The Seven Secrets of Distribution November 2010 Daniel Enskat Head of Global Consulting

2 Distributor Key Themes ProductMarketing/ InformationTrendsClient Service Be focused, don’t try to be a supermarket and satisfy everyone Are you a household name in your top asset classes/ categories?—analysts hedge their bets Investment management, unfortunately, is the least important in the equation Consistency and “gentlemanly” way of working with distributors Niche and cookie cutter products work well, easy to explain, back to basics Customer events are nice, but not essential (often not attended) “Annus horribilis”: Wealth managers change processes Different distributors need different approaches (sophisticated vs. local) Products: A little more sexy, a little more aggressive (but still cookie-cutter) Information is a commodity, everyone can do it, but not everyone does it well Private banking will mostly grow outside of domestic markets Local language research around themes, broad-based support Increased client demand for transparency, simpler products Intermediaries love a good story Lost in translation: asset managers don’t understand end client needs/ knowledge Two camps of asset managers when it comes to responding throughout the crisis Back to guided architecture, fewer managers, fewer products Help the analysts do their job: Bring ideas to advisers (practice management) In addition to a quality products, campaigns play a key role Companies that focus on operational excellence are likely to succeed Core asset classes/ categories almost impossible to penetrate More independent thought and research instead of factorial updates Growth opportunities in new clients segments and geographies Service levels matter enormously UCITS III/ Newcits is a hot topic, but limited cash flows (for now); naïve approach of hedge funds Fund analysts rely more on industry aggregators and local sites Few big winners; some firms blacklisted for the next few years Senior commitment and communication

3 Global Mutual Fund Flows by Region, Asset Class In US$ Billion Bond Mixed Equity Other Source: Strategic Insight Simfund GL, MF 5-Year ( ) H’2010

4 Distribution Channels by Market *Please note: insurance companies are not yet authorized to sell mutual funds in China, and currently there are no IFAs available to Chinese retail investors. Source: Strategic Insight estimates, Asian Industry Associations Distribution Channels – Asia

5 Distribution Channels by Market Distribution Channels – Europe

6 Global Distribution Opportunity Matrix

7 Top Selling Non-US Long-Term Funds Net Flows Historically, Ranked by YTD August 2010 (In US$ Billion) Source: Strategic Insight Simfund GL

8 Fund Selection Units More Power Fund Selection Units Post-Crisis More Complexity More Concentration

9 The Next Five Years Global AUM Market Share

10 0% 20% 40% 60% % 20% 40% 60% Local 1940 Act Source: Strategic Insight Simfund GL, MF UCITS Cross-Border UCITS Local The Next Five Years Global AUM Market Share

11 Challenges and Investment Dichotomies Turn speculators into investors Pensions Cumbersome sales processes Emerging Markets Head office centricity Brand, staff, language The long-term view Local market perception US vs. global Developed vs. Emerging Local vs. Offshore Investment Themes vs. Solutions Active vs. Passive Relative vs. Absolute Returns Fee-based vs. Commission- based Traditional vs. Alternative Industry Key ChallengesInvestment Dichotomies

12 Strategic Insight Contact the Strategic Insight Global team: