GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Know the Flows
Slide 2 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 1 Company
Overview EPFR Global delivers a complete and transparent picture of
institutional and individual investor flows driving global markets.
Strategists, traders, and investors use EPFR flow and allocation
data to gain the most current, global view of changing investor
demand and manager positioning. Trading and allocation strategies
leverage EPFR historical and current data to improve returns and
manage risk. Series sourced through direct relationships with fund
managers and administrators The universe covers over $17 trillion
in globally domiciled funds. EPFR flows are available at either the
asset class aggregate, fund group, investment manager, individual
fund and share class levels to support the most granular and
informed insights. Comprehensive, transparent, and robust daily,
weekly, monthly updates available T+1 in addition to historical
time series. Slide 3 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA
Users of EPFR Data 2 Government/Central Banks Asset ManagersHedge
Funds Banking and Brokerage Strategists Capital Markets Research
Analysts Types of usage: Proprietary trading Directional calls for
clients Targeting sales efforts Market analysis Fund Managers
Portfolio Analysts Marketing and Product Development Types of
usage: Factor in investment process Competitive analysis, product
dev Asset allocation Quantitative analysis Regulators Monetary
Authorities Types of usage: Cross-border flow analysis Flows impact
on currency as well as local equity/debt markets Global
Macro/EM/Discretionary Quantitative Investors Types of usage:
Momentum trading Liquidity analysis Market timing Slide 4 GLOBAL
GLOBAL FUND FLOWS AND ALLOCATIONS DATA 3 Uses of EPFR Global Data
Foreign investor flows can be a useful leading indicator especially
at the country level and particularly in Emerging Markets Investors
use flows relative strength to help time entry/exit to individual
countries Market Timing Country allocation data - global fund
manager positioning provides additional data as a momentum signal
and is often used in multi-factor models Momentum Indicators
Country and sector flows can be leading indicators of broader
market direction. Relative strength of flows to favored
countries/sectors vs out of favor countries/sectors helps managers
decide when to get in or out. Directional Signals Allocators will
cross-check their own analysis with investor sentiment based on
flows/positioning Portfolio managers can compare their allocations
with their peers for performance analysis Asset Allocation &
Benchmarking Monitoring flows into asset classes provide a useful
signal of investor risk appetite. Similarly, fund manager
positioning (for example cash positions) indicate changing fund
manager risk appetite Measuring Risk Slide 5 GLOBAL GLOBAL FUND
FLOWS AND ALLOCATIONS DATA 4 EPFR Global Key Data Sets Core
Datasets (based on data sourced directly from managers or
administrators) Derived Datasets (based on flows and allocations
data) Fund Flows Fund manager allocations at month-end across the
countries or sectors they invest in. Equity/Bond Fund Flows
Daily/Weekly/Monthly * also includes AUM, Performance Country
Weightings Monthly Sector / Industry Weightings Monthly Equity /
Bond Fund Holdings Monthly Fund Allocations Country & Sector
Flows The amount of cash flowing into and out of funds world- wide.
Distribution of fund flows by country or sector. Combines data from
fund flows and fund allocations. Country/Sector/Industry Flows
Daily/Weekly/Monthly Regional packages available
Daily/Weekly/Monthly Slide 6 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA Fund Flows Overview Leverage the transparency of
the EPFR universe and the granular breakdown of flows 5 Geographic
investment focus Style/sector Bond categories Asset Class Breakdown
Institutional vs Retail US Domiciled vs Non-US Domiciled Investor
Types Differentiation Dedicated Country Funds vs Global, GEM, and
Regional Mandates Mutual funds vs ETFs Active vs Passive Fund Types
Differentiation Fund Flows The amount of cash flowing into and out
of funds world- wide. What are Fund Flows? Calculates Net Flows
(investor contributions/redemptions) for individual funds and then
add these up by asset class Net Flow calculations exclude portfolio
performance and currency fluctuations Includes funds registered
globally not just those domiciled in the US Updated
daily/weekly/monthly Fund Flows The amount of cash flowing into and
out of funds world- wide. Slide 7 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA Fund Flows: Asset class breakdown Highly
granulated flow data for more than 100 country, regional, sector
and asset class categories 6 (includes Global & US ) Slide 8
GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 7 Fund Flows: Drill
down to detail view .... 7 Slide 9 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA Fund Flows: Investor types differentiation US
equity fund flows since January10 8 All investor types US
Institutional Investors US Retail investors Non-US investors in US
equity Only US institutional investors were the main buyers at the
bottom US Retail investors missed the big US Equity rally between
Q2/2010 and Q1/2011. Non-US investors (US equity funds domiciled ex
US) stayed away in Q2/Q3 2010 Slide 10 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA 9 Fund Flows: The Big Picture Global cross-asset
allocation Total Aggregate Equity, Fixed Income, and Money Market
Fund Flows Developed vs. Emerging Market Equity Flows Developed vs.
