April 2011
Perspectives
The situation in Japan //////// Macroeconomic Analysis Japan: local or global effect? //////// Asset Allocation Bonds: prioritize selectivity in 2011 //////// Expertise Focus
www.am.natixis.com CORPORATE AND INVESTMENT BANKING / INVESTMENT SOLUTIONS / SPECIALIZED FINANCIAL SERVICES
Summary Macroeconomic analysis
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Publishing Director: F. Lenoir /// Editorial Committee: Th. Benoist, B. Boulay-Mégard, H. Henriques, Ch. Lacoste, K. Massicot, Ph. Le Mée, R. Monclar, F. Nicolas, Ch. Point, S. de Quelen, ML. Rouy, JP. Snel, B. Thiery, Ph. Waechter ///
Coordination - Writing: C. Boutou, N. Clémot /// Graphic Design: F. Dupertuys /// Contributors: A. Demode, R. Cyrille, P. Berthelot, D. Rolley, S. Potard.
PAGE 3
Editorial
Since the March 11 earthquake, the situation in Japan has been the subject of much commentaries and debates. At a Natixis AM’s Workshop on March 23rd, the Natixis AM’s experts attempted to provide some elements of response to the question "Japanese crisis, commodities, energy: what are the scenarios?" For Philippe Waechter, chief economist and Franck Nicolas, head of global asset allocation & ALM, over and above the human tragedy, the Japanese economy has been weakened and there are numerous unknowns: the real impact of the earthquake on the country and the rest of the world, the reconstruction conditions, the potential issues surrounding nuclear, etc. While the full effects of this catastrophe remain difficult to quantify at present, these two experts don’t, however, see the recent events calling into question long term global economic activity and the dynamism of the Japanese economy. In this April edition, you can also find an Expertise Focus dedicated to the bond markets on pages 10 to 13, markets in which a more pro-active and selective approach will be required in 2011. Natixis Asset Management has thus chosen to prioritize three strategies to take advantage of the fixed income opportunities (high yield, emerging debt and the inflation theme), notably through the Natixis Euro High Income Fund, the Loomis Sayles Emerging Debt and Currencies Fund and the Natixis Global Inflation Fund. As usual, you can also find the summary of Natixis Asset Management’s international offer [pages 14 to 17 of this issue].
Philippe zaouati Deputy CEO, Head of Business Development
Natixis Asset Management
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Perspectives /// April 2011
PAGE 4
macroeconomic analysis
The situation in Japan Since the March 11 earthquake, the situation in Japan has been the subject of much commentary and debate. Over and above the human tragedy, some thoughts on the possible direction of the Japanese economy seem in order. A number of question marks effectively remain: reconstruction, the knock-on effects of the earthquake for the rest of the world and, lastly, issues surrounding nuclear.
 Lessons from the past In 1995, the immediate impact of the Kobe earthquake was a -2.6% decline in industrial output at national level in January, followed by a significant rebound in February (+2.2%) and March (+0.95%). This ability to react was also seen in a rapid reconstruction effort. 15 months after the earthquake, 98% of the productive capacity of the manufacturing sector had been rebuilt.
Philippe waechter Chief Economist
A shock as such a scale can provoke important fears of knock-on effect for the rest of the world...
Perspectives /// April 2011
The detailed research into the impact of such events is recent, dating back to 1993. It shows that, in this type of situation, the ability to react is very dependent on the level of development of the affected country. Strong and structured institutions enable the issues and priorities to be rapidly identified, and projects and their conditions to be launched. An educated human capital facilitates the reconstruction process. Production effectively results from implementation of a combination of work and capital. When an earthquake occurs, capital is destroyed and must be replaced by work. The more this human capital is educated, the better it adapts to this new combination. In other words, the more developed the country, the greater its ability to react rapidly. At another level, the impact of the reconstruction will have a positive effect on productivity since the new equipment installed will incorporate more technical progress. This will facilitate the elimination of the shock and the return to a more positive economic situation. Japan should thus rapidly rebuild its economy even if the magnitude of the shock recently undergone is significantly greater than that of Kobe. In the short term, however, economic activity is likely to turn down before growth resumes. Japan may also be affected by regional arbitrages linked to a redistribution of activity.
While the economic activity of a developed country may be relatively little affected overall, the region that has suffered the shock may nonetheless experience a negative long-term impact on activity.
 Knock-on effects for the rest of the world Japan is the third largest world economy and the short-term slowdown it will suffer could penalize global economic activity. On this point, it is worth highlighting two separate but complementary points: n Exports from the major industrialized countries to Japan are relatively low. Exports of goods and services from the United States to Japan, for example, represented 6% of their total exports in 2010 versus around 2% of exports (excluding the euro zone) for the euro zone. The slowdown will thus have no major mechanical effect for the Western industrialized countries. Of the developed countries, Australia will be the most affected given the size of its commodity exports to Japan. Chinese exports to Japan are slightly below 8% of its total exports. In other words, the direct impact of reduced exports to Japan will be limited and will not derail global economic growth given its robust state if we are to believe the first economic statistics available for 2011. n The PMI-type economic indicators point to strong growth in activity that is fairly evenly distributed between geographies. The global economic situation is relatively good with every world region a beneficiary. This positive trend will enable any potentially negative impact from Japan to be offset.
