seb report: risky investments still a good long-term bet

8/9/2019 SEB report: Risky investments still a good long-term bet

1/36

InvestmentOutlook Ma 2010piv bkig - ivm gy

h d ud c h wld hdl h

u?


2/36


3/36

3Investment OutlOOk - may

Contents

rodcio ____________________________________________________________5

Sr ______________________________________________________________Poroio rg _______________________________________________________

Th: Th db brd c h word hd h prr? _______________ 11

Th: Rdrwig h i p ___________________________________ 1

Th: Mr p or r h xcpio __________________________ 1

Mcro r ______________________________________________________ 20

CL

Eqii ______________________________________________________________ 22

Fixd ico _________________________________________________________ 2

Hdg d _________________________________________________________ 2

R ___________________________________________________________ 2

Pri qi _________________________________________________________ 30

Coodii _________________________________________________________ 32

Crrci ___________________________________________________________ 3

Srg


4/36

4 Investment OutlOOk - m ay

Thi doc prodcd b 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 oiio or iccrci, or or o whor which ri ro ric o i. i rrch i rrrd o,

o 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 bco odd d o or idiid circc. prodc prodc rr id o ri.

Thir 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 o i i crii doid i orig crrc, chg i xchg r c ipc h rr. Yo o r rpoib or or

i dciio d o hod w 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.. cr o hod dic iord o or idiid

circc ro or SEB dior.

i u x: A cor o or rio Pri Big ofc i Lxborg, Sigpor d Swizrd o r obigd o piord o h x r ppicb i h cori o or ciizhip, ridc or doici wih rpc o b cco d ci rcio. SEB do

o proid x rporig o orig cori ig h o or proid cocrd horii wih iorio d wh rqird.

Hans PetersonGob Hd o Srg

+ 46 8 76 69

h.pro@b.

Lars Gunnar AspmanGob Hd o Mcro Srg+ 46 8 76 69 7

r.p@b.

Rickard LundquistPoroio Srgi

+ 46 8 76 69 7

ricrd.dqi@b.

Victor de OliveiraPoroio Mgr d Hd o S Lxborg

+ 6 6 [email protected]

Johan Hagbarth Srgi

+ 46 8 76 69 8

joh.hgbrh@b.

Carl BarnekowGob Hd o Adior T+ 46 8 76 69 8

cr.brow@b.

Reine KaseEcooi

+46 8 76 697

ri.@b.

Liza BraawCoicor d Edior

+46 8 76 699iz.brw@b.

Thi rpor w pbihd o M 8, .

co r bd o iorio d i ib bor M , .

Srg


5/36


The debt problems o industrialised countries

will aect the risk perceptions o markets or

a long time. The concepts o high and low risk

will gain new meanings. Knowledge, a compre-

hensive view and understanding are essential,

now that traditional truths about risk must be

questioned.

Th c crii i Grc h ocd io o gigic

bdg dci d i gor db oi,

i i Erop. Thi wi c h w r iw ri or

r o co.

For og i, h or or ow-ri i h b

qi poroio copod o hr i ro Norh

Aric, Erop d Jp. Nowd, i prcic ch

poroio priri cop grop o high idbd

cori h wi b orcd o d ohow wih hir db

prob. Rgrd o wh db roio rg h

choo, i wi c cooic growh. Toghr wih ow

iio d ow ir r, hi ipi dowid ri or

h crrci o idriid cori ddig o

h ri picr. Wh d o b ow-ri i i h

c ocid wih rhr high ri. A prdig hi h

occrrd.

Ch cd

od w ci d cooic word chrcrid

b db prob d ow cooic growh i h id-

riid ECD cori, copd wih bi br -

ci i d high growh i h rgig r (EM)

phr h codiio driig wh i high ri d

wh i ow ri r chgig. Mwhi rgig r

r do o or rhig h ior i ooig or.

r biio i o bid w-dirid poroio h h

good chrcriic d c proid b rr i

ci ci. r qio h ior

hod i whhr h x b o cor i or

b orc o r or corig ir d pricip

p h h o gob corporio i r

idr. Th wr w b h o corpor bodr prhp or rci h o gor bod

ro ri dpoi. Th i i or ipor h r o

diri propr d o h h righ ic pproch.

Wh i ow ri? Th wr o h qio c h

o do wih ior. i bo hig owdg d

coro, w coprhi iw o h cor w c

drd h c or i. For xp, od i

i or ipor o ii rgig i rio poroio

h o pp rdiio diricio bw go-

grphic r. Ai o drig driig orc i or

ipor h i h b or og i. Prdoxic, o-d i i w-d, corrc pricd pri

qi d b ri h gob qii d wih

h wrog crrc xpor.

Fcu d dd

For good ro, w r doig o o pc i hi i

o Investment Outlooko qio bo ri d idbd-

. Tod h r pio i i g.

Db prob i idriid cori wi c ro

h rdiio occp o o pc i crii

poroio. Th ri i i i bc w bi h h

ro o ri d h w h r hdd b poroio g-

r b rd. Th rdiio ocio hod

poig corrio bw h r bd o og

i ri do o proid h who wr od. d

or i-dph drdig i dd o b o bid

good poroio. Th driig orc bhid r pric rd

b xpod. Trdiio rh b qiod.

Th r dobd xciig w i i h rqir

w pproch o ri.

Hans Peterson

CIO Private Banking and Global Head o

Investment Strategy

iduc

New times new approach to risk


6/36


Sr

exctd 1-ya

rasoningtun isk

equitis 9% 17%

POSITIVE.There is a short-term risk o corrections due to fscal worries and as macroeconomic indicators

stop providing upside surprises. But urther along, low ination and moderate growth may drive OECD

markets. Eastern Europe and Asia will continue to beneft rom higher economic growth. The euro zone isleast attractive, with the worst growth potential.

