Dec 2012
Uncertainties Cloud Market Opportunities
Derek Yung
Senior Managing Director
AllianceBernstein Investment Taiwan Limited
AllianceBernstein Investments Taiwan Limited is the Master Agent of AllianceBernstein fund in Taiwan. AllianceBernstein Investments Taiwan Limited 57F-1, No.7, Sec. 5, Xing Yi Rd., Taipei City
110, Taiwan R.O.C. 02-8758-3888 AllianceBernstein Investments Taiwan Limited is a separate entity and operated business independently.
Since investing involves risk to principal, positive results and the achievement of an investor’s goals are not guaranteed. There are no assurances that any investment will be profitable. No
information contained in the results should be construed as investment advice. Please consult your Financial Advisor for personalized financial guidance. The information contained herein reflects,
as of the date hereof, the views of AllianceBernstein and sources believed by AllianceBernstein to be reliable. No representation or warranty is made concerning the accuracy of any data compiled
herein. In addition, there can be no guarantee that any projection, forecast or opinion in this article will be realized. The views expressed herein may change at any time subsequent to the date of
issue hereof. This article is provided for informational purposes only and under no circumstances may any information contained herein be construed as investment advice.
©2012AllianceBernstein L.P.
Markets Performed Better than They Felt…
Returns in US Dollars
3Q 2012 Returns
YTD 2012 Returns
28 Feb 2009 – 30 Sep 2012
Annualized Returns
World
US
Europe
Equities
Japan
Emerging Markets
Global High Yield
Credit
Emerging Market Debt
Global Corp
Gov’t
Bonds
US Gov’t
Japan Gov’t
Euro Gov’t
Commodities
Alternatives
Treasury Inflation
Protected Securities
Global Real Estate
Investment Trusts
Past performance does not guarantee future results.
As of 30 September 2012
Global High Yield, Global Corp, Japan Gov’t and Euro Gov’t in hedged USD terms. All other non-US returns in unhedged USD terms.
An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect
fees and expenses associated with the active management of a portfolio. Please see the end of the presentation for index definitions.
Source: Barclays Capital, DJ-UBS, FactSet, FTSE, MSCI, Standard & Poor’s and AllianceBernstein
AllianceBernstein.com
1
…Because of Real Economic and Capital-Market Uncertainties…
BUSINESS
‘Fiscal Cliff’ Becomes Top Investor
Concern for September
BofA:
September 18, 2012
Greek Leaders Struggle With
Spending Reductions
September 20, 2012
Spain, Italy 10-Year Bonds Drop;
Spanish Yield Rises to 6.46%
Italy slashes growth forecast for
2012. Rome expects 2.4% contraction
August 28, 2012
while eurozone PMI falls.
September 19, 2012
August 5, 2012
Fearing an Impasse in Congress,
Industry Cuts Spending
WORLD
September 10, 2012
Asia Trade Data Show
Weakening Demand
AllianceBernstein.com
China, euro-zone PMI data
highlight global fears
September 20, 2012
US inflation fears
rise after QE3
September 17, 2012
2
We Expect Modest Global Growth to Continue
Global Purchasing Managers’ Index (PMI)
 Tension between uncertainties’ cumulative
effect on global growth…
Official Rates (Percent)
Emerging Markets
 …and highly stimulative fiscal and monetary
policies…
Developed Markets
AllianceBernstein Real GDP Growth Forecasts (Percent)
 …should culminate in a slightly better 2013
PMI through August 31, 2012; official rates and GDP forecasts as of September 30, 2012
Source: JPMorgan Chase, Markit and AllianceBernstein
AllianceBernstein.com
3
Attractive Equity Potential Tempered by Volatility
Long-Term
Expected Return (%)
Near-Term
Expected Global
Equity Volatility (%)
Asset Allocation
Our View of Equity Allocation: Long-Term 60/40 Investors
Long-Term Average
70
15.5
14.6
60
50
Global Stock Index
Equity Allocation (%)
Normal
40
Historical analysis and current forecasts do not guarantee future results.
Data do not represent past performance and are not a promise of actual results or range of future results.
As of 1 October 2012
Global sovereign bonds are represented by global, developed, sovereign, seven-year constant-maturity nominal bonds; global stocks by a universe similar to MSCI World.