Natixis Asset Management
PAGE 5
macroeconomic analysis
Two further points: n In the short term, given the greater globalization than in 1995, there could be some adjustments linked, firstly, to the lack of immediate availability of Japanese product inventories and, secondly, the production of products to replace those manufactured in Japan in countries within the region (South Korea, Taiwan, etc. ). n One final important point relates to the financing of the reconstruction. The repatriation of Japanese capital may be envisaged in that Japan has a very positive net external position. Investments in the rest of the world, particularly in bonds, could be sold depending on the needs.
 The nuclear issue This question has two crucial aspects: n The first is the potential impact of a nuclear shock if the problem of the Fukushima plant is not resolved. The first part of this article was based on the assumption that the incident at the plant will be contained. Were this not to prove the case, a very significant rise in risk aversion with regard to Japan would not be limited to the financial markets. This could put a stop to the recovery in the Japanese economy. The use of the conditional tense is justified here as witnessed in the 2001 counter-example when an increase in risk aversion had been expected for all the Western economies after the September 11 terrorist attacks but did not, in the end, materialize.
n The second point would be any revisiting of nuclear as a viable energy source. The additional energy requirements for the development of the emerging countries are very substantial and questioning the role of nuclear would require finding alternative energies such as gas, oil and coal. This would be reflected in a rise in the price of these commodities and an increase in CO2 emissions. ///
Written on 28/03/2011
Japan - Industrial output - Post-Kobe monthly change 3.00 2.00 1.00 0.00 -1.00 -2.00 -3.00
Kobe earthquake jan 94
jul 94
jan 95
jul 95
jan 96
jul 96
Source: Datastream - Natixis Asset Management
* The net external position is the balance between assets held outside Japan and the assets held by non-residents in Japan. These assets can be both tangible (e.g. factories) and financial (bonds).
Natixis Asset Management
Perspectives /// April 2011
PAGE 6
Asset allocation
Japan : local or global effect? March was marked by the events that hit Japan. The worst seems to have been avoided even if it is too early to draw all the conclusions. The consequences for this already highly-indebted country are numerous: the paralysis of a part of Japanese production, a major medium-term reconstruction effort, the possible questioning of nuclear and the impact on conventional energies. All the effects of this catastrophe are, at present, difficult to quantify but do not necessarily compromise global growth.
franck nicolas Head of Global Asset Allocation & ALM Risk categories
Tactical allocation*
Risk subcategories
02/11(1) 03/11(2)
Fixed income Equities Fixed income United States Euro zone UK Emerging markets Japan
+ = = -
=
Euro issuers
Corporate Invest. Grade
+
+
Equities
United States Euro zone UK Japan Emerging markets
= + = + -
+ = = = -
Currencies
Dollar Yen Sterling
-
= = -
=
=
-
-
++
++
(against the euro)
Commodities Oil Gold Industrial materials
(1) Investment committee as of 24/02/2011. (2) Investment committee as of 16/03/2011.
Scale from -- to ++ * Weighting gap vs. strategic allocation of investor.
Perspectives /// April 2011
Natixis Asset Management has nonetheless reduced the risk in its model portfolio by adopting a more prudent stance when faced with the proliferation of major social unrest in the Near and Middle East, soaring commodity prices that are liable to be driven to new highs by geopolitics, the ECB discourse on potential monetary tightening as of April and the difficulties of the Bank of England and a number of emerging regions in keeping the lid on inflation.
Fixed income For the moment, within fixed income, the priority should be on holding significant reserves of cash and inflation-linked bonds. The exit from accommodative monetary policies (quantitative easing is expected to end this June in the United States) is approaching and imported inflation risks could see a rise in long-bond yields. While credit represents a moderate risk, its absolute performance could be impacted by the possible rise in interest rates. Lastly, investing in emerging bonds seems risky since inflationary pressures are present in several of these regions. The monetary authorities are effectively going to have to make a choice to the detriment of short-term growth at a time when food supplies are expensive.
Equities Natixis Asset Management has slightly reduced its exposure to equities by neutralizing an over-weight posted over the past few months and reinforced since the end of 2010. A return to the more defensive market segments (e.g. return to the United
States, adding to positions in the cyclical sectors that have been laggards in Europe, lightening of positions in the financials that will be subject to new solvability tests by the summer, etc.) has also contributed to reducing overall risk. We now have an underweight on emerging equities given the temporary uncertainties in these regions. Note: global economic growth, corporate earnings and liquidity all remain positively oriented.
Currencies There are still concerns about Japan since it is very tempting to finance some of the reconstruction work by repatriating the capital currently invested in US bonds. This could lead to negative effects by driving the yen higher relative to the dollar. Some G20 central banks have thus mobilized to try to curb the rise in the yen. In the same vein, but for other reasons, the emerging currencies continue to be favored by the interest rate tightening inherent in combating imported inflation. The ideal policy mix remains to be found since this phenomenon is countered, in particular, by currency appreciation but remains detrimental, on the other hand, to a country’s external trade.
