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GLOBAL INVESTORAsset Management Newsletter from ADCB
April 2014
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
Global Market
Performance
Macro
Themes
Product
Spotlight
adcb.com Page 2
Global Market PerformanceFollowing their stronger performance in February,
global equity markets turned lower in March, as most
of the indices in our coverage declined. Investors
worldwide focused on the escalating crisis between
Ukraine and Russia and concerns regarding China’s
economic slowdown. US markets such as Nasdaq
declined 2.53% in March as continuous selloff in the
biotechnology and technology sector weighed on
the overall market. However, the Dow Jones and S&P
500 gained 0.83% and 0.69%, respectively, on
positive domestic macro data, including GDP, jobless
claims, and consumer confidence. Further, the FTSE
lost 3.10% as political relationships between the West
and Russia deteriorated. The Hang Seng fell 3.0%
after the country reported its first ever domestic
corporate bond default (a situation that the
authorities exacerbated by signaling they may allow
other struggling companies to suffer the same fate)
and concerns mounted over China’s economy. The
Nikkei closed 0.09% lower after US Federal Reserve
Chair Janet Yellen raised the prospect of interest rate
hikes starting earlier than markets had previously
expected. However, the Sensex jumped 5.99% as
wholesale price inflation fell to a nine-month low, the
current account deficit improved, and markets
reported strong foreign institutional buying.
The GCC ended the month bearishly, with five
indices finishing lower and two higher. The MSM 30
and KSE underperformed other regional markets,
declining 3.61% and 1.56%, respectively. The MSM 30
fell back, mainly due to losses in the Industrial and
Services sectors, while the KSE decreased on
negative sentiment in the Consumer Services and
Real Estate sectors.
Further, copper prices dropped 7.05% on geopolitical
tensions and growing default risks in China, its largest
importer, as global supplies continue to increase.
Meanwhile, Natural Gas fell 5.16% amid concerns that
the arrival of spring will bring warmer temperatures
throughout the US and cut into demand for heating.
Wheat prices rose 16.39% as traders worried that
Ukraine's escalating crisis may hurt the country’s grain
exports. Meanwhile, corn prices rose 9.75% to a five-
month high, also due to unrest in Ukraine.
Performance
Review
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 3
Global Market Performance
Index Snapshot (World Indices) Commodities, Yields and Currencies
Index Latest 1M Change 1Yr Change YTD Commodity Latest 1M Change 1Yr Change YTD
S&P 500 1,872.34 0.69% 19.32% 1.30% NYMEX Crude 101.58 (0.98%) 4.47% 3.21%
Dow Jones 16,457.66 0.83% 12.89% (0.72%) OPEC 104.27 (1.72%) (2.36%) (3.96%)
NASDAQ 4,198.99 (2.53%) 28.51% 0.54% Natural Gas 4.37 (5.16%) 8.62% 3.33%
Hang Seng 22,151.06 (3.00%) (0.67%) (4.96%) Gold 1,283.40 (2.88%) (19.53%) 6.78%
Nikkei 14,827.83 (0.09%) 19.60% (8.98%) Platinum 1,418.50 (1.92%) (9.72%) 3.46%
FTSE-100 6,598.37 (3.10%) 2.91% (2.23%) Copper 6,645.00 (7.05%) (12.36%) (10.14%)
Sensex 30 22,386.27 5.99% 18.85% 5.74% Sugar 17.77 0.62% 0.62% 8.29%
MSCI World 1,673.87 (0.09%) 16.69% 0.77% Soybean 1,464.00 3.52% 4.23% 11.55%
MSCI EM 994.65 2.92% (3.89%) (0.80%) Corn 502.00 9.75% (27.79%) 18.96%
TASI 9,473.71 4.03% 32.95% 10.99% Wheat 697.20 16.39% 1.40% 15.20%
DFM 4,451.00 5.46% 143.33% 32.08% Rice 15.60 1.46% 1.56% 0.58%
ADX 4,894.42 (1.30%) 61.78% 14.08% Yields and Currencies 101.58 (0.98%) 4.47% 3.21%
KSE 7,572.81 (1.56%) 12.67% 0.31% 2Y Treasury 0.44 0.11 0.19 0.06
BSE 1,356.91 (1.15%) 24.31% 8.65% 10Y Treasury 2.73 0.07 0.86 (0.31)
MSM 30 6,856.89 (3.61%) 14.48% 0.33% EUR 1.3775 0.67% 7.44% 0.05%
DSM 11,639.79 (1.12%) 35.70% 12.14% GBP 1.6662 (0.02%) 9.55% 1.04%
JPY 102.80 0.60% 9.18% (2.30%)
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
Indian Markets rally in 2014
So far this year, major global equity markets have
performed poorly, yielding negative investment
returns. Expected slower economic growth in China,
rising tension between the West and Russia over the
annexation of the Crimean peninsula, and a liquidity
squeeze caused by US Fed tapering have all
contributed to the downturn. Nevertheless, Indian
equity markets have shown greater resilience in 2014,
largely due to the country’s improved macro-
economic fundamentals. Its major economic
indicators including GDP growth, inflation and the
current account deficit (CAD) are either improving or
have bottomed out. All are expected to recover both
this year and next. As a result, many foreign funds
have increased their exposure to India. Politically,
they also expect improved governance once the
country’s national elections are over in April-May.
