SEB report: In search of the best - amid chill winds (March 2010)

8/8/2019 SEB report: In search of the best - amid chill winds (March 2010)

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InvestmentOutlook March 2010private banking investment strategy

Qiy i crci

Brighr propc hd

hi oig growh pzz


2/38


3/38

3Investment OutlOOk - maRCH 00

Contents

rodcio ____________________________________________________________5

Sry ______________________________________________________________6Poroio rgy ________________________________________________________8

Th: Qiy i crci _______________________________________________ 11

Th: Brighr propc hd ________________________________________ 1

Th: hi oig growh pzz _____________________________________ 17

Mcro ry _______________________________________________________ 19

asset CLasses

Eqii ______________________________________________________________ 21

Fixd ico _________________________________________________________ 2

dg d__________________________________________________________ 26

___________________________________________________________ 29

Pri qiy _________________________________________________________ 32

oodii _________________________________________________________ 3

rrci ___________________________________________________________ 36

Srgy


4/38

4 Investment OutlOOk - maRCH 00

Thi doc prodcd by SEB coi gr rig iorio bo i i prodc. Ahogh h co i bd o orc jdgd o b

rib, SEB wi o b ib or y oiio or iccrci, or or y o whor which ri ro ric o i. i rrch i rrrd o,

yo hod i poib rd h rpor d h dicor coid wihi i, or rd h dicor rig o pcic copi od o www.b./di-

cir. orio rig o x y bco odd d y o yor idiid circc. prodc prodc rr id o ri.

Thir y w ri, d hioric rr r o gr o r rr; i o c, o c xcd h iii o id. Whr

ihr d or yo i i crii doid i orig crrcy, chg i xchg r c ipc h rr. Yo o r rpoib or yor

i dciio d yo hod wy obi did iorio bor ig h. For or iorio p ir i h ipid propc

or d d iorio brochr or d d or rcrd prodc, ib www.b.. cry yo hod dic iord o yor idiid

circc ro yor SEB dior.

Inormation about taxation: A cor o or rio Pri Big ofc i Lxborg, Sigpor d Swizrd yo r obigd o p

iord o h x r ppicb i h cori o yor ciizhip, ridc or doici wih rpc o b cco d ci rcio. SEB doo proid y x rporig o orig cori ig h yo yor proid cocrd horii wih iorio d wh rqird.

Hans PetersonGob d o Srgy

+ 4

h.pro@b.

Lars Gunnar AspmanGob d o Mcro Srgy+ 4

r.p@b.

Rickard LundquistPoroio Srgi

+ 4

ricrd.dqi@b,

Victor de OliveiraPoroio Mgr d d o S Lxborg

+ [email protected]

Johan Hagbarthd o i Sppor

+ 4

joh.hgbr@b.

Carl BarnekowGob d o Adiory T+ 4

cr.brow@b.

Reine KaseEcooi

+4

ri.@b.

Liza Braawoicor d Edior

+4 0iz.brw@b.

Thi rpor w pbihd o Mrch , 00.

co r bd o iorio d yi ib bor Fbrry , 00.

Srgy


5/38


We are in a sort o holding pattern; selectivity

pays, and thoughtulness is becoming a virtue.

The path towards better days is lined with

various challenges, such as miserable govern-

ment inances and worries about monetary

tightening. We are moving rom beta to alpha

and seeking quality. This is the ocus o the

spring issue o Investment Outlook.

Thi yr h bg wih w rd. Th cooic pr

h cooidd. Mwhi h r h b rig

bo ch hig h gor c o rio

Erop cori d cooic poicy ighig i

hi. Mr codiio h bco or cri.

Lr hi yr, growh r i h ED wi ow poi-

i iory c d c i pcg d. Thi

w r ow ocig o h c pror w

wiho rog cycic ppor. hi ph, h wh wi

b prd ro h ch. W r or i

rgy. Tody hr r i good poi i. Th

gob cooy i coiig o grow hogh rhr owy,

which i rh dg. A h r prci

h r or prdicb, ri ppi wi cib. Thi, i

r, wi d o grr ir i ri c.

We Have mOveD intO reaL estate

W h ow or r p io h r r

i or poroio. A rpid pwig i r rcio

good pric biy br h pric h

d o h cooic xpio i dr wy. Thr r

pr hr wih pri qiy, i which w o d

ry i h h yidd good rr, pciy

coprd o c wih iir ri xpor. h

og r, or id i h i i br o by i oo ry

h oo .

Aohr i r w r cry ig d -

ig cio i i rgig r (EM). ody ci ci-

, ior r drwig hrp diicio bw highd ow qiy. or opiio, y EM cori rpr

high qiy i r o growh d c. pid growh wi

riggr ir r hi, b h cobiio o qiy d

poi crrcy gi i rci. Soc r i h EM

phr wi probby yid good rr. Tody worri bo

hi ory ighig r y ry w b o-

owd by riio i h r h i i o hir d-

g o p iio ri i chc.

time tO FOCUs On QUaLity

Fro b o ph i o o or i h. ohr

word, w ow d o d good rr wih phi oqiy, oowig h r rpid r pr ph. W h

h dg o big b o poy brod pcr o

i opporii.

Drig rc qrr, or corpor bod r i-

h b ry cc. W wi ri xpod o

corpor bod, pciy i h igh Yid g. Dpi

rdy ry good r i hi g, w or coi-

d poi rr. Th rr r iy o d p

big w bo ho o gob qii i b

ri i r o oiiy, crig h poi or good

poroio g.

Thr wi b o chg drig h prig o 00, b

i owh ogr prpci h propc or coo-

i d ci r r brigh. Th y o hi i ow

cooic pr, copd wih ow iio. B h pwig

wi i, pciy i h G cori. Thi wi dd

grr ciiy i or i.

Hans Peterson

CIO Private Banking and Global Head o

Investment Strategy

Iuci

In search o the best amid chill winds


6/38


Sry

Expected 1-year

Reasoningreturn risk

Equities 8% 17%

positivE.Stock markets are past their very best period and in some places are now being subjected

to conicting orces. Yet the current phase is rather equity-riendly, and valuations are below historical

averages. There is good stock market potential in the US, emerging markets (mainly Eastern Europe) and

companies with fnancial stamina.

Fxd com 5%* 6%

WAit-AND-sEE/positivE.Corporate bonds remain appealing, and High Yield bonds in particular are moreattractive than government bonds. Our exposure to convertible debt instruments remains avourable, andemerging market debt is increasingly attractive.

Hedge funds 7% 6%

positivE. The eect o initiatives to regulate the hedge und industry remains unclear. Looking ahead, our

ocus will be on quality managers who have proven capacity, with an emphasis on Macro, CTA, Relative

Value and Fixed Income strategies.

Real estate 4% 3%

WAit-AND-sEE/positivE. Access to lending is gradually improving, the number o transactions is rising,

and yield is alling. All this indicates that the real estate market is on its way into a recovery phase. Variousproblems remain, however, and it will be important to stick to quality properties.

Privateequity 15% 24%

positivE.The number o transactions is increasing, indicating that the gap between buyers and sellersis now beginning to narrow. The secondary market remains attractive. The risks concern quality in the

economic cycle and possible risk aversion.

Commod 5% 15%

WAit-AND-sEE.A stronger USD, economic policy tightening measures in China, a dip in OECD economic

growth and regulation o US commodities trading are risk actors that are lowering the prospects or thisasset class as a whole. Industrial metals are the least attractive, while agri-commodities may rise due topoorer harvests and protectionism.

Cuc 5% 3%

WAit-AND-sEE/positivE.The USD will appreciate against the EUR in the next ew years. Emerging market

currencies should appreciate, while commodity-related currencies may lose some ground. Better risk appetite

should lower the JPY and CHF somewhat urther ahead.

* Expected return on corporate bonds that are weighted about /3 Investment Grade and /3 High Yield.

HistOriCaL risk anD retUrn

(FebrUary 29, 2000 tO JanUary 31, 2010)

CHange in OUr eXpeCteD retUrns

Equities

Fixed income*

Hedge funds

Real estate

Private equity

Currencies

Commodities

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0% 5% 10% 15% 20% 25% 30%

Expected volatility

Expected

return

ioric r bd o h oowig idic: Eqii = MS A Word. Fixd ico = JP Morg Gob GB dg. dg d = FX Gob dg Fd. =

FTSE EPA/NAET Dopd. Pri qiy = LPX. oodii = S&P GS T. rrci = Brcydg rrcy Trdr.

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2008-11

2009-02

2009-05

2009-08

2009-12

2010-02

Equities Fixed income* Hedge funds Real estate

Private equity Currencies Commodities

Fixed Income

Equities

Private equity

Commodities

Real estate

Hedge funds

Currencies

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

0% 5% 10% 15% 20% 25% 30%

Historical volatility

Historicalreturn

Equities

Fixedin

come

Hedgef

unds

Realestate

Private

equity

Commo

dities

Currencies

Equities 1.

Fixed income -.2 1.

Hedge unds .35 .2 1.

Real estate .75 -.1 .23 1.

Privateequity

.83 -.18 .28 .82 1.

Commodities .27 -.12 .27 .22 .3 1.

Currencies .17 .65 .51 -.1 -.6 -.1 1.

HistOriCaL COrreLatiOn (FebrUary 29, 2000 tO

JanUary 31, 2010)

eXpeCteD risk anD retUrn (1 year HOriZOn)


7/38


Sry

WeigHts in mODern prOteCtiOn

WeigHts in mODern grOWtH

1%

5%

0%

0%

0%

10.5%

83.5%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

3.5%

5%

5%

2.5%

3%

30%

27%

24%

0% 10% 20% 30% 40%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

WeigHts in mODern aggressive

rOLLing 36-mOntH COrreLatiOns vs. msCi WOrLD

(eUr)

1%

0%

5%

10.5%

0%

22.5%

29%

32%

0% 10% 20% 30% 40%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

2002 2003 2004 2005 2006 2007 2008 2009

Fixed income Hedge funds Real estate

Private equity Commodities Currencies

tHeme: QUaLity is CrUCiaL

EUR/USD [ma 5 ] MSCI Wo rld [ma 5 ]Source: Reuters EcoWin

Mar

2008

Jun Sep D ec

2009

M ar Jun Sep Dec

2010

MSCI

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

1.65

EUR/USD

700

800

900

1000

1100

1200

1300

1400

1500

1600

tHeme: CHina sOLving grOWtH pUZZLe

China, Exports, Chg y/y China,Investment in Fixed Assets, Urban, Chg Y/Y

Source: Reuters EcoWin

1996 1998 2000 2002 2004 2006 2008

-30

-20

-10

0

10

20

30

40

50

Percent

-30

-20

-10

0

10

20

30

40

50

Since late , the USD has strengthened rom . to .3 per EUR,

while the stock market has lost only a ew per cent. This indicates that

the correlation between equities and the dollar has begun to loosen.

Both in - and -, when export growth ell, the pace

o investments rose in China. We now discern a similar pattern or the

period onward.