Commodities Commodity prices have remained firm, stoking overall inflation in several world regions with risks of transmission to core inflation via production costs. ///
Written on 29/03/2011
Natixis Asset Management
PAGE 7
Market data
As of 28/02/2011 France
Value
CAC 40 CAC Mid 100 IT CAC 20 SBF 120 SBF 250
1 year
4 110.35 7 538.90 4 029.39 3 071.81 3 005.88
Europe
10.83% 24.46% 21.21% 12.87% 13.10%
Value
MSCI Europe EuroStoxx 50 DAX Footsie
1 year
99.17 3 013.09 4 249.07 5 994.01
United States
16.16% 10.43% 25.79% 11.94%
Value
Dow Jones S&P 500 Nasdaq Brent Crude Future
Value
Nikke誰 Hong Kong Singapore Shangha誰
World
Value
MSCI World
18.41% 20.17% 24.31% 44.06%
Rate
5.60% 5.53% 4.88% 17.99%
4.92% 13.24% 9.44% 24.04%
5 years French Treasury Bond 5 years USTN 10 years French Treasury Bond 10 years USTN 30 years French Treasury Bond 30 years USTN
2011 3.86% 1.31% -5.63% 3.55%
19.26%
0.689% 1.094% 1.379% 1.767% 0.150%
1 year 0.370 0.438 0.421 0.552 0.020
2011 -0.128 0.088 0.152 0.260 0.020
Fixed income
2011
1 year
1 351.65
Eonia 3 months Euribor 6 months Euribor 1 year Euribor Fed Funds
2011
1 year
10 624.09 23 338.02 3 010.21 315.14
Money market Rate
3.98% 7.89% 4.82% 1.59%
1 year
12 226.34 1 327.22 2 782.27 111.80
Asia
2011 8.03% 4.21% 9.17% 7.36% 7.33%
2.677% 2.135% 3.547% 3.413% 4.036% 4.489%
1 year 0.399 -0.149 0.144 -0.179 -0.003 -0.041
2011 0.54 0.127 0.185 0.126 0.155 0.15
Fixed income Value Euro/Dollar Euro/Yen (100) Euro/Sterling Dollar/Yen
2011 5.59%
1.3812 113.1617 0.8492 81.9300
1 year 1.21% -6.69% -5.27% -7.80%
2011 2.96% 4.00% -0.89% 1.02%
Monthly index Global industrial output and commodities index 350
160
CRB* commodity index
150
300
140
250
130
200
120
150
110
100 50 2000
100 Industrial output 2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
90
2011
Sources: CPB, Datastream, Natixis Asset Management
The direction in commodity prices mainly depends on the trend in economic activity. As seen in this chart, the profile of the CRB* commodities index (excluding energy) tracks that of global industrial output. This activity trend has been conditioned by that of the emerging countries, especially by Asia and, particularly, China. These countries are seeing rapid development driven, principally, by industry and the manufacturing sector, leading to a strong and sustained increase in the prices of industrial products such as metals, basic materials and oil. The increase in commodity prices does not reflect speculative behavior but primarily indicates an acceleration in the activity of the emerging countries.
Highly accommodative monetary policies with very low interest rates can accentuate these trends. However, this acceleration only exists due to the very rapid growth in this emerging demand. * Commodity Research Bureau.
Natixis Asset Management
Perspectives /// April 2011
PAGE 8
Natixis AM Workshop FOCUS
Japanese crisis, commodities, energy: what are the scenarios? On March 23rd, the Natixis Asset Management Workshop focused on commodities brought together some 200 participants around the question "Japanese crisis, commodities, energy: what are the scenarios?" A question to which the Natixis AM experts were able to provide some elements of response with presentations and analysis from Philippe Waechter, chief economist, Franck Nicolas, head of global allocation & ALM, Brigitte Le Bris, head of international fixed income and currencies, HervĂŠ Guez, head of extra-financial research and Emmanuel Bourdeix, CIO equities, asset allocation and structured products.
A limited impact on the Japanese economy The recent events affecting Japan should only have a limited impact on the global economy. "The affected regions represent only 6-7% of the Japanese economy. Research shows that with stable institutions and a highly-qualified population, an earthquake in a developed country does not have any serious consequences for the growth dynamic ", said Philippe Waechter, chief economist. Remember that fifteen months after the Kobe earthquake, Japan had recovered 98% of its industrial production capacity.
Soaring commodity prices The increase in commodity prices will, however, be sustainable. There has been a change in trend since the early 2000s as seen in the chart below. Until then, increases were followed by decreases. This no longer seems to be the case: the quantum shift has come from the growth in demand from emerging countries. Their proportion of total demand has moved from 33% to 47% currently and is set to reach 50% in 2040 since, according to the forecasts, 90% of the increase in demand will come from this zone. "In the short term, this new situation is impacting corporate earnings and changing the behavior of households who are reducing their consumption. It is also weighing on the public accounts and generating interest rate hikes aimed at containing the increase in inflation" commented Philippe Waechter.