Since the end of 2013, foreign institutional investors
(FII) have invested USD 2.84bn in Indian stock
markets.
During the first few months of this year, the Sensex
rose 4.0% (as of March 25), while the MSCI World and
Emerging Market indices lost 0.8% and 5.0%,
respectively. Indeed, the Sensex has outperformed
most major global equity markets in 2014, including
the NASDAQ (up 1.19%) and S&P 500 (up 0.49%),
while the Nikkei, Hang Seng, FTSE and Dow Jones
indices have posted negative returns of 11.15%, 6.26%,
3.39% and 1.81%, respectively.
Source: Reuters
Indeed, India (as measured by the Sensex) has
outperformed all other BRIC states, including South
Africa (up 1.3%), while China, Russia and Brazil have all
reported negative returns.
Weak performances by equity markets in developed
countries so far this year are, as already stated,
Source: Reuters
attributable to a possible slowdown in China and the
Crimea crisis. Both could impede or derail the global
economic recovery in 2014 and 2015.
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 4
Macro Themes
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
90
95
100
105
1-Jan
-14
14-J
an
-14
28
-Jan
-14
11-F
eb
-14
25-F
eb
-14
11-M
ar-
14
25-M
ar-
14
(Index to 100)
Sensex v/s MSCI Emerging v/s MSCI World
Sensex MSCI Emerging markets MSCI World
+4.0%
-5.0%
-0.8%
80
85
90
95
100
105
1-Jan
-14
14-J
an
-14
28
-Jan
-14
11-F
eb
-14
25-F
eb
-14
11-M
ar-
14
25-M
ar-
14
(Index to 100)
BRICS YTD stock market performance
Sensex MCX10 BOVESPA
SSEC JSE SA
+4.0%
-12.7%
-6.8%
-2.4%
+1.3%
GLOBAL INVESTOR
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 5
Macro ThemesAs a result, funds have switched from equity markets
to other safe haven assets such as gold, the price of
which has risen 9% as of March 25 this year, after
falling 28% in 2013.
Additionally, performances by emerging equity
markets have also been adversely affected by a
liquidity squeeze, due to the Fed’s tapering program,
Source: Reuters
which began in January 2014. Since then, the bank
has reduced its bond buying program to USD 55bn
monthly from USD 85bn previously to reflect the
continuing recovery in the US economy. As a result,
many emerging markets have suffered outflows of
capital, which have caused sharp declines in both
their currencies and equity markets.
Meanwhile, Indian equity markets have outperformed
their counterparts worldwide, as investors returned to
the market, impressed by the country’s improving
macro-economic fundamentals and potential for
greater political stability. Sectors such as Capital
Goods, Banking and Consumer Durables which will
directly benefit from the improved economic growth
have gained 16.7%, 10.9% and 8.5%, respectively, so
far this year and have outperformed other sectors
such as IT, Technology and Metal which declined
4.0%, 3.8% and 4.3%, respectively. IT and Technology
will be negatively impacted by the Rupee
appreciation as majority of their revenues comes
from exports, while expected slowdown in China is
likely to impact earnings for the companies in the
Metal sector.
Note: As of March 27, 2014
Source: BSE
After comparatively modest increases in FY13 and
FY14, the IMF forecasts Indian GDP growth will
accelerate from 3.8% in FY14 to 5.1% in FY15 and 6.3%
in FY16. Moreover, recently decreased inflation has
provided further support, with many economists
believing lower inflation will enable the Reserve Bank
of India (RBI) either to lower interest rates or at least
ensure they rise no further, helping boost GDP
growth both this year and in FY15.
Asset Management Newsletter from ADCB
APRIL 2014
88
92
96
100
104
1-Jan
-14
14-J
an
-14
28
-Jan
-14
11-F
eb
-14
25-F
eb
-14
11-M
ar-
14
25-M
ar-
14(Index to
100)
BRICS YTD currency performance
INR RUB BRL CNY ZAR
+2.3%
-8.4%
+1.7%
-2.2%
-3.4%
16.7
10.9
8.5
-3.8 -4.0 -4.3
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
CAP.GOODS
BANKEX CONSUMERDUR.
TECK IT METAL
(Per cent)
Sensex YTD sectoral performance
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 6
Macro Themes
Source: IMF
Source: Trading Economics
Currently, most emerging markets suffer from high
CAD, due to lower economic growth and high
inflation. To prevent further deterioration, the
Government of India raised the import duty on gold
from 6% in January 2013 to 10% in August 2013,
resulting in a significant decline in its importation in
2013. Gold is the country’s second largest import
after crude oil.
