Years 10-20 Years 20 years + Fund Index Fund breakdown by maturity bucket 40% 33% Benchmark-aware rather than benchmark- 30% 20% 15% 17% 14%14% 23% 18% 19% 12% constrained, giving us the freedom to express our investment views 10% 11% 10% 5% 7% 1% 0% Ability to allocate towards off-index credits in 0-1 Year 1-3 Years 3-5 Years 5-7 Years 7-10 10-20 20 years + Years Years corporate and local markets Fund Index Source: AXA IM as at 31/05/2018. Market reference: the JP Morgan EMBI Global Diversified Index. The fund does not have a reference index. JP Morgan EMBI Global Diversified Index, is given as a basis for comparison only. Yield and duration calculations include cash held within the portfolio, use the next-call method for all Financials in the portfolio and duration/yield-to-worst for all other holdings. Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in 31 the fund may receive as a distribution yield. *Average rating of securities’ available S&P, Moody's and Fitch ratings using scores from the linear scale.
Portfolio country risk exposure AXA WF Global Emerging Markets Bonds 0,15 0,10 Top and bottom contributors to relative duration 0,05 0,00 -0,05 -0,10 -0,15 -0,20 Nigeria Kenya Philippines Senegal Indonesia Chile Colombia Hungary Ukraine Cote D ivoire Ecuador Angola Iraq Jordan China Pakistan Dominican Republic Argentina Lebanon Uruguay Careful management of country duration exposure 32 Source: AXA IM as at 31/05/2018 Data is unaudited and sourced from our front office portfolio management system.
Reference material
Why invest in Emerging Markets Bonds at AXA IM? €447 billion in Fixed Income, c.120 investment professionals Team Emerging Market FI investment experts located in each major market around the world, ensuring our clients benefit from local insights 20 London Years’ experience managing Philosophy 20 FI investment Emerging Market FI assets focused on income generation and professionals downside mitigation while aiming at Greenwich 32 FI investment Frankfurt $10.4bn optimising the risk/return profile over the market cycle professionals 5 FI investment professionals Tokyo 3 FI investment US billion in Emerging Market professionals FI strategies globally Paris Process 52 FI investment Zurich a global, top-down approach professionals 5 FI investment 12 complemented by bottom-up research Mexico City 2 FI investment professionals Investment professionals specific to the drivers of each sub-asset professionals dedicated to Emerging Market class Hong Kong FI strategies globally 5 FI investment Solutions professionals proven ability to provide bespoke 4 solutions to meet our clients’ evolving Locations represented locally, needs across Europe, Latin America and Asia Scale critical size, particularly in corporate credit, affords us excellent access to the markets Robust global framework bringing together local experts 34 Source: AXA IM as at 30/04/2018. AUM data as at 31/03/2018 (latest available).
The Emerging Markets assets we manage Managing c$10 billion of EM Fixed Income assets, with c$2 billion managed in open-ended funds London $3.17 billion of assets managed Majority of assets from Paris, London, Milan and Frankfurt Mexico City $2.30 billion of assets managed 100% institutional client base Paris $2.61 billion of assets managed Hong Kong Most assets split across Belgium, $2.31 billion of assets managed France, Germany and Ireland Most of assets from Hong Kong and Singapore 35 Source: AXA IM as at 31/03/2018 (latest available).