Emerging Market Fixed Income Flows Recent flows are still largely
in favor of Fixed Income funds, although the overall flight from
equities has temporarily reversed course Until the recent rally,
investors have shown a lack of confidence in equity markets, as
flows continue to remain in the red over the past year Demand for
Emerging vs. Developed Market debt has skyrocketed this year as
investors search for favorable yields Slide 11 GLOBAL GLOBAL FUND
FLOWS AND ALLOCATIONS DATA 10 Fund Flows: Practitioner examples and
investment signals Flows provide additional information useful in
the asset allocation process, including: Future performance of
equities vs bonds (using 4 week flows to risky assets vs mm)
Regional equity allocation Sector allocation within fixed income
Relative value Comparing strength of flows across regions as a
liquidity pulse The Liquidity Pulse compares the size of the
current flow to a country or region (4-week average flows as % of
assets) with the average size of the flow in the last 13 weeks. The
relative size of the flows is given as standard deviation from the
mean. Most powerful on a cross-sectional (regional) basis. Equity
Trading Rule Excess flows are shown to cause predictable and
investable inflection points. The rule is based on 4 week total
overall flows for GEM equity funds: Outflow total greater than or
equal to - $8bn buy signal Inflows greater than or equal to $6.5bn
sell signal Global cross-asset allocation Slide 12 GLOBAL GLOBAL
FUND FLOWS AND ALLOCATIONS DATA Practitioner Example: Global risk
indicator 11 Best call: On May 6th 2010 BofA backtesting indicates
that GFSI would have flashed "sell. Risk assets sold off over the
next 30 days, as equities corrected 5.5%, commodities fell 8.1% and
HY bonds lost 2.6% Chart 4 shows a backtested chart of the GFSI
sell indicator and the performance of major asset classes. The GFSI
would have warned of a major correction in risk assets on 6th May
2010. Source: BofA Merrill Lynch Global Research, EPFR Global,
Bloomberg; indexed to 100 in Oct09 Slide 13 GLOBAL GLOBAL FUND
FLOWS AND ALLOCATIONS DATA Practitioner Example: Global cross-asset
allocation 12 Chart 10 shows that the results of the monthly
best-of-two strategy for global equities and global bonds are
similarly convincing. The strategy would have generated an excess
return of roughly 8pp per year before costs, and total return was
more than twice the benchmark return with lower volatility. The
strategy therefore clearly dominates the equally-weighted
benchmark. Using money market returns as risk-free rate, the
strategy has had a Sharpe ratio of 1.3 since 2004, while the
benchmark only had a Sharpe ratio of 0.2. On average, funds would
have to be switched between global equities and global bonds three
times per year; so even including transaction costs, a significant
excess return would have been earned. These results clearly suggest
that the direction of flows into or out of risk assets and into or
out of money market funds contains information about future
performance of equities versus bonds. Source: EPFR, Datastream,
Commerzbank Corporates & Markets Chart 10: End-of-month
best-of-two strategy for global equities vs global bonds based on
the four-week average fund flows as a percentage of AuM into risk
assets and money market funds Slide 14 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA Practitioner Example: Credit research analysis 13
US Credit Outlook Support from the deep The hidden force supporting
asset prices is, of course, the flood of liquidity from the Fed. In
his most recent testimony and elsewhere, Bernanke has deemed the
fact that equity prices have risen significantly, volatility in the
equity market has fallen, [and] corporate bond spreads have
narrowed as evidence that the Federal Reserves recent actions have
been effective. By holding interest rates on cash at zero even as
the economy has continued to recover, the Fed has left investors
scrambling for return wherever they can find it. Much of the rally
has been justified by the recovery in the economy, of course. Yet
the fall in yields to their lowest levels since the 1960s, the