Source: IMF
Moreover, stronger economic activity in high income
regions such as the US and Europe is also boosting
Indian exports. All these factors have helped decrease
India’s CAD. As a result, the IMF now expects the
country’s CAD to improve from a negative 4.8% of
GDP in FY13 to negative 4.4% in FY14 and negative
3.8% in FY15, while local rating agency CRISIL
forecasts India’s CAD will narrow to a six-year low of
negative 2.0% in FY14, before increasing to negative
2.7% in FY15 as imports pick up.
Given the turnaround in India’s macro-economic
fundamentals and the expected positive outcome of
the upcoming general election due in April-May,
many global fund managers have increased their
exposure to India. So far this year, a total of USD
2.84bn have flooded into the country’s equity
markets, compared to only USD 0.57bn in South
Africa and USD 0.47bn in Brazil. Meanwhile, Japan
has suffered an outflow of USD 19.50bn and South
Korea around USD 3.41bn.
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
10.5
6.3
3.2 3.85.1
6.3
0.0
5.0
10.0
15.0
FY 2011 FY 2012 FY 2013 FY 2014E FY 2015E FY 2016E
(Per cent)
India's GDP growth rate
GDP % chg (Constant price)
10.8
10.9
10.4
9.4
9.3 9.9
9.6
9.5 9.8 10
.2 11.2
9.9
8.8
8.1
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Jan
-13
Feb
-13
Mar-
13
Ap
r-13
May-1
3
Ju
n-1
3
Ju
l-13
Au
g-1
3
Sep
-13
Oct-
13
No
v-1
3
Dec-1
3
Jan
-14
Feb
-14
(Per cent)
India's inflation rate - CPI
-2.7
-4.2
-4.8-4.4
-3.8-3.4
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
FY 2011 FY 2012 FY 2013 FY 2014E FY 2015E FY 2016E
(Per cent)
India's current account balance
Current account balance (% of GDP)
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 7
Macro Themes
Note: As of March 26, 2014
Source: Bloomberg
In conclusion, we expect India to continue to
outperform other emerging and developed markets
in 2014 based on its improving macro-economic
indicators such as GDP, inflation and CAD. Moreover,
returns from Indian equity markets may improve
substantially later this year if any major political party
secures an absolute majority at the forthcoming
elections in April-May.
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
2.84
-3.41
0.57 0.47
-19.50-20
-15
-10
-5
0
5
India S.Korea S.Africa Brazil Japan
(USDbn)
Net foreign equity flows
Foreign equity flows net (YTD 2014)
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 8
Macro ThemesUAE aviation sector continues to scale new heights
The UAE aviation industry has been the catalyst for
transforming and rapidly expanding the UAE into an
International Hub. The government’s determination
to ensure the country possesses global connections
and substantial investments in UAE airports and
airlines to promote a world class aviation industry in
the UAE are both progressing well. Regional
passenger and cargo traffic is forecast to increase,
due to UAE’s strategic location, its popularity for
business and leisure travel, and Dubai’s recent
successful bid to host World Expo 2020. Moreover,
the UAE aviation industry is also set to benefit from
inorganic growth as major domestic airlines diversify
into related businesses. The country’s aviation
industry is now a core component of the UAE
economy. According to the UAE General Civil
Aviation Authority (GCAA), it is forecast to contribute
approximately 15% of regional GDP by 2016,
compared with an estimated 12% in 2013.
In the development of the UAE aviation sector, the
government has played a key role in creating a
business-friendly environment for air transport by
introducing low taxes and world-class infrastructure.
The GCAA has always focused on opening new
markets to UAE carriers. Today, the UAE is signatory
to 160 air service agreements (ASA) with 160
countries, permitting the country’s carriers to land at
foreign airports. In addition, Dubai’s aviation industry
has also benefited from the emirate’s strategic
location. The region is within eight hours flying time
of most of the world’s important destinations and
two-thirds of its population, making Dubai
International Airport (DXB) one of the busiest in the
world. In 1972, the airport serviced only nine airlines,
connecting around 20 destinations. Currently,
passengers can choose from more than 260
destinations offered by over 145 carriers. As a result,
the total number of passengers using DXB exceeded
66.4 million in 2013 compared with 57.6 million in
2012. With increasing demand for flight slots and
rapidly growing passenger numbers DXB was
previously projected to overtake London’s Heathrow
as the world’s most popular international airport by
2015. However according to the latest data published
by airport authorities, DXB is already the busiest
airport for international passengers globally, with
more than 12.1 million in January and February this
year, compared with 10.3 million at Heathrow. Even
on an annual basis DXB’s passenger volume will
probably exceed London Heathrow’s if the low single
digit growth expected by Heathrow airport authorities
in 2014 proves accurate.