Emerging Markets and Asia Fixed Income solution range Client toolbox AXA WF Emerging AXA WF Global AXA WF Asian AXA WF Asian AXA WF China Markets Short Emerging Markets Short Duration High Yield Bonds Short Duration Duration Bonds Bonds Bonds Bonds • $1,431mn AUM • $136mn AUM • $125mn AUM • $29mn AUM • $25mn AUM • Global focus • Global focus • Asian focus • Asian focus • China focus • Short duration bias • Full maturity profile • Short duration bias • Full maturity profile • Short duration bias • Total return approach • Benchmark-aware • Total return approach • Total return approach • Total return approach A comprehensive range of solutions to meet our clients’ evolving needs For indicative purposes only. Past performance is no guarantee of future results. 36 Source: AXA IM - Data as of end May 2018
Global investment process 1 Define macro 2 Define active 3 Portfolio environment strategies construction Top-down inputs combine to Alpha Group forecasts / Alpha Groups define market form a global macro view, used recommendations feed portfolio expectations and active strategies as a framework by each Alpha construction, ensuring efficient using MVST analysis Group* use of risk budget Active portfolio management Risk is continuously monitored, driven by continuous MVST with multiple levels of control analysis and performance review Continuous 5 Risk 4 strategy review monitoring Strong top-down focus complemented by rigorous bottom-up research *Alpha Groups: small sub teams of the FI team split by expertise: country allocation/term structure/inflation/investment grade/high yield/emerging markets. MVST: Macro, 37 Valuation, Sentiment, Technicals.
A single common investment language: MVST Investment teams assess performance potential based on four factors: M V S T Macro Valuation Sentiment Technicals A regular review of the global A consideration of how current Ongoing review of market Analysis of likely changes in economic and policy outlook levels reflect interest rates and positioning, consensus views and supply and demand and allows Portfolio Managers to credit risks. Deviations from fair market commentary regulatory factors (government assess the likely macro influences; value are assessed in terms of the supplemented by our own funding, cash-flows, corporate taking into account potential likely contribution to expected Portfolio Manager Survey to issuance) and the expected changes in the level of risk free return. reach an understanding of how impact of these on yield and yields and credit spreads and how potential changes in sentiment spread changes. this will affect returns. may affect investor behaviour. Expected negative Scores reflect qualitative views and provide a consistent Expected positive impact on returns impact on returns (yields higher / spreads wider) framework across our teams globally (yields lower/ spreads tighter) -2 -1 0 +1 +2 …spoken by all investment teams globally 38
Portfolio Engineering & Solutions Solution design, portfolio optimisation and risk monitoring • Global team of eight engineers and strategists, embedded within local investment teams and working side-by-side with portfolio managers • Quantitative experts responsible for: Designing bespoke solutions across the full FI risk spectrum Scenario analysis / stress testing Portfolio optimisation Risk monitoring and oversight Performance attribution Developing and maintaining the sophisticated suite of tools used throughout the process • Adds an additional layer of risk monitoring within the investment team, and brings a different perspective to the investment process Quantitative experts providing a different perspective to the process 39 Source: AXA IM as at 30/04/2018
Portfolio Engineering & Solutions A range of complimentary systems – both proprietary and third party Portfolio construction Risk monitoring Performance attribution UBS Delta 3rd party risk management system which provides detailed risk reports, volatility and correlation calculations, overall portfolio tracking error decomposition and performance attribution. Used for ad-hoc requests where additional flexibility is required (historical VaR, stress tests, etc). BAWIFI Or (“Building Allocation Within Fixed Income”): a proprietary portfolio Synview iPA/FIA optimisation tool used during the quarterly Forecasting process to determine A proprietary Fixed Income portfolio decision-making tool which enables A performance attribution tool (developed by an independent team) which is the optimal allocation within the Fixed Income asset class (i.e. between portfolio managers to monitor overall opportunities and potential new extremely flexible, very user friendly and accurate over very long periods of government bonds, inflation-linked, IG credit, HY, proxy swaps). It uses our strategies relative to sources of risk. time. The scope includes all Fixed Income funds globally. own Fixed Income portfolio managers’ views, risk / return factors and other optimisation criteria. The Credit Allocation Optimiser A proprietary optimisation tool used during quarterly Forecasting in order to determine relative sector allocation within the credit universe. The Global Credit Allocation Optimiser A proprietary optimisation tool used during quarterly Forecasting in order to determine relative allocation between investment grade credit markets in different currencies. thinkFolio® Third party front-to-back office tool used globally which enables Fixed Income portfolio modelling, trade order management, compliance and cash management . Expert practitioners who know how to get the best out of a wide variety of tools 40 Source: AXA IM
