Yale University Presentation
March 5, 2003
1
EPFR: Company Overview
Brief History:
• 1994: EPFR founded (Global Investor Publishing, Inc.), Cambridge, Massachusetts
USA
• 1995-99: Launched Russia Portfolio, Central Europe Portfolio, Brazil Portfolio:
publications for institutional investors
• 2000: Acquired Emerging Market Funds Research, Inc.
Principals:
Dwight Ingalsbe – Managing Director/Co-Founder
Brad Durham – Managing Director/Co-Founder
Ian Wilson – Director, Fund Data
Cameron Brandt – Director, Global Markets/Sectors Analysis
The Database
• 3200 Equity and Fixed Income Funds with $700b in assets
• Global Emerging Markets (GEM), Asia ex-Japan, Pacific, LatAm, EMEA
Regional, Country funds, International/Global funds, Japan country funds, and
developed Europe funds
• Assets tracked account for 80-85% of funds in Asia-Pacific ex-Japan region, 90%
of fund assets in Africa/Middle East, Emerging Europe, Latin America regions
• Includes funds registered in all of the world’s major domiciles: Luxembourg,
USA, Ireland, Canada, Guernsey, Jersey, Cayman, Bahamas, France, etc.
• Data is obtained through direct relationships with fund managers and their
administrators developed over more than a decade
3
The Reports
• Equity/Bond Fund Flows Data: Weekly or
Monthly
• Country/Regional Weightings Data
• Country Flows Data: Equity Fund Net
Buying/Selling by Country
• Sector Weightings Data: GICS Level II
• Regional Data: Asia-Pacific, LatAm, EMEA
• Company Holdings Data
4
EMERGING MARKET & INTERNATIONAL E Q UIT Y F UN D F LO W S
Month Ended July 31, 2002
Assets BoM
Monthly
Net Change
Monthly
Net
Change
Monthly
Portfolio
Chg
Monthly
Portfolio
Chg
M onthly
Flows **
M onthly
Flows
Assets EoM
Fund
US$ mill
US$ mill
%
US$ mill
%
U S $ mill
%
US$ mill
Curr
Domicile
-124.610 -15.11%
-68.494
-8.30%
-56.116
-6.80%
700.265
USD
Lux
Fund
GLO BAL E M E RGIN G M ARKE T F UN DS
AAF Globa l E me rging M a rke ts E quity Fund A
824.875
AAF Globa l E me rging M a rke ts E quity Fund D
0.184
-0.015
-8.07%
-0.015
-8.36%
0.001
0.29%
0.169
USD
Lux
Abe rde e n E me rging M a rke ts T rust
20.993
-1.846
-8.79%
-1.881
-8.96%
0.036
0.17%
19.691
GBP
UK
Aca dia n E me rging M a rke ts Fund
39.783
0.607
1.52%
-2.115
-5.32%
2.721
6.84%
40.389
USD
USA
9.134
-1.435 -15.71%
-1.215 -13.30%
-0.220
-2.41%
7.699
USD
Lux
ACM GI D e ve loping R e giona l M a rke ts P ortfolio A
25.654
-7.385 -28.79%
-1.903
-7.42%
-5.482
-21.37%
18.269
USD
Lux
ACM GI D e ve loping R e giona l M a rke ts P ortfolio B
12.591
-1.029
-8.17%
-0.942
-7.48%
-0.087
-0.69%
11.562
USD
Lux
2.953
-0.223
-7.55%
-0.221
-7.48%
-0.002
-0.07%
2.730
USD
Lux
-11.748 -65.35%
-1.320
-7.34%
-10.428
-58.01%
6.228
USD
Lux
Ace Fund E me rging M a rke ts
ACM GI D e ve loping R e giona l M a rke ts P ortfolio C2
ACM GI D e ve loping R e giona l M a rke ts P ortfolio I
17.976
Active st Lux N e w H orizon Fund
26.804
-2.218
-8.27%
-1.889
-7.05%
-0.329
-1.23%
24.386
EUR
Lux
Active st N e w Globa l E me rging M a rke ts