simultaneous rally in gold and recent sell-off in the dollar, leave
us thinking that this is about more than just fundamentals. In some
ways the fund flows speak louder than the actual market movements:
investors have been selling cash assets to buy almost anything
else. In 2010, much of this liquidity was making its way into EM;
now that investors are growing nervous about political stability,
it has again been channeled into US and developed markets (Figure
5). Even IG at 3% starts to look interesting when cash deposits and
money market funds are yielding virtually nothing. Source: Citi
Investment Research and Analysis, EPFR Slide 15 GLOBAL GLOBAL FUND
FLOWS AND ALLOCATIONS DATA 14 Using overall country weights against
benchmark as a momentum signal Momentum Indicators Comparing
country/sector/cash positions with peer group Benchmarking Tracking
the smart money how funds get in/out at the optimal time Market
Timing Fund Allocations Fund manager allocations at month-end
across the countries or sectors they invest in. What are Fund
Allocations? Monthly data reported by managers or administrators
(based on holdings, fund factsheets) Fund level detail includes
total fund assets, % weight in cash, % weight by country Includes
funds registered globally not just US Country & Sector
Allocations Overview Slide 16 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA 15 Actual country and regional weightings (in % of
AUM) Country Allocations: Overview 15 Slide 17 GLOBAL GLOBAL FUND
FLOWS AND ALLOCATIONS DATA Country Allocations: Relative Country
Weights 16 Non-ETF Global Equity Fund Active Weights vs. MSCI ACWI
ETF PacificEurope & Middle EastAmericas Latin AmericaEMEAAsia
Slide 18 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Country
& Sector Flows Overview Derived data based on Fund Flows and
Fund Allocations Updated daily, weekly, monthly Unique high
frequency view of cross border portfolio flows driving valuations
in FX, Equity, Bonds. Measures relative strength of flows at a
Sector or Country level 17 Fund Allocations Fund manager
allocations at month-end across the countries or sectors they
invest in. What are Country Flows/Sector Flows ? EPFR multiplies
the most recently available Fund group allocations (to a country or
sector) x Flows into that Fund Group - to estimate overall flows at
a country or sector level. Allows users to analyze flows by fund
group, ETF vs MF, and by domicile Includes funds registered
globally not just those domiciled in the US EPFR also tracks flows
to dedicated Sector Funds, as an alternative measure of demand for
individual sectors Country or Sector Flows Distribution of fund
flows by country or sector. Combines data from fund flows and fund
allocations Slide 19 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA
Practitioner Examples: Sector Flows 18 Cumulative Sector Flows are
still in the red for the most part, with the Materials sector being
the only exception Consumer DiscretionaryConsumer Stapes Energy
Healthcare IT Telecom Financials Industrials Materials Utilities
Cumulative 52 Week Flows Weekly Flows (% AuM) Slide 20 GLOBAL
GLOBAL FUND FLOWS AND ALLOCATIONS DATA Practitioner Examples:
Global Country Allocation Model 19 Utilizing Flows in Multi-Factor
Asset Allocation Global Country Selection Model In this report, we
demonstrate how utilizing EPFR Country Flows alongside standard
investment factors add value to country allocation strategies
Backtests using EPFR Fund Allocations and Fund Flows as factors in
a global country selection model yield convincing results
Investment factors Active Country Flow compares one country to the
cross sectional average Active Investor Spread uses EPFR country
allocations data to measure active, speculative investor activity
in emerging markets Model Features Provides an interactive
environment for portfolio managers to backtest strategies with EPFR
Fund Flow & Allocations data Create custom country portfolios
Adjustable factor weightings and strategy parameters allow for a
high level of adaptability Slide 21 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA New research based on EPFR Global data 20 What is