Both are reported in and hedged into US dollars.
*As of 30 September 2012. Equity here refers to 70% US equity (MSCI USA) and 30% international equity (25% MSCI EAFE, 5% MSCI EM). **Represented by the MSCI All
Country World Index.
An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect
fees and expenses associated with the active management of a portfolio. Please see end of presentation for index definition.
Source: MSCI and AllianceBernstein
AllianceBernstein.com
4
Market Environments Inform Portfolio Strategy
Potential Market Environments and Portfolio Strategies
Financial
Crisis/Recession
Negative real growth
Fears of deflation
Risk On/Risk Off


1%–2% global GDP growth
Fears shift between inflation
and deflation
Recovery/Normalization


Market Volatility
High and sustained
Frequent shifts between high
and low volatility
Low and sustained
Market Return
Negative
Modest
High
Investment Focus
Preservation
Income
Appreciation
Bonds
Governments
Credits
High-beta credit
Real Assets
TIPS
Real estate
Commodities
Equities


Currencies
Defensives
US
Hedged


Stability
Global
Partial hedge


3%–5% global GDP growth
Healthy reflation
Economic Outlook



Cyclical
Non-US
EM
Unhedged/carry exposure
As of 30 September 2012
There is no guarantee that the portfolio strategies presented would yield positive results, or that the market environments presented will occur.
Source: AllianceBernstein
AllianceBernstein.com
5
Maintaining Our Corporate Exposure
Corporate Spreads to Governments
 Valuations are fair
Euro Area
US
Nongovernment Debt:* Net Issuance
 Lack of supply is generally supportive of
nongovernment debt, including corporates
Leverage:** US
 Fundamentals suggest we are in the middle to late
stages of the credit cycle
Issuance and leverage as of June 30, 2012; spreads through September 30, 2012
*US-dollar investment-grade, high-yield and emerging-market corporates, mortgagebacked securities, commercial mortgage-backed securities, asset-backed securities
(including card, student loan and manufactured home) and collateralized loan obligations
**Gross Leverage = Total Debt/EBITDA; Net Leverage = (Total Debt – (Cash + Cash
Equivalents))/EBITDA; both metrics are for the Barclays Capital US Investment-Grade
Corporate Index
Source: Barclays Capital and JPMorgan Chase
AllianceBernstein.com
Gross
Net
6
Corporate Spreads Remain Wider than Average
Spreads to Governments
Global Investment-Grade Corporates
US CMBSs
US AAA ABSs
US Mortgages
Emerging-Market Debt
Average
Global High-Yield Bonds
Through 30 September 2012
Averages are for the periods shown; emerging-market debt is US-dollar denominated only.
Source: Barclays Capital and AllianceBernstein
AllianceBernstein.com
11
Corporate Fundamentals Remain Relatively Strong…
Revenue
1Q12
3Q11
1Q11
3Q10
1Q10
3Q09
1Q09
3Q08
1Q08
1Q07
 Growth is still positive, although trend is declining
40
30
20
10
0
(10)
(20)
(30)
3Q07
Y/Y % Change
Revenue and Operating EPS Trends: S&P 500
OEPS
EBITDA Margin Trends: US Credit
 Margins remain high in both investment-grade and
high-yield industrial companies…
Percent
24
20
Investment-Grade
16
12
High-Yield
8
Dec 05 Nov 06 Oct 07 Sep 08 Aug 09 Jul 10
Jun 11 May 12
Cash/Debt Ratios: US Investment Grade Corporates
 …and cash positions, while below recent peaks,
continue to be strong
Top chart and bottom as of end June 2012; Middle chart as of May 2012.
