Navigating Emerging Markets

Matthew StraussVice-President, Portfolio Management

and Portfolio Manager

Emerging markets

• Emerging markets (EM) investments: longer-term perspective– An integral part of a fully diversified equity portfolio, not only for the strong of heart

• Risk and return– Containing volatility within emerging markets without sacrificing all of the upside

• Outlook– Taking advantage of the diversified nature of emerging markets and moving beyond Brazil,

Russia, India and China (BRICs)

20

30

40

50

60

70

80

Advanced economies

Emerging market and developing economies

% o

f glo

bal G

DP1

Increasing economic importance

Source: IMF & World Bank

United StatesChinaIndia

JapanGermany

RussiaBrazil

United KingdomFrance

ItalyMexico

Korea, South

0 2 4 6 8 10 12 14 16

Largest 12 economies in the world2

U.S.$ trillion (2012)

1&2 Purchasing Power Parity

A market that can’t be ignoredEquity market capitalization

Source: World Bank

0

4

8

12

16

20

24

0

20

40

60

80

100

120 % of world market (left axis)

% of GDP (right axis)

Reaping the benefits

-60%

-30%

0%

30%

60%

90% Emerging Markets (EM) Developed Markets (DM)

5yr rolling average DM 5yr rolling average EM

% re

turn

per

ann

um

Higher returns but with higher volatility

Source: Bloomberg * YTD – 31 Aug

Signature’s approach to EM investments

• The inconvenient EM truths– Cyclical – deal with it– Less transparent – cry me a river– More political – ask Obama about Putin

• Signature’s approach– It’s a team – 9 global sector specialist PMs (and 8 analysts), 3 macro strategists (and 2 EM analysts)

• Explore all sources of risks and return– Active stock, sector, country and currency management– Cross-asset class expertise (e.g. rates, FX, credit, commodities, equity, property)

• Regulatory/policy & political risks – Beyond the headlines– Country visits– Expanding EM fixed-income capabilities

• Analyzing companies – the importance of quality– Must go beyond financials analysis and company reports (e.g. strong balance sheets, sustainability of margins,

and returns on invested capital)– Meeting management (e.g. corporate governance, strength, track record, accounting principles, direction) – Discussions with competitors, holding companies, and subsidiaries (e.g. barriers to entry, market share,

corporate governance and respect)

Absolute returns & focusing on volatility

CI Signature Emerging Markets Fund

EM outlook, part I of II

* Aug. 31 2014

3944939629398073998740165403454052540703408834106141241414214159941779400

500

600

700

800

900

1000

1100

1200

1300 MSCI Emerging Markets Equity Index

China stimulus

Caught in a rangeGrowth slowdownTighter monetary conditionsLower commodity pricesFed taperingHigh valuations

2014 YTD* return- Emerging: 10.7%- Developed : 7.3%- S&P 500: 9.9%

EM outlook, part II of II

• BRICs• Business cycle• Politics

– Russia/Ukraine– Middle East– Turkey– China

• EM fund – fully engaged– China, India, Philippines and Mexico over Brazil & Russia– Selective cyclical over over-priced defensives – Financials, health care and industrials over telecom and energy

Panel Discussion

FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS

Thank you

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