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GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Know the Flows…

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Presentation on theme: "GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Know the Flows…"— Presentation transcript:

1 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Know the Flows…

2 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 1 Company Overview EPFR Global delivers a complete and transparent picture of institutional and individual investor flows driving global markets. Strategists, traders, and investors use EPFR flow and allocation data to gain the most current, global view of changing investor demand and manager positioning. Trading and allocation strategies leverage EPFR historical and current data to improve returns and manage risk. Series sourced through direct relationships with fund managers and administrators The universe covers over $17 trillion in globally domiciled funds. EPFR flows are available at either the asset class aggregate, fund group, investment manager, individual fund and share class levels to support the most granular and informed insights. Comprehensive, transparent, and robust daily, weekly, monthly updates available T+1 in addition to historical time series.

3 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Users of EPFR Data 2 Government/Central Banks Asset ManagersHedge Funds Banking and Brokerage  Strategists  Capital Markets  Research Analysts Types of usage: Proprietary trading Directional calls for clients Targeting sales efforts Market analysis  Fund Managers  Portfolio Analysts  Marketing and Product Development Types of usage: Factor in investment process Competitive analysis, product dev Asset allocation Quantitative analysis  Regulators  Monetary Authorities Types of usage: Cross-border flow analysis Flows impact on currency as well as local equity/debt markets  Global Macro/EM/Discretionary  Quantitative Investors Types of usage: Momentum trading Liquidity analysis Market timing

4 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 3 Uses of EPFR Global Data Foreign investor flows can be a useful leading indicator – especially at the country level and particularly in Emerging Markets Investors use flows relative strength to help time entry/exit to individual countries Market Timing Country allocation data - global fund manager positioning provides additional data as a momentum signal and is often used in multi-factor models Momentum Indicators Country and sector flows can be leading indicators of broader market direction. Relative strength of flows to favored countries/sectors vs out of favor countries/sectors helps managers decide when to get in or out. Directional Signals Allocators will cross-check their own analysis with investor sentiment based on flows/positioning Portfolio managers can compare their allocations with their peers for performance analysis Asset Allocation & Benchmarking Monitoring flows into asset classes provide a useful signal of investor risk appetite. Similarly, fund manager positioning (for example cash positions) indicate changing fund manager risk appetite Measuring Risk

5 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 4 EPFR Global Key Data Sets Core Datasets (based on data sourced directly from managers or administrators) Derived Datasets (based on flows and allocations data) Fund Flows Fund manager allocations at month-end across the countries or sectors they invest in. Equity/Bond Fund Flows Daily/Weekly/Monthly * also includes AUM, Performance Country Weightings – Monthly Sector / Industry Weightings – Monthly Equity / Bond Fund Holdings – Monthly Fund Allocations Country & Sector Flows The amount of cash flowing into and out of funds world- wide. Distribution of fund flows by country or sector. Combines data from fund flows and fund allocations. Country/Sector/Industry Flows Daily/Weekly/Monthly Regional packages available Daily/Weekly/Monthly

6 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Fund Flows Overview Leverage the transparency of the EPFR universe and the granular breakdown of flows 5 Geographic investment focus Style/sector Bond categories Asset Class Breakdown Institutional vs Retail US Domiciled vs Non-US Domiciled Investor Types Differentiation Dedicated Country Funds vs Global, GEM, and Regional Mandates Mutual funds vs ETFs Active vs Passive Fund Types Differentiation Fund Flows The amount of cash flowing into and out of funds world- wide. What are Fund Flows? Calculates “Net Flows” (investor contributions/redemptions) for individual funds and then add these up by asset class Net Flow calculations exclude portfolio performance and currency fluctuations Includes funds registered globally not just those domiciled in the US Updated daily/weekly/monthly Fund Flows The amount of cash flowing into and out of funds world- wide.

7 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Fund Flows: Asset class breakdown Highly granulated flow data for more than 100 country, regional, sector and asset class categories 6 (includes Global & US )

8 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 7 Fund Flows: Drill down to detail view ……………………………………………………………………………..………………………………………………….………….…… 7

9 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Fund Flows: Investor types differentiation US equity fund flows since January‘10 8 All investor types US Institutional Investors US Retail investors Non-US investors in US equity Only US institutional investors were the main buyers ‘at the bottom’ US Retail investors missed the big US Equity rally between Q2/2010 and Q1/2011. Non-US investors (US equity funds domiciled ex US) stayed away in Q2/Q3 2010

10 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 9 Fund Flows: The Big Picture Global cross-asset allocation Total Aggregate Equity, Fixed Income, and Money Market Fund Flows Developed vs. Emerging Market Equity Flows Developed vs. Emerging Market Fixed Income Flows Recent flows are still largely in favor of Fixed Income funds, although the overall flight from equities has temporarily reversed course Until the recent rally, investors have shown a lack of confidence in equity markets, as flows continue to remain in the red over the past year Demand for Emerging vs. Developed Market debt has skyrocketed this year as investors search for favorable yields