Qul cucl: Ar h rcory, h oc i ow hiig o orihig cori d qiy copi

bh oc hd: Th r hod o ro rdig wr o pr ri wi bi

Ch ol owh uzzl: Doic dd hod b b o or cooic gi


8/38


fli g

mODern prOteCtiOn

E dr h or rb r codiio o rc

oh, Modr Procio h prod b d h di-

rd poii rr. Dpi ch h gorc crii i ohr Erop, hi ory ighig

r d Prid Brc b propo or ricr

big r, hodig xcp o r i howig poi-

i rr. Grd h r pric or or iid ri

xpor i corpor bod boh Grd (G)

d igh Yid (Y) ro hir Jry p, b

hy r i ig poii coribio o h poroio.

r xpor o h orig xchg r coi o b

h w i i h poroio, wih rgi gi yid,

b pr w o jor c or cocr. W rgry

r- or i dciio, howr.

r poii iw o G d Y bod ri rgy -

chgd, b w r chooig o rdc h ir iiiy

o or G bod hodig. W r rpcig or hodig wih o

h h iir rgy d gr, b wih igi-

cy horr drio. y cy rhr ry o b

worryig bo riig r ir r, b hi rc

or cio id owrd yp o ri i h Modr

Procio poroio. Th xd ico d wih ch p

d o rr rgi h w h cho o i i

h cy xcdd or xpcio, o j chd

h. w highy rrig o wch how hir gr

iy igd hrogh h r rbc. i

coro i o o h o ipor copo, d i i

o r o oidig o rhr h chiig rg

gi. W c o h hi h word.

Th hdg d porio o h poroio i chgd, oc-

ig o r r rgi. Thi yr bg w or or

hodig, d i hi c w oo orwrd o h co-ig yr wih codc. Ar hrp rcori drig which

o h gid , hr i ow cr rd:

r pyr h c pr h wh ro h ch wi

b h wir. Thi c o b xprd i chic r

prig ph ro b, which i xcy wh r

r rgi r bo.

Portolios or a new nancial reality

83.5%

1% 5%

10.5%

Cash

Currencies

Hedge funds

Fixed income

Our Modern investment programmes have been adapted to the new market conditions. Our positive

view o corporate bonds remains in place, but we are choosing to reduce interest rate sensitivity. Ourconvertible debt instruments show that we have ound the desired cushion against a stock market

downturn. We are keeping our weighting or equities unchanged. Our hedge und holdings have

perormed well, and we are raising our return expectations in this asset class. The same applies to

real estate, a new eature o our portolios along with emerging market debt. We have lowered our

return expectations or commodities and have consequently down-weighted this asset class.


9/38


mODern grOWtH

Th ci word h ow diiy bhid i o

ggri rcory priod. Th oc h hid bc o

crr cooic rii, d prhp bi wy ro x-pcio o r growh. Mr h rioy bg o

qio h high idbd o Wr cori d hir

og-r cpciy o gr growh. Mo i jor

crrci r crig cocr, d r r dob

bo h o h ro i h w o gor c

cri pririy i h crrcy io Mdirr -

br io. Wh hi y cooic gi og

rgig r cori o ror o r id

cooig o i cooy, hi d ixorby o criy

d o o ri ppi. oodii, pririy d

hir prodcr, qicy rd pro-ig d ig

r pric. W rgrd or xpor o coodii ih Modr Growh poroio roby bcd. E

hogh i rhr hrpy i i riy hor i,

w r h i chooig o ri or poiio, ic hi x-

por i w-dirid i r.

Eqii r ry rhr hrd-hi c wh

r worri ipy, b ic w did o or b

prdd o joi h wid cbrio d id hd o

ro icrig or hodig o qii, w coorb

wih or xpor, which i bo 4 pr c. Th qii

porio o h Modr Growh poroio i bd o good x-

pcd rr i rio o ri drig h coig yr, d

r rbc h o cd o chg h opiio.

r i crio h h prob cooi i

h EU wi d wih hir ibc, hogh hi proc

y bi ogr h dirb, d h w gob

ci crii c b oidd. W iy iw hi

r o coo o i cooy r d ogic p

h hod d o or id, b priod o co-

oic growh, hogh chrcrid by rgiy owr r

o xpio.

h xd ico porio o h poroio, w r doig

h i Modr Procio: rdcig or ir r

iiiy i G bod. h wy, w r rpcig orhodig wih o h h iir rgy d g,

b wih igic horig o drio. Ahogh w r

or ri-icid i h Modr Growh poroio, w bi

h h ri dj i jid coidrig or x-

pcd rr o G bod. r Y bod hodig wi ri

ic, howr.

r hodig o corib db ir h prord

xpcd. So r h r h b o proid wih h

chio gi oc r dowr h w wr -

ig, b wih grr poi or coid pr h cor-

por bod. Th choic o wo copry i

prod wi, ic h o h h rgr qii

h dird rgiy gi yid, whi h o oc-

ig o h bod r h yidd poii rr. W r

id wih or xpor o corib db.

J w wr ry i brcig id pri qiy, wow or h poi or rci ri-djd rr

i r . or jdg, h corci r

r wi boo o drig h r pr o 00. W r

chooig o rdc or ch hodig by hr pr c o h

poroio by oig io w-dirid r d,

which wi i iy i op, dirc-i r

d. r objci d xpcio i o r yry rr

o bw - pr c i h yid o h dryig prop-

ri. Sic or Investment Outlook(Dcbr 00), w

h rid or xpcd rr o r .

Trig o pri qiy c, or biiori o brod or poroio, b pr w d i

difc o bc rci i wih rob

iqidiy. r rch i coiig, d i h i w r

chooig o ri or crr poiio i id pri qiy,

which h coid o corib poiiy o h poroio.

J i Modr Procio, w h o rcid y poi-

i coribio i Modr Growh ro orig xchg

xpor. W o idi c or cocr, b i

i Modr Procio, w r wiig o r- or dciio

i or o i h crri highr ri d grr

rr poi.

Aog h hdg d h w rcy ddd o h Modr

Growh poroio, w h b cd by p prob-

or h hdg d idry. dg d h pror

ry w rci o ch w oy h hy dcid o co

h d o w dpoi. Th prpo o hi i o oid

joprdiig h biiy o h d o gr coid

good rr or xiig ior. W rcy id i

ch d, d ow w rch or copry

ri. Th poroio i rob d w-dirid, wih

rgi h w bi h good poi o corib o

good, b rr. hi c, oo, w h rid or

xpcd rr or h coig yr.

Poroio rgy

3%

2.5%

3.5%

27%

24%

5%5%

30%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities


10/38


Poroio rgy

mODern aggressive

Ahogh w r or icid o ri i h Modr

Aggri poroio, i 00 w crrid o o ro-

cio o ri i ordr o ipro h bc d corriobw or hodig. Spcic chg wr d i qii

i or o grr xpor o Y, d brodr d i

coodii w ddd o h poroio.

W h ow rdcd or coodiy xpor o d

rgy prodcr. Thi i h hodig h h prord o

pccry ic h bgiig o yr go, d hrp

pr qioby d o owr xpcd r rr.

h w o hi cooic poicy ighig r,

w h coqy owrd or rr xpcio or h

coodii c, d w r h o rdcig or

xpor. d w r icrig or pri qiy hodig.Thi i qy ggri i r, b h dir

driig orc. W r o ocig pr o or coodii

xpor o rgig r db (EMD), ig hi w

hodig i h xd ico c.

Th ro o rgig r i gob growh i diy i-

crig. Th cori i h rgig r (EM) phr

ow cco or bo pr c o gob copio.

Thi h hy h rpd h US, which cco

or rod pr c. Ahogh h ED cori i

prodc pr c o h word o GDP, h growh r

i h EM phr h b wic high drig h p

yr. A hir cooic d poiic codiio ipro, h

crdi rig o EM cori r ow big pgrdd.

ddiio o high ir r d poii propc,

h EM crrci r icrigy rci o ior,

d h crrci r iy o pprci rhr. Fro

h dpoi o gr, EMD h high rrpoi. proid opporii o wor wih yid cr,

ir r d oc crrci, b o wih bod id

i hrd crrci. Sic 00, EMD i oc crrci h

yidd rr o or h pr c. W or

coid good prorc, hogh i wi hrdy b

rog drig h p i yr.

A i h Modr Growh poroio, i Modr Aggri w

h o rcy b cd by p prob or h

hdg d idry. dg d h pror ry w r-

ci o ch w oy h hy dcid o co h d

o w dpoi. Th prpo o hi i o oid joprdiigh biiy o h d o gr coid good rr

or xiig ior. W rcy id i ch d,

d ow w rch or copry ri. Th

poroio i rob d w-dirid, wih rgi h

w bi h good poi o corib o good, b

rr. hi c, oo, w h rid or xpcd

rr or h coig yr.

r w r chooig o o i i h yp o r

i Modr Growh, ic i di r do

o y corib o h objci o h Modr Aggri

poroio.

22.5%

10.5%

29%

32%

1% 5%

Cash

Commodities

Private equity

Hedge fundsFixed income

Equities


11/38


This year, the ocus o investors will be on

quality

whether it concerns bonds, currencies or

equities

The winners will be lourishing countries and

quality companies

rc yr, r o h ior o

ror cor rid. Th priod ro 00 o h r o

00 w doid by high ri ppi d yrocig

hr pric. Ar h, ior d ro yhig riy, b

by h prig o 00 hy wr gi byig ri i

rg qii.

Th word cooy rid h doody crio pid

by h di d orcr, c h i pricd io r

ody. Shr pric, coodiy pric d rr o db

crii d ohr h rbodd ro hir 00

ow. Wh cibd h o wr h wr pricd

drig h o c crii ph o h pio h

brpcy w ii h i, ow-qiy .

Ar iig hrogh r yr o r whr hy wr

ihr oorig h ccror or ig boh o h

br, ody r pyr r icrigy diigihigbw i bd o good d bd ri. Th priod

w r rig wi h o b orgiig o bd ri

w h c yr. d w or h o h o

00 wi b ig h dryig qiy o , rgrd-

o whhr hy r gor crii, corpor

bod, crrci or qii.

cr xp o how h r h bg o oc o

qiy i ody cocr bo Gr gor c.

i o w h h PGS cori (Porg, y, Grc

d Spi) r i hy cooic hh. W wro bo

hi i Investment Outlook r bc o yr go (Mrch00). For w ro zo br cori, h co o bor-

rowig w high h i i i ow.

Th dirc i h drig h prig 00, h r w

gd j o b i, d oy ow h ior bg oo-

ig or coy qiy.

COUntry risk Has an impaCt

Th ci iio o cori h bg o c i-or dciio d i hig cr ipc o rio

r. qi r h h ro i oig grod

wh h ro y i crig h joi. Nor i i y

rpri h Gr gor bod r oig

h cory ich cor o iocy. Sowh or r-

priig, howr, i h hr d bod o copy i

Porg Tco h prord r wor h ho o i

copior Dch To, hogh h wo cop-

i h iir crdi rig d bi od.

Th pr i dicrib i w iw r h g-

grg . Drig h p hr oh, h Gr ocr h o or h 0 prc d h Spih oc

r pr c. B i Gry h oc r

Only the best is good enough

th:

Qul cucl


2005 2006 2007 2008 2009 2010

Index

200

250

300

350

400

450

500

viOLent stOCk market sWings

In recent years, the stock market has behaved like a rollercoaster. In our assessment, the market has now entered

a phase where investors are increasingly evaluating the

underlying quality o assets. Market players are thus not as

likely as previously to be as unanimously positive or nega-

tive towards risk assets.