Diverging monetary policies 25 central banks have increased their policy rates and the ECB followed suit in April. One third of the reduction in interest rates took place after the failure of Lehman and has now been reversed. The increase in long-bond yields should, however, remain limited. "The Fed continues to prioritize growth and employment over inflation. Furthermore, the emerging countries, which are those where the inflationary pressures are the strongest, can counter inflation by managing the level of their currencies", highlighted Brigitte le Bris, head of international fixed income and currencies. In her view, the increase in short-term interest rates could, however, be a bit higher, leading to a flattening in the yield curve. The events in Japan and the resulting issues surrounding nuclear have led to a rise in risk aversion. This could continue or even increase in the short term were the nuclear problem or the tensions in the Middle East to get worse or the austerity budgets imposed on Greece, Ireland and Portugal generate significant social unrest. For Emmanuel Bourdeix, CIO equities, asset allocation and structured products: "In the medium term, however, a number of factors point to lower risk aversion: abundant liquidity, the continued low level of interest rates even after a modest rate hike and the improvement in the situation of companies linked to the economic recovery".
CRB* Commodity Index 300
Base 100 in 2010
250 200 150 100 50 0 1951
1956
1961
1966
1971
* Commodity Research Bureau.
Perspectives /// April 2011
1976
1981
1986
1991
1996
2001
2006
2011
Source: Datastream - Natixis AM
Natixis Asset Management
PAGE 9
Natixis AM Workshop FOCUS
Commodities and investment opportunities Commodities constitute a "bona fide" asset class which is decorrelated from equities, offering attractive investment opportunities over different periods than equities, particularly during the current reflationary period. Commodities also perform particularly well* in a low interest rate environment since they don't deliver a yield with the return exclusively in the form of capital gains. "The selection of commodities based on their cycle (short for agricultural products, long for finite commodities) and forward curves (etc.) are all tactical signals enabling the optimization of performance", said Franck Nicolas, Head of Global Allocation & ALM. "But their use requires effective operational management
of factors like the choice of indices, SRI issues, the liquidity of the underlyings, physical delivery, etc." The increase in commodity prices is effectively a long-term phenomenon. "Since 1800, the world population has increased by a factor of ten whereas it only doubled in the preceding period. It is set to reach 9 billion in 2040. And yet, fossil and mineral reserves are now only measured in decades", reiterated HervĂŠ Guez, head of extra-financial research. "Prospecting for new sources of energy will become increasingly expensive. We are going to have to look farther afield and secure production against adverse climate conditions". Prices should also remain volatile since they are increasingly escaping the producer cartel.
In conclusion, HervĂŠ Guez highlighted that the Japanese shock opens the way to the debate on the role of nuclear which was sidelined in Copenhagen. "It is bound to influence the respective weight of the different energies. Renewable energies should benefit from the current context and the continued debate on nuclear, particularly solar energy which, after a difficult implementation phase and a second euphoric phase approaching a bubble, should return to favor with investors."
* The quoted figures refer to the past. Past performance is not a reliable indicator of future performance.
The Natixis Asset Management Workshop on March 23 rd gathered some 200 participants.
Further information: consult the dedicated Newsletter Natixis AM Workshop available on: www.am.natixis.com Natixis Asset Management
Perspectives /// April 2011
PAGE 10
Expertise FOCUS
Fixed income: what are the opportunities in 2011?
2011 outlook The natural risks in Japan and geopolitical risks in the Middle Eastern countries seem to counterbalance the expectations of an increase in policy rates from the ECB. The bond outlook for 2011 thus remains unchanged at this stage. Risky assets effectively remain underpinned by: n accommodative interest rate policies in the developed countries, n stronger US growth and increasingly driven by private demand, n a gradual deficits,
reduction
in
public
n c orporate fundamentals remain solid,
that
n t he stabilization of the banking system.
The gradual increase in interest rates and inflation driven by commodities offers a favorable environment for seeking return in the different segments of the international bond markets: n h igh yield: positive carry trade and default rate expected to be very low, ne merging: flows decelerating but fundamentals still positively oriented, n i nflation-linked: exposure to the rise in commodity prices.
The Natixis Asset Management teams have pinpointed three main themes in order to seize the market opportunities: equities, selectivity in the bond markets and volatility. Having addressed the equities theme last month, this edition of Expertise Focus is dedicated to selectivity in the bond markets during 2011.
Fixed income: three key strategies To increase return while limiting exposure to Euro-denominated sovereign risk, Natixis Asset Management prioritizes a pro-active management approach within the following diversification segments: n Two carry strategies focusing on the market segments with attractive returns such as high yield, and emerging debt which offers a source of additional value via currencies n Exposure to inflation-linked bonds to benefit from the impact of the rise in commodity prices.
1. High yield Thanks to the continued expansion of its primary market (a record level of issuance last year), high yield should continue to offer numerous investment opportunities given the financing needs of issuers seeking an alternative to bank debt and the current level of spreads.
2. Emerging debt Concerning emerging bonds in currencies with returns that remain attractive, the Natixis Global Asset Management multi-boutique model offers exclusive access to two additional sources of expertise: that of Natixis Asset Management in Europe and that of Loomis Sayles & Co, L.P. in the United States detailed on pages 12 and 13.
3. Inflation in the bond markets For investors not able to benefit from the rise in commodity prices via other asset classes (in particular, equities), international inflation-linked bonds present a promising alternative for the next few months. n Even if the oil price were to stabilize, the past increase should continue to be reflected in inflation over the next few months. n The Natixis Asset Management specialists also expect further upwards pressure on food prices.