the impact of fund liquidations (outflows) to equity valuations in
emerging markets where foreign funds have big positions and how can
investors can use this information in their investment decisions
Dec 2010 Oxford-MAN paper (Journal of Finance candidate) Launched
December 2010 the index uses weekly country flows data to improve
country allocation and outperform the FTSE EM index FTSE - EPFR EM
Fund Flows Index This new (Q4 2010) BofA Merrill index measures
global investor risk appetite analyzing daily flows to EM equity,
High Yield bond, and Money Market funds Global Financial Stress
Index EPFR is developing a suite a investment strategies to aid
clients in the utilization of fund flow and allocations data
directly in the investment process Country / Sector / Regional
allocation models, FX trading Slide 22 GLOBAL GLOBAL FUND FLOWS AND
ALLOCATIONS DATA Sample Clients 21 "The flow data from EPFR has
proved to be a useful source of added value in some quantitative
models of equity markets we have constructed. It provides an extra
dimension of information to that available from the typical equity
market databases used by quants and so affords an edge in
performance over much of the competition." Dr. Stephen Rees Head of
Investment Process Research Schroders, London Emerging market
mutual funds' country allocations appear to contain information on
future equity returns beyond that contained in standard valuation
and momentum indicators. Analyst Global Asset Allocation Research
Team Salomon Smith Barney I find the EPFR Global Country Weightings
Report to be an invaluable tool in helping me track my competitors'
regional and country allocations on a monthly basis. The Report is
timely and very comprehensive. Brad Aham Portfolio Manager State
Street Global Advisors Sell Side Buy Side Government/Media Slide 23
GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Company History 22
EPFR Global founded Cambridge, Massachusetts USA 1994 EPFR Global
launches Russia Portfolio, Central Europe Portfolio and Brazil
Portfolio: publications serving more than 600 institutional
investor clients worldwide. 1995-1999 EPFR Global launches Research
and Analysis Services, providing independent research services for
investment management firms. 2000 EPFR Global acquires Emerging
Market Funds Research, Inc., a database of global equity and fixed
income funds. 2001 EPFR Global expands fund database by four-fold
to more than 15,000 equity and fixed income funds with $10 trillion
in assets. Client base expanded by nearly 10-fold and includes
leading institutional investors, global equity and fixed income
analysts, strategists, investment managers, hedge funds, central
bankers. 2001-2007 EPFR Global launches new Web Interface, new
Country Flows data set, and Web Services for automated data
delivery in trading and investment models. 2008 EPFR Global
launches delivery with Haver Analytics to provide weekly and
monthly international fund flows data for equities, bonds and money
markets. 2009 EPFR Global acquired by Informa PLC 2010 Slide 24
GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Key Contacts 23
Dwight IngalsbeManaging Director/Co-FounderTel: (+1-617) 864-4999
ext. 26Email: [email protected] Brad DurhamManaging
Director/Co-FounderTel: (+1-617) 864-4999 ext. 24Email:
[email protected] Ian WilsonManaging Director, Fund DataTel: (+1-804)
217-8653Email: [email protected] Simon RingroseManaging Director,
SalesTel: (+1-617) 864-4999 ext. 30Email: [email protected]
Cameron BrandtDirector, ResearchTel: (+1-617) 864-4999 ext.
22Email: [email protected] Patrick ParadisoSales (Latin America)Tel:
(+1-917) 543-6181Email: [email protected] Jean-Claude
MoosSales ExecutiveTel: (+1-212) 907-5814Email: [email protected]
Rikolv Hatlehol-DesaiSales Director (EMEA)Tel: (+44) 7766
805657Email: [email protected] Bin PengSales Director (North
China)Tel: (+86) 10 6562 5321Email: [email protected] Robert
SheridanBusiness Development Manager, AsiaTel: (+65) 8484
1094Email: [email protected] Young-il SunwooSales
(Korea)Tel: (+821) 9608-0101Email: [email protected] Todd
WillitsManager, Client ServicesTel: (+1-617) 864-4999 ext. 27Email:
[email protected]