12/38


h oy bo 4 pr c d i Swd oy pr

c. Borrowig co o copi oprig i w ro

zo cori h cibd biy (riig ir

r o o), whi h borrowig co o copi wih

oprio i cori i Gry h rid b.

or r h diigihig bw cooic codi-

io i dir cori d ig h copi h

opr i w cooi wi b dry cd. Aog

ohr hig, h copi wi c owr dd d

highr x h copior bd i cooi h r

o or b grod. Ero zo cori wih poor bdg-

ry dicipi r o o i grppig wih r dci

prob. Th gob cooic owdow d h ch

o gigic i pcg h dg dp ho i y

Wr gor bdg. rchig or qiy, i-

or r h or ird i cori h h gd

hir bdg w d c how oid ch bc d cr-

r cco rp (ch Swd, Norwy, d d

Gry). A c cocd o h cori r

h iy o b i hir dd.

QUaLity UpsWing FOr emerging markets

ioricy, gi g o wid i h word cooyh rd io -bow or i h rgig r

phr, b hi i rod h oppoi i r. Mo d-

opig cori h dord ipri growh g-

r, hogh h gob cooy h rd i wor

cycic p i y dcd. rprcio o h

ci d cooic crii i h o Wr cori

h hir crdi rig dowgrdd by irio

rig gci. For dopig cori, howr, h rd

h b owrd rgr br o poii rig chg-

, i wh h gob cooy w dow or h

co. Th i ro or hi w ordr i h h coo-

i i h EM phr h igicy or b ci

d h bor. Th EM phr h cpd h

br o h gob cooic owdow, d hi i rcd

i h rd o hr pric. r, EM hr proidd

rr o pr c drig 00, coprd o oy pr

c or h r o h word (boh i US dor r), b

h i ry o EM oc xchg y o b iwd coqc o hir hig wiho jicio

igicy rhr h Wr oc xchg wh

h ci crii w rgig i wor. or h h

corrcd hir prio pio h rgig r

wr or rb, which prod wrog.

or , i o rgig r wi r-

i i dd og gob ior, pciy i

wh qiy i gidig pricip. i iy ED cori

h c h bigg chg. Thir cr gor

db h yrocd, d i br o idriid

cori ch db i highr h o yr o GDP. hrgig r cori, h growh o gor db

h b or b, d ggrg i rpr

h 0 pr c o GDP. Th br o job i h EM

phr h icrd drig h p ix oh, whi h

crr bor r iio d ooo i h ED

cori ppr ch gooir. Fiy, w xpc h EM

phr o coi dirig growh gr w bo ho

o h ED cori. Th dirc i i riig.

Accordig o h MF orc or 00 h EM phr wi grow

by ry . pr c, whi h ED cori r oy pro-

jcd o grow by bi bow . pr c.

CHanges in em CreDit ratings

s&p fITCH Moody's

China A+/Sb A+/Sb A/Po

Estonia A-/Sb BBB+/Ng A/Ng

Mexico BBB/Sb BBB/Sb B/Sb

Russia BBB/Sb BBB/Sb B/Sb

Hungary BBB-/Sb BBB/Ng B/Ng

Lithuania BBB/Sb BBB/Ng B/Ng

Bulgaria BBB/Sb BBB-/Ng B/PoIceland BBB-/Ng BB+/Ng B/Sb

Indonesia BB-/Po BB+/Sb B/Sb

Turkey BB/Po BB+/Sb B/Sb

Ukraine +/Sb B-/Ng B/Ng

ig p oo p ig dow oo

dow

Th: Qiy i crci


F inland Swe de n G er ma ny I taly Por tu gal Spain G re ec e

-15.0

-12.5

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

-15.0

-12.5

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

stOCk market trenDs in eUrOpe (3 mOntHs)

The perormance o some European stock markets varies

greatly, reecting the inuence o each countrys nancial

situation on investors decisions.

The past our months have been dominated by positive changes

in credit ratings, as shown by the colours in the table. This applies

both to the actual rating (letter combination) and the uture

outlook (positive/stable/negative).


13/38


tHe Us DOLLar a sOUrCe OF COnCern

Sic h bgiig o 00, w h hrp US do-

r pprciio, d w xpc hi rd o coi.

ioricy, rog dor h gry b yoyowih wr oc r, pciy i h EM phr. So i

h rgig o h dor hr o ri i gr

d EM i pricr? Thr r r xpio

or h cocio bw h dor d h oc r.

i h h dor o gi rgh drig priod

wh ri ppi i ow. or hir ri d

by US gor crii, rghig h dor. Bd

o h coio wido h EM cori r h o

rb o xr hoc, oc r dci i h

cori wr hrpr. Thi i, h rgh o h dor i

pririy coqc o w ro, ic h ro y

h rd o o b bi o hy grod. Pr o h dorpr c o b cribd o xpcdy rog US

cooy. Sic h prob r h pcic o Erop, i-

hr US oc xchg or rgig r rgio hod

r y jor dg.

Aohr ro why rgig r cori h hi-

oricy b pciy hrd hi by rog dor i h

hy h prioy b ow coodiy prodcr.

oodii r rdd i dor, d rog US crrcy

ph dow coodiy pric. Tody, howr, h EM co-

ri who h w-dirid oc r, d h

EM phr i dpd o coodiy xpor. For Li

Aric d i hr y b cr ipc i h dor

ri rog, b o r hi yr coodiy pric h

how ow corrio wih h dor.

r, ody h dor do o po h hr o

ri drig rir priod o dor pprciio. B

hogh h corrio bw h dor d oc r

i o ogr rog, h dor pwig i rc cri

dci i ior ri ppi. Th o ri wi

pror rogy, d i i p o h ior o b o h righ

hor. A iod rir, i or h qiy o

wi b icrigy ipor i hpig ior o

h propr choic.

QUaLity COmpanies WiLL be tHe Winners

Aid ro cory-pcic dirc, h r wi o

io cco h copi how dir qiy .

oprd o o gor which c oro co-oic chg copi h rid h ci d

crdi crii r gry i good hh. Tody hy ypicy

h wr poy, id-dow iori d highr

prodciiy. owr, cri yp o copi wi cop

br h ohr i h r ci h w or.

pwrd r cyc, i h r ph i i high-b,

ow-qiy hr h pror o rogy. Th oc

r cr i y p i hi iii ph. Ar ix

o w oh, h oc r rd ori. or

, i wi b qiy copi h dri h oc

r i hi ph (whr w r ow).

Accordig o or criri, qiy copi r w-b-

ihd copi h h rid-d-d, cc

bi od. Thy o b b o dor good,

ior rig growh rgrd o r ci. Fiy,

hy h od c d rog bc h.

ci whr qiy i bcoig icrigy ipor, i-

or wi py xr or copi wih h chrcriic.

wy o diigihig high-qiy oc i o oo hir

poi or high diidd. A copy h h hioricy

pid high diidd o hrhodr rgrd o r

ci ogh o h w-cioig bi od,

od bc h d rog ch ow. Sic gob

growh i xpcd o b ow i 00-0 d h word h

ow rd h or r ph o h rcory, h dii-

dd i i y o corib riy rg proporio

o h o rr o hr.

Thi yr i wi b xr ipor or ior o choo

good ri . or iw, drig 00 good ri wi b

o EM cori (oc r, crrci d bod), h

US (h dor d US oc xchg) d qiy copi

wih high, b diidd.

Th: Qiy i crci

tHe stOCk market is De-COUpLing FrOm tHe DOLLar

Since late , the US dollar has appreciated

greatly against the euro (which has allen rom

USD . to USD .3). Meanwhile the stock

market has lost only a ew per cent. This indi-cates that the correlation between the stock

market and the dollar has begun to loosen.EUR/USD [ma 5] MSCI World [ma 5]


Mar

2008

Jun Sep Dec

2009

Mar Jun Sep Dec

2010

MSCI

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

1.65

EUR/USD

700

800

900

1000

1100

1200

1300

1400

1500

1600


14/38


th:

Bigh ppch

Markets are now largely treading water

but there are good odds o improvedperormance a bit urther ahead

The key is slow economic recovery and low

inlation

Th iro or ci y drgo

igic hi i h cor o cooic cyc. Sic

xpcio ordiriy dri h crr bhior o h

r, h r y hd o h cooic cyc. Th

o rc priod o riig ri pric bg i h

r qrr o 00, i ohr word 4- oh bor h

hi ro rcio o rcory i h idriid cori

o h ED.

hi iii ph, r bg o dico ii

cooic pr, wih dig idicor hir cop

d hi i w idicor cocp, gr hoo, w

coid. i ppi o bd ro ow d occioy

ig r ir r. Wh h rcory w o co-

rd by crr crocooic iic drig h cod

h o 00, hi rhr d h pr i ri -

. Mor rcy, howr, h picr h chgd. A wph h bg, icdig boh poii d gi i-

c, d h rd o pric h h b igicy

or ixd. r r h ric ( pg ) dic h

chrcriic o h ph h h r h ow rd.

Wh hpp o pric rhr hd i 00 d

ry i 0 wi dpd o ro cor. Aog h

o ipor cor h cro wi b cooic

d pric rd w h dircio o cooic poicy

i boh h ED d h rgig r (EM) phr, p

h propc o r-oig rpri, ihr pid or

dowid.

A pr, ch o h word cooy i chrcrid by

rog cycic o, wih oy porio o Er

Erop ggig bhid. Th ED cori r big

ro coid powr cooic i r,

jor hi i h iory cyc ro drw-dow o bid-p

d ry rog rg i crig. Drig h r

pr o 00, howr, h ED cori wi o gr

Slow upturn will benet risk assets

US, GDP, Total, Constant Prices, AR, SA, USD, 2005 prices [c.o.p 261 obs]US, S&P 500 Composite, Index, Total Return, Close, USD [c.o.p 261 obs, ma 21]


1992 1995 1998 2001 2004 2007

Percent

-4

-3

-2

-1

0

1

2

3

4

5

6

Percent

-50

-40

-30

-20

-10

0

10

20

30

40

50

stOCk market a step aHeaD OF tHe eCOnOmy

It is historically well documented that the

stock market is a leading economic indicator.

This also applied during , when share

prices began climbing 4- months beore the

economy (measured here as US GDP).


15/38


d o hir growh dyic h priig i c

d. h EM phr, xpio wi whi coi i

high gr, wih h -growig Ai cooi i pricr

dig h wy. hi i xpcd o cco or ry / ogob GDP growh o 4. pr c drig 00.

Thi d-rc gob cooic rd wi cr widy co-

rig cooic poicy codiio, pciy ic h gp

i growh r wi c iio propc o ppr ry

dir. Whi h ED cori r prdicd o how

cor pric iio o bo pr c hi yr d oy

ighy bo 0. pr c i 0, pric icr i h EM

phr o d p rod pr c boh yr.

i hi i o pciy high i hioric prpci.

Whi h ED cori wi b chrcrid by y pric-

dprig orc rg pr cpciy, h ow r opy icr i h po-wr priod, w bor r,

high prodciiy y EM cori wi b corod by

cri orhig dci i h r cooy, copd

wih pric bbb ri.

mOre rOOm FOr LOOse mOnetary pOLiCy

Th d or cooic poicy ighig wi h b b-

iy grr i h EM phr h i h ED. B o

copicio i h ED i h h ci prob o h

gor i br o cori wi ci c

b-ighig. Thi i ohig h i i icr roo

or coid oo ory poicy, howr ( o pg

4). h EM phr, o h ohr hd, pbic c r

i r br hp, o c poicy dciio wi b dir

ro ho i h ED. Th boo i i h h oc o

cooic ighig i h EM phr wi b o ory

poicy, o c poicy.