37.493
-2.525
-6.74%
-2.523
-6.73%
-0.002
-0.01%
34.685
EUR
Lux
AGF E me rging M a rke ts V a lue Fund
24.621
-1.616
-6.56%
-1.291
-5.24%
-0.325
-1.32%
22.152
CAD
Canada
AIG D yna mic E me rging W orld Fund plc
32.826
-1.314
-4.00%
-1.314
-4.00%
0.000
0.00%
31.512
USD
Ireland
-0.041 -12.70%
-0.021
-6.37%
-0.020
-6.33%
0.282
USD
Ireland
-1.391
-6.36%
-1.391
-6.36%
0.000
0.00%
20.464
USD
Ireland
AIG Globa l E me rging M a rke ts Fund A
0.324
AIG Globa l E me rging M a rke ts Fund C
21.855
AIM D e ve loping M a rke ts Fund A
153.237
-15.934 -10.40%
-14.360
-9.37%
-1.574
-1.03%
137.303
USD
USA
AIM D e ve loping M a rke ts Fund B
45.252
-6.513 -14.39%
-4.278
-9.45%
-2.235
-4.94%
38.740
USD
USA
AIM D e ve loping M a rke ts Fund C
3.575
-0.349
-9.77%
-0.338
-9.46%
-0.011
-0.31%
3.225
USD
USA
Alta mira Globa l D iscove ry Fund
7.938
-0.452
-5.70%
-0.317
-3.99%
-0.136
-1.71%
7.209
CAD
Canada
5
As of July 31, 2002
COUNTRY WEIGHTINGS
GLOBAL EM ERGING M ARKET EQ UITY FUNDS
FUND
Fund Size
Capital International Emerging Markets Fund
Emerging Markets Growth Fund
Emerging Markets Trust
3,475.04
14,796.58
444.80
CitiEquity Emerging Markets Fund
CG Pays Emergents
Magellan
Commercial Union PP Emerging Countries Fund
Cordius Invest Emerging Markets
181.63
6.40
64.36
492.45
28.81
CS Equity Fund Emerging Markets Fund
196.24
Deutsche Emerging Markets Equity Fund Inst
Deutsche GSF Global Emerging Markets Fund
106.14
726.37
Dresdner GDF Emerging Markets Fund
Driehaus Emerging Markets Growth Fund
9.06
36.38
AFRICA &
MID EAST
51.82
50.95
50.30
49.91
50.39
53.72
53.72
51.24
49.87
50.56
62.34
62.34
58.90
58.90
62.80
62.80
54.27
57.64
55.96
55.11
55.11
57.37
18.97
26.59
27.19
26.40
26.73
14.93
14.93
13.75
13.79
13.77
14.31
14.31
16.40
16.40
11.70
11.70
14.22
14.21
14.22
15.99
15.99
13.11
9.48
12.60
12.71
11.94
12.42
12.69
12.69
21.15
20.26
20.71
9.00
9.00
8.90
8.90
7.34
7.34
10.64
10.94
10.79
10.64
10.64
14.99
11.90
5.20
5.04
4.70
4.98
17.09
17.09
11.73
11.19
11.46
13.73
13.73
13.80
13.80
13.37
13.37
13.32
13.94
13.63
14.83
14.83
9.21
China
3.01
3.18
2.69
5.21
3.69
1.57
1.57
2.13
3.86
3.00
0.62
0.62
1.40
1.40
4.79
4.79
7.55
3.27
5.41
3.43
3.43
5.32
3.29
3.46
3.43
3.24
3.38
4.87
4.87
3.39
6.81
5.10
5.50
5.50
6.90
6.90
1.28
1.28
6.30
6.67
6.49
7.96
7.96
7.99
Hong
Kong
2.77
0.37
0.33
0.33
0.34
0.00
0.00
11.94
6.28
9.11
0.25
0.25
0.00
0.00
5.32
5.32
0.00
0.00
0.00
0.00
0.00
0.71
India
Indonesia
Korea
11.74
10.04
9.83
9.78
9.88
4.85
4.85
3.81
3.93
3.87
5.18
5.18
4.30
4.30
5.45
5.45
6.17
6.18
6.18
3.93
3.93
2.46
2.12
2.30
2.32
2.25
2.29
0.91
0.91
8.31
7.73
8.02
1.19
1.19
1.60
1.60
1.06
1.06
1.64
1.66
1.65
1.27
1.27
4.00
15.25
18.62
18.56
18.67
18.62
22.33
22.33
12.94
15.05
14.00
26.28
26.28
25.50
25.50
26.52
26.52
21.68
22.97
22.33
22.30
22.30
18.16
6
INDUSTRY GROUP WEIGHTINGS/GICS II - ASIA E X -JAPAN RE GIO N AL E Q UIT Y F UN DS
FUND
GMO Asia Fund
G rantham, Mayo, van Otterloo Average
HSBC AsiaPacific Fund
HSBC GIF Asian Equity Fund