Source: Airport authority, Press release
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
57.6
66.4
12.1
69.8 72.3
10.3
0
10
20
30
40
50
60
70
80
2012 2013 Jan-Feb 2014
(Mn)
International passenger traffic
Dubai International London Heathrow
Global Market
Performance
Macro
Themes
Product
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Review
adcb.com Page 9
Macro ThemesSupported by steady, almost inexorable growth in
passenger traffic, government and airport authorities
have increased investments in airport infrastructure
across the UAE. To accommodate future expansion,
Dubai has built the Al Maktoum International Airport
(AMIA), located on the outskirts of Dubai in Jebel Ali.
The airport currently operates as an aviation cargo
center. In time, it is expected to become the largest
airport in the world at a budgeted cost of AED 36bn
(USD 10bn). It will occupy an area of 140 square
kilometers and be capable of serving 160 million
passengers and 12 million tons of freight annually.
Moreover, DXB is investing further in airport and
airspace expansion, which it expects will raise the
airport’s passenger handling capacity to 90 million
annually by 2018 from 60 million in 2011, at a cost of
AED 28.8bn (USD 7.8bn).
Similarly, Abu Dhabi International Airport is building
the new Midfield Terminal, which is expected initially
to increase annual passenger handling capacity to 30
million by 2017 from 17.5 million currently.
Source: Airport authority
Despite the enormously significant roles played by
the UAE government and regional airport authorities
in helping develop its aviation industry, substantial
expansion of operations by major local carriers such
as Emirates Airline, Etihad Airways and Flydubai has
enabled much of the industry’s recent growth.
Source: Company website
Supported by continued enlargement of the UAE
aviation industry, these carriers have placed
multibillion-dollar orders for new aircraft to drive the
next stage of their expansion. At the recent Dubai
Airshow in November 2013, Emirates ordered 150
Boeing 777s in a deal worth USD 76bn at list prices, as
well as 50 Airbus A380s costing USD 23bn.
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
74
214
34 36
0
50
100
150
200
250
Etihad Emirates Air Arabia Fly Dubai
(Carriers)
UAE- Airlines fleet size
50.9
57.6
66.4
6.4
12.414.7
16.5
1.6
6.6 7.5 8.5
0.8
0
10
20
30
40
50
60
70
2011 2012 2013 Jan-14
(Mn)
UAE airports passenger traffic
Dubai International Abu Dhabi InternationalSharjah International
Global Market
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Macro
Themes
Product
Spotlight
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Review
adcb.com Page 10
Macro ThemesMeanwhile, Etihad bought 30 Boeing 787-10
Dreamliners, 25 777Xs, 50 Airbus A350 XWBs and 36
A320neos, as well as two freighters, one each from
Boeing and Airbus. In addition, smaller airlines such as
FlyDubai, Emirates’ low-fare subsidiary, also ordered
111 Boeing 737s and 738s worth USD 11.4bn.
Source: Company press release
With further exceptionally strong growth likely in
Dubai and Abu Dhabi, the region’s global connectivity
will increase as more airlines, routes and flights are
added, boosting the UAE’s passenger and cargo
volumes. Moreover, Dubai has won the right to host
World Expo 2020, further expanding likely regional
passenger and cargo volumes between now and the
event. Authorities expect ~25 million visitors to the
exhibition, of which ~70% are forecast to arrive from
outside the UAE.
In addition to organic growth in airport infrastructure
and carriers, the UAE’s aviation sector has also
developed in other ways. For example, Etihad has
extended its coverage by acquiring equity stakes in
several international airlines, including Air Seychelles,
Air Berlin, Virgin Australia, Air Serbia, Aer Lingus, and
Switzerland-based regional carrier Darwin Airline. It is
also expected to buy a 24% interest in India’s Jet
Airways.
Further, the UAE has already launched initiatives to
expand and diversify itself into the aerospace
manufacturing supply chain. It has established Strata,
an advanced composite, aero-structures
manufacturing facility based in Al Ain producing high
quality aircraft components through partnerships with
major aircraft manufacturers, including EADS/Airbus
and Boeing. At the Dubai Airshow, the facility signed
deals valued at USD 5bn to provide composite
materials and metallic aerostructure parts to Airbus
and Boeing aircraft. Agreements were also
announced with Rolls-Royce and GE Aviation to
service and maintain engines made by the two
companies. Officials hope to create 20,000 jobs
within the aerospace manufacturing sector by 2030.
In conclusion, the UAE aviation sector is now
established as one of the most important
components of regional economic growth. It
continues to progress rapidly through investments in
infrastructure, capacity building and diversification,
and by creating a business friendly environment, to
further increase the region’s growing importance to
the global aviation industry.