So cori, pciy i Ai, h rdy bg o

igh hir ory poicy. hi wo-g icr i

ch rr rqir or b ic h bgiig o

00 h rcd h gr io. Er Erop i

ggig bhid i h cooic cyc, rcd i i

rc c i i y ir r. So r hr r o ig

h h w ory poicy r i h EM phr wib orc. Thi hod b i igh o h c h h

bo-iod pric d bbb ri do o ppr o b

o rio ( o pg ). Frhror, hr r y

idicio h EM crrci wi coi o ri i ,

cooig o hir cooi, pciy i hi r i

pprciio o h y, w h orcd ( pg ).

Aohr pr o h picr i h propc o rhr b

coodiy pric ( pg 4).

Looig hd bo o yr, ory poicy i h ED

i h iy o b oo hor-r ir r wi ri

hioricy ow, whi og-r yid wi cib oy ody.

Mwhi ighig r wi b ipod i h EM

phr, b h iy o b o h ggri id.

r, hi hod b gob iro h b ri

. r y occr i, howr, h r

oc o d bco cocrd bo o owrd

oghr ory poicy, ird by h gi rc-io o h Fdr r oc i id-Fbrry

h i w riig h dico r o Fd dig o b.

mODest interest rate Hikes in 2011

Drig 0, by idicio hr wi b ir r hi

o iry brod ro i h ED, b h ppr iy o

b od ic iio propc r o worrio d

y cori wi b ighig hir c poici. Nor i

hr y ro o oicy q highr ir r

wih ig pric. d, hiory how h drig

rhr og priod, odry riig ir r h go

hd i hd wih riig pric, pciy i i h bpoib o i ir r icr o highr cooic

growh (highr r ir r), o o riig iio xpc-

io.

Th ro bhid rcio o hir r o h

bq rcory. A h hr o h o rc rcio

w h Aric b-pri orgg crii, oowd by ci d cooic crii i h US h qicy prd o

h ir ED. Br r bbb o chrcrid

br o Erop cori, or xp h Uid

Kigdo, rd d Spi.

Th cycic pro o h ED drig 00 d 0 h i

iib i or cry b od pr wih GDP growh

r o bo . pr c, riic o h pr i h

ry 0 d 000 i coi wih h rcory p-

r h h gry oowd rcio cd by br

bbb.

Th: Brighr propc hd

Treasury Bills, Bid, 3 Month, YieldStandard & Poo rs, 500 Composite, Index, Total Return


2000 2002 2004 2006 2008

Percent

0

1

2

3

4

5

6

7

Index

2000

2500

3000

3500

4000

4500

5000

5500

HigH interest rates aLOngsiDe bULL markets

Worries that interest rate hikes will kill the current stock mar-ket upturn are exaggerated. During 4-6, or example,

the US stock market rose at the same time as the Fed was

raising key rates.


16/38


sLOW UptUrns aFter reaL estate Crises

Sic h ry 0, hr h b or h 0 r -

cri i h ED cori h h d o igiccooic p. coo doior o h cri

h b h h bq cycic pr h b ow

d rhr ghy. Thy h o b chrcrid by rg

pr prodcio cpciy, which h coribd o ow i-

io prr d ow ir r. Frhror, rwd

cycic rr or dob dip h b rr. cori

h id coid, hogh i ow gr d occioy

prig. Th growh p h w bi wi occr i h

ED drig h cod h o 00 i qi coi wih

hi hioric pr.

So how h ri y prord drig ch od-

cycic pr? Drig h r rcory yr, qiih b og h h h ri rpidy i ,

d h h rd rdig wr ph or -

oh, wih or or idwy r pric o

i 004, or xp ( Investment Outlook, Dcbr

00). Ar h, oc r h gry rd

ph chrcrid by rwd pric pr. Prhp h

i y or ow cooic pr bcoig og o i

ow iio. Thi, i r, y h grodwor or rhr ow

ir r d h orb i iro.

traDing-Water pHase FOLLOWeD by better

grOWtHr, hr i h good chc h h crr rd-

ig wr ph i ri r wi b oowd by

rwd ipro i growh owrd h d o hi yr

d ry i 0.

Wh, h, igh dirp or r crio i g-

i or poii dircio? ry riig iio d iio

xpcio, ccopid by hrp ir r hi, woddobdy b ry gi d wod probby h h

icr i boh ri pric d owh r h

cooic pr. Aohr ri wod b i gor -

ci prob c d, prhp oghr wih rpriigy

rg b o, riggr w o ci r roi. A

hird dgr wod b i ory ighig i h rgig

r phr i igicy or ggri h xpcd

d h hi o c jor dg o ED ci

r.

CHanCe OF UpsiDe sUrprise

dryig dd i idriid cori or

cooic gi h priig i rdippr, h r wod probby iw hi orby

ig h rpriigy good growh do o d o

widprd xpcio o r pric icr. h

icro , i wod b poii i bc h d ico

o copi ipro r h xpcd,

rghig h qiy/ rio d ci i o

copi d ig hir oc chpr i r o pric/

qiy rio. Thi wod b boh h corpor bod d

oc r.

Th: Brighr propc hd

Euro Zone, Consumer Prices, All-items ex energy and seasonal food, SA, 2005=100, Chg Y/YUS, Consumer Prices, All items less food and energy, SA, 1982-1984=100, Chg Y/Y


2005 2006 2007 2008 2009

0.75

1.00

1.25

1.50

1.752.00

2.25

2.50

2.75

3.00

Perce

nt

0.75

1.00

1.25

1.50

1.752.00

2.25

2.50

2.75

3.00

inFLatiOn is a key FaCtOr

Low ination benets risk assets, and we

expect ination to remain low on both sides o

the Atlantic or an extended period. The main

actors behind this are large spare capac-

ity, historically small pay increases and highproductivity.


17/38


th:

Ch olowh uzzl

Credit expansion and over-investments are

worrisome

but domestic demand may take over as a

driving orce

China has good potential or sustainable

long-term growth

Mr i h hid owrd hor-r cocr

bo h biiy d ibiiy o hi cooic

growh. Ery hi yr, rpid ofci cio id pririy

dig by h big cor oo y ior by rpri

d d o worri bo how ch h hi cr bwi igh i poici. Byod h hor-r worri, ohr

obc o hi og-r cooic growh r ooig.

h og r, hi dogrphic ppr wd. h

di r, h or ig rio ro ody

0 pr c or o o GDP o roo or doic co-

pio. Ad ifci cpi r i yicy

ocig pri cpi o h wrog i. Tody

high i i cig worri bo r bbb.

D o cocrio o ipcd i d riig

crdi ppy, iio i hor-r hr. So how rio

r h obc, d i hi i rci i-

rg?

LenDing gOes intO investments

Accordig o ofci iic, xd i i hi r

qi o 4 pr c o GDP, dobdy high dworrio gr. gry d, og ohr

hig, o grr dd or coodii, which i r

corib o cooic growh. B prodcio cpciy i

rpidy xpdig, d or-i ri cig boh

rp cpciy d ifci o id-p cpi. A xd

i i hi h ri proporio o GDP, or

d or cooi h h xprd cocr bo

h gi ipc o hi high i .

To drd h hi i phoo, i

b iwd i cycic prpci. Drig rir cooic

dowr, i 00-00, i ro hr oGDP wh orig dd . r h gor-

i oo or oohig cooic cio d

iig dd drig p. So i hr o ri o or-

cpciy? hi h coid rg d or irrcr

xpio or xp, h gh o hi oorwy

pr 00 ihbi i 4. r, coprd o . io-

r i h US. riy o h i big d

r fcicy-riig, b hi h d d or

br irrcr, d hi pdig h iprod h po-

i or icrig rd d bor obiiy i h cory.

d, h ri i h h gor y o ccd i

cig bc i i r i i d wih h righ

rgh xr dd rr.

Potential greater than risks in China

investments OFFsetting eXpOrt DeCLine

Both in - and -, when export

growth ell, the pace o investments rose in

China. We now discern a similar pattern or the

period onward.China, Exports, Chg y/y China,Investment in Fixed Assets, Urban, Chg Y/Y


1996 1998 2000 2002 2004 2006 2008

-30

-20

-10

0

10

20

30

40

50

Percent

-30

-20

-10

0

10

20

30

40

50


18/38


Aohr orc o cocr i hi rog crdi xpio,

rcd og ohr hig i M oy ppy icr

o ry 40 pr c i Jry coprd o oh r-

ir. Th xpoio i crdi ppy i ig cocr boboh bbb d iio. B hi crdi growh i o

rogy id o irrcr pdig. hi, b r

orcd o pricip i cig i r, d c-

cordig o o obrr o hird o h icrd

crdi ppy i d o i i r.

So i hr ri o o o? dd, b y o h o

h go o projc crrid o by gor-owd

copi, d rg proporio c h b iwd go-

r-grd o. oidrig hi izb rd

rp d high ig rio, hr i o igic ri,

og GDP growh y rob .

bUbbLing reaL estate priCes

Gi hi rg i pcg, i d crdi

ppy, pric bbb r ri i h r r. Pric

o pri ho h go p by or h pr c i

o yr. Ahogh hi i high gr, i hod b iwdi rio o i bo . Th pric pr qr r o

ho i di i or h hr i highr h i Bijig,

d propri i hi r r bow h io h

prid bor h bbb br i h US i 00. Th pric

icr r o iy cocrd i jor co cii

i Shzh d Shghi, w Bijig. A wh

i co o cooic iic ro hi, iorio bo

ho pric d ccy r i o wd or icoi,

d i i difc o i h ipc o rbiio o

propry pric. i qi cr h hr i ri o bbb

i h oc r, b i i or difc o rg h hi

o o io propry bbb.

tHe neeD FOr DOmestiC DemanD

hi' rc xpio h iy b xpor-dri. Th

cory h id hiy i i crig cor, which

ody cco or or h 40 pr c o GDP, b hih bco or idriid hr i o d or r-

ic (ody bo 40 pr c o GDP) o xpd. Th ric

cor cco or ch or o GDP i ohr Ai coo-

i (bo 0, 0 d 0 pr c i og Kog, Tiw d

Soh Kor, rpciy).

Th y i o g doic dd oig, d hi ry

high gro ig rio o rod 0 pr c o GDP o-

r h poi or hi. Thr r rio ro why h

ig rio i o xcpioy high: Dogrphic hi,

rig i or d or copi d idd-gd

ig or rir (i cyc hory); c o oci y, which dri pri br ig; rog pro growh

copi; d h c o fci cpi r,

which h copi p o c hir ow

i. Fiy pig which h rd i gdr

ibc h d o r copiio or rrigb

wo. Sig h bco copii oo og .

A h prob b ddrd i ordr o brig bo

grr doic dd. Thi proc h o bg. For

xp, h o-chid poicy h b rhr d. A w

oci y y i ow big d i rr r, d

h qi o bo USD biio wi b p or h

x hr yr o ipro h hh cr y. Th c-

or poi owrd icrd pri copio i hi i

h og r. W wod o i o rgd cpi-

r h ow or fci cig or copi.