Perspectives /// April 2011
Natixis Asset Management
PAGE 11
Expertise FOCUS
Item : high yield Against a backdrop of low interest rates and modest growth, high yield credit bonds offer an attractive risk/return ratio. Companies are refinancing massively in the fixed income market given the low interest rates and the tighter bank lending conditions linked to the implementation of Basel III.
Focus on Natixis Euro High Income Fund Why high yield ? High yield bonds have a number of attractions: n a verage returns well above those of investment grade bonds in return for higher volatility, thus offering an attractive risk/return ratio, nh igh yield also constitutes a good source of diversification, this asset class having a low or negative correlation with the other asset classes,
Philippe Berthelot
n l astly, with a very marked increase in the size and volume of issuance in recent years, the high yield bond market is no longer considered a niche market.
Head of credit management Natixis Asset Management
After two excellent years for high yield credit is it too late to invest? 2009 and 2010 were two very good years for high yield credit bond issuance. In 2011, valuations remain attractive but we are still far from normalized levels. We expect a tightening in risk premia. We nonetheless believe that it is not too late since the company fundamentals remain solid and the default rate is expected to decline.
The fund in brief Natixis Euro High Income Fund(1): enables investors to diversify and dynamize their portfolios in seeking to benefit from the return on high yield credit bonds. Fund specifics n A high yield corporate universe (including financials) n A bottom-up approach using fundamental credit research n A principal source of alpha: stock selection n Significant dedicated resources: • 2 senior credit portfolio managers • 11 experienced credit analysts • 2 quantitative analysts Fund features Management company: Natixis Global Associates Subadviser: Natixis Asset Management Legal form: SICAV (1) sub-fund Inception date: November 18, 2010 Minimum recommended investment horizon: 3 years Net assets: EUR 104,21 millions at 28/02/2011 ISIN code: LU0556616935 (I/C EUR) Fees TER(3) : 1% Maximum subscription fee: 3% Minimum initial subscription: EUR 100 000
(1) Natixis Euro High Income Fund is a sub-fund of the Luxembourg Sicav Natixis International Funds (Lux) I., whose main risks are credit risk (including high yield risk) and risk of loss of capital. For full information in connection with risks, see the prospectus at www.am.natixis.com (2) Rating below BBB- (Standard & Poor's Ratings Services), Baa3 (Moody's Investors Service, Inc.) or equivalent for Fitch Ratings.
Co-portfolio managers n Philippe Berthelot, CFA n Vincent Marioni
(3) Total Expense Ratio.
Natixis Asset Management
Perspectives /// April 2011
PAGE 12
Expertise FOCUS
Item : emerging debt Emerging bonds constitute a source of diversification in a global allocation. The advantage of this asset class for investors is exposure to the strong economic growth of the emerging countries coupled with their solid fundamentals.
Focus on Loomis Sayles Emerging Debt and Currencies Fund Why emerging debt? In the wake of 2009, 2010 was a good year for emerging debt. Economic growth and debt reduction constitute a virtuous circle. Firstly, the growth of the emerging countries is above that of their developed counterparts.
David Rolley Portfolio manager Loomis Sayles & Co, L.P.
Secondly, the fundmentals of the emerging countries are improving and are, in many cases, better than those of the developed countries. Emerging country credit ratings are improving, with a growing proportion of investment grade issues in, for example, the JP Morgan GBIEM global diversified index. Lastly, average returns on emerging debt, and particularly on debt issued in local currencies, are higher than those on developed debt.
How do you take advantage of these opportunities with the Loomis Sayles Emerging Debt and Currencies Fund? We prioritize emerging debt issued in local currencies, a market that has grown considerably in the past few years. We have an opportunistic approach based on a long-term vision, focused on the research and acquisition of under-valued stocks. In an investment universe covering both emerging sovereign and corporate debt, our two main sources of value added are country/currency selection and positioning on the yield curve.
What are your thoughts on the possible increase in interest rates consistent with the inflationary concerns in the emerging countries? While an interest rate hike would penalize the "bond" driver of the fund, it would however favour the "currency" driver. The Loomis Sayles Emerging Debt and Currencies Fund should thus also be able to benefit from this specific context.
The fund in brief Loomis Sayles Emerging Debt and Currencies Fund(1): for investors looking to diversify their bond portfolios thanks to an opportunistic approach on emerging country bonds. Fund specifics n An opportunistic fund focused on emerging bonds n A selection of sovereign and corporate bonds, issued in local currencies n A value bias in the stock selection and choice of currencies n A recognized specialist in bond portfolio management: Loomis Sayles & Company, L.P. Fund features Management company: Natixis Global Associates Subadviser: Sayles & Company, L.P. Legal form: SICAV (1) sub-fund Benchmark: JP Morgan Government Bond Index Emerging Markets global diversified (indicative figure) Inception date: September 27, 2006 Minimum recommended investment horizon: 3 years Net assets: USD 110,85 million at 28/02/2011 ISIN code: LU0255249772 (I/C USD) Fees TER(2): 1.10% Maximum subscription fee: 3% Minimum initial subscription: USD 100 000 Co-portfolio managers
(1) The Loomis Sayles Emerging Debt and Currencies Fund is a sub-fund of the Luxembourg Sicav Natixis International Funds (Lux) I., whose main risks are those of interest rates, credit, inflation, volatility and liquidity. For full information in connection with risks, see the prospectus at www.am.natixis.com
n David Rolley, CFA n Edgardo Sternberg
(2) Total Expense Ratio.