11 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 10 Fund Flows: Practitioner examples and investment signals Flows provide additional information useful in the asset allocation process, including: Future performance of equities vs bonds (using 4 week flows to risky assets vs mm) Regional equity allocation Sector allocation within fixed income Relative value Comparing strength of flows across regions as a ‘liquidity pulse’ The Liquidity Pulse compares the size of the current flow to a country or region (4-week average flows as % of assets) with the average size of the flow in the last 13 weeks. The relative size of the flows is given as standard deviation from the mean. Most powerful on a cross-sectional (regional) basis. Equity Trading Rule Excess flows are shown to cause predictable and investable inflection points. The rule is based on 4 week total overall flows for GEM equity funds: Outflow total greater than or equal to - $8bn ‘buy’ signal Inflows greater than or equal to $6.5bn ‘sell’ signal Global cross-asset allocation

12 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Practitioner Example: Global risk indicator 11 Best call: On May 6th 2010 – BofA backtesting indicates that GFSI would have flashed "sell.” Risk assets sold off over the next 30 days, as equities corrected 5.5%, commodities fell 8.1% and HY bonds lost 2.6% Chart 4 shows a backtested chart of the GFSI sell indicator and the performance of major asset classes. The GFSI would have warned of a major correction in risk assets on 6th May Source: BofA Merrill Lynch Global Research, EPFR Global, Bloomberg; indexed to 100 in Oct’09

13 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Practitioner Example: Global cross-asset allocation 12 Chart 10 shows that the results of the monthly ‘best-of-two’ strategy for global equities and global bonds are similarly convincing. The strategy would have generated an excess return of roughly 8pp per year before costs, and total return was more than twice the benchmark return with lower volatility. The strategy therefore clearly dominates the equally-weighted benchmark. Using money market returns as risk-free rate, the strategy has had a Sharpe ratio of 1.3 since 2004, while the benchmark only had a Sharpe ratio of 0.2. On average, funds would have to be switched between global equities and global bonds three times per year; so even including transaction costs, a significant excess return would have been earned. These results clearly suggest that the direction of flows into or out of risk assets and into or out of money market funds contains information about future performance of equities versus bonds. Source: EPFR, Datastream, Commerzbank Corporates & Markets Chart 10: End-of-month ‘best-of-two’ strategy for global equities vs global bonds based on the four-week average fund flows as a percentage of AuM into risk assets and money market funds

14 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Practitioner Example: Credit research analysis 13 US Credit Outlook Support from the deep The ‘hidden force’ supporting asset prices is, of course, the flood of liquidity from the Fed. In his most recent testimony and elsewhere, Bernanke has deemed the fact that “equity prices have risen significantly, volatility in the equity market has fallen, [and] corporate bond spreads have narrowed” as evidence “that the Federal Reserve’s recent actions have been effective.” By holding interest rates on cash at zero even as the economy has continued to recover, the Fed has left investors scrambling for return wherever they can find it. Much of the rally has been justified by the recovery in the economy, of course. Yet the fall in yields to their lowest levels since the 1960s, the simultaneous rally in gold and recent sell-off in the dollar, leave us thinking that this is about more than just fundamentals. In some ways the fund flows speak louder than the actual market movements: investors have been selling cash assets to buy almost anything else. In 2010, much of this liquidity was making its way into EM; now that investors are growing nervous about political stability, it has again been channeled into US and developed markets (Figure 5). Even IG at 3% starts to look interesting when cash deposits and money market funds are yielding virtually nothing. Source: Citi Investment Research and Analysis, EPFR

15 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 14 Using overall country weights against benchmark as a momentum signal Momentum Indicators Comparing country/sector/cash positions with peer group Benchmarking Tracking the ‘smart money’ – how funds get in/out at the optimal time Market Timing Fund Allocations Fund manager allocations at month-end across the countries or sectors they invest in. What are Fund Allocations? Monthly data reported by managers or administrators (based on holdings, fund factsheets) Fund level detail includes total fund assets, % weight in cash, % weight by country Includes funds registered globally not just US Country & Sector Allocations Overview

16 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA 15 Actual country and regional weightings (in % of AUM) Country Allocations: Overview 15

17 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Country Allocations: Relative Country Weights 16 Non-ETF Global Equity Fund Active Weights vs. MSCI ACWI ETF PacificEurope & Middle EastAmericas Latin AmericaEMEAAsia