Thi wi b copi o rdc hir ig.

beyOnD tHe FinanCiaL Crisis

A hi popio grow d o pwrd i wordwid

propriy rig, h dd or good d ric wi

o grow. Th bo-iod r d c wi

o y h grodwor or cooic xpio dri by

or fci r d or bcd dd pro

which procioi bco gob h i hr hod b h cory o chi w ci

d poiic r i h gob r. h ogr r,

o o h y cor wi b gr growh, coodiy

xpio d bor obiiy.

hi ccd drig h coig yr i igig

hrogh h xiig iio hr d h ri o orh-

ig by o iy, w-bcd cooic ighig

r, hr wi b poi or ib og-r

growh. Thi wi, howr, dpd o coid d-rgio

o h cpi r, br oci y wor d i-

crd doic dd.

Th: hi oig growh pzz

Money supply, M2, growth rate, Chg Y/Y Investment in Fixed Assets, Urban, Chg Y/Y


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

5

10

15

20

25

30

35

40

45

50

55

Perc

ent

5

10

15

20

25

30

35

40

45

50

55

investments traCk LenDing

The close parallels between changes in investments and

money supply indicate that a large proportion o higher

credit supply goes into investments. As China tightens its

stimulus, credit growth and investment as a share o GDP

should also decline.


19/38


mco u

Emerging markets will account or most global

expansion in -...

...while ading stimulus efects and trouble

spots will hamper OECD growth

Fiscal tightening and low inlation will

persuade central banks to postpone rate hikes

Th gob rcory h gid rgh i rc oh.

Ergig Ai cooi r xpdig rpidy, Aric

growh w xpcdy rob i 00, d i Erop

h poi or rcory h iprod. Ldig idicor

r igig ccrd xpio drig h r h o

00. Ar h, h c o c i d h wig i

h iory cyc i h ED cori wi d, cig

growh o o or ow.

Th rod hd i id wih rio chg d ri.

hi coo o i cooy, b worri bo h co-

qc o hi r howig h h word cooy ri

rgi d dpd o hi dd. E i ohr

Erop ir how h growig ci prob o go-

r c d o rg-c cri o codc. c

r-p i rob po idic h h roo or crig

cooic poicy xi rgi h rrowd.

W or GDP growh i h 0 cori o h

rgiio or Ecooic ooprio d Dop

(ED) o bo . pr c y drig h x cop

o yr. Th o r highr growh i h rgig r

(EM) phr or h pr c gob GDP wi cib by

bo 4. pr c boh i 00 d 0.

Bc o odr cooic growh i h ED, rorc

iiio wi ri ow. Upoy wi h b c

high or o i o co, d iio wi ri

ow. Thr i i ri h h i ory iio

big proidd by cr b wi y riggr i-io. or pric i h ED wi icr by pr c

hi yr d j bo 0. pr c i 0.

FrOm UpsWing tO LOst mOmentUm in tHe Us

Th Aric cooy oo o i r drig h orh

qrr o 00, b igic hr o hi growh w x-

pid by hi i h iory cyc. Thi wi o corib-

poiiy o growh drig h r h o 00 b h

d c i r o bb wy. ddiio,

d o rhr i bor r rcory d coid

ri i hohod ig, pri copio wi grow -

y owy or rcory yr. US GDP wi grow by ry

. pr c hi yr d j bo pr c i 0.

Wih poy c high , og wih ry ow

cpciy iiio i bi, ow iio i iy. Th

Fdr r i h o i hrry o ri i y ir

r, b wi id wi i Dcbr 00.

DeFLatiOn WOrries in Japan

Jp coid cooic pr wi b ow. Lrg c

i pcg h o cd pri copio o

o, d hohod i i gi ig. owr,

bi h bco or opiiic, hogh hi h o

b ogh o boo cpi pdig p. A wig oh y d h gob rcory which wi b Jp

xpor w o ddiio c i wi r

Road to recovery lined with challenges

ar ma 1 quarter


2000 2002 2004 2006 2008

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

%q

/qirstakt

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

ameriCan grOWtH sUrge

GDP growth in the United States accelerated signicantly

during the nal quarter o 2009, but this was essentially due

to scal stimulus programmes and the efects o the shit in

the inventory cycle.


20/38


GDP growh o . pr c i 00 d ry pr c i

0. Th bigg chg i Jp i h ri o dio.

or pric r crry ig by or h . pr c

yr-o-yr. Thr i h o ro or h B o Jp ori i y ir r or xdd priod.

eUrOpe rOLLing again, bUt nOt espeCiaLLy Fast

Th Uid Kigdo w o o h big cooi o xi

h rcio, wih GDP growig rgiy gi i h orh

qrr o 00. Thr i cr opii og bi,

which proi highr cpi pdig, whi w pod

d icrd word rd wi b xpor. Briih pri

copio i growig owy, howr. GDP wi icr by

h pr c hi yr d bi or h . pr c

i 0. Th B o Egd wi p i y r chgd

i Dcbr 00.

Th ro zo cooi h o bg o grow, b rhr

ggihy. Vrio dig idicor r igig ccr-

io, b h picr i o iry cr. Th ibiiy rig-

grd by h ci prob o h Gr gor i

ri cor. Brgoig bdg dci i o ro zo

cori r riig o difc qio bo h pri-

cip d rgio gorig h ro y. A riy

odr rcory i h ro zo GDP wi grow by bi

or h . pr c hi yr d pr c i 0 ow

iio, gor ci prob w cocr

bo h hh o h big y i h crrcy io

wi prd h Erop r B (EB) o p i y

ir r chgd i hi yr.

nOrDiCs enJOying strOng FUnDamentaLs

Th Nordic cori r big ro good d-

i h or o rg crr cco rp d i

irio prpci rog gor c.

Norwy wi joy high oi pric d xry rog pbic

c. Swd d Fid wi b ro h pwig i

gob dd or idri prodc. Dr, howr,

h rcory wi b or i d o prorcd djprob i h corcio d hoig cor.

em spHere Driving tHe WOrLD eCOnOmy

Whi h ED cori r xpcd o corib bo

. prcg poi o gob GDP growh hi yr, EM

cori wi cco or or h . prcg poi.

Ergig cooi, pciy i Ai, wi h cco or

h io hr o gob growh i 00. D o igicy

owr gor db h i h ED, h d or c

cooidio wi b r r i h EM cori. Li

Aric which od GDP dci yr i ow grow-

ig gi h o h gob rcory d xpiorycooic poici, w h ix o cpi ro ohr

rgio.

E Er Erop, h rgio hrd hi by h gob cri-

i, i ow cibig o o i rcio. 00 h coo-

i wi grow gi, wih h xcpio o Li. h hr

Bic cori, h o c crii i or. Th cori

h dg o h icipi rcory i gob

dd, d hr i icrd codc i hir rgy

o iiig hir crrcy pg o h ro wih h hp

o ir dio. Eoi cooy i i h b

hp, d w prdic h h cory wi joi h crrcy

io d irodc h ro i Jry 0.

Mcro ry

Germany, ZEW, economic expectationsGermany, IFO, business climate index


2000 2002 2004 2006 2008

Index

-75

-50

-25

0

25

50

75

100

Index

80

85

90

95

100

105

110

115

nO rapiD german UptUrn

Various indicators in Germany signal economic growth, but

judging rom the IFO business index and the ZEW nancial

market index, the upturn will be rather modest.

E sto ni a, E UR Gre ec e, USD


Jan

2009

Mar May Jul Sep Nov Jan

2010

100

200

300

400

500

600

700

800

Basis

points

100

200

300

400

500

600

700

800

tHe Crisis Has mOveD sOUtH

While Estonias economy and nances have quickly recuper-

ated, in Greece the situation has become acute. This is re-

ected in the credit deault swap (CDS) premiums to insure

ve-year government bonds rom these countries.


21/38


a cl:

Equii

Stock markets have passed their very best

period

and have entered a phase dominated by

more contradictory orces

Strong potential or the US, Eastern Europe

and growth companies with inancial stamina

Soc r cod 00 wih rog ry, rgy d o

br o rpriigy good US crocooic rpor,

which bood growh d pro xpcio o h hrh-

od o 00. B oy w or o io h Nw Yr ri

o r hoc bg. Th icdd Prid Brc

b propo or ricr big r o b wod

b owd o ow or opr hdg d, pri qiy

d or propriry rdig i, d h iz o ci

iiio wod b crid hi cooic ighig

by o highr b rr rqir d c-

ig gor ci crii i Grc. Th cd

hr pric o hrpy d oiiy o cib dricy

o w occio.

Th r worri wr rhr d by grr -

criy rgrdig h rgh o cooic growh i h

ED idriid cori. Aohr joy-ir w Sdrd& Poor dowgrdig o Jp crdi ooo d o h

dio ri i h cory d gor db o-

ig owrd 00 pr c o GDP. Mor cori i h EM

phr di d h Phiippi oowd hi xp

d cd ory ighig, whi Brzi cr b

igd h ir r hi y b ipd wihi

cop o oh.

Mr cocr bo cooic xi poici o rd p

wh h Fdr r ocd i w riig i di-

co r h ir r h b py wh borrowig

ro h Fd ( o pg 4). Fd hir B Brhd idd igd i rir pch h ch chg

w coig, b h iii oc r rcio o h -

oc w i cry gi.

market sHOCks aFFeCt regiOnaL eXCHanges

Th r hoc h doid Jry d ry Fbrry

o hd cr ipc o rgio oc xchg. Whi h

US d Swdih oc r, or xp, prord br

h h or word idx, ohr Erop r w

h ro wr wighd dow by h dr odig o

h Mdirr. Ergig r oo xr big,

iy d o hi ory ighig r. Fig

coodiy pric d o dciig ri ppi pd dow

coodiy-hy oc xchg i Li Aric.

Aohr ro why y Erop oc xchg h

prord or poory h Aric o ic h bgi-

ig o 00 i h gp i rpor o cooic growh.

y c, cro iic i h US h b br h

h corrpodig Erop o. Whi h US cooy

grw by . pr c ro h hird o h orh qrr o

00, h gr i boh h UK d h ro zo wr oy

+0. pr c. Gry, GDP gd. Frhror, h

SM prchig gr idx i h US h cibd r

or h i Erop qi i rc oh.

Positive and negative orces compete


Jan

2009


2010

200

225

250

275

300

325

350

Index

200

225

250

275

300

325

350

gLObaL stOCk markets

Since the start o 2010, global stock markets have aced

worries such as Chinas economic tightening and a govern-

ment nancial crisis in Greece, leading to clear share pricereversals, but the bull market that began in March 2009 is

not over.


22/38


Soc xchg i h ro zo r cry rb o

gi orc riig borrowig co d growh-cripig

c ighig i h w o h ohr Erop crii,

w owr cooic growh o h h US.

Th wig o h ro, which h iprod h ir-io copii o h crrcy io, i oy iy o

o hi oy i pr.

By Fbrry, h oc r ood hd gi iprod

owh, wh worri og ci r pyr

bo ohr Erop gor db d o o

x. Ao worh oig i h h gi orc i Jry

d ry Fbrry dd o obcr o rpriigy good

copy rig rpor or h orh qrr o 00, -

pciy i r o pro. y , h rd o h p

cop o oh how h h oc r h bhid

i r hrp pr ph, which bg ry i Mrch 00,

d h rd phd chrcrid by ohr codiio,

opporii d ri.