Perspectives /// April 2011
Natixis Asset Management
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Expertise FOCUS
Item : inflation Between interest rate hikes and global inflation, geopolitical concerns and regulatory changes, inflation-linked bonds represent an attractive alternative in the bond markets.
Focus on Natixis Global Inflation Fund After an eventful start to the year in the financial markets, what is the outlook for the Natixis Global Inflation Fund? On interest rates, the outlook is divided between a more hawkish tone from central bankers in the developed countries and uncertainty surrounding the impact of the Japanese catastrophe. On inflation, the growth of the emerging countries and the crisis in the Middle East is stoking the increase in commodity prices. Although we don’t see any underlying inflationary pressure, global inflation is nonetheless increasing in all the geographical regions.
Sophie Potard Head of GT Govies and Inflation-linked Management Natixis Asset Management
With a relatively neutral interest rate component and an increasing inflation component, the context is particularly positive for the fund.
How do you manage the dichotomies between the inflation expectations in the emerging and developed countries in the fund? The Natixis Global Inflation Fund’s global investment universe offers multiple opportunities. In a positive market context for the emerging countries, we can benefit from the yield pick-up derived from diversification strategies: n t he inflation carry with arbitrages in favour of emerging inflation-linked bonds relative to those of the G7 countries. ne xposure to emerging currencies, and principally those of the commodityexporting countries.
This fund is for what type of investor? The Natixis Global Inflation Fund is particularly suitable for two types of investor: n those looking for an inflation hedge in their bond allocation since an inflationlinked bond fund is structurally attractive over the long term, acting as both a shock absorber in the event of interest rate hikes and a hedge against the inflation risk. n those looking to participate in the revaluation of risky assets but who are constrained in terms of capital consumption(3) and for whom inflation-linked bonds represent a good alternative.
(1) Natixis Global Inflation Fund is a sub-fund of the Luxembourg Sicav Natixis International Funds (Lux) I., whose principal risks are those of interest rates and currencies. For full information in connection with risks, see the prospectus at www. am.natixis.com
The fund in brief Natixis Global Inflation Fund(1): for investors looking to benefit from the diversification offered by international inflation-linked bonds. Fund specifics n Invested mainly in inflation-linked sovereign bonds n A broad universe: from the G7 to the emerging countries n Dual exposure to inflation-linked bonds and currencies n 5 sources of alpha: inflation arbitrage, exposure to real interest rates, break-even strategies, Euro-denominated sovereign debt selection and two diversification strategies (exposure to commodity currencies and inflation-linked bonds in the emerging countries) Fund features Management company: Natixis Global Associates Subadviser: Natixis Asset Management Legal form: SICAV (1) sub-fund Benchmark: Barclays World Government Inflation Linked All Maturities Index hedged in Euros Inception date: June 30, 2006 Minimum recommended investment horizon: 2 years Net assets: EUR 46,03 million at 28/02/2011 ISIN codes: LU0255251166 (I/C EUR), LU0390502267 (I/C USD) Fees TER(2): 0.65% Maximum subscription fee: 2.50% Minimum initial subscription: € 100 000 (I/C EUR), $ 100 000 (I/C USD) Portfolio manager n Sophie Potard
(2) Total Expense Ratio. (3) Solvency II.
Natixis Asset Management
Perspectives /// April 2011
PAGE 14
our international Product range
Brief overview of our international product range The key expertise of Natixis Asset Management dedicated to international clients are gathered in n 8 sub-funds of the Natixis International Funds (Lux) I SICAV and the Impact Funds SICAV (pages 14 to 16), n and in a selection of 27 complementary funds covering all asset classes (listed on page 17).
Sub-funds of the Natixis International Funds SICAV
Matthieu Belondrade & François Théret
Natixis Emerging Europe Fund Get the most out of the growth in the emerging European zone as part of a conviction management strategy • Investment universe: Emerging Europe Equities • Benchmark: MSCI Emerging Europe Index (indicative only) • Minimum recommended investment period: 5 years • Risk Indicator: Target tracking-error ex ante between 6 and 10
I, A I, A I, D R, A R, A R, D
EUR USD USD EUR USD USD
LU0147917792 LU0095830922 LU0095831060 LU0147918923 LU0084288595 LU0084288678
Thierry Cuypers
Natixis Europe Smaller Companies Fund Make the most of attractive European small and mid caps in a conviction investment style • I nvestment universe: European Equities •B enchmark: MSCI Europe Small Caps NDR (indicative only) •M inimum recommended investment period: 5 years •R isk Indicator: Target tracking-error ex ante between 2 and 7 (indicative, barring crisis context)
I, A I, D R, A R, D
EUR EUR EUR EUR
LU0095827381 LU0095828272 LU0064070138 LU0064070211
Christine Lebreton
Natixis Impact Europe Equities Fund Benefit from the growth potential of socially responsible European companies through conviction-based management • Investment universe: European equities • Benchmark: MSCI Europe (indicative only) • Minimum recommended investment period: 5 years
I, A I, D R, A R, D
EUR EUR EUR EUR
LU0095828512 LU0095828785 LU0066549592 LU0066549832
See the full prospectus which is the only legally binding document. See the Legal Information on page 2 for important information about the funds.