HSBC GIF Asian Opportunties Fund
ING Asia-Pacific Equity Fund
H SBC Asset Management Average
LG Asian Smaller Companies Fund Limited
Oppenheim East Asia Special Fund
Lloyd G eorge Management Average
Matthews Asian Growth & Income Fund
Matthews Pacific Tiger Fund
Matthews I nternational Capital Management Average
Merrill Lynch IIF Asian Emerging Markets Fund
Merrill Lynch I nvestment Managers Average
Morgan Stanley IF Asian Equity Portfolio
Morgan Stanley SICAV Asian Equity Fund
Van Kampen Asian Equity Fund
Morgan Stanley I nvestment Management Average
Liberty Newport Tiger Fund
Newport Pacific Management Average
Pictet Institutional Fund Asian Equities
Pictet Asset Management Average
M&G South-East Asia Fund
Prudential Portfolio Managers Average
Schroder Pacific Growth Fund
Schroder I nvestment Management Average
Scudder Pacific Opportunities Fund
Scudder Kemper I nvestments Average
Sogelux Fd Equities Emerging Asia
Societe G enerale Asset Management Average
Threadneedle Asian Growth Fund
Threadneedle I nvestment Management Average
Peer Average
Size US$ mill
120.234
24.937
150.592
36.415
10.748
56.480
211.430
121.208
127.918
59.108
47.049
165.165
69.612
506.761
76.431
166.357
223.774
91.521
12.112
272.602
3,641.207
Energy
Materials
Capital
Goods
Commercial
Services &
Supplies
Transportation
Automobiles &
Components
%
%
%
%
%
%
4.03
4.03
0.85
0.97
0.92
6.28
2.26
0.00
1.40
0.70
2.40
0.00
1.20
2.79
2.79
1.10
0.95
1.05
1.03
0.00
0.00
3.08
3.08
1.85
1.85
3.95
3.95
2.89
2.89
1.42
1.42
1.78
1.78
1.59
8.97
8.97
7.67
10.48
11.02
5.72
8.72
3.60
7.90
5.75
1.60
2.20
1.90
14.29
14.29
5.98
5.66
5.97
5.87
0.00
0.00
14.98
14.98
4.57
4.57
0.00
0.00
11.90
11.90
8.40
8.40
12.66
12.66
7.46
2.09
2.09
3.37
10.70
11.08
5.00
7.54
11.90
3.30
7.60
0.00
0.00
0.00
1.29
1.29
6.12
8.48
4.56
6.39
5.66
5.66
8.17
8.17
3.32
3.32
2.64
2.64
1.09
1.09
1.55
1.55
7.64
7.64
4.75
0.00
0.00
1.75
0.84
0.58
0.00
0.79
0.90
0.00
0.45
0.00
2.30
1.15
0.00
0.00
0.41
0.00
0.39
0.27
0.00
0.00
1.92
1.92
0.00
0.00
0.50
0.50
0.00
0.00
2.41
2.41
0.00
0.00
1.05
3.31
3.31
4.82
8.66
8.82
5.66
6.99
0.00
8.60
4.30
2.70
0.00
1.35
0.50
0.50
4.21
3.81
4.07
4.03
0.00
0.00
5.65
5.65
1.35
1.35
3.31
3.31
1.91
1.91
2.56
2.56
5.41
5.41
3.34
2.73
2.73
3.43
3.16
3.40
0.00
2.50
1.00
12.10
6.55
4.00
1.60
2.80
6.62
6.62
4.29
5.41
5.58
5.09
0.00
0.00
1.23
1.23
1.24
1.24
2.69
2.69
3.21
3.21
6.68
6.68
1.95
1.95
2.93
7
CROSS BORDER COUNTRY FLOWS (AGGREGATE)
Month Ending Fe
Mkt Value of
Holdings
Beginning of Month
Increase (decrease)
Mkt Value of Holdings
during month
N e t P urcha se s
(S a le s) for
the Month
N e t P urcha se s
(S a le s) a s %
of BoM H oldings
US$ mill
US$ mill
U S $ mill
%
1.250
-0.062
-0.008
-0.62%
China
4,006.720
191.524
218.946
5.46%
India
5,418.970
-223.467
68.937
1.27%
Indonesia
1,155.020
-143.879
58.719
5.08%
15,230.540
-660.712
74.942
0.49%
Malaysia
1,992.300
77.222
21.118
1.06%
Pakistan
6.800
-0.521
0.161
2.37%
457.730
20.159
4.321
0.94%
43.510
-1.083
0.023
0.05%
Taiwan