Th r ph w chrcrid by iiiy icorrc pricig

o ri , xpcio o iproig cooic codiio

d riig pro, h o h xpcio, ow or

ig ir r d py poii yid cr. hwho, hi ord h b poib codiio or qii

d ohr ri .

Th crr ph i o qiy-ridy, b o o

h x h iii ph. Wh wi b pciy

ipor ow r pro, pro i d io.

Expcio o pro rd r crry rhr high i

o cori h growh orc r +0- pr c i

00 d 0 whi hr pric dci i Jry d r-

y Fbrry d o ig io. y xchg, h

r ow bow hir hioric rg. Thi idic h h

oc r h b cd by h gi hh occrrd ic h bgiig o 00 ( bo), d

h h r i owh cpic bo h cooic

d ci r.

igh o hi cpici, idc o coid cooic

pr i ry ipor cor i oc r prorc.

Th o o cooic growh i crry rog, dpoii growh rpri y ry w occr i h hor

r, boh i h ED d h EM phr. Lr hi yr,

howr, h growh r i idriid cori ri

ig o or owig. Ery ig o hi or xp ig

prchig gr idx gr i h US d Erop r

iy o h gi ipc o oc xchg.

Th ri picr i icd gor ci prob,

b big id d r cocr bo ii

xi poicy. Worri rgrdig xi poici r iy oc-

ig o wh wi hpp i h ory poicy d, which

o cor h brig o h ppy o iqidiy d ir-

r, which r ipor o h oc r. Thi i

rod, xi r wi o oy dircy c r ir-

A c: Eqii

S&P 500 Composi te relative MSCI AC World, USDS&P 500 Composite relative MSCI AC World, USD, 21 day moving average


Feb

2009

Apr Jun Aug Oct Dec

2010

Feb

-17.5

-15.0

-12.5

-10.0

-7.5

-5.0

-2.50.0

2.5

Index

-17.5

-15.0

-12.5

-10.0

-7.5

-5.0

-2.50.0

2.5

Us stOCks beat WOrLD inDeX

In recent months, the US has shown high economic growth

and strong leading indicators. This has helped US stock ex-

changes beat the world index.

EuroSTOXX 50 relative MSCI AC World, EUR, 21 day moving averageEuroSTOXX 50 relative MSCI AC World, EUR


Feb2009

Apr Jun Aug Oct Dec2010Feb

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

Index

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

WHiLe eUrOpean Ones LOse grOUnD

Government nancial problems in southern Europe gener-

ally and Greece in particular pulled down European share

prices. Current macro data in Europe have also been much

weaker than US statistics.

5

10

15

20

25

30

35

Feb-00

Feb-01

Feb-02

Feb-03

Feb-04

Feb-05

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Dow Jones Euro Stoxx 12MTH FWD P/E MSCI EM 12MTH FWD P/E

OMX INDEX 12MTH FW D P/E S & P 500 INDEX 12MTH FW D P/E

sHares Have beCOme CHeaper

Share price declines since the beginning o 2010 have

resulted in lower valuations (P/E ratios). This means that to

some extent, stock markets are sceptical o prot orecasts.

Sorc: Dr


23/38


r i y r hi, b probby o bod yid ic

y cr b h bogh rg qii o bod

h hy wi grdy di.

i r h by o idicio, xi poici wi b dyd

or iry og i i jor idriid cori, b

ird by h rcio o h Fd dico r hi

i Fbrry, hr i obio r ro. Aohr

xp i ro 004, wh xpcio o hi i h US

y ir r h dr d r bg o circ

ry h r qrr, b h hi oo pc oy i

J. Th priod wh r hi xpcio wr cig

ohrwi coicidd wih h bgiig o priod o rg

rdig i oc r, which chrcrid ch o 004.

o ED cori, ch Norwy d Swd,

r y r hi r rdy i h crd drig 00, d

Ari i iy o coi riig i y ir r

rhr pc. B i i pririy i y EM cori h

ir r wi b rchd p drig 00, hogh o i

ggri wy. ighr ir r i ii Ai

d Li Aric cori y i riggr irrid

ci r rcio i boh h US d Erop.

miX OF pOsitive anD negative FOrCes

h who, oc r wi h probby b xpod

o ix o poii d gi orc, whi codiio wi

dirg gry dpdig o gogrphy d cor.

Soc r i h ED cori wi b ro ow

ir r or ohr whi, w riig pro d

rob hr io, b wi b dry cd by

h propc o cooic poicy ighig d cooic

dip r i 00. h hor r, h US cooy wi grow

r h h o Erop. Aog wih owr hor-r ir-

r, hi gi h US dg. Shr io r

didy bi highr cro h Aic, b h dr -

c o hi r wighy h h ci d crdibiiy

prob h h ro zo i grppig wih. Th dor h

pprcid o r hi yr, b hi do o diiih h US

dg o y gr x, ic h qiibri xchgr gi h ro i owhr rod USD .0. Th EM

phr wi b ro high cooic growh, good ci

i d coprd o h ED rg pro icr

d owr P/E rio, b wi b giy cd by xi-

ig d coiig ory ighig r d o

o x by riig xchg r (which r rh

dgo o orig ior). EM oc r, or

crio i h growh d pro wi h o highr ir-

r by wid rgi.

A coprio o h rg or iig i ED co-

ri d h EM phr or h r, b codiio r

o idic hrogho h EM phr. Drig 00-0,

growh wi b high i Ai d iio hr wi b owr

h i Li Aric, which wi joy growh bo h

i Ai. r r hi wi occr i y cori

o boh o h coi. Er Erop i i dir

iio. By idicio, rhr ir r c r ii-

hr, iy i i, gry d oi, d wih

w xcpio h rgio wi b chrcrid by ccr-ig GDP growh. Er Erop i h h oy rgio i h

word h how h codiio h y ppy drig h

r hrp pr priod i h oc r.

HigHer QUaLity anD seLeCtivity

ED oc r h rd priod chrcrid by

highr qiy d ciiy h hi ro b o ph.

Thi or cor d copi wih b rig pow-

r, rog c d iid cycic iiiy cgory

h icd cor good, iorio choogy d

phrcic copi. Sic h word oid h ED

wi or ch r r growh h h copi

ho r, i i xr dg i hy opr goby.

A c: Eqii


2003 2004 2005 2006 2007 2008 2009

0

1

2

3

4

5

6

7

Percent

0

1

2

3

4

5

6

7

market Was nOt Listening tO bernanke

Chairman Ben Bernanke had clearly signalled that the USFederal Reserves discount rate would be raised and that this

should not be regarded as a monetary tightening. Yet when

the Fed acted, initial market reaction was clearly negative.


2005 2006 2007 2008 2009

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

Percent

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

interest rates being CUt in eastern eUrOpe

In most countries, interest rate cutting is over or rates have

begun to be raised. Parts o Eastern Europe are an excep-

tion. Russia recently lowered its key interest rate to 8.5 per

cent, and urther cuts are predicted.


24/38


a cl:

Fxd co

will be a good year or corporate bonds...

...with both macro and micro actors benetingthis asset class...

...and High Yield in particular much more

attractive than government bonds

L i 00, gor bod yid ro igicy o

boh id o h Aic, wh rog US cro iic

cd h r o pric i ccrd ir r hi by

h Fdr r (Fd). i ppi gry ro Nw

Yr pprochd, rcd i oc r ry, highr

coodiy pric d pr i corpor bod pric.

Shory r Nw Yr, h pr wr irrpd

ri ppi rd ri o bow: Prid b

propo or ricr big r, h r-p o gor

ci prob i ohr Erop d hi ory

ighig r. h xd ico r, h rpo

w i yid o gor crii rgrdd ,

highr yid o gor crii ro cori wih

rg bdg dci d db w dciig corpor

bod pric. L i Fbrry, ci r worri dd

o o x d ri ppi rrd.

Th rogr word cooic pr, og wih orhigri i Ai d gor ci cop i ohr

Erop, dor h d o ch cooic poicy xi

rgi. Growig pbic cor dci r orcig y

cori o ip c b-ighig. h G0

cori, c poici r xpcd o hi ro hig

poii c o bo pr c o GDP o gi ipc

o bo pr c i 0.

Th ppor h c poicy h proidd o h cooy i

h dipprig. Mwhi r id crig

or rob big y ( dgr o r-rgio, ii

o h iz o bc h, c.) r o hir wy, which

ipi ory ighig d highr co o cpi. Thi

icr h roo or coid oo ory poicy. Th

propc o pri ry ow iio h o rg

pr cpciy d ig i bor co dd o hi roo.

Th jor cr b h Fd, h Erop r

B (EB), h B o Egd (BoE) d h B o Jp

(BoJ) h o coid o phi h riy o h

rc cooic crii d h drcord h rgiiy

o h rcory. Th Fd coi o rp i r h

h dr d r i iy o ri xry ow or

xdd priod. Th rc US dico r hi w o

ory ighig ihr, b p owrd oriio

o poicy r rir crii i ohr word, idicio h

h ci r i cioig ory gi. igh o

hi, i wi probby b ry yr bor h Fd, h EB

d h BoE bgi hiig hir y r. For h BoJ i wi b

ogr, ic Jp i gi xpricig dio ri.

Srogr cooic codiio, h propc o ir r

hi rhr hd d rpidy growig bdg dci poi

owrd riig gor bod yid/ig bod pric

drig 00. Bc o coid ry ow iio d

rog codc i h iio-ghig poici o cr

b, howr, h yid icr wi b odr.

Corporate bonds still attractive

Government Benchmarks, Bid, 10 Year, Yield, ClosePolicy Rates, Fed Funds Target Rate


2000 2002 2004 2006 2008

0

1

2

3

4

5

6

7

Percent

0

1

2

3

4

5

6

7

steeper yieLD CUrve in tHe Us tHis year

While the Fed is expected to leave its key interest rate

unchanged at 0-0.25 per cent or nearly another year, US

government bond yields will rise, though moderately. The

consequence will be a steeper yield curve and the risk o

lower prices on government bonds.


25/38


iig gor bod yid d h rwd oc opbic cor dci d db which h priodicy

cd h r o highr crdi d wp (DS) pr-

i o h gor bod o cri cori h o

o corpor bod g h gor -

crii ri rci i h xd ico c.

i r h corpor bod r o rci bor. Y

00 oo i i wi b good corpor bod yr, hogh

o co o h rcord yr 00, wh y igh Yid (Y)

bod ro i by 0- pr c d Grd

(G) bod by -0 pr c.

brigHter prOspeCts at miCrO LeveL, tOO

r cry b how odr cooic growh d ow

iio i h word drig 00, iro h h

hioricy b orb or corpor bod. Propc

oo brighr h icrocooic w. My cop-

i whrd h ci d cooic crii rpriigy

w, iy d o ggri co-cig r. A h

cooy h rcord, hir pro h icrd d hir

bc h h rghd. opi iprod hir

bc h by ch bod i, xdd bod

db riy, coid ogh co coro d rrici-

wih i, which h icrd hir iqidiy.

opi r h hhir.