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
150
5056
87
111
0
20
40
60
80
100
120
140
160
Boeing Airbus
(Carriers)
New orders from UAE airlines
Emirates Etihad FlyDubai
Global Market
Performance
Macro
Themes
Product
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Performance
Review
adcb.com Page 11
Product Spotlight
GLOBAL INVESTOR
Henderson Horizon Global Property Equities
Fund
Global property equities – an introduction
Global property equities offer exposure to all types of
real estate ranging from shops and offices to
industrial units, hospitals, hotels, storage units and
residential property. As the pie charts demonstrate, a
global listed equity fund can offer significant
geographic and sector diversification whilst
identifying opportunities across the world.
Real estate markets are not homogenous and returns
can vary widely from one location to another,
affected by economic cycles as well as local legal,
taxation, and demand and supply factors. Significant
variations can be found even within the same area,
reflecting the location and quality of an individual
property. What all property has in common, however,
is its tangible asset class status together with its
strong potential for income generation.
Strong historical returns
Global property equities have delivered strong returns
historically. This can be explained by the
compounding effects of underlying income from
tenants, together with the potential capital gain on
properties. Listed real estate companies invest in
direct property offering liquid and cost-effective
exposure to this attractive asset class. Although
property equities can be more volatile than direct
property, this volatility has been more than offset by
superior long-term returns, diversification and
liquidity. Global property equities have outperformed
both bonds and general equities over the last ten
years.
Asset Management Newsletter from ADCB
APRIL 2014
Composition of the global listed market
France 3% UK
7%Germany
2%
Sweden 1%
United States 48%
Canada 4%
Hong Kong/China 8%
Japan 13%
Singapore 4%
Australasia 7%
Other Europe 3%
Source: FTSE EPRA NAREIT, Bloomberg, Henderson Global Investors, as at 28 February 2014
Index: FTSE EPRA/NAREIT Developed Real Estate Total Return Index
Retail32%
Office25%
Industrial9%
Residential15%
Healthcare7%
Storage3%
Hotel3%
Other6%
Source: DataStream, MSCI, S&P Citigroup, Henderson Global Investors, total return indices in USD,
Bonds= Citigroup Global Govt Bond (7-10 yrs), Equities = MSCI World, Property equities
=FTSE EPRA/NAREIT Developed
5.2
7.38.3
0
2
4
6
8
10
Global Govt. Bonds Global Equities Global PropertyEquities
%
Past performance is not a guide to future performance.
Annualised total returns (10 years to 28 February 2014)
Source: Henderson Global Investors
Global Market
Performance
Macro
Themes
Product
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adcb.com Page 12
Product Spotlight
GLOBAL INVESTOR
Why invest in a global property equity fund?
• Strong returns: In the current low growth, low
interest rate environment, rental yields remain
attractive, helping to underpin total returns. The
return from global property equities has
outperformed global equities and global
government bonds over the past ten years. Past
performance is not a guide to future performance.
• Diversification: A global property equity fund can
invest in several property companies, which in turn
hold multiple properties, providing exposure to a
broad tenant base across numerous geographies.
• Quality of assets: Prime properties are very
expensive, costing tens or even hundreds of
millions of US dollars. Listed property companies
have the financial firepower and borrowing
facilities to be able to develop and purchase prime
properties. A global property equity fund can
select the best of these companies to build a
geographically diverse portfolio.
• Cost effective: A global property equity fund buys
listed property companies and therefore avoids
the high transaction costs of direct property
ownership.
• Liquidity: Property equities are listed on stock
exchanges, allowing positions to be altered rapidly.
In contrast, a ‘physical’ property fund faces the
additional and often time-consuming challenge of
finding a buyer or seller for a property, with all its
accompanying legal and transaction hurdles.
Henderson’s competitive advantage
• Established team with strong track record:
Henderson has been managing global property
equities since 1997 and the property equities team
manages US$2.7 billion across several property
equity funds and mandates. (Figures correct at 31
December 2013).
• Global reach: Our property equity team is located
in offices in Europe, Asia and the US. Since 2007,
within North America, Henderson has worked with
Harrison Street Securities, a North American sub-
advisory property team that shares Henderson’s
bottom-up research approach.
• Local expertise: Our multi-local model means that
individual investment processes, which are distinct
to each market, can capitalise on regional
idiosyncrasies.
• Wider Henderson expertise: The fund enjoys
access to the expertise and support of
Henderson’s investment management and
research capabilities across all the key asset
classes including equities, fixed income and
alternatives.
Investment philosophy and process
In the long run, the performance of real estate
securities is determined by real estate markets
and the quality of assets and management in
individual companies. In the short run, however,
local economic factors and fluctuations in
exchange rates and the prices of other asset
classes can influence property equity prices. The
investment philosophy is based on the following
beliefs:
• Regional flexibility. The characteristics of
property equity markets vary across the
world. Our regional specialists, therefore,
adapt their investment process to local
markets in seeking to optimise returns.