Source: Bank of America Merrill Lynch, J.P. Morgan, Morgan Stanley
AllianceBernstein.com
8
…but Signs of Mid-Cycle Behavior Are Appearing
Stock Repurchase Announcements: S&P 500
50
USD Million
 The number of share buybacks is increasing
25
20
15
10
5
0
Jan 08
25
Dec 08
Nov 09
Oct 10
Value of Announcements (Right)
0
Aug 12
Sep 11
No. of Announcements (Left)
US Credit Ratings: Ratio of Upgrades to Downgrades
 Fewer ratings upgrades are causing the
upgrades/downgrades ratio to decline
% of Issuers
4
0
(4)
Investment-Grade
(8)
High Yield*
(12)
(16)
2002
2003
2005
2006
2008
2009
2011
2012
Weekly S&P 500 EPS Forward Estimates
130
2008
 Earnings-per-share estimates are higher than
during the financial crisis, but falling
USD
110
90
2007
AllianceBernstein.com
2013
2006
Initial Estimates
2010
2005
70
50
Jan 04
EPS revisions as of September 21, 2012
*Trailing three-month rate
Source: Bank of America Merrill Lynch, Capital IQ, Morgan Stanley
2012
2011
2009
2004
Jan 06
Jan 08
Revised Estimates
Jan 10
Jan 12
Final Outcome/Latest Estimates
9
Opportunities in US High-Yield and Emerging-Market Corporates
High-Yield Defaults Remain Low (Percent)
High-Yield Default Rate‡
 We believe high-yield default rates should
remain low
Base Recession
Case
Maturities Pipeline: High Yield Bonds vs. Leveraged Loans
 Forthcoming maturities in high-yield bonds are
relatively low, suggesting modest refinancing risk
Net Leverage: Emerging-Market vs. US Corporates**
 We see select opportunities in emergingmarket corporates, which have strong
fundamentals
**Net leverage less cash refers to the last 12 months ratio of debt capital (bank loans, bonds, etc.) to
EBITDA (earnings before interest, tax depreciation and amortization)
‡Data from J.P. Morgan; reflects par-weighted default rates. Recession scenario assumes that every
bond trading below 70 cents on the dollar defaults. As of 4 September 2012. .
Source: Moody’s Investors Service, JPMorgan Chase and AllianceBernstein
AllianceBernstein.com
10
Globalizing Portfolios Has Diversified Interest-Rate Risk
EM Currency Has Not Provided Diversification
Country Returns Vary Across Cycles*
Three-Year Correlation to Equity†
Global Bond Returns (Hedged to USD): Percent**
2008
2009
2010
2011
Australia
15.1
Euro Area
4.1
UK
7.2
UK
16.1
Euro Area
7.9
US
13.8
Japan
1.4
US
5.9
US
9.8
UK
2.9
Canada
11.7
UK
-1.6
Canada
5.6
Australia
8.9
Australia
2.8
UK
10.4
Canada
-1.9
Japan
2.9
Canada
8.3
Japan
2.2
Euro Area
8.4
Japan
6.7
8.4
US
-3.6
Australia
–5.9
10.0
Euro Area
1.0
Australia
0.3
6.9
Japan
2.6
Euro Area
2.6
13.5
1.0
YTD*
6.2
0.7
0.2
-0.5
S&P 500
Barclays
Capital Global
Treasury
Index
Hedged
Barclays
EmergingCapital Global Market Currency
Treasury
Index
Unhedged
Developed
Currency
Three-Year Volatility†
15.4
US
2.1
Canada
1.7
0.8
Best
Performer
16.9
10.5
Worst
Performer
Gap
between
best
and worst
9.8
6.5
2.7
S&P 500
MSCI World
Barclays
Barclays
EmergingCapital
Capital Global
Market
Global
Treasury
Currency
Treasury
Index
Index Hedged Unhedged
Developed
Currency
Past performance does not guarantee future results. These returns are for illustrative purposes only and do not reflect the performance of any fund.
*Left graph as of 20 September 2012; right graph as of 30 September 2012
**Returns represented by respective Barclays Capital government bond indices within each country. An investor cannot invest directly in an index and its performance does not
reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio.
†EM currency represented by WisdomTree Dreyfus Emerging Currency Fund (CEW); global treasury hedged and unhedged represented by Barclays Capital Global Treasury
Index; developed currency represented by PowerShares DB US Dollar Index Bullish Fund (UUP).