Fixd incom 6%* 6%

POSITIVE or High Yield,NEgaTIVE or government securities. Company profts will strengthen and bankruptcyrisk will decrease corporate bonds remain attractive. High Yield bonds with large spreads over governmentsecurities are the most appealing. Government bonds in emerging markets, with their high yields, are also attrac-

tive. Swedish government securities will continue to provide minimal returns and continue to risk interest rate

hikes.

Hdg funds 8% 6%

POSITIVE. The prevailing tensions between and within asset classes provide continued good potential or

hedge unds. We will continue to ocus on quality managers in the Macro, CTA, Relative Value and Fixed

Income strategies, while Event Driven is becoming increasingly attractive.

ral stat 5% 3%

WaIT-aND-SEE/POSITIVE. Capital is seeking out quality properties. Better general economic conditions

and lower unemployment will beneft this asset class. Monetary tightening and possible bubbles in China

constitute risks.

pivatquity 15% 22%

POSITIVE.The number o private equity (PE) transactions will continue to increase in an environment o

low valuations. The secondary market is attractive when fnancially pressed investors are orced to sell atdiscounts. Listed PE still has room or sizeable upturns.

Commoditis 5% 18%

WaIT-aND-SEE.Lower growth ahead in the OECD countries will reduce demand or industrial metals, whilelow real interest rates will keep demand or gold up. Agri-commodities will be squeezed in the short term,

but higher ethanol production may boost the price o maize (corn) and other crops urther ahead.

Cuncis 5% 3%

WaIT-aND-SEE/POSITIVE. Interest rate dierentials will continue to drive currencies. Export countries such

as Sweden and emerging market countries will see their currencies appreciate, while the euro will be pushed

down by large government debts. China will begin allowing its currency to appreciate during 00.

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

XpCD ik D U ( y OiZO)

iOiCL ik D U

(my , O piL , )

Cg i OU XpCD U

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

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2008-11

2009-02

2009-05

2009-08

2009-12

2010-02

2010-05

Equities Fixed income* Hedge funds Real estate

Private equity Currencies Commodities

Fixed Income

Equities

Private equity

Commodities

Real es tate

Hedge funds

Currencies

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

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

Historical volatility

Historicalreturn

iOiCL COLiO

(my , O piL , )

Equities

Fixedincome

Hedgefunds

Realestate

Privateequity

Commodities

Currencies

Equities 1.00

Fixed income -0.0 1.00

Hedge unds 0.3 0.2 1.00

Real estate 0. -0.13 0.2 1.00

Privateequit

0.5 -0.1 0.2 0. 1.00

Commodities 0.2 -0.11 0.2 0.23 0.31 1.00

Currencies 0.1 0. 0.5 -0.01 -0.03 -0.02 1.00

Hioric r bd o h oowig idic: Eqii = MSC AC Word. Fixdico = JP Morg Gob GB Hdg. Hdg d = HFRX Gob Hdg Fd. R = FTSE EPRA/NARET Dopd. Pri qi = LPX. Coodii = S&P GSC

TR. Crrci = B rcHdg Crrc Trdr.


7/36


Sr

Wig i mOD pOCiO

Wig i mOD gOW

1%

5%

0%

0%

2%

10.5%

81.5%

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

1.5%

4.5%

4.5%

3%

3%

30%

28.5%

25%

0% 10% 20% 30% 40%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

Wig i mOD ggiv

OLLig -mO COLiO v. mCi WOLD

(U)

0.5%

0%

4.5%

11%

0%

23%

26%

35%

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

m: Db bUD C WOLD DL

pU?

Norway

Canada

France

US

Italy

Greece

Finland

DenmarkAustralia

SwedenGermany

Netherlands

Spain

Ireland UK

Japan

-15

-10

-5

0

5

10

15

0 50 100 150 200

Public debt (% of GDP)

Publicsurplus/deficit

(%o

fGDP)

m: DWig ivm mp

US (50%)

Japan (10%)

UK (10%)

Other (30%)

For countries with large government debts and public sector de-

cits such as the US, Greece, Italy and Japan tough years o debt

resolution lie ahead.

The MSCI World index is oten used as a benchmark or global

equity unds, but 70 per cent o its exposure is to three countries

and the EM sphere is missing.

h d ud c h wld hdl h u? Th db oi i h W rgh rg or rgig

r xpor

dw h : Wh w high ri i rd b ow ri oorrow, or xp i rgig

r

m u ul h xc: Th wr priod i r i probb j p drig h b r o cch

or brh


8/36


pl

MDERN PRTECTN

Dpi occio oi r, hi poroio prord

w drig h r w oh o . Sic h prir

prpo o Modr Procio i o prr h o

cpi, i rr o r o pr c drig h r hr

oh b coidrd icor, gi h r ci-

. W o o h prcic hodig coribd o

h poroio poii rr d h o hodig oid

hi rwor.

Brodr xd ico d (ch p or o rr)

r coiig o dir good rr, og wih or

corpor bod d hodig, boh Grd (G)

d High Yid (HY). r crrc d i o

bg o corib o or prorc. h hdg dporio o h poroio, howr, ho d h dhr o

h Eqi Mr Nr rg h o r xpc-

io, d h hodig b rcoidrd.

Nw drig h priod i h w r chooig o bgi i-

ig i r . or jdg, hi c hod b

b o r coribig poii o or rr, whi iro-

dcig ohr p o ri d rr orc o h poroio.

W o or h h ow ri pro o hi c wi

w io h Modr Procio i phiooph.

h who, or xiig ix o i i icor.

Th poroio i dirig rob rr ow, co-

rod ri. Epci i ri-djd r, w r id

wih i prorc.