Investment information AXA WF Emerging Markets Short Duration Bonds Risk and Reward profile Investment objective & strategy Lower risk Higher risk Investment objective To seek performance by investing mainly in short duration debt securities issued in the emerging debt universe in USD over a medium term period. Potentially lower risk Potentially higher reward Investment universe Transferable debt securities issued by emerging countries governments, 1 2 3 4 5 6 7 corporations, public or private companies and supranational entities. The Fund* may invest up to 15% of its assets in bonds in local currency The risk category is calculated using historical performance data and Investment horizon Minimum Three years may not be a reliable indicator of the Sub-Fund's future risk profile. The risk category shown is not guaranteed and may shift over time. Investment team Sailesh Lad , Mikhail Volodchenko The lowest category does not mean risk free. Risk profile taken from I Capitalisation USD Key Investor Information Document. The most recent risk category, which may be different for each share class, is available in the latest KIID. Fund* structure Luxembourg SICAV Launch date 06 September 2012 Additional Risks • Credit Risk : risk that issuers of debt securities held in the Sub-Fund may default on their obligations or have their credit rating downgraded, resulting in a decrease in the Net Asset Value. • Liquidity Risk: risk of low liquidity level in certain market conditions that might lead the Sub-Fund to face difficulties valuing, purchasing or selling all/part of its assets and resulting in potential impact on its net asset value. • Counterparty Risk: risk of bankruptcy, insolvency, or payment or delivery failure of any of the Sub-Fund's counterparties, leading to a payment or delivery default. • Impact of any techniques such as derivatives: certain management strategies involve specific risks, such as liquidity risk, credit risk, counterparty risk, legal risk, valuation risk, operational risk and risks related to the underlying assets. The use of such strategies may also involve leverage, which may increase the effect of market movements on the Sub-Fund and may result in significant risk of losses. • Geopolitical Risk: investments in securities issued or listed in different countries may imply the application of different standards and regulations. Investments may be affected by movements of foreign exchange rates, changes in laws or restrictions applicable to such investments, changes in exchange control regulations or price volatility. *Fund = AXA WF Emerging Markets Short Duration Bonds, a sub-fund of Luxembourg SICAV AXA WF 41 Source: AXA IM as at 30/12/2016.
Investment information AXA WF Global Emerging Markets Bonds Risk and Reward profile Investment objective & strategy Lower risk Higher risk Investment objective To seek both income and growth of your investment, in USD, from an actively managed, risk-adjusted emerging markets bond portfolio. Potentially lower risk Potentially higher reward Investment universe Debt securities issued in emerging countries (Latin America, Eastern Europe, 1 2 3 4 5 6 7 Asia, Africa, Middle East) by governments or quasi government issuers as well as private or public companies denominated in USD, Euro or local currencies The risk category is calculated using historical performance data and Investment horizon Six years may not be a reliable indicator of the Sub-Fund's future risk profile. The risk category shown is not guaranteed and may shift over time. Investment team Sailesh Lad , Mikhail Volodchenko The lowest category does not mean risk free. Risk profile taken from I Capitalisation USD Key Investor Information Document. The most recent risk category, which may be different for each share class, is available in the latest KIID. Fund* structure Luxembourg SICAV Launch date 13 September 2005 Additional Risks • Credit Risk : risk that issuers of debt securities held in the Sub-Fund may default on their obligations or have their credit rating downgraded, resulting in a decrease in the Net Asset Value. • Liquidity Risk: risk of low liquidity level in certain market conditions that might lead the Sub-Fund to face difficulties valuing, purchasing or selling all/part of its assets and resulting in potential impact on its net asset value. • Counterparty Risk: risk of bankruptcy, insolvency, or payment or delivery failure of any of the Sub-Fund's counterparties, leading to a payment or delivery default. • Impact of any techniques such as derivatives: certain management strategies involve specific risks, such as liquidity risk, credit risk, counterparty risk, legal risk, valuation risk, operational risk and risks related to the underlying assets. The use of such strategies may also involve leverage, which may increase the effect of market movements on the Sub-Fund and may result in significant risk of losses. • Geopolitical Risk: investments in securities issued or listed in different countries may imply the application of different standards and regulations. Investments may be affected by movements of foreign exchange rates, changes in laws or restrictions applicable to such investments, changes in exchange control regulations or price volatility. *Fund = AXA WF Global Emerging Markets Bonds, a Sub-Fund of Luxembourg SICAV AXA WF 42 Source: AXA IM as at 30/12/2016.