Asset Management Newsletter from ADCB
APRIL 2014
Source: Henderson Global Investors
Global Market
Performance
Macro
Themes
Product
Spotlight
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adcb.com Page 13
Product Spotlight
GLOBAL INVESTOR
• Research is key. Companies listed in the same
space will have different assets, different
management and different financing
arrangements. We therefore emphasise bottom-
up knowledge of their property portfolios and
management.
Top down regional asset allocation is determined by
reference to macroeconomic considerations, market
expectations and risk appetite. As the diagram shows,
property markets can be at different stages in a cycle.
Geographic weightings in the fund tend to be similar
to the benchmark weightings (FTSE EPRA/NAREIT
Developed Index), with excess returns generated
from stock selection.
The portfolio typically comprises 60-70 positions, of
which typically 30-35 are in North America, 15-20 in
Asia-Pacific and 15-20 in Europe. Stock selection
involves careful fundamental research of property
companies incorporating a scoring system that takes
into account quantitative and qualitative components
such as valuations, dividend growth, liquidity and
quality of management. This establishes a forecast of
re-pricing within defined groups of stocks allowing
the fund to invest in those companies with the
strongest relative value. Constant risk monitoring is
undertaken at desk (pre-trade) and by central systems
(pre- and post-trade).
Asset Management Newsletter from ADCB
APRIL 2014
Source: Henderson Global Investors
Source:CBRE Research Q4 2013
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 14
Product Spotlight
GLOBAL INVESTOR
Where do you see the main opportunities and
risks?
The fund is overweight North America, given
expectations of 7% cash flow yields and 8-10%
dividend growth from key companies in the region.
The development pipeline is still small at only 1% of
existing stock, which merely keeps pace with
depreciation of existing stock.
Within Europe, the UK and Sweden remain attractive.
Again, office supply and demand looks favourable as
reflected in the City of London supply chart where
very little speculative space (space without a tenant) is
under construction.
The fund is underweight eurozone retail because low
eurozone inflation means upward indexation of rents
will be low. It is also underweight Asia because of a
slowdown in residential markets and rich Japanese
valuations.
The fund remains vigilant towards changes in interest
rates and rising bond yields. Many property
companies have locked in financing for the medium
term, so the reduction in earnings from rising interest
rates is expected to be contained. The additional yield
(transaction cap rate spread) provided by property
over the yield on 10-year US Treasuries also remains
at or above average levels, suggesting property is far
from being overvalued.
Asset Management Newsletter from ADCB
APRIL 2014
City speculative space under construction,
millions of square feet
Source: Henderson Global Investors
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
199
6
199
7
199
8
199
9
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
<400k sqft >400k sqft
Source: IPD, Henderson Global Investors, as at February 2014
Spread: Transaction cap rates vs 10yr Treasuries
0
1
2
3
4
5
6
199
1
199
3
199
5
199
7
199
9
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Transaction caprate spread
Average spread
Source: NCREIF, Raymond James. Henderson
Global Investors, at 31 December 2013
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 15
Product Spotlight
GLOBAL INVESTOR
Disclaimer
The Henderson Horizon Fund (the “Fund”) is a
Luxembourg SICAV incorporated on 30 May 1985,
managed by Henderson Management S.A. This
document is intended solely for the use of
professionals and is not for general public
distribution. Any investment application will be made
solely on the basis of the information contained in
the Fund’s prospectus (including all relevant covering
documents), which will contain investment
restrictions. This document is intended as a summary
only and potential investors must read the Fund’s
prospectus and key investor information document
before investing. A copy of the Fund’s prospectus
and key investor information document can be
obtained from Henderson Global Investors Limited in
its capacity as Investment Manager and Distributor. A
copy of the Fund’s prospectus, key investor
information document, articles of incorporation,
annual and semi-annual reports can be obtained free
of cost from the local offices of Henderson Global
Investors: 201 Bishopsgate, London, EC2M 3AE.
Issued in the UK by Henderson Global
Investors. Henderson Global Investors is the name
under which Henderson Global Investors Limited
(reg. no. 906355) (incorporated and registered in
England and Wales with registered office at 201
Bishopsgate, London EC2M 3AE and authorised and
regulated by the Financial Conduct Authority) provide
investment products and services.
Past performance is not a guide to future
performance. The performance data does not take
into account the commissions and costs incurred on
the issue and redemption of units. The value of an
investment and the income from it can fall as well as
rise and you may not get back the amount originally
invested. Tax assumptions and reliefs depend upon
an investor’s particular circumstances and may
change if those circumstances or the law change. If
you invest through a third party provider you are
advised to consult them directly as charges,
performance and terms and conditions may differ
materially.
The securities included in this document are not
registered in the Foreign Securities Registry of the
Superintendencia de Valores y Seguros for public
offering and, therefore, the use of this document is
only for general information purposes.
Nothing in this document is intended to or should be
construed as advice. This document is not a
recommendation to sell or purchase any investment.
It does not form part of any contract for the sale or
purchase of any investment.