5,466.380
663.780
-267.020
-4.88%
Thailand
1,896.930
136.473
-21.713
-1.14%
35,676.150
59.433
158.427
0.44%
Country
ALL F UN DS CO M BIN E D
Bangladesh
Korea
Philippines
Sri Lanka
All Funds: T ota l E me rging Asia
8
Latin Ame rica Matrix
COUNT RY
Navigator
EPFR-Smart
M oney Index
----------GEM / LatAm fund
aggregate
weightings
Country
Bets
----------Largest GEM
equity fund
country bets
Country
Flows
-----------
Cumulative
Country Flows
-----------
Fund manager
net
buying/selling
% of total
assets
YTD cumulative fund
net buying / selling
in $USm
Arge ntina
LatAm Funds
0 .7 1 %
GEM Funds
6 .5 5 %
Brazil
LatAm Funds
3 6 .2 0 %
Gartmore PSF
Emerging Markets
Strategy Fund:
1. Quilmes Industrial:
$ 1 4 .8 9 m
100
+6 .0 5 %
50
2. Telecom
Argentina: $ 9 .5 9 m
-
3. Siderca: $ 4 .5 0 m
1,500
1. CVRD:
$ 5 7 0 .0 7 m
2 .4 1 %
AGF Emerging
Markets Value
Fund:
1,000
-0 .7 8 %
300
250
Chile
LatAm Funds
7 .8 0 %*
2. Petrobras:
$ 5 3 6 .5 6 m
500
1 1 .6 0 %
-
GEM Funds
0 .8 5 %
----------Combined GEM,
LatAm regional and
country funds
154
1,
15
05
203 0 0
1,
1, 4
30
5 1,
3
(0
50
0)
)
1,
2
(
10
5
1,0
2
(
15
0
(
10
2
0
00
0
2)
)
50
1, 15
0
(
2
0
5
0
)
1,
10
0
(
3
0
0
0
)
(
3
5
0
)
1,
0
0
05
0
(
4
0
0
1,3
(
0
4
0
5
0)
)
0
(
5
0
(
5
0
)
10
(0
6
55
0
00
0
2)
)
00
9
5
(
6
0
5
0
0
(
7
0
0
)
92
0
((
7
02
5)0
0)
)
8
0
5
(
8
0
0
)
(
(8
1,
5
0
0
)
8
0
0
1,10
5
(
9
0
00
)
7
5
((
1,
9
0
50
0
)
7(
(
0
1,
0
15
-015
0
(5
00 )
(
1,
2
0
6
5
(
0
1,
2
5
((
1,
4
3
)
0
65
0
10
0
03
) 5
5
(0
1,
0
)
1,
4
0
5
0
(
0
1,
)
4
5
45
5(
(
0
1,
)
5
0
(0
1,
5
00
5
))
10
5 0
4
0
0
0
)
(
1,
0
6
)
0
3
5
(
0
1,
6
5
35
0(
((
0
1,
07
7
) (5
010 0 )
1,
-6
0
)
2
(
0
1,
0
8
)
0
0
)
2
0(
0
1,
0
8
)
5
15
(
(
10
0
1,
0
9
)
0
5
0
( 1,
09
) 5
10
0
)
50
00
)
0
)
0)
)
(-8
)
0
)
( 15
-0
00
))
-
150
GEM Funds
0 .1 3 %
T op Equity
Holdings
Genesis Emerging
Markets Fund:
1. Cia. Telecom.
Chile: $ 1 0 7 .8 7 m
200
+0 .0 2
150
100
6 .3 9 %
3. Ambev:
$ 4 0 9 .0 7 m
50
-
2. Antofagasta
Holdings: $ 6 3 .6 m
3. Banco Santander:
$ 5 4 .8 6 m
9
CLIENTS
EPFR CLIENTS
• Clients are leading global investment banks, brokerages and institutional
investors. Partial list includes:
• ABN AMRO
• Batterymarch Financial
• BNP Paribas
• Bear Stearns
• BV Capital
• CLSA Emerging Markets
• CSFB
• Deutsche Bank
• Goldman Sachs
• Hyundai Securities
• HSBC
• ING Barings
• J.P. Morgan Chase
• Fidelity Investments
• Merrill Lynch
• Morgan Stanley
• Nomura Securities
• Pictet Asset Management
• Schroders AM
• Salomon Smith Barney
• State Street Global Advisors
10
PM Strategy/Insights
• Original, investment oriented research for investment
management firms on international/emerging markets
11
PM Outlook on Emerging Markets: sentiment improving
- EMs drawing attention for the right reasons for first time since early 90's
- Three years of outperformance of developed markets
- Valuations compelling v. developed world: GEMs at forecasted ‘03 p/e of 8.6x
- Corporate governance gap narrowed in wake of Enron, WorldCom, et al.