AXA IM Fixed Income: specialist investment streams Investment streams Closely supported by Buy and Maintain Active Structured Fundamental Credit Research Team 38 dedicated analysts Government Money Markets Alternative Credit Euro – Sterling – Global Euro – Sterling Global Portfolio Engineering & Solutions Leveraged Loans & 8 embedded risk managers / portfolio strategists Aggregate Inflation Euro – Sterling – Global Euro – Sterling – Global Private Debt European, US Liquid Securitisation & Investment Strategy & Macro Investment Grade Credit Government Research Euro – Sterling – US – Global Euro – Sterling – Global Structured Assets European 12 dedicated economists / strategists1 Illiquid Securitisation & Emerging Markets Aggregate Euro – Sterling – Global Structured Assets Fixed Income Trading Desk European 23 dedicated traders Investment Grade Credit Euro – Sterling – US – Global Responsible Investment Team 10 dedicated RI analysts High Yield European – US – Global Independent Risk Management Emerging Markets Global Over 200 professionals Specialised streams supported by vast shared resources 43 Source: AXA IM as at 30/04/2018. (1) Including 11 from the Research & Investment Strategy team, and one dedicated US FI strategist.
Our Global Emerging Markets Fixed Income team Biographies • Sailesh is the Head of Active Emerging Markets Fixed • Mikhail is a Portfolio Manager with over nine years’ Income with over 20 years’ industry experience industry experience covering both the quantitative within the Global Emerging Markets Fixed Income and fundamental aspects of EM Fixed Income. team, where he is responsible for managing global emerging markets portfolios since joining AXA IM in • Mikhail has comprehensive knowledge in evaluating 2015. EM local, sovereign and currency markets through use of quantitative and qualitative analysis and • Sailesh has extensive investing experience in the use models, as well as investing experience in derivate of emerging markets derivatives and FX as well as and cash bonds across the whole EM universe, cash hard and local currency bonds in portfolio including Frontier economies. management. • Prior to joining AXA IM, Mikhail worked for over two • Prior to AXA IM, Sailesh worked for three years at years in the EM team at Old Mutual Global Investors, Ignis Asset Management where he was the Deputy helping to run both local and external currency debt Head of Emerging Markets, responsible for managing funds. Before that, Mikhail spent six years at Ignis both the external and local currency debt positions. Asset Management within the Emerging Markets Prior to that, Sailesh worked for six years at team and Risk team, helping to manage both Henderson Global Investors within their emerging absolute and benchmarked emerging market debt markets team. Before that, Sailesh worked as a trader funds. Sailesh Lad in Emerging Markets at BlueBay Asset Management Mikhail Volodchenko, CFA for four years. Sailesh started his career at Moore • Mikhail is a CFA Charterholder, holds a Master’s Head of Active Emerging Portfolio Manager degree (Distinction class) in Finance from Imperial Capital Management as an economic strategist and Markets Fixed Income then as a trader Business School and a Bachelor’s degree (Upper Second class) in Mathematics with Management • Sailesh holds a Bachelor’s degree (1st class) in Studies from University College London. Financial Economics from Coventry University. Source: AXA IM as at May 2018 44 There is no assurance that any particular individual will be involved in the management of the portfolio for any given period of time, if at all.