Perspectives /// April 2011
Natixis Asset Management
PAGE 15
our international Product range
Sub-funds of the Natixis International Funds SICAV
Clothilde Malaussene
Natixis Euro Aggregate Plus Fund Benefit from a broad range of fixed income investment opportunities • Investment universe: Mainly Euro denominated government or private issuers rated Investment / Diversifying fixed income assets • Benchmark: Barclays Capital Euro Aggregate • Minimum recommended investment period: 3 years
I, A I, D R, A R, D
EUR EUR EUR EUR
LU0161120547 LU0391146155 LU0161121271 LU0390502184
Sophie Potard
Natixis Global Inflation Fund Get the most out of diversification in inflation-indexed bonds in a global universe • Investment universe: International inflation-linked bonds • Benchmark: Barclays World Government Inflation linked all maturities Index hedged in euro • Minimum recommended investment period: 2 years
H-I, A H-I, D I, A I, D R, A R, D
USD USD EUR EUR EUR EUR
LU0390502267 LU0390502341 LU0255251166 LU0255251596 LU0255251679 LU0255251752
Hanna Stekelorom
Natixis Impact Euro Corporate Bond Fund Combining responsability and conviction-based strategies in the eurocredit universe • Investment universe: Mainly Euro-denominated investment grade debt securities • Benchmark: Barclays Euro Aggregate Corporate Index • Minimum recommended investment period: 3 years
I, A I, D R, A R, D
EUR EUR EUR EUR
LU0155376477 LU0391146072 LU0155380156 LU0390502770
See the full prospectus which is the only legally binding document. See the Legal Information on page 2 for important information about the funds.
Natixis Asset Management
Perspectives /// April 2011
PAGE 16
our international Product range
Sub-funds of the Natixis International Funds SICAV
Philippe Berthelot & Vincent Marioni
Natixis Euro High Income Fund High total investment return through a combination of high current income and capital appreciation • Investment universe: The fund invests primarily in sub-investmentgrade euro-denominated debt securities • Benchmark: BofA Merrill Lynch Euro High Yield, BB-B Rated Constrained Index • Minimum recommended investment period: 3 years
R, C I, C S, C RE, C Y, C I, D R, D S, D
EUR EUR EUR EUR EUR EUR EUR EUR
LU0556617156 LU0556616935 LU0556617313 LU0556617586 LU0556617743 LU0593537219 LU0593537482 LU0593537565
Sub-fund of the Impact Funds SICAV
Clotilde Basselier & Suzanne Senellart
Impact Funds Climate Change Reconciling climate change with a performance oriented strategy in a global equity fund • Investment universe: Global equities • Benchmark: The MSCI World index (indicative only). • Minimum recommended investment period: 5 years
I, C I, C J, C
USD EUR EUR
LU0448199025 LU0448199371 LU0448199454
See the full prospectus which is the only legally binding document. See the Legal Information on page 2 for important information about the funds.
Perspectives /// April 2011
Natixis Asset Management
PAGE 17
our international Product range
A selection of 27 complementary funds This quarterly reviewed list of funds aims to highlight Natixis Asset Management's most innovative products and its wide range of expertise. Fund name
Fixed income
Money market
Asset Class
Natixis Cash Première
IA: FR0010157834
Natixis Cash A1P1
IA: FR0010322438
Natixis Cash Eonia
IA: FR0010298943
Natixis Tréso Euribor 3 mois
IA: FR0010831693
Natixis Tréso Plus 3 mois
IA: FR0007075122
Natixis Court Terme 6 mois
IA: FR0010885236
Natixis Souverains Euro 1-3
IA: FR0010208421
Natixis Souverains Euro 3-5
IA: FR0010036400
Natixis Souverains Euro 5-7
A: FR0010201699
Natixis Souverains Euro 7-10
A: FR0000449092
Natixis Souverains Euro
IA: FR0010655456
Natixis Inflation Euro Natixis Obli Opportunités 12 mois
Equity
Natixis Crédit Euro
I: FR0010680223 IA: FR0010796391 I: FR0010171108
Natixis Convertibles Euro
IA: FR0010658963
Natixis Convertibles Europe
IA: FR0010171678
H2O Multibonds
IA: FR0010930438
Natixis Actions Euro Value
IA: FR0010270025
Natixis Actions US Growth
IA: FR0010256404
Sonic Monde Natixis Actions Global émergents Impact Funds Climate Change
Alternative investment
Share and ISIN code
Natixis Performance Active Allocation Natixis Constellation European Event
IA €: FR0010555797 IA: FR0010711051 IA $: LU0448199025 IA: FR0010688812 IA €: LU0161071237 IA $: LU0161073951
H2O Adagio
IA: FR0010929794
H2O Moderato
IA: FR0010929836
H2O Patrimoine
IA: FR0010930446
These funds are authorized for sale in France and possibly in other country(ies) where their sale is not contrary to local legislation. Please refer to legal information of this material.