Nw bod i which wr pciy ro yr oo o coi high o hi yr w. Th

coqc wi b icrd ppy o corpor bod,

b h dd i iy o ri rg, og ohr hig

d o biy highr ci yid o corpor bod

h o gor bod. Aohr ro i h Erop

iiio ior r ow icdig Y bod r-

gic c i hir xd ico poroio. Thi h b

r i h US or h p dcd.

prOpOrtiOn OF bankrUptCies FaLLing steepLy

ddiio, brpci i h Y g rcy pd

hir p o boh id o h Aic. Accordig o SEB

orc, brpci i Erop wi ro p o j

bo pr c o Y ir o oy pr c hi -

, whi h corrpodig US gr r bo pr

c d j bo 4 pr c. Thr i o rd owrd

biy rgr rcori r corpor brp-

ci, which wi o cor rdc ior o.

r orc or 00 idic rr o or h pr

c o Y bod d pr c o G bod. boh c,

hi i r owr h i 00, y igicy or h

gor bod r xpcd o yid. Th br xpcd

rr o Y bod h o G bod i d o highr ci

yid, d h o grr riig roo or rrowig hprd bo gor bod.

A c: Fixd ico

AAA Rated BBB Rated CCC Rated and above


Sep

2007

Dec

2008

Mar Jun Sep Dec

2009

Mar Jun Sep Dec

2010

Mar0

250

500

750

1000

1250

1500

1750

Basis

points

0

250

500

750

1000

1250

1500

1750

HigH yieLD bOnDs mOre attraCtive

Yields on HY bonds in the US (-year CCC-

rated industrial bonds) are ar above those o

-year government bonds, while the spread

or Investment Grade bonds (AAA and BBB) is

signicantly narrower.

A c: Fixd ico


26/38


a cl:

g fu

Alpha-generating capacity increasingly vital

Obama and politics having an impact

Analysis especially important beore investing

A w dcribd i or Investment Outlook(Dcbr

00), yr w riy ip priod or hdg d

gr. c ci r bg o rcpr i

r Mrch, priod chrcrid by iy rd

oy o bg, ig 00 h b hdg d yr i

dcd. Brod hdg d idic ro or h pr c,

whi o o h rrowr idic gid ry 0 pr c.

Dircio hdg d ch Eqiy Log/Shor (L/S) g-

rd good rr drig 00, hogh hy wr odyb by oc r. Qii dircio hdg d

od pr roghy i i wih brod idic (bo

pr c). dg d wih grr qii bi d

or oc o dowid procio hd bi o difcy pro-

dcig icory d dd o gr bow-idx

rr. ro w h hy drid h powr

o h word cooic rcory. w o cor r orgr o bh xr cioy r o o h wor

ci cri i hiory, pciy coidrig h y

dircio hdg d pror br or i h oc

r. Thi i bc gr hdg hir cpi i ro-

bd i, o bc hy b oc r wh h

cib hrpy. For dircio d h w iw owr-

qiy, 00 w ry good yr. Th rcory o h r-

bd h o gr rr by oowig r

pwrd, wh r cd b rr.

h crr iio wh rg pr o r ori-

io h occrrd w xpc h dir o hdgd wi b cc. i o ogr poib o chi

y b rr, o o h x i 00.

Looig hd, i wi b biy or ipor or i-

or o dg o qii d h horoghy

From beta to alpha time or hedge unds

FUND YTD* INDEX VALUE 2009 2008

HFrX glol Hd Fud idx . % . . % . %

HFrX equl Whd s idx 0.55 % . . % . %

HFrX aolu ru idx 0.30 % . . % . %

HFrX m Dcol idx 0.27 % . . % . %

HFrX a idx - . % . %

HFrX equ Hd idx -0.73 % . . % . %

HFrX equ m nul idx 0.91 % . . % . %

HFrX e D idx 0.79 % . . % . %

HFrX Dd scu idx 2.16 % . . % . %

HFrX m a idx 0.99 % . . % . %

HFrX mco idx -0.77 % . . % . %

HFrX sc Dfd idx -1.64 % . . % . %

HFrX rl vlu a idx 1.19 % . . % . %

HFrX Col a idx -0.12 % . . % . %

*Jry -Fbrry , . Sorc: dg Fd rch


27/38

27

hdg hir dowid d h ry good coro o hir ri.

Thi ppi rgrd o whhr h d r dircio

i r or r or bo rr- or rdig-orid.

Th ph grig cpciy o hdg d wi driwhhr w i i h or o.

COmpetitiOn imprOves aLpHa pOtentiaL

Th rprcio o h ci crii h crd good

r opporii or hdg d. Ahogh h o

qiy o dr g ri rod USD

riio, h dcrig br o d h bd ho

h rid. Thr r o ogr y ior chig

h d. Aohr cor h py jor pr i

copiio ro h rdig dpr o h b h-

. B cod or dowizd y o hir propriry

rdig dpr drig h ci crii. Ahogh o

h b r-bihd, w or o jor xpio i

hi porio o b oprio. ro i criy

bo wh r r o h g wi ppy.

tHe impaCt OF Obama anD pOLitiCs

Prid Brc b d y ohr poiici h

h opporiy o ry o r bc h coc i ordr orgh hir powr. Wih rgrd o hdg d, hi h

d rio or. Th rg ipc wi probby b

ro chgig poiic dd o b. wi o

i bor dciio r d o wh r wi ppy i

h yr hd. B y r prohibiig b ro ow-

ig hdg d wod obioy py y ro. Th i

r o chg h wod c h biiy d poi or

b o crry o rdig or hir ow cco, dpdig

o cpi dqcy r d ohr cor.

A coqc o h ci crii, hdg d y o

ry w h o cor i ighr rgio, hogh h

crii w o h o h d. UTS /V r (dr

h EU dirci o Udrig or oci i

Trrb Scrii) d poiic dd or or rg-

io y p prr o hdg d o ipro rdig cy-

c, rprcy d rporig. Thi i o cor good or i-

or, b hr i o ip id o h x h hi yii h d poi or grig ry good rr.

i difc o qiy by how ch, hogh. E ody, o

hdg d h h oy b rdd or h cor

(T) d h b bd i rio x h h bg

o p UTS -copi oprio. Frhror, o

o h rg d high-pro hdg d h rcy

joid h dg Fd Sdrd Bord (FSB). Th d-

op wi b irig o oow d h h poi

o dy r h wy hdg d opr. ohr

word, h hdg d word iiby hdd owrd

bcoig or rgd. Th oy qio i whhr hi

wi occr i ow iiii, or xp i h FSB, orhrogh giio. y , w r coicd h q-

iy g wi o oy ri b wi o hri i

rgd r.

OUr searCH prOCess

ry ipor cor o io cco i rchig

or hdg d o i i i o idiy d h c dd

dirb chrcriic o or i pro h dir

ro ho pod by ch c r-id

qii. Prhp o ipor i h hdg d hod

proid good procio i robd i. or opiio,

oowig r dowr h dic or i i

h wor hig gr c do. d r

hd, i wi or h dcd j o cib bc

o h iiiy, ig or oc r

rr. cdig h ir-o-ir c drig hi

dcd, h ior iio i d wor. hdg

d c corib dowid procio, i i h highy -

b. ddiio, hdg d c gr rr high

ho o qii or br, proidd hy r qiy d

wih good ri coro d iiio rcr. Aohr

ipor qiy h w i or i or ior rr ow,

which good hdg d c proid.

W bgi or cio proc by pciyig dirb hdgd chrcriic. Th w r rchig or d h

wi dd o or poroio h chrcriic w r iig or.

prcic, hi i r o riwig y hdg d

qiiy o which o h high ogh r-

r d ow ogh ri o b coidrd. Ao ipor

hr i h h ow o rr h h righ chrcriic.

W w good ri/rwrd rio wih yry bw

ri d rr. Dowid procio b hr, b o

h biiy o gr poii rr wih rgr pid

h dowid. Uioriy o rr i o ipor, wih

y oh o gi poib. Th br o o-ig

oh hod b w, o or h wo or hr pr yr.

W ow h ri i, o cor, rqird i ordr o chi

rr. B i hdg d h good ri coro y,

Investment OutlOOk - maRCH 00


Jan

2009


2010

1000

1025

1050

1075

1100

1125

1150

1175

Index

1000

1025

1050

1075

1100

1125

1150

1175

FrOm reCOvery tO FOCUs On QUaLity

Last year was very good or hedge unds, while 2010 began

on a weak note. Quality will be important (HFRX Global

Hedge Fund Index).

A c: dg d


28/38


i i poib o gr rr wih h chrcriic w

w, gi ry high qiy. Fiy, i i ipor h h

riy rg w py hod worh hir co. h

rio o o rr i o ccpb, w h d.

c w cop h qii rch proc, w bgi

h qii proc (i prcic o hi occr coi-

oy). Thi cocig h hdg d i qio o

r h i h dq oprig rcr wih o-

c o ri coro, bc ofc cio, copic c. r

w wor oghr wih Ky A Mg, which h og

xpric o yig d iig i hdg d.

Ar hi, d o h bi o xpcd rr, ri c. w

p oghr ib poroio h rc or objci. W

pibiiy chc d dob ri coro o rdc hri o i i h proc. Th p i ry o

oior or i d r h hdg d h

dird wh w h dird, w ig whhr

hy wi coi o pror ccordig o or rqir.

styLes We preFer at present

Gi or h 00 wi b yr or ph r-

r, w r ocig o dig hdg d wih h cpc-

iy o dir high rr iy d o h prior qiy

o hir g d oprio. Qii Mcro hdg

d w io hi o rqir, ic h d

r b o choo ro h rg o poi i

ch qii, xd ico, coodii d crrci

c. Thi brod poi ry o ipi ri, which

qiy crci. Drig 00 hi w dord wih

gr phi. Th Mcro idx w i cry gi rri-

ory, whi h b d dird ib r.

h yic id o Mcro w d TA (oodiyTrdig Adior) d, which od-bd g

d or good chrcriic or poroio-bidig ic hy

d o b og o oiiy, h proidig good opporii

or icory rr i i o crii. 00 TA gr-

d rr w bo 0 pr c drig yr wh hdg

d grop oo hy big, wih 0 pr c dow-

r or brod hdg d idic. didg o h-

ig TA i h poroio i copriy high oiiy, wih

rhr rg cio ro oh o oh. h hdg

d word, rg cio r cid pproxiy

pr c p or dow. Worh oig i h hi i iir o

oc r.

W o h poii iw o i V d o yp

o Fixd co. D o hir borrowig, o o h d

y b highy rgd. B w r chooig o b ry c-

io bo d h h or h ow or borrowig,

ic hi y b dgro, jdgig ro h xpric o

00. r cio co rr dr or codi-

io, b i i or i o oid dig p big rppd i

c o dd crii.

or jdg, gi h good opporii h xi i

h hdg d word w h high rr xpcio dr-

ig 00 d 0, hogh h dirc i r y b

izb dpdig o d qiy.

80

90

100

110

120

130140

150

160

170

Feb-

06

May

-06

Aug-06

Nov-06

Feb-

07

May

-07

Aug-07

Nov-07

Feb-

08

May

-08

Aug-08

Nov-08

Feb-

09

May

-09

Aug-09

Nov-09

HFRX SYSTEMATIC DIVERSIFIED - PRICE INDEX HFRX GLOBAL HEDGE FUND U$ - PRICE INDEX

QUaLititative (Cta) HeDge FUnDs WeatHereD tHe

Crisis WeLL

When the crisis was raging at its worst be-

tween the second hal o 7 and early ,

CTA unds ofered precisely the protection

that was expected, thanks to their ability to

unsentimentally take advantage o existing

market prices.