Portolios or shiting nancial winds

2%

81.5%

1% 5%

10.5%

Cash

Currencies

Real estate

Hedge fundsFixed income

In our Modern Investment programmes, we apply our approach to markets and asset classes in

practice. The turbulence surrounding the scal crisis illustrates the value o the guiding principles

governing our asset management: diversication among several asset classes and the ambition to

capture long-term trends in economies and markets. Despite extreme market uctuations, long-

term conditions have not undamentally changed. We are thus sticking to our balanced investment

tactics, holding decent proportions o risky asset classes such as equities and private equity, com-

bined with more stable investments such as real estate, corporate bonds and hedge unds. Among

minor portolio adjustments worth noting are a small risk increase in our Modern Aggressive porto-

lio as well as the expansion o our real estate and emerging market debt holdings.


9/36


mOD gOW

A h word coo coid o rcor, h Modr

Growh poroio ro b or h hr pr c drig

h r qrr o . Thi poii rd o coidi Apri. hodig r o cd b h or cod

h h icd h ci r i rc oh,

b gi i good ri diricio d i o r cc

choic o i, h poroio h prord w. Th

c h h coribd o o i rr r

qi d xd ico i, oghr wih pri

qi d hdg d. Coodii d crrci h

prord icori o d.

h og r, w xpc h word coo o rcor

rg pd, b i h hor r or cod wi -

ow roo or dippoi. h Modr Growh poroiow r w prprd or hor-r rr, whi ig

i h c pror icori i i o poii

r. h g-o-wr bw hor-r cocr d

og-r poi, w ri i boh cr poii -

id d xggrd pii.

W r riig or crr xpor o qii, which

icd hodig i boh rdiio gob d d i

br o brod rgig r d. h xd ico

porio o h poroio, or xpor o crdi ri ir-

wi ri i pc, b w r ig chg

b rpcig Grd Libor (hor drio) wih

Ergig Mr Db.

Th hdg d porio o Modr Growh i dirig good

rr, d i biiig c o h poroio gi good

opporii o ri i ohr c. W orcoid word io i c, boh bw

c d rgio. Thi hod proid good oppor-

ii or hdg d. Gob Mcro, CTA d Eqi

L/S r rgi h hod b b o pror w i h

r, o w r chooig o ri h hodig. Th good

r o proid good poi or Mirg, d w

r o chooig o p ch i. W r ig

rgi pwrd dj i or rr xpcio or

hdg d.

R i ri w c or i Modr

Growh. W xpc i o b b o dir good ri-djdrr hd d o proid biiig c i h poro-

io. Hr w r ocig o or b propr i

wih phi o ch ow. Cri high-ri propr

i projc igh o b rci, b r o i-

b i hi poroio or boh ri d iqidi ro.

r crr poiio i id pri qi, which w r

chooig o ri, h coribd good rr o r. W r

rchig or copr i i hi c,

b hi i difc bc o iid iqidi.

Poroio rg

3%

3%

1.5%

28.5%

25%

4.5%4.5%

30%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge fundsFixed income

Equities


10/36


Poroio rg

mOD ggiv

A h oriio o r d cooi h pro-

grd, w h cci cd h ri i h Modr

Aggri poroio. r iio i o grd icr riwh w rgrd hi ib.

W r ig chg h o: rpcig

corib dbr hodig wih qii. Sic h di-

co h w w xid i h corib hodig wh w

bogh i h dipprd, w r rpcig i wih qii

ic h ri i rg h , b h poi i br.

Thi pproch o pr h g o h Modr

progr. W oc o i wih h

poi or h b ri-djd rr whi ig o

dg o owh rgr r hi.

h qii c, rg proporio o h poroio

i coi o rgig r. Thi h word

o ic, boh i i d crrc r. orh

o h gi o or EM d r ribb o crrci.

W c h h xiig growh i h word coo i

coig i ro rgig r, d i i r o b

id i h r.

Ahogh hr i roo o icr h ri i h poro-

io, h dciio r ir i hr i ooh cioig

ri diricio. A ri rg proporio o i

i h Modr Aggri Poroio i i xd ico; how-

r, h r i h h o qi-i rr

xpcio, b owr ri. Thi proid wih good

chio i h poroio, b ooig bi rhr hd w

or h w hod owr hi proporio o b o

gr h rr w r iig or bi

cc. Aog corpor bod, or High Yid hodig r i

prorig odig; h r, icid, good i-

i o r iio. W h p o cor-ib dbr, ic h r xpcd o h coid

good rr poi.

h hdg d d, w h cho d h r bi

or ggri. W o h o hodig i hdg d

o or b r d xpc o c h iz o h

hodig i h coig qrr whi big or i

hdg d. W r cig dic prob, ic o o

or hdg d h cho o op ccpig w dpoi.

Thi i r good, ic h gr or ri

h i iz cod dr c prorc. Sic h d

i cc, w r riig or hodig d h -whi od qid ri or r i.

Th r i w h d i h ohr

Modr progr do o i p o h rr

xpcio h gor Modr Aggri, which i wh w

h o r i i hi poroio. Thr r i-

dd w-gd opporiic r i h

h good rr poi, b hir iqidi i gr oo

poor or hi poroio.

Pr coodi i h o coribd hig

hi r. d i h i b coodi hr h

h rcordd gi, d w iid or coodi hr

i o oh go. rropc, w did o bi

oo r. Thr wi dobd b w opporii o

i i coodi hr gi, b h o w r

hodig o.

23%

11%

26%

35%

0.5% 4.5%

Cash

Commodities

Private equity

Hedge funds

Fixed income

Equities


11/36


h:

h d ud c h wld

hdl h u?

Beyond Greece, massive government debt

mountains loom

While the Western world grapples with its

debts......