FOR UNITED ARAB EMIRATES RESIDENTS ONLY
This document, and the information contained
herein, does not constitute, and is not intended to
constitute, a public offer of securities in the United
Arab Emirates and accordingly should not be
construed as such. The Units are only being offered
to a limited number of sophisticated investors in the
UAE who (a) are willing and able to conduct an
independent investigation of the risks involved in an
investment in such Units, and (b) upon their specific
request. The Units have not been approved by or
licensed or registered with the UAE Central Bank, the
Securities and Commodities Authority or any other
relevant licensing authorities or governmental
agencies in the UAE. The document is for the use of
the addressee only.
Source: Henderson Global Investors
Asset Management Newsletter from ADCB
APRIL 2014
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 16
WealthDesignTM: Funds Performance Review
GLOBAL INVESTORAsset Management Newsletter from ADCB
APRIL 2014
Fund House Performances
Fund Asset Class / Target Market ISIN CNY 3M YTD 12M 36M 60M
Equity Funds
Developed
M&G GLOBAL LEADERS FUND "A" Global Equities GB00B1RXYW84 USD (0.1%) (0.1%) 17.1% 21.0% 117.3%
M&G GLOBAL DIVIDEND FUND "A" Global Equities GB00B39R2V77 USD 0.4% 0.4% 15.1% 36.4% 173.5%
AB GLOBAL THEMATIC REASEARCH PORTFOLIO "A" Global Equities (Thematic) LU0069063385 USD 1.3% 1.3% 19.8% 2.1% 99.9%
FIRST EAGLE AMUNDI INTERNATIONAL FUND "A" Gobal Equities LU0068578508 USD 2.2% 2.2% 10.1% 20.7% 86.1%
OASIS CRESCENT GLOBAL EQUITY FUND "A" Islamic Global Equities IE00BCV7MP24 USD 2.7% 2.7% NA NA NA
M&G AMERICAN FUND "A" US Equities GB00B1RXYR32 USD 0.1% 0.1% 16.0% 29.3% 130.6%
SCHRODER ISF EURO EQUITY FUND "A" European Equities LU0106235293 EUR 3.4% 3.4% 23.2% 32.1% 106.5%
JPMORGAN FUNDS- PACIFIC EQUITY FUND "A" Asia Pacific Equities LU0210528096 USD (6.1%) (6.1%) 4.2% 7.3% 86.1%
FTIF FRANKLIN TECHNOLOGY FUND "A" Global Tech Equities LU0109392836 USD 3.9% 3.9% 23.9% 28.0% 160.7%
JPMORGAN FUNDS- HIGHBRIDGE US STEEP FUND "A" US Equities LU0325075496 USD 2.1% 2.1% 18.6% 44.7% 164.0%
JPMORGAN FUNDS- HIGHBRIDGE EUROPE STEEP FUND "A" European Equities LU0325073954 EUR 5.7% 5.7% 18.4% 23.3% 115.3%
Emerging
SCHRODER ISF EMERGING MARKETS FUND "A" Global Emerging Markets Equities LU0106252389 USD (3.1%) (3.1%) (3.1%) (9.3%) 79.8%
SCHRODER ISF BRIC FUND "A" BRIC Equities LU0228659784 USD (3.9%) (3.9%) (2.1%) (18.5%) 55.5%
AMUNDI ISLAMIC- BRIC QUANT "A" Islamic BRIC Equities LU0399639573 USD (3.2%) (3.2%) 4.2% (26.9%) 63.6%
FTIF FRANKLIN INDIA FUND "A" India Equities LU0231203729 USD 9.0% 9.0% 7.6% (10.6%) 106.0%
FIDELITY FUNDS -LATIN AMERICA FUND "D" Latin America Equities LU0050427557 USD (1.6%) (1.6%) (17.0%) (22.0%) 90.4%
FTIF -TEMPLETON EMERGING MARKETS SMALLER COMPANIES FUND "A" Emerging Markets Small Cap Equities LU0300738514 USD 1.0% 1.0% 4.1% 2.5% 153.6%
EASTSPRING INVSTMENTS- DRGAON PEACOCK FUND "A" China & India Equities LU0259732245 USD (2.6%) (2.6%) 1.6% (19.2%) 73.6%
BLACKROCK GF EMERGING EUROPE FUND "A" Emerging Europe LU0011850392 EUR (9.9%) (9.9%) (13.5%) (25.3%) 85.0%
JPMORGAN FUNDS-ASEAN EQUITY FUND "A" South East Asian Equities LU0441851309 USD 3.8% 3.8% (8.4%) 18.0% NA
Frontier
AL NOKHITHA FUND UAE Equities (Active) ADCBANF UH AED 21.5% 21.5% 73.6% 119.4% 144.2%
ADCB MSCI UAE INDEX FUND UAE Equities (Passive) ADCBMSC UH AED 23.5% 23.5% 81.2% 144.4% 222.5%
ADCB ARABIAN INDEX FUND Arabian Markets Equities (Passive) ADCARAB UH USD 10.7% 10.7% 31.9% 35.2% 88.7%
FTIF-TEMPLETON FRONTIER MARKETS FUND "A" Frontier Markets Equities LU0390136736 USD 0.0% 0.0% 9.7% 12.8% 118.5%