18 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Country & Sector Flows Overview Derived data based on Fund Flows and Fund Allocations Updated daily, weekly, monthly Unique high frequency view of cross border portfolio flows – driving valuations in FX, Equity, Bonds. Measures relative strength of flows at a Sector or Country level 17 Fund Allocations Fund manager allocations at month-end across the countries or sectors they invest in. What are Country Flows/Sector Flows ? EPFR multiplies the most recently available Fund group allocations (to a country or sector) x Flows into that Fund Group - to estimate overall flows at a country or sector level. Allows users to analyze flows by fund group, ETF vs MF, and by domicile Includes funds registered globally not just those domiciled in the US EPFR also tracks flows to dedicated Sector Funds, as an alternative measure of demand for individual sectors Country or Sector Flows Distribution of fund flows by country or sector. Combines data from fund flows and fund allocations

19 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Practitioner Examples: Sector Flows 18 Cumulative Sector Flows are still in the red for the most part, with the Materials sector being the only exception Consumer DiscretionaryConsumer Stapes Energy Healthcare IT Telecom Financials Industrials Materials Utilities Cumulative 52 Week Flows Weekly Flows (% AuM)

20 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Practitioner Examples: Global Country Allocation Model 19 Utilizing Flows in Multi-Factor Asset Allocation Global Country Selection Model In this report, we demonstrate how utilizing EPFR Country Flows alongside standard investment factors add value to country allocation strategies Backtests using EPFR Fund Allocations and Fund Flows as factors in a global country selection model yield convincing results Investment factors Active Country Flow compares one country to the cross sectional average Active Investor Spread uses EPFR country allocations data to measure active, speculative investor activity in emerging markets Model Features Provides an interactive environment for portfolio managers to backtest strategies with EPFR Fund Flow & Allocations data Create custom country portfolios Adjustable factor weightings and strategy parameters allow for a high level of adaptability

21 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA New research based on EPFR Global data 20 What is the impact of fund liquidations (outflows) to equity valuations in emerging markets where foreign funds have big positions – and how can investors can use this information in their investment decisions Dec 2010 Oxford-MAN paper (Journal of Finance candidate) Launched December 2010 the index uses weekly country flows data to improve country allocation and outperform the FTSE EM index FTSE - EPFR EM Fund Flows Index This new (Q4 2010) BofA Merrill index measures global investor risk appetite analyzing daily flows to EM equity, High Yield bond, and Money Market funds Global Financial Stress Index EPFR is developing a suite a investment strategies to aid clients in the utilization of fund flow and allocations data directly in the investment process Country / Sector / Regional allocation models, FX trading

22 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Sample Clients 21 "The flow data from EPFR has proved to be a useful source of added value in some quantitative models of equity markets we have constructed. It provides an extra dimension of information to that available from the typical equity market databases used by quants and so affords an edge in performance over much of the competition." Dr. Stephen Rees Head of Investment Process Research Schroders, London “Emerging market mutual funds' country allocations appear to contain information on future equity returns beyond that contained in standard valuation and momentum indicators.” Analyst Global Asset Allocation Research Team Salomon Smith Barney “I find the EPFR Global Country Weightings Report to be an invaluable tool in helping me track my competitors' regional and country allocations on a monthly basis. The Report is timely and very comprehensive.“ Brad Aham Portfolio Manager State Street Global Advisors Sell Side Buy Side Government/Media

23 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Company History 22 EPFR Global founded Cambridge, Massachusetts USA 1994 EPFR Global launches Russia Portfolio, Central Europe Portfolio and Brazil Portfolio: publications serving more than 600 institutional investor clients worldwide EPFR Global launches Research and Analysis Services, providing independent research services for investment management firms EPFR Global acquires Emerging Market Funds Research, Inc., a database of global equity and fixed income funds EPFR Global expands fund database by four-fold to more than 15,000 equity and fixed income funds with $10 trillion in assets. Client base expanded by nearly 10-fold and includes leading institutional investors, global equity and fixed income analysts, strategists, investment managers, hedge funds, central bankers EPFR Global launches new Web Interface, new Country Flows data set, and Web Services for automated data delivery in trading and investment models EPFR Global launches delivery with Haver Analytics to provide weekly and monthly international fund flows data for equities, bonds and money markets EPFR Global acquired by Informa PLC 2010

24 GLOBAL GLOBAL FUND FLOWS AND ALLOCATIONS DATA Key Contacts 23 Dwight IngalsbeManaging Director/Co-FounderTel: (+1-617) ext. 26 Brad DurhamManaging Director/Co-FounderTel: (+1-617) ext. 24 Ian WilsonManaging Director, Fund DataTel: (+1-804) Simon RingroseManaging Director, SalesTel: (+1-617) ext. 30 Cameron BrandtDirector, ResearchTel: (+1-617) ext. 22 Patrick ParadisoSales (Latin America)Tel: (+1-917) Jean-Claude MoosSales ExecutiveTel: (+1-212) Rikolv Hatlehol-DesaiSales Director (EMEA)Tel: (+44) Bin PengSales Director (North China)Tel: (+86) Robert SheridanBusiness Development Manager, AsiaTel: (+65) Young-il SunwooSales (Korea)Tel: (+821) Todd WillitsManager, Client ServicesTel: (+1-617) ext. 27


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