... economies in the emerging markets sphere

are running in high gear

Wih gor db o or h pr c o GDP

d bdg dci o r pr c, Grc crd h

digh o o h oc, xd ico d orig xchg

r. Er i M, Grc rchd gr wih i

ow ro zo cori d h rio Mor

Fd (MF) o o oig EUR biio. Th cor

o h rrow cpd dig. Th ph o

hi gr w og d widig or boh poiic d

ci ro. A hir p, wo-r Gr orig

bod id cibd o r pr c. Nor i i poib o

dcr d o h rgc, hogh h EUR 7 biio

ci pcg r id b h Erop Uio d

h MF oidd iqidi crii i Erop.

Thi o c wo ir h chg h

Wr cori c. A r o i c i

poici chd idi r h Lh Brohr

hoc i Spbr 8 d drig h dp ci dcooic crii h oowd, h G7 cori wi coci

h icrd hir cr gor db o rcord-

high pr c o GDP b h d o . Wh, h, wi

b h ipicio o hi db prob? How wi i ipc

h gob coo d h r?

g d ul u h c

For gor o b i db i ohig or h

or copi o c hir ciii b borrowig. J

copi ooh hir iqidi d d rdc hir id-

p cpi hrogh db cig, gor c ooh

hir crr d r cpi ow rqir. oh ro bhid od gor db prob i h

rcr db h grd grow.

Ar h word hd drgo dprio d word

wr icdig jor cooic cio h rd i

oro oci coqc h id o cooi JohMrd K gid grod. H docd ci ro

or gor i oohig cooic cc; h d-

cocp w h gor hod id ig

i good i h bd i o pr xpior c

poic i ogh i. hi w, h gor cod

h dr cooic d oci coqc o cig

cooic codiio.

Priodic rp d dci i gor c r

rd o h ccic r o h coo. Drig boo

priod, x r ri d po , whi

cooic dowr d o highr po, owr xr d high oci wr xpdir. Th ccic

rp d dci corib o dcr d icr i

o gor db h coo c.

Howr, h poiic ici o rdc xpdir dr-

ig cooic boo r r h h ici o

boo xpdir i ogh i. h r-p o cio,

or r ro hr i o wiig o ri x

d ri gor bidi. Bor oci biir ch

po irc wr irodcd, rp d

dci or or o ch ohr drig cooic

cc, d gor db dd o b ir b pr-

cg o GDP. B h wr xpdd, h ccic

porio o gor db did o ih drig co-

oic pr. Srcr db h pr h pri hrogh

h ir cc h h cci xpdd.

xc d c l

Exci rg cr gor db d o

prob. rdc codc og ior h co-

r wi b b o i p obigio, which d

o owr crdiworhi d highr ir r or bod

id. B cor highr dig co, d h pp

o iqidi hri or boh pri idiid d bi.

Ui hi hpr pri copio d bi-rd cpi pdig, hrb owig cooic growh.

d (Rihr d Rogo) how h GDP growh

In the shadow o the debt mountains


12/36


b o prcg poi wh gor db rch 9

pr c o GDP.

Wh, h, i good o gor db? Th i-rr or o ip, righorwrd hodoog or

ccig h opi db . Dpdig o h od

d prr, or xp, opi US db c b i-

d whr ro o 66 pr c o GDP. Accordig

o h Sbii Pc, EU cori r ppod o r h

gor db i bow 6 pr c o GDP, which h MF

d h Word B o rgrd h ppr ii or od

gor c.

Howr, hr r horic gidi or wh od

o gor db :

. A ib og-r c poic r x r

hod b cpb o dig r ir d pricip

p. og-r gor c r xpcd o

d p ibcd, h pri cor ri rdcio i i

copio d wi or, i icipio o highr

r x brd.

. Roo or cor-ccic c r iod

bo, db hr o GDP ri drig ccic dowr.

cor h high iii db , cooic dowr

wi r i highr idbd d roo or

c i. ch iio, i h gor icr

i db, hi h dr coqc icdig owr og-

r growh.

. Coribig o cooic xpio rob o

gor db b growh bc rgr br o

high-rr projc c obi dig wh r ir

r r ow. B xci high db, wih h ccop-

ig highr gor bod id, wi c cpi o

br xd ico ri o gor crii. Thi

wi crowd o fcic-riig pri i.

il u c l uc

For h bo-iod ro, cori wih ow iii

gor db brd c ch or powr ci r h h grr ipc o hir coo-

i h cori wih high iii gor db. A

grop, bor h ci crii h idriid cori

hd gor db oig bo 6 pr c o GDP.

Lrg gor-cd bi-o d i r,

w owr r d highr xpdir drig h

ci d cooic crii, h d o xpodig gor-

bdg dci. Accordig o MF orc, gor

db i h ECD cori who wi rch pr c

o GDP wihi r.

E i i r i h Wr word wr wih-drw, pbic xpdir wod o b bo . pr

c o GDP. Looig hd, igoro d crdib cio

p o rdc pbic dci wi h b ipor i ordr

o cr codc boh i h ci r o cpi

wi h righ i d copi o h dr

o bgi hirig w po.

cox, Swd i hd p xp o co-

r h h prcid good crii g. h w o

h Swdih big crii o h r 99, h gor

iii chd rg id pcg. r ix r priod,

gor db ro b bo prcg poi o or

h 7 pr c o GDP. Ar h, h gor ip-

d dric b-ighig r which hpd i

bdg bc wig ro - pr c o GDP o r +4

pr c i h pc o r, b cooic growh w

r ow drig hi priod.

For h rgig r (EM) phr, h picr i ir

dir. A grop, EM cori rd h crii wih

gor db o o bo pr c o GDP. Th MF

i h h cori wi oo b bc h

Th: Th db brd c h word hd h prr?