Global Market
Performance
Macro
Themes
Product
Spotlight
Performance
Review
adcb.com Page 17
GLOBAL INVESTOR
WealthDesignTM: Funds Performance Review
Asset Management Newsletter from ADCB
APRIL 2014
Fund House Performances
Fund Asset Class / Target Market ISIN CNY 3M YTD 12M 36M 60M
Fixed Income
Developed
BNY MELLON GLOBAL BOND FUND "A" Global Bond IE0003924739 USD 2.2% 2.2% (0.5%) 4.0% 22.3%
SCHRODER ISF GLOBAL CORPORATE BOND FUND "A" Global Corporate High Yield Bond LU0106258311 USD 2.2% 2.2% 2.8% 14.6% 46.1%
AMUNDI FUNDS- BOND GLOBAL AGGREGATE "A" Global Aggregate LU0319688361 USD 0.6% 0.6% 3.6% 15.2% 78.2%
Emerging
PICTET-EMERGING LOCAL CURRENCY DEBT FUND "A" Emerging Markets Bond LU0255798364 USD 1.7% 1.7% (9.3%) (2.8%) 46.7%
FTIF-TEMPLETON GLOBAL BOND FUND "A" Global Bond LU0252652382 USD 0.6% 0.6% 0.5% 12.6% 52.6%
High Yield/Sukuk
GOLDMAN SACHS GLOBAL HIGH YIELD PORTFOLIO "A" Global High Yield LU0234573771 USD 2.9% 2.9% 7.5% 25.1% 118.0%
Alternatives
Real Estate
HENDERSON HORIZON FUND- GLOBAL PROPERTY EQUITIES FUND "A" Global Real Estate Companies Equities LU0209137388 USD 2.2% 2.2% (2.9%) 17.3% 160.3%
NEUBERGER BBERMAN US REAL ESTATE SECURITIES FUND "A" US Real Estate Securities IE00B0T0GQ85 USD 6.7% 6.7% 1.1% 22.4% 215.5%
Commodities
JPMORGAN FUNDS GLOBAL NATURAL RESOURCES FUND "A" Natural Recources Companies Equities LU0266512127 USD 2.0% 2.0% (7.2%) (46.8%) 38.0%
BLACKROCK GF WORLD GOLD FUND "A" Gold Mining Companies Equities LU0055631609 USD 13.8% 13.8% (28.4%) (53.5%) (18.6%)
SCHRODERS ISF GLOBAL ENERGY FUND "A" World Energy Companies Equities LU0256331488 USD 2.2% 2.2% 15.0% (27.6%) 50.0%
BLACKROCK GF WORLD MINING FUND "A" Global Mining Companies Equities LU0075056555 USD (0.8%) (0.8%) (11.2%) (47.2%) 23.4%
AMUNDI ISLAMIC -GLOBAL RESOURCES "A" Islamic Global Resources Equities LU0399640407 USD 2.6% 2.6% 9.7% 3.5% NA
Multi Asset/ Balanced
RUSSELL GLOBAL 35 MULTI MANAGER "A" Multi Asset-Moderate IE00B02WN480 USD 0.9% 0.9% 2.6% 13.3% 60.6%
RUSSELL GLOBAL 50 MULTI MANAGER "A" Multi Asset-Moderate IE00B02WN597 USD 0.7% 0.7% 5.2% 15.3% 72.8%
RUSSELL GLOBAL 70 MULTI MANAGER "A" Multi Asset-Moderetly Aggressive IE00B02WN712 USD 0.5% 0.5% 8.6% 17.8% 89.4%
RUSSELL GLOBAL 90 MULTI MANAGER "A" Multi Asset- Aggressive IE00B02WN829 USD 0.3% 0.3% 11.9% 19.1% 103.9%
adcb.com
Sources
All information in this report has been obtained from Bloomberg sources except where indicated otherwise. All data in this report is as of the last
international business day of the preceding calendar month except where indicated otherwise.
Disclaimer
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”,
“intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be
achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are
subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements.
Readers are cautioned not to place undue relevance on these forward looking statements. ADCB expressly disclaims any obligation to update or revise any
such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of
unanticipated events
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been obtained from third party sources, this information may be based on assumptions or market conditions and may change without notice.
The information in this report was prepared by employees of ADCB and is current as of the date of the report. The information contained herein has been
obtained from sources that ADCB believes to be reliable, but ADCB does not guarantee its accuracy, adequacy, completeness, reliability, or timeliness, and
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