Emerging
Market Equities
Neptune Investment
Management
For investment professionals only.
Not for use by private investors
Market capitalisation in US$bn
2
2011
10,500x
2011
2,500x
2011
83x
2011
36x
2011
32x
2011
60x
Emerging economy stockmarkets have grown beyond all
recognition
Source: Emerging Stock Markets Factbook 2011. Investments in Emerging Markets are higher risk and potentially more volatile
than those in established markets.
Travel itinerary
 The journey so far….
 Short-term concerns and outlook
 Accessing emerging market growth
3
The journey so far……
Demographics
 “Demographic dividend”
 Burgeoning youth population
– Spending greater share of disposable
income
– Larger work force → more money being
ploughed back into the economy
– “Dependency ratio” → fewer dependents
to support
Exponential population growth fuelling EM economies
Source: Neptune Research, Feb 2012
4
The journey so far……
5
Political
Political regimes across the World (1945-2010)
160
Autocracies
Democracies/partial democracies
Number of countries
(pop. > 500,000)
140
120
100
80
60
40
20
0
1945
1965
1985
Dramatic demographic transition in late 1980s and 1990s
Source: Polity IV Data Series, Dec 2010
2005
The journey so far……
Financial stability
Emerging economies’ average annual inflation rate 1980-2010 (%)
EM governments today fight inflation; before the late
1990s, they did not
Source: International Monetary Fund, World Economic Outlook Database, December 2011.
6
The journey so far……
Financial stability
120
Gross general government debt in advanced and emerging economies
2000 and 2010 (% of GDP)
Advanced economies
Gross government debt (% of GDP)
7
Emerging and developing economies
100
80
60
40
20
0
2000
EM government debt is low compared to developed
markets today and EM historically
Source: International Monetary Fund, World Economic Outlook Database, Apr 2011.
2010
Short-term concerns
 China’s growth concerns
– Inflation dilemma
– Property bubble
– Policy uncertainty clearing
 European solvency crisis
– Recessionary fears
– Confidence crisis
– Political response
 De-risking of portfolios
EMs are well insulated against a European downturn but
cannot come away unscathed from a European fallout
These are Neptune’s personal views and as such the content of this document is deemed to be impartial research.
8
2012 YTD and outlook
 Ongoing policy easing is supportive of EM equities
 YTD global liquidity surge is driving markets
 2011 laggards are rallying the hardest YTD
 Key risks remain in Europe
We believe the best opportunities are in EM rate-sensitive
sectors
These are Neptune’s personal views and as such the content of this document is deemed to be impartial research.
9
Outlook
10
Real global growth forecast (%)
Period
2009
2010
2011
2012e
2013e
US
-3.5
3.0
1.5
2.2
2.6
Eurozone
-4.3
1.8
1.6
-0.5
1.7
Japan
-6.3
4.0
-0.5
1.1
1.0
UK
-4.9
1.4
1.1
0.5
1.8
China
9.2
10.3
9.5
8.4
8.8
Russia
-7.8
4.0
4.3
4.5
5.0
Brazil
-0.6
7.5
3.8
3.3
4.3
India
6.8
10.1
7.8
6.8
7.3
Economic forecasts point to EM economies for growth
potential
Source: Neptune Economics Team, March 2012. Please remember that forecasts are not a reliable indicator of future performance.
The forecasts are Neptune’s personal views and as such this document is deemed to be impartial research. We do not undertake to
advise you as to any change of our views.
Accessing EM growth
 EM listed companies
– Local leaders sometimes best way to access niche areas
 Western listed companies
– Multi-nationals invested globally
– Western brands in EMs e.g. Estee Lauder/Burberry/Rolls Royce
 Corporate (M&A) activity
– Unilever purchases Kalina in Oct 2011
– PepsiCo consolidates ownership of Wimm-Bill-Dann in Sept 2011
Investment opportunities can be accessed via Western
and EM companies
References to specific securities are for illustrative purposes only and should not be taken as advice to invest.
11
Why Neptune for EM exposure?
1.
Long-term exposure to EM
– History of investing in EM as part of global portfolios since 2002
2.
Size and scale
– Nearly £1.6bn invested in EM across the Neptune fund range
3.
Series of firsts
– Launched the first UK long-only Russian equity and Chinese equity income funds
4.
In-house proprietary research
– Combining analysis of macroeconomic drivers, global industry sectors and
individual companies
5.
Team-based process
– Fund managers are also sector analysts, feeding off research from the 24-person
investment team
Think Neptune for emerging markets!