Norway

Canada

France

US

Italy

Greece

Finland

DenmarkAustralia

SwedenGermany

Netherlands

Spain

Ireland UK

Japan

-15

-10

-5

0

5

10

15

0 50 100 150 200

Public debt (% of GDP)

Publicsurplus/defici

(%o

fGDP)

Db-bUDD COUi FC bL-igig

For countries with large government debts and

public sector decits such as the US, Greece,

Italy and Japan tough years o belt-tighten-

ing lie ahead.


13/36


Th db brd - c h word hd h prr?

ri db . Th ci crii hd idr ipc o

h cooi h o h ECD cori, d hir ow

idbd owd roo or rgr i r.

uh ud u wll h wh

Cori h orco db oi h hr

i ri: iio, crrc dprciio d bdg

ri.

High iio c h o o o hri. ohr

word, h r co o o bco owr borrowr b-

h xp o dr. io c b crd b pri-

ig o, b ch or poic rg prppo

w-cioig big d high cooic cpci

iiio i ordr o h ipc. A iio c c

o b chid b o crrc dprciio i oi doid i h cor crrc d h o hi

crrc , iio i ipord d h co o h o

i r r.

Grc, Spi d ohr ro zo cori co pp

h wo ri, howr, ic hir ir r

i b h Erop Cr B d hir crrc i

r-io. For h cori, h ri or og

h bog o h ro i h hird ri

bdg ri.

Bdg ri i h hrd w. h gor

bgi o rp i db wh i h chid bdg rp

h r o ogh co-cig d x hi. Sdi ro

h Word B d whr how h growh i cr

or ib wh bdg ri occr i i

rdcio i pbic xpdir, coprd o icr i

x r. For xp, b cig bidi d riig h

rir g, cor boo i prodcii whi ipro-

ig i gor c. Sch r d o jor

poiic chg, howr, pci i cori wih

izb pbic cor.

r cocio i h cori h h od c o-

d wi jo highr growh r i h r h coriwih drd c. Th Wr word h c

r o bow-poi growh d h gigic chg

o rorig ordr o hir gor c. Aog h

b-poiiod Wr cori r Swd, Norw d

Cd, whi io o h priphr o h ro zo wi

c h bigg ri.

Gob pig, Ai cooi wi jo h high

growh or r o co, oowd b Li Aric

cooi. Er Erop wi grd pic p pd. Thi

dirc i growh r which wi h b pid b

ECD db prob wi c coid ow o cpi

o h EM phr, whr h growh ooo i b. A i

h cori wi ri i , d boh c d or

poic ighig wi b ipd i i Ai d Li

Aric o o orhig. Th crrci o EM cori

wi h pprci ri o ho o Wr cori. Thi

wi hp rdc xpor dpdc i EM cori d -corg growh h i dri b doic dd.

ECD cori h oow h rpoib ph o c b-

c bdg ri d h h ow cpci ii-

io d high po wi how ow ir r d

ow iio. h o h odr cooic growh, h

oc r i h cori b. Cori h

choo h iio ri or r b o g hd

o hir gor c, howr, wi high iio

copd wih riig bod id cr orb -

ri or qii.

Th hdow o h Wr db oi h riorc

rg i or o EM xpor i rio or r

, qii, crrci boh di- d og-r.

-6

-4

-2

0

2

4

6

8

10

12

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

World Industrialised countries

Euro zone Central and Eastern Europe

A sia ex Japan, Korea Middle East and North Afri ca

i i ig g

According to IMF orecasts, real GDP growth will be highest

in Asia, at more than 8 per cent annually during the next

several years, compared to less than 2 per cent in the OECD

countries.


14/36

14

h: dwh

Traditional risk-spreading alls short

Emerging markets no longer so risky

Currency movements will play a major role

Ui h r 98, h i ib i r-

i wr qii o doic oc xchg d xd

ico i i oc crrc. Sic h, h pc o

dop i h ci d h b xpoi. Tod

ior h r iid rg o ri pc o

p hir o.

Th w ri proid br poi or grig

good rr. B h i h r or copx, r-qirig w owdg d iigh io h ri d oppor-

ii o h i. To o x, coio

pio bo ri, qi d poi rr o

c b coidrd owh odd. r i

h i h r r, w wi c ohig o prdig

hi, whr od rh wi b rd. Sch hi wod

rdrw h i p d d o chg i h pricig

o ro i.

bd qu ud d

coio pio i h rdiio brod go-

b qi d proid h b ri-prdig i qi

poroio. Thi id h brod qi d icd

xpor o rio r h do o h h

pr o rr (h ow corrio). h chi

diricio, which rdc ri wiho dcrig h

poi rr o h x. Thr i o dob h

diricio i powr oo or owrig poroio ri, b

wh w c b cpic bo i whhr gob d, or

xp, i c h b w o chiig ri-prdig i

qi poroio.

Eqi d gr gr d o o dirg o or-

gr x ro hir bchr idic. Coq

gob qi d o h ocio iir o gobidx, which i r i bd o h r cpiiio o

rio oc xchg. Th gob idx o rq

d bchr i h MSC Word dx. Th hr co-

ri rprig h rg xpor i hi idx r h

Uid S ( pr c), Jp ( pr c) d h UidKigdo (9. pr c). Ergig r (EM) cori r

o rprd . A ior, o hod b cpic

o whhr hi c rpr good ri-prdig,

ic 7 pr c o xpor i o o hr cori d h

EM phr i iig.