Disclaimer Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly. This promotional communication does not constitute on the part of AXA Investment Managers a solicitation or investment, legal or tax advice. This material does not contain sufficient information to support an investment decision. Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision. Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice. The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors. AXA WF Emerging Markets Short Duration Bonds, AXA WF Emerging Markets Short Duration Bonds, and AXA WF Global Emerging Markets are sub-funds of AXA World Funds. AXA WORLD FUNDS ‘s registered office is 49, avenue J.F Kennedy L-1885 Luxembourg. The Company is registered under the number B. 63.116 at the “Registre de Commerce et des Sociétés” The Company is a Luxembourg SICAV UCITS IV approved by the CSSF and managed by AXA Funds Management, a société anonyme organized under the laws of Luxembourg with the Luxembourg Register Number B 32 223RC, and whose registered office is located at 49, Avenue J.F. Kennedy L-1885 Luxembourg. Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. References to league tables and awards are not an indicator of future performance or places in league tables or awards and should not be construed as an endorsement of any AXA IM company or their products or services. Please refer to the websites of the sponsors/issuers for information regarding the criteria on which the awards/ratings are based. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding. Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries. 45
Disclaimer El presente documento está destinado exclusivamente a clientes profesionales de conformidad con las normas MiFID (Directiva sobre Mercados de Instrumentos Financieros). La información detallada y, en su caso, los datos financieros reseñados tienen exclusivamente una finalidad informativa y, en ningún caso, están dirigidos a clientes minoristas y/o inversores finales. La información contenida en el documento está destinada a clientes profesionales y contrapartes elegibles tal y como son definidos en los artículos 205 y 207 del Texto Refundido de la Ley del Mercado de Valores, presumiéndose, por tanto, la experiencia, conocimientos y cualificación necesarios para tomar sus propias decisiones de inversión y valorar correctamente sus riesgos y el de sus clientes. Igualmente, la información y, en su caso, los datos económicos y financieros reseñados no suponen asesoramiento en materia de inversión ni una promoción financiera ni invitación o recomendación de adquisición o inversión, ni constituyen, por sí mismas, una base para la toma de decisiones inversoras ni suponen una garantía de rentabilidad futura de inversiones financieras. El mercado financiero es fluctuante y está sujeto a variaciones y los tipos de cambio pueden sufrir oscilaciones que incidan directamente en la rentabilidad de las inversiones, tanto al alza como a la baja. No debe tomarse como referencia la rentabilidad pasada de los productos pues no implica que se comporte de igual forma en el futuro. El receptor de esta información debe tener presente que la evolución de las variables económicas y los valores de los mercados financieros pueden cambiar significativamente y ser diferentes a los análisis e indicaciones que figuran en este documento. En el supuesto de que se haga referencia a una o varias Instituciones de Inversión Colectiva en particular se recomienda visitar la página web www.axa-im.es con el fin de (i) tener un conocimiento más detallado de las mismas (ii) acceder a información sobre su disponibilidad y registro para su distribución y (iii) conocer sus términos, características y condiciones mediante el análisis del Documento de Datos Fundamentales para el Inversor (DFI) y del correspondiente folleto informativo disponibles en el precitado sitio web. AXA INVESTMENT MANAGERS (AXA IM) no asume responsabilidad alguna por cualquier acto u omisión derivada del mal o incorrecto uso de la información facilitada, declinando toda responsabilidad por el uso incorrecto o inadecuado del presente documento. AXA INVESTMENT MANAGERS GS LIMITED SUCURSAL EN ESPAÑA, tiene su domicilio social en Madrid, Paseo de la Castellana núm. 93, 6ª planta, se encuentra inscrita en el Registro Mercantil de Madrid, hoja M-301801, y se encuentra registrada en la CNMV bajo el número 19 como ESI del Espacio Económico Europeo con Sucursal. 46
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