Natixis Asset Management
Perspectives /// April 2011
PAGE 18
News
Natixis AM meets with institutional investors Awards for Natixis AM n Le Monde / Eurofonds-Fundclass
Grands Prix:
Natixis AM, best French investment management In the 2011 Le Monde/Eurofonds-Fundclass Grands Prix, Natixis AM was awarded, for the fourth consecutive year, the best French investment management company in the "more than 100 rated funds" category(2). On March 16 and 17, Natixis AM welcomed its clients to the 2011 Institutional Asset Management Forum dedicated, this year, to an audit of the effects of the new economic and financial situation in terms of transformations and risks but also investment opportunities. A key event for Natixis Asset Management, which manages more than 75% of its €302 billion of assets under management on behalf of institutional clients.
n Natixis AM meets with institutional investors Over two days, the marketing teams provided clients and visitors with information on Natixis Asset Management's product range and investment solutions. New this year: the products offered by H2O Asset Management which were, notably, featured in a video with Bruno Crastes and Vincent Chailley, respectively CEO and CIO of H2O AM, an entrepreneurial venture specialized in international bond management and global macro-type multistrategies.
n Round table: Natixis AM and the sovereign debt market
Brigitte Le Bris, head of international fixed income and currencies at Natixis AM, participated in a round table on the theme: "The sovereign debt market: how do you build an asset allocation strategy between Europe, the United States and the emerging regions?". This round table was chaired by Frédéric Debaere, director of investment consulting at CFA-Mercer France. "This seventh edition of the Forum was, as every year, a key opportunity to meet our clients and discuss their investment needs and the solutions we can offer within the framework of the multi-boutique model", said Jean-Pierre Snel, head of institutional clients and Roland Monclar, head of strategic clients at Natixis AM. (1) Data as of 31/12/2010.
n Lipper Fund Awards (France) Awards for two funds managed by Natixis AM Natixis AM was honored in the Lipper Fund Awards (France) for the quality of its asset management and good track record on long-term from its two funds: CNP Assur France and Natixis Horizon 2015(3).
n Victoires des SICAV/La Tribune -
EuroPerformance
Natixis AM fund ranked number one in its category
Natixis AM also won plaudits in the 2011 Victoires des SICAV(4) awards from La Tribune in partnership with EuroPerformance for its CNP Assur Performance fund which won first place in the "Diversified – Flexible International Management" category. . All these awards testify to the quality of Natixis AM's investment management and its ability to generate long-term returns within a risk control framework. (2) Companies whose funds had been rated by Fundclass for at least four years at 31/12/2010 and marketing more than 100 funds in Europe (Source: Le Monde Argent 12/03/2011). (3) Lipper Certificates are awarded to funds approved for marketing in France with a track record of at least 36 months at 31/12/2010, and posting the best returns within their category over one or more periods depending on the universe (source: Lipper). (4) The awards are made within each national universe (domestic open-ended or mutual funds and foreign funds approved for marketing in France). Only the funds registered in the EuroPerformance database as being available for sale in the local market are eligible for an award and the funds must have been ranked by EuroPerformance for at last five years at 31/12/2010. (Source: La Tribune – Les Victoires des SICAV, 01/04/2011). The figures mentioned refer to previous years. Past performance is not a reliable indicator of future performance. Reference to any rankings, awards or ratings for an UCITS cannot be interpreted as indicating its future performance.
Further information : www.am.natixis.com Perspectives /// April 2011
www.am.natixis.com About Natixis AM > Awards Natixis Asset Management
expert. C ombining e x pe r ti s e to c r eate v alue Thanks to the Natixis Global Asset Management multi-boutique model, Natixis Asset Management offers privileged access to the expertise of over 20 specialized asset managers located in Asia and the US in particular. Natixis Asset Management leverages its teams’ knowhow over all asset classes and investment styles to best meet its clients’ new requirements.
With €302bn of assets under management as of 31 st December 2010, Natixis Asset Management offers its clients new value generating solutions. European expert of Natixis Global Asset Management
www.am.natixis.com Corporate and Investment Banking / Investment Solutions / Specialized Financial Services
Natixis Asset Management - Limited Company with a capital of 50 434 604.76 euros - RCS Paris 329 450 738 - AMF approval no. GP 90-009 - 21, quai d’Austerlitz -75634 Paris Cedex 13 - Tel: +33 1 78 40 80 00
multi
www.am.natixis.com Natixis Multimanager Subsidiary of Natixis Asset Management A French simplified joint-stock company Share Capital of 7 536 452 € RCS Number 438 284 192 Paris Regulated by AMF under n°GP 01-054 Registered Office: 21 quai d’Austerlitz 75 634 Paris, Cedex 13 - Tel. +33 1 78 40 32 00 www.multimanager.natixis.com
communication-nam@am.natixis.fr - April 2011. Cover picture: © Elpis Loannidis/Shutterstock.
Perspectives is a Natixis Asset Management's publication - Natixis Asset Management - Communications Department - Business Development -
Natixis Asset Management Limited Liability Company Share Capital 50 434 604,76 € RCS Number 329 450 738 Paris Regulated by AMF under n°GP 90-009 Registered Office: 21 quai d’Austerlitz 75 634 Paris, Cedex 13 - Tel. +33 1 78 40 80 00