Th qio i high r, pci i od r

ci chrcrid b grr oc o cor ri. Th

cooic oc o cori h bco r ipor

ri prr i i dciio. Thi i dord,

i pricr, b priig r cocr bo Gr

gor c. A pr, o cori bor-

row highr ir r h crdiworh copi p.

or h rgrd corpor bod or rib h

gor bod. Th c h cor ri i highr

i o c h crdi ri how h h r h r-

d i iw o ri. Wh, h, i h o h co-

ri h ior d o b xpod o i gob d?

cu c xuGrc i r ro o i grppig wih prood dci

prob. Mo Wr cori r chrcrid b dwi-

Old truths mean big risks

US (50%)

Japan (10%)

UK (10%)

Other (30%)

big OCD COUi DOmi mCi WOLD

The MSCI World Index is oten used as a benchmark in tradi-

tional broad equity unds. The index is 70 per cent exposed

to three countries, and the EM sphere is missing.

Investment OutlOOk - m ay


15/36


dig ch rr d o h xpi gob rcio d

gigic i pcg o rc r. Aog h co-

ri wih h bo w gor c r

h US, Jp d h UK. Thir bdg dci r , or r, pr c o GDP (Grc pr c). Cr gor

db d pr c o GDP i Jp, or h 9

pr c i h US d 6 pr c i h UK ( pr c i

Grc). h UK, h pri db brd o bi d

hohod i o og h high i h word.

Th ci iio o cori h bg o ic

ior dciio d i h hig ipc o rio

r. Erop, or xp, hr i cr d

oicb cocio bw cor cooic hh

d h prorc o i oc r. or diigih

bw h cooic poi o dir cori dbi h copi oprig i w cooi wi b

dr cd.

Th rr o hr i drid i h og r b

cop pro d xpcio bo h r rd o

pro. B pro r, i r, dpd o h drig

cooic prorc o h r whr copi

opr. Copi i db-ridd cori ri cor-

ig dd d highr x h copior bd o

cooi h r o or b grod. i ipor,

howr, o poi o h hi priri ppi o copi

h i h doic r. Expor copi h

hir prodc i r whr dd i high pror

br. Low cooic growh hod dow bor co, d

cor w c c i crrc o o ,

crig copii dg or xporr.

i cr h h gigic gor db h h c-

cd r hrig o hpr GDP growh i db-

ridd cori or r o co ( pg -).

Thr i h ro o h h oc r i h

cori wi o b wighd dow i h og r. A

qii poroio ocd o h bi o h r cpii-io o oc xchg h ppr o b ri high

ri i. Diricio rg occr bw hr

cori h wi c oro cooic chg or

r. pi o hi, qii poroio copod o

hr i Norh Aric, Erop d Jp i rgrdd

i wih ow qi ri.

u ch

Aohr cr didg i h h rpid growig EM

phr h i or o wigh i o gob qi d.

A jori o EM cori h dord ipri

growh gr, hogh h gob coo h rdi wor cooic p i iig or. ddiio, h

growh o gor db i EM cori h b coid-

rb owr h i h ECD cori. A ggrgd

, EM orig db i qi o h pr c

o GDP.

Th EM phr h hioric b cgorid high

ri i, b od ior hod qio hi od

rh. Thr r i br o EM cori h r chr-

crid b corrp gorc, o-xi dcio

opporii d cooi o h bri o ri. B h

cori r bcoig wr d wr, d gr p-

ig h EM phr i o bi or b grod h

prio.

Th o coo r o ri i ci hor i

oii, i ohr word h riio i rr or i.

High oii d o grr cri bo wh rr

i wi proid, which h i i high ri

i. Hioric, EM oc xchg h hd co-

idrb highr oii h ECD oc xchg. B i

rc r, oii i h EM phr h o h

i h ECD. Th ri o qi i i h EM

cori h h diiihd.

Th iprod oc o EM cori i o rcd

i h crdi rig ro irio gci. Drig h

p ix oh, h rd h b owrd or d or

rig pgrd, i wh h gob coo h b

i dp rcio. Howr, Wr cori h

hir crdi rig dowgrdd i h rh o h

ci crii.

Thr r rio ro o wodr bo h cicio

o EM i xr high ri. Wh ior

r hi iw, h rci o EM wi icr

wih riig pric coqc. or hod,

howr, b wr h poiic ri i i highr i h EM

Th: Rdrwig h i p

Government debt as a percentage of GDP

Developed economies Emerging economies Nordic countriesSource: OECD, SEB

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

30

40

50

60

70

80

90

100

110

30

40

50

60

70

80

90

100

110

SEB forecast

Lg Db bUD i OCD

Due to the global economic slowdown and the launching o

gigantic stimulus packages, central government debt as a

percentage o GDP has increased dramatically in the OECD

countries. In the EM sphere, however, indebtedness is low.


16/36


cori h i dopd Wr docrci. ddiio,

ior d o oid priphr r wh cod wid

bow, d h EM phr i i rgrdd big dh opic i poroio.

Cuc

Crrc o r ohig h ior do

o ch ch gr iporc o wh chooig whr o

p hir o, b h i ir h gid

icrig gob diprio, hi cor h bco icr-

ig ipor o br i id.

Sic d gr d ohr ior do o gr

crrc-hdg hir poiio, rg proporio o ri d

rr wi dpd o wh hpp i h orig xchg

r. Hioric, hr pric o bo wic ch xchg r. ohr word, h oc r h bo

wic h oii o h orig xchg r. Th o

hird o h rr o qi i i cor wih

ohr crrc i drid b crrc o.

or jdg, h d rgh o cori wi

bco icrig ii driig orc i h orig

xchg r drig h x w r. Cpi wi oid

cori i ci difci d o, pci, o EM

cori whr growh i highr d probii rgr.

W o prdic h ig dg o ir r di-rc wi b rog driig orc; ior wi borrow

whr ir r r ow d i whr h r high.

Th r wi b dowwrd prr o ow-ir crr-

ci, whr h crrci o cori wih high ir

r wi pprci. Tod h ir r diri

bw cgori o cori r rg, d h wi wid

rhr. h o id r h ECD cori, whr h

ighig o ir r i big popod. h ohr

id r EM cori, whr ir r h b

rid ro rd ir high . r picr o r

rd i h orig xchg r h proid ohrro o r qi poroio wih rg xpor o

db-ridd cori.