Source: Barclays Capital, Bloomberg, Haver Analytics, J.P. Morgan, MSCI, National Accounts, S&P/Dow Jones, US Department of the Treasury and AllianceBernstein
AllianceBernstein.com
11
Diversification of Risks In an Uncertain Environment Is Highly Important
Annual Returns in USD (Percent)
Best
2002
2003
2004
2005
EMD Local
29.1
High Yield
29.0
EMD Local
23.1
EMD USD
10.7
EMD USD
13.1
EMD USD
25.7
EMD USD
11.7
Global
Gov’t (H)
5.0
US
EMD Local High Yield
Treasuries
17.8
11.1
11.8
Inv.-Grade Inv.-Grade Inv.-Grade
Corporate Corporate Corporate
10.1
8.2
5.4
Global
US MBSs
US MBSs
Gov’t (H)
8.8
3.1
4.8
Global
US
US MBSs
Gov’t (H) Treasuries
4.7
8.0
2.2
Worst
Gap between
Best and
worst
High Yield
–1.4
Global
Gov’t (H)
2.0
30.5
27.0
2007
2008
US
EMD Local EMD Local
Treasuries
12.0
16.3
13.8
US
Global
High Yield
Treasuries Gov’t (H)
11.9
9.0
9.1
2009
2010
High Yield
58.2
High Yield
15.1
US
EMD Local
Treasuries
15.6
9.8
EMD USD
28.2
EMD Local
13.1
EMD USD
8.5
EMD USD
14.7
EMD USD
12.0
Inv.-Grade
Corporate
8.2
High Yield
12.1
EMD Local
2.9
EMD USD
9.9
US MBSs
6.9
US MBSs
8.3
Inv.-Grade
Corporate
18.7
US
Treasuries
2.8
US MBS
5.2
EMD USD
6.3
Inv.-Grade
Corporate
–4.9
EMD Local
16.6
Inv.-Grade
Corporate
4.3
Global
Gov’t (H)
3.3
Global
Gov’t (H)
5.6
Inv. Grade
Corporate
4.6
EMD Local
–6.9
US MBSs
5.9
EMD USD
–10.9
Global
Gov’t (H)
1.0
US
Treasuries
3.1
High Yield
1.9
High Yield
–26.2
8.9
14.4
40.0
High Yield
2.7
US MBSs
2.6
US
Inv. Grade
Treasuries Corporate
3.5
1.7
19.6
2006
9.0
Inv.-Grade
Corporate
9.0
US
Treasuries
5.9
2011
YTD*
Global
Gov’t (H)
5.5
Inv.-Grade
Corporate
8.7
Global
Gov’t (H)
3.7
US MBSs
5.4
High Yield
5.0
US MBSs
2.8
US
Treasuries
–3.6
Global
Gov’t (H)
3.6
EMD Local
–6.4
US
Treasuries
2.1
61.8
11.5
16.2
13.5
US MBSs
6.2
Past performance does not guarantee future results. These returns are for illustrative purposes only and do not reflect the performance of any fund. Diversification does not
eliminate the risk of loss. High yield is represented by the Barclays Capital US Corporate High Yield Index; EMD (Emerging Markets debt) USD are represented by the JPM
EMBI-Global; EMD Local is represented by the JPM GBI-EM Index unhedged. Corporates (investment grade) are represented by Barclays Capital US Corporate Investment
Grade. US Treasuries are represented by the Barclays Capital US Treasury Index. US MBSs are represented by Barclays Capital US MBS Index. Global Gov’t. (H) is
represented by the Barclays Capital Global Aggregate Treasury Bond Index. An investor cannot invest directly in an index and its performance does not reflect the
performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. Please see
the end of the presentation for index definitions.
*Through 30 June 2012
Source: Barclays Capital, JPMorgan Chase and AllianceBernstein
AllianceBernstein.com
12
Stability
Lower Volatility Opportunities in Relative Value Strategies
Market-Neutral Is Usually Detached
from Market Fluctuations*
Traditional
Long/Short Concentrated
Differentiated Stock Returns May Favor
Relative Value Strategies*
Excess Return in Different Dispersion Environments
Rolling Three-Year Correlation of Market-Neutral Index
Correlations with Equities
Intra-Market Correlations Fall**
Ratio (×)
0.70
Correlations with Bonds
0.50
S&P 500
0.30
0.10
Jun 10
MSCI World
Dec 10
Jun 11
Dec 11
Jun 12
Past performance and historical analysis do not guarantee future results.