Source: Neptune as at 31.01.12.
12
Accessing EM growth via Neptune fund range
Fund
Fund manager
Fund size
S&P fund
rating
Neptune Balanced
Robin Geffen
£908.8m
N/A
Ewan Thompson
£35.0m
A
Neptune Global Alpha
Robin Geffen
£94.1m
N/A
Neptune Global Equity
Robin Geffen
£1.1bn
AA
Neptune Emerging Markets
Neptune’s flagship funds with exposure to EM growth
Source: Lipper as at 31.01.12. An S&P Fund Management Rating represents an opinion only and should not be relied on when
making an investment decision. “S&P” and “Standard & Poor’s” are trademarks of The McGraw-Hill Companies, Inc. Copyright ©
2011 Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.
13
GDP expectations
14
Neptune’s projection: split of nominal global GDP growth 2009-2014
1980s
1990s
2000-08
2009-14*
Advanced
economies
86%
92%
60%
38%
Emerging
economies
14%
8%
40%
62%
“By 2014, two-thirds of global GDP will be generated by
emerging markets” Robin Geffen, Neptune Investment Management
*Source: Neptune Projection. Please remember that forecasts are not a reliable indicator of future performance. The forecasts are
Neptune’s personal views and as such this document is deemed to be impartial research. We do not undertake to advise you as to
a change of our views. Investments in Emerging Markets are higher risk and potentially more volatile than those in established
markets.
Neptune’s industry recognition
15
Moneywise Fund
Awards 2009 & 2010
North America Sector Winner
Trustnet Awards 2010
Neptune US Opportunities Fund
wins North America award
Neptune European
Opportunities Fund wins Europe ex
UK award
Active North American
Equity Manager Award
High Alpha Equity Manager
Award
UK Equity Small Winner - 3 Years
Equity North America Winner - 5 Years
Contact details
16
Neptune Investment Management Limited
3 Shortlands, London, W6 8DA
Tel: 020 3249 0100
Fax: 020 3249 0123
sales.enquiries@neptune-im.co.uk
www.neptunefunds.com
Adam Hughes, Head of Intermediary Sales
Dennis Pellerito, Manager, UK Strategic Partners
Andrew Taylor, Intermediary Sales Manager
Phil Horton, Sales Manager, Strategic Partners
Sean Cooney, Sales Consultant, Strategic Partners
020 3249 0158
020 3249 0170
020 3249 0161
020 3249 0171
020 3249 0167
Justin Ralph, Sales Support Manager
Angela Ferrar, Senior Sales Support
Andrew Nickson, Sales Support
020 3249 0177
020 3249 0173
020 3249 0213
Calls may be recorded for monitoring and training purposes and for your protection
Important information
17
This document is issued by Neptune Investment Management Limited (“Neptune”), 3 Shortlands, London, W6 8DA which is authorised and
regulated by the Financial Services Authority, FSA number 416015. Details of Neptune's regulatory status and authorisation by regulators
in other countries are available from us on request. The Neptune web address is www.neptunefunds.com
Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us
as to their accuracy or completeness. These are the analyst’s personal views and as such this document is deemed to be impartial
research. We do not undertake to advise you as to any change of Neptune's views. This is not a solicitation or an offer to buy or sell.
Neptune Investment Management Limited has produced this report for private circulation to Investment Professionals only. The material is
not intended for the use of Private Investors. All information is given in good faith but without any warranty.
Neptune Funds are available to any persons that may be marketed to under the Financial Services and Markets Act (Promotion of
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This communication is only intended for persons resident in jurisdictions where such distribution or availability would not be contrary to
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The provision of investment services may be restricted in certain jurisdictions. You are required to acquaint yourself with any local laws
and restrictions on the availability of any services described.
Please check whether such products are available in the country in which your clients are resident. None of the Neptune products are
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Some Neptune Funds may have a high historic volatility rating and past performance should not be a guide for future performance. The
value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may
not get back the original amount invested. These Funds may invest more than 35% in government and public securities in a number of
jurisdictions. Forecasts and past performance are not an indicator of future performance. Investments in Emerging Markets are higher risk
and potentially more volatile than those in established markets. These and other risks are described in the prospectus which should be
read carefully prior to investing.
The current Prospectus, Simplified Prospectus and most recent annual and semi-annual reports can be obtained by calling 0800 587 5051
or downloaded from www.neptunefunds.com.
Any past performance data that has not been shown is due to the information not being available.
Neptune is not authorised to give investment advice and only provides information on Neptune products.