A ior, o hod o br i id h crrc

o ic h prrqii or cor

copii. For xp, h wr ro h bd

h rd rog Gr xpor cor o b ro w

gid copii dg ( pg 4-).

D w d

hi h ric, w h chgd coio -

pio h r o rgrdd bo rh. For

xp, rdiio gob qi poroio d o proidgood ri-prdig, b rhr h oppoi. W h o

xid cor h r ipor i ig w-odd

i dciio.

Fd, i i r o big wr ior o

wh ri o i xpod o d h ocig o d o

chi h b ri-djd rr. Howr, h r i

iig big, o ohig h w high ri rd

b ow ri oorrow (or xp EM ).

Diricio ri h b oo or chiig high ri-

djd rr. B h choic o i or chiigri-prdig i r ipor. Th h rc i

or word r h o w r iir wih d h h high

pprciio d good probii.

W crr bi h good ri qi copi,

EM orig bod, High Yid bod d h codr pri-

qi r.

Th: Rdrwig h i p

J.P. Morgan G7 currency volatility indexVIX volatility index for US equities

Source: Reuters EcoWin

2005 2006 2007 2008 2009 20100

10

20

30

40

50

60

70

80

90

Percent

0

10

20

30

40

50

60

70

80

90

Equity market

FX market

CUCy impC

The volatility o the stock market is about twice

as large as that o the oreign exchange market.

Thus one third o the return on an equity invest-

ment in another country is determined by currencymovements.


17/36


It is easy to be blinded by a positive market

mood and macro statistics

and view the world with excessive optimism

Risk asset markets enter a calmer phase

Righ h bgiig o 9, h pii og boh

ior d orcr w rig. M drw pr

wih h dprio o h 9, d o who drd o

prdic brigh r or r d h or coo

w rgrdd rioo d . B o i b-

or, ho who drd h i o chg coio

iw d rd o o b righ. A pric r or ri

qii, corpor bod, hdg d, pri qid o o bg drig h cod qrr o 9.

J h xboo , h coo biid ir oo

hrr. rio cori or xp h Uid

S ccic rcor d drig h hird qrr.

Th coo h rbodd -6 oh r h oc

r, i w ppod o.

Th cooic pr w r cord b iic o-

wrd h d o 9. Toghr wih igic co-cig,

hi bd corpor pro o ri w, whi irr i o idriid cori rid hioric

ow. A r o hi orb cooic iro,

pric o ri coid hir pwrd jor. Grd

h h cr bri rd dowwrd j r h bgi-

ig o wh h c i Grc w rd d

Chi oo p o igh i cooic poici, ior

did o ow h o b crd or og i. d

h prig o w doid b rog r i ri -

r dpi ocic h cod d icrig

worrio c iio i Grc.

Wllulld llTh i or h prig r w rpriig good cor-

por rig d highr growh xpcio, boh og

cro orcr d r pr. For h r i i hi

pr cc, h r r r h h cooi wh

i c o riig h r pwrd. Siic or Mrch d

Apri o ppord h picr o ccrd growh i

pr o h word coo, r growh hd owd r i

pr rd o whr.

The time has come to catch our breath

h: mu ulh xc

UK, PMI ManufacturingEurozone, PMI Manufacturing US, PMI ManufacturingChina, PMI ManufacturingSource: Reuters EcoWin

2005 2006 2007 2008 2009 2010

30

35

40

45

50

55

60

65

Index

30

35

40

45

50

55

60

65

pigim FO pUCig mg

In many parts o the world, purchasing manag-

ers in the manuacturing sector indicate that the

wheels o industry are turning aster. The biggest

upswing is in the US, but in Europe and China the

expansion has also gained strength.


18/36


Aog ohr, prchig gr i h US, Ai d

Erop idicd iprod codiio. Exporr i h

Erop Uio cor cori gid gob copii-

wh h ro rcio o h Gr crii.Cori i Chi, Sigpor d di rpord ccr-

ig GDP growh. Aric cor dd prdicio h

hir ig rio wod ri. d h bro io hir pig-

g b o h cod icr hir copio or h

hir ico prid. Th ood o hohod iprod

i h US, Jp d h ro zo. Siic wd o

hop h h dp dprd Aric hoig r

which rg riggrd h ci d cooic crii i

o i w owrd biiig.

Howr, i i o b bidd b chr r d poi-

i cro iic d h iw h r wih xciopii (h xc oppoi o r 9). i o org

h hr r chi h c h coo o

chg gr wih rhr hor oic. Th ppi o h

c h ccrig cooic growh o c h

gi pc.

cl c hd wh

qio i how ch o hi cooic growh i d

o h rrod i h ior cc d c i

r, d how ch i coqc o icrd -

drig dd ro hohod d bi. For x-

p, i h US h hi ro ior cbc o USD -6

biio i h cod qrr o 9 o ior bid-p

o USD + biio i h r qrr o proidd poi-

i GDP coribio o r 6. prcg poi. Th

cor oghr wih h coribio ro Prid b

i pcg xpid or h h ir Aric

GDP growh drig h cod h o 9 drig

dd h d drig h r qrr o hi r h

coribio ro h wo cor ddd p o or h

. prcg poi o GDP growh, which od . pr

c. ohr word, drig dd idd ro r i

, b o b rod . pr c.

ori d c i r proppig p Aricgrowh drig h crr qrr w, d b o idic-

io h o coribio wi b owh rgr h i h

r qrr. Th pricr cor r ipor ro

bhid rogr rc Aric cooic iic. B i i

o o i h US h h orc h ipc. Poii

growh c ro rrod i h ior cc r

oicb i rg porio o h word coo, d bdg

i i o i proppig p growh i pc -

pci i h idriid ECD cori.