Left graph as of 31 December 2011; top right graph as of 31 March 2012; bottom right graph as of 30 June 2012
An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. Please see end of presentation for
index definition.
*Market-neutral is represented by HFRI EH: Equity Market Neutral Index, Left graph: equities by S&P 500 Index and bonds by Barclays Capital US Aggregate Bond Index.
**Correlation using rolling daily returns over six months. Correlation is a statistical measure of how two values move in relation to each other.
Source: Bank of America Merrill Lynch, Barclays Capital, Bloomberg, FactSet, Hedge Fund Research, MSCI, S&P/Dow Jones, US Federal Reserve and AllianceBernstein
AllianceBernstein.com
13
Where Are Valuations of Asia ex Japan Today?
Price to Book
Price to Forward Earnings
+1 SD
Average
-0.5 SD
Ratio (x)
Ratio (x)
+0.5 SD
-1SD
+1 SD
+0.5 SD
Average
-0.5 SD
-1SD
Past performance does not guarantee future results.
Through September 30, 2012
Ratios not available for MSCI Asia ex Japan index prior to 2005, so calculated from Bernstein’s Asia ex Japan universe of stocks
Averages and standard deviations calculated using the inverted ratios (book to price, and forward earnings to price)
Source: FactSet and AllianceBernstein
AllianceBernstein.com
14
Conclusion
Core bonds should be diversified, global and currency hedged to offset riskier assets
High-yield bonds appear attractive. Bear in mind that they are still subject to the fluctuating
nature of investments
Stocks still seem attractive based on long-term valuations, but higher volatility and uncertainty
warrant a modest underweight
Equity allocations should diversify across strategies with diverse benchmark sensitivity and risk
levels
Investment portfolios should be informed by the market environment and actively managed to
capitalize on evolving opportunities
AllianceBernstein.com
15
Appendix
AllianceBernstein.com
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AllianceBernstein.com
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AllianceBernstein.com
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A Word About Risk
The information contained herein reflects, as of the date hereof, the views of AllianceBernstein and sources believed by AllianceBernstein to be
reliable. No representation or warranty is made concerning the accuracy of any data compiled herein. In addition, there can be no guarantee
that any projection, forecast or opinion in this article will be realized. The views expressed herein may change at any time subsequent to the
date of issue hereof. This article is provided for informational purposes only and under no circumstances may any information contained herein
be construed as investment advice.
Fixed-Income Securities Risk. Investment in the fixed-income portfolios entails certain risks. Past performance is not a guide to future
performance. Investment returns and principal value of these funds will fluctuate so that an investor’s shares, when redeemed, may be worth
more or less than their original cost. The value of underlying fixed-income investments of a portfolio can vary dramatically, in response to the
activities and results of individual companies or because of general market and economic conditions and changes in currency exchange rates.
The value of a portfolio’s investments may decline over short- or long-term periods. Specific fixed-income risks include interest rate risk, lowerrated and unrated investments risk, prepayment risk, sovereign debt obligations risk, corporate debt risk. These and other risks are described
in a fund’s prospectus. Prospective investors should read the prospectus carefully and discuss risk and the portfolio’s fees and charges with
their financial adviser to determine if the investment is appropriate for them.
This document is provided for informational purposes only and is not intended to be an offer or solicitation, or the basis for any contract to
purchase or sell any security or other instrument, or for AllianceBernstein to enter into or arrange any type of transaction as a consequence of
any information contained herein. Under no circumstances may any information contained herein be construed as investment advice.
Past performance is no guarantee of future results. There is no guarantee that any forecasts or opinions in these materials will be
realized. The information herein reflects prevailing market conditions and our judgments as of the date of the presentation, which are subject to
change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of
all information available from public sources. No representation or warranty is made concerning the accuracy of cited data. Opinions and
estimates may be changed without notice and involve a number of assumptions which may not prove valid. In addition, there can be no
guarantee that any projection, forecast or opinion in these materials will be realised. Neither this presentation nor any of its contents may be
used for any purpose without the consent of AllianceBernstein.
AllianceBernstein.com
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A Word About Risk
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