Sorc: Dr

A c: dg d


29/38


a cl:

Rl

The sun is beginning to rise over the real estate

market

Yield is starting to all

Storm clouds in China and elsewhere

Th i y bgiig o ri or h r r-

r h crii. Whi cio i doi h r,

rcio h bg o icr, dird propry ow-

r h rd or pid h dowid rpri, crdi

r r rcorig d r w ccy r

o h bood o i o b-r. Th c-

or idic h h i h co o i i h r

r.

My r i Ai whrd h crii riy -

chd. obid wih rg gor i pcg,

hi h d o r whr w highr ig ciiy.

ddiio, yid (prcg rr) h bg o

coqc o riig r pric. Th poii c

h o b rcd i icrd br o rc-

io.

Erop i o howig riig rcio o, hogh o

h pc i Ai. Th br o rcio

i bc roghy h i 00, r booigo drig h r h o 00.

Norh Aric h picr i iir o Erop, hogh

h crii w dpr. Mjor co cii r dorig

grr biiy, whi h picr whr c b igi-

cy wor. pi o hi, h o iprio i poii.

Th riig br o rcio idic h r

i h bg o co io py or ior. Lrg

ci h h b o h idi r ow b-

giig o b cid, which i ig h r pric

wi ri. W do o bi pric wi cib rpidy, howr.

Th pr wi probby b rhr ow d dy. Thr r

ry poi hzrd. Th icd poiic cor d

poib r bbb i hi.

i r h h o rcio i h Uid S r-

i ow, b i or jdg h boo i p d hr

wi b or r d or h x w yr. Looig dir g, i ppr h ridi d ri

propry rcio wi icr, whi o idri

propri d ofc bidig i o b i h cr,

wiho y cr pwrd rd. Nor i i rpriig h h

rcory i r ch jor crii. r or -

i poii, hogh w wi probby d o wi

i h d o 00 bor cri g how y cr

ipro. My propry r r probby ig h

opporiy o ipro h fcicy o hir pc g,

which y dry c h r o h rgi.

A or r pric, w d ch cdo idch hy h probby bood o d h pric pr

hod b ii. Th r r cy coi

o ro b-r h bh i dir wy, b

hogh o g y g bhid, i or jdg

r i c proiig r.

Time to start cautiously investing in real estate

0

50

100

150

200

250

300

Mar-00

Mar-01

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Price index Demand index Supply index

tbi inDeX Has bOttOmeD OUt

Prices o US commercial properties have stopped alling

and have stabilised at a low level, though continuing to

uctuate. Further improvements are expected, but at an

uneven pace.

Sorc: MT/E


30/38


Th MT rcio-bd idx (TB) o US corci r

pric i ow bpig og h boo r jor

dci. A jor dci do o oicy ipy h

hr i gr poi or rpid pr, b hi birprd good og-r iio. or hod

b pi, hogh, pciy r h r r ry

o h prcdig yr. riy, h pwig w bor.

Th r i ow cor o i rd growh i. y ,

oriio i good w or r .

Th S&P/-Shir dx o 0 jor U.S. cii i prd

o rc wh i hppig i rg porio o h Aric

r. Accordig o hi idx, pric r i owr h

yr go, b h r o pric dci i qicy owig.

Accordig o h Fdr oig Fic Agcy (FFA)

dx, h picr i or , wih poii d gigr.

Th Aric hoig r i owy o i wy o rcor-

ig, o idcd by rgr br o hoig r

i Jry d by h Nio Aociio o obidr

(NAB) dx, which ro bi or h xpcd iFbrry. W irpr h gr poiiy, pciy

i igh o dippoiig gr i h prcdig oh.

A owh br bor r, cooic growh, ow

ir r, chp ho d xdd x crdi or

r-i byr r cor h r hpig o ipro h

iio.

yieLD anD priCe inDiCate nOW is time tO bUy

Th yid d pric chg idic h ow i good

i o i i r . Wh yid i ow, propri r

y oo xpi ic ior wi h ipy o r

good rr o hir id cpi. h ohr hd,wh yid i high, propri r o oo chp. br

o Erop cori, yid h bg o gi, ig-

ig good i o by.

Erop, yid drig o o h 000 dcd d

bood o bor h b-pri crii, which h

h r pric wr high. Th ow yid h i

w ppry r o xci borrowig. W r ow

xpcig yid o oy odry, proiig good

b o pccr rr o r i. Wh

i hodig bc h r o o x i h dowizig o

dig h i ow dr wy. ri cri how ch

cpi wi b i h y.

Aohr cor idicig h i i good i o r i-

ig i r i h rd o ofc r. Thy y g

bhid h gr cooic rd, b w c rdy di-

cr rogh h proi pr.

Th word cooic rcory i hig poii ipc o

h dd or r . B how do h ppy id oo?

c o h rir crii i h hr i w co-

rcio o ofc d idri bidig. A r, xiig

bidig wi bco or rci, which hod proid

good poi or pric icr or h x r yr.

nOt OnLy pOsitive FaCtOrs i c o oy poii cor

pr, b o dgr. cocr cc o cig.

Th biiy o b o proid cpi ri owh

cr, og ohr hig d o criy bo wh

rgory rqir wi ppy i h r. Lo-o-

rio ody wih rod h o cig ro b r

w bow ho o - yr go, wh h rio i o

c cod b 00 pr c. To b owd o i high

o-o- rio, i i jor dg o b ior

h h b cc drig h crii d h good crdi

S&P Case-Shiller, Composite-10, 2000M1=100 [c.o.p 12 months]FHFA, USA (Purchase-Only), 1991M1=100 [c.o.p 12 months]


2000 2002 2004 2006 2008

-20

-15

-10

-5

0

5

10

15

20

25

Percent

-20

-15

-10

-5

0

5

10

15

20

25

Us HOme priCes are LeveLLing OFF

US residential real estate prices are continuing to stabilise

and will soon be climbing compared to one year earlier.

United States, Building Permits, Total, AR, SAUnited States, Housing Starts, Total, AR, SA


2000 2002 2004 2006 2008

Millions

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

Millions

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

bUiLDing permits anD HOUsing starts are Up

The number o US building permits has risen, and although

the number o housing starts has not yet increased much,

there are many indications that the situation will improve in

the coming months.

A c:


31/38

31

hiory. Good r ior wih odig rc

rcord h or good i opporii or .

So borrowr h dd p big qzd, b ohd hir ci obigio. B do o w o

h borrowr i h rch, ic hi ri i probby

wor h hpig h o ri ciy d good

cr o hir propri. By worig oghr ciy o ro

h iio d h riio o cooy wih

owr or o-o- rio, boh b d borrowr

c gr wiho cig r oo ch.

h Uid S, o o rod USD 00 biio pr yr

d i 00-0. Srig i 0 h o wi dci

igicy, o bo USD 0 biio. Thi i cr idic-

io o how ch h or dig r hri, dobioy i c r r. W hod xpc h

proc o dig oriio o ohr w

yr, b i i dr wy d wi b good or r

i p.

Th br o d qr r i wy corcd

propri i hi i ohr orc o cocr h h h

poi o hr h hi r, wih rprcio i

h word cooy. Th ory ighig h hi h

bg wi hp coo dow w r corcio, b

by how ch i cri. h p id i hi, hr r

orc howig highr r pric. r, w r o

worrid bo hi, b w i wih o ig hi o poi dgr, hogh o.

Thr i idc h qiy py or r ior.

Th y oy h w d by r i

r (ET) i h cod d hird qrr o 00 w

rgy r o gr o ri r h ci

crii. Looig hd, hig wi probby o b y.

wi b or ipor o rch or propry gr h

gr rr hogh h r i o worig qi

opiy, d o i i ho porio o h r h

r prdicd o h pciy brigh r. r o

iy crio idwy b owh poii rwih riig pric or ridi propri d

ho porio o h r r wih cr d oc

gor d b copi .

Sic w ow h goig p o h horizo, w r

chooig o r iig i r i h riy por-

io o h r. W xpc o r ior rr ow,

which wi proid biiy i or poroio riy ow

ri.

Investment OutlOOk - maRCH 00

Europe, GPR, 250 REIT IndexUnited States, Dow Jones Wilshire, Specialty, REIT Index (Float Adj)World, GPR, 250 REIT IndexAsia, GPR, 250 REIT Index


Jan

2009


2010

50

70

90

110

130

150

Index

50

70

90

110

130

150

reit inDiCes WOrLDWiDe sHOW same UpWarD trenD

Indices o real estate investment trusts (REITs)

clearly show the increase in risk appetite that

reached the market in March and con-

tinued or the rest o the year. Now the ocus

is shiting to a lasting upturn and underly-

ing growth, where quality will be even moreimportant.

A c:


32/38


a cl:

iv qui

The recovery will benet private equity

Thawing credit market a key issue

Excellent situation or strong market players

L yr cooic d r rcory bd pri

qiy (PE) i. or Investment Outlook

(Dcbr 00), w rgd h h iprod codiio

hd id h grodwor or poii growh, ohig h

o r ppr o h occrrd. A br o PE rcio

h b copd, whi r pric o id PE cop-

i h prord w. Th SEB Lid Pri Eqiy d i

p or h pr c ic h d o Nobr 00. PE

copi h p o rcory d brighr rpropc, hogh y poi o h h iio i r

ro h b.

A wy, hr r rg boh or d gi poii

rd or PE i. Th gi cor hod o b

gcd or drid, b o h who or -

i h h poii id owigh h. Gi h w

r i h ph o dp crii, howr, ciiy i

or ipor h h gir i o god.

eCOnOmiC anD CreDit Crisis a maJOr bUrDen

Th rbc o rc yr h hr PE copi i ri-

o wy. Bc o w cooic codiio, PE-owd

copi rg copi h prord bow x-

pcio d/or h cord prob. Sic cqii-

io r ory d wih borrowd d, PE copi

r dpd o poii ch ow. Wh hi i b, hy

cor ci prob, o bc b c i

o o proc hir ci wh PE-owd copi do

o h co grd or h o.

Th crdi r crh word h iio, wh dr

hd gr d o rdc hir ri d i hir bc

h. r, hi d o r h w ry roz

oid drig h wir o 00/00. V ry hrpy,d ior wr ry rc hrogho 00. Th o-

o w rcio w h i ow i yr.

Srig i h cod qrr o yr, howr, i-

pro w oicb . Th cycic rcory

d crdi r h owy bg cioig gi do hrp icr, o oy o oc xchg b

o or PE copi. Th propc o coid dc

growh hd grdy br codiio or rg

copi.

CreDit market is reaWakening

rdi r dop r cor who c r

or difc o . B dig o PE h grdy

rd. A br o rcio h rcy b -

ocd i which i i cry ppr h b r gi

hpig o c PE copi, bi owr o-o-

rio h drig h p yr. Aciiy i o icrig ih corpor bod r, whr h copi c obi

cig, didy high co b wiho co.

Thr r o w cri cig oio, wih cri

pio d og h pyr.

h ohr hd, cc o cpi ri crc. B r-

i dr prr, d poiic iiii r dirpig h

picr. pricr, Prid b propo o o ow

b o ow PE copi or d ri rig p pr-

r o h r. ddiio, hr i probby i gr

d or y PE copi o di hodig or ci

ro.

B, d hi

Documents

SEB report: In search of the best - amid chill winds (March 2010)