- Earnings growth sounder, higher dividend yield than developed markets
- Commodities: EM universe a good way to play commodities cycle
12
Risk Factors to the Rosy Scenario
- Double dip recession/deflation scenario
- Prolonged war with Iraq: dampening growth forecasts
- PMs prefer a bad certainty to uncertainty
13
General Trends in EM fund management
EM Converging into International Asset Allocation
- EAFE to ACWI
- EPFR fund mergers/liquidations rising
- EM portfolio management teams absorbed into international groups
- Giving EMs a neutral weighting in a bigger pool of assets ($1 trillion+) good for EMs
Country v. Sector in Asset Allocation
- Do equity returns depend more on global sector factors or country factors?
- In recent years funds have adopted a sector approach due to rising correlation of countries
- EMs the exception: Country factors still more important
- Low country correlation = higher diversification = lower risk
14
Trends in the fund data
Investors paying more attention to fund flows
• 2002 first year of US mutual fund outflows since year after '87 market crash
• Previously taken for granted
Why follow fund flows?
• Signal a broadening or contracting of the investor base
• Indicate shifts in risk aversion to the asset class
• Provide evidence of trend chasing
• Show changes in liquidity
15
2002: Only Asia ex-Japan equity, EM bonds attract inflows
2002 Emerging Market Fund Flows
EM Equity
Asia ex-Japan Equity
LatAm Equity
EMEA Equity
EM Bond
1,500.000
1,000.000
500.000
In US$ millions
0.000
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
1/
9/
7/
4/
2/
5/
9/
2/
6/
2/
6/
3/
1/
8/
6/
0/
3/
7/
0/
4/
8/
5/
3/
2/
9/
7/
/
/
/
/
/
/
/
/
1
2
1
2
1
2
2
2
1
1
3
1
2
1
2
2
1
1
/
/
/
1
4
5
6
7
1/
1/
2/
2/
3/
3/
4/
5/
6/
7/
7/
8/
8/
9/
9/
10
11
12
10
11
12
-500.000
-1,000.000
-1,500.000
-2,000.000
-2,500.000
Source: EmergingPortf olio.com Fund Research
16
EM Bond Fund Flows
- Last week's EM bond
inflows historic high
- 2002 first year of positive
inflows into bond funds
- EM bond funds return
+ 17% p.a. past 5 years
- EM bonds poor reputation:
sovereigns safer than you think
17
Regional Allocation Themes
Asia near all-time high in GEM equity fund weightings: 53.7%
GEM Equity Fund Regional Weightings
Jan. '96 - Aug. 2002
60.00
50.00
Latin America
Europe
30.00
Africa & Mideast
Cash
20.00
10.00
M
n96
ay
-9
Se 6
p96
Ja
n9
M 7
ay
-9
Se 7
p97
Ja
n9
M 8
ay
-9
Se 8
p98
Ja
n9
M 9
ay
-9
Se 9
p99
Ja
n0
M 0
ay
-0
Se 0
p00
Ja
n0
M 1
ay
-0
Se 1
p01
Ja
n0
M 2
ay
-0
2
0.00
Ja
% of total net assets
Asia
40.00
18
Regional Allocation Themes
Demise of the LatAm regional fund
Latin America Equity Fund Flows
Jan-96 to Nov-02
Monthly Flows
Cumulative Flows
600.000
2000
1000
400.000
0
8
Ju
l-9
8
Ja
n9
7
Ju
l-9
7
Ja
n9
6
Ju
l-9
6
Ja
n9
5
Ju
l-9
5
Ja
n9
4
l-9
Ju
Ja
n9
4
3
Ju
l-9
3
Ja
n9
2
Ju
l-9
2
-2000
-200.000
-3000
Cumulative, in US$ millions
-1000
0.000
Ja
n9
Monthly, in US$ millions
200.000
-400.000
-4000
-600.000
-800.000
-5000
-6000
Source: EmergingPortfolio.com Fund Research
19
Country Allocation Themes
• GEM funds enter ’03 with key
overweights in Brazil, India, Russia and
Thailand
• Will these country bets help funds beat
their benchmark in the year ahead?
• Year to date index returns
Russia: +7.54%
Thailand: +6.83%
Inida: -3.07%
Brazil: -8.02%
20
Country Allocation Themes
Emerging Market Country Flows* YTD - Nov 1
In US$ millions
1500
1000
500
0
-500
-1000
-2000
Brazil
Malaysia
China
Russia
Israel
Thailand
Chile
Argentina
Croatia
Turkey
Peru
Czech Rep
South Africa
Hungary
Philippines
Poland
India
Hong Kong
Indonesia
Singapore
Taiwan
Mexico
Korea
-1500
Source: EmergingPortfolio.com Fund Research
* Fund net buying/selling based on 700 funds with $150b in assets
21