Th ccic bci c wi d drig h c-

od h o , howr. h US, probb rod hr

orh o h poii ipc o h ior cc h

rd occrrd, d r hi r h coribio o i-

or o GDP w b gi or priod, wh h pc

o bid-p ow; h i, h cod drii h chg

i h r o chg bco gi. Mwhi h

growh ip ro c i r wi o hiro p o i.

Thi cod did b o b corrpodig ccr-

io i drig bi d hohod dd. B

hogh h o rc cro d rc ch ipro-

, i i i h h wi b rg ogh coc-

io i r o h ECD cori who.

Dwu im ucu dx uull c

Drig h prig, h SM prchig gr idx or h

US crig cor h cibd bo 6,

ocid wih high growh. Hioric, howr, hi ph

h b ir bri d h o b oowd b dow-

r i boh h SM idx d GDP growh. For xp, hi

occrrd drig h rcori o h r 97, id-98

d r . Hr, oo i ohr pr o h bi

cor iori r p ipor ro, ic

wig ro cbc o bid-p ordiri c h ordr-o-ior rio o . Thi, i r, i ig o bi

o ow dow hir prodcio r.

i r h hr h b rog ociio bw

h SM idx, which i doid b rg copi, d

Aric GDP, b i rropc h corrio bw h

Nio Fdrio o dpd Bi (NFB)

bi idx d GDP i rogr. i, hi i

wrig ig, ic drig h prig h gp bw h

NFB d SM idx w h wid ic bi r-

bg i 974. Bhid h ow gr r h difci

xpricd b bi i gig b o d h

rg ro o h i-dprd corcio idr i h

NFB idx.

Th: Mr p or r h xcpio

FiCL imULU D ivOi biD U

gOW

During the latter part o 2009, more than all US growth

in GDP was due to scal stimulus and a turnaround in the

inventory cycle. Looking ahead, the economy will have to be

more sel-sustaining when these eects ade.

Annualised

Inventory contributionNet effect of stimulus

GDP growth

Source: CBO, Recovery.gov, SEB

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

09 10 11

-2-1

0

1

2

3

4

5

6

-2-1

0

1

2

3

4

5

6SEB forecast


19/36


Th: Mr p or r h xcpio

cor bhid hohod dd i h rd o

ico, which i r i dpd o wh hpp i h -

bor r. idriid cori, h bor r-

wd prcpib drig h ci d cooic

crii. Thr r idicio h po wi o

grow ogh i h x wo r o ph dow -

po ch. r hi wi r i ow ico growh,

which wi prb hpr pri copio.

Thr r h ro o prdic h h priig

ECD pwig wi b oowd b dcrio r i .

B ch cor o do o o b pr o h

orc o r pr d h coi r ri

i h coig oh, o op o worri bo gor

c pci i Erop.

h wh h c

A pr, r pr h ro o b pd wih h

rog crocooic d. B i co b rd o h

h wi grd bgi o worr h high growh h

grodwor or iio ri bi rhr hd hogh o

jid ccordig o or d h xpcio

o ccrd ir r hi i ii coriwi h gi oohod.

Dop i Chi ic h o 9 wh h

oc r hr bg o o grod coprd o word

idic how wh c hpp wh h r hi ro

iig o diiig rog cro gr. Wh h Chi h

ipd hir r cooic ighig r r

i , hi o o dr cd h oc r i

Chi b o hoo ohr oc r. Aohr xp i

ro 97, wh xpcio o US ir r hi cd

W Sr hr pric o r pr c. Worri

bo h gi pc o ccrig cooic growh

iio dgr d ccopig cooic poic igh-

ig r h o ri cor o br i id.

r bic orc i h h crr ECD ccrio or

h ro dicd bo wi o coi og ogh

or iio xpcio o prd igic. A odr

dcrio or cop o qrr i o, b idicio, r r ri h cig pric d ir r

xpcio, b p i i o h ipc o

pric d icr cri or i.

i or o r h xcpio h pr i ri

r occio p or brh. Sic h crr b

r bg i Mrch 9 d i hi prig, or x-

p, oc r h go hrogh hr porr dip:

o rod id-9, o r i d o r i M.

Looig rhr bc i hior how h ic 97, qi-

i, corpor bod, hdg d, pri qi d d

coodii h ordiri rd wr ph whh ccic rcor h b dr w or r qrr.

Wh h coo h rig coid o grow, r

whi ri pric h bg w pr ph h

h d or og i. US xcpio w i h r

98, wh ccic dob dip occrrd d o hrp ir-

r hi id cobig high iio.

Aig h h ECD growh p r hi r h i

iib i or cr b wi b id d bri, wih coid

ow iio, o ir r worri wi g oohod d

c prob do o c dric, wr priod

i ri r wi o b p or brh i b

r h pri or ohr cop o r.

OECD weighted leading indicatorsMSCI World Net index, change y/y


1980 1990 2000

Indicator

85.0

90.0

95.0

100.0

105.0

110.0

Percent

-50

-30

-10

10

30

50

CLO Lik bW OCk mk D COOmy

It is a well-known act that the stock market is usually a step

ahead o the economy during both upturns and downturns.

This connection is underscored by the largely simultane-

ous turnarounds in the World Index and leading economic

indicators in the OECD countries. History also shows that the

initial strong rebound is ordinarily ollowed by something o

a pause, which in turn is ollowed by strong periods or both

the stock market and the economy.

Index of Small Business Optimism PMI ManufacturingSource: Reuters EcoWin

1995 2000 2005

Index

80

85

90

95

100

105

110

115

Index

30

35

40

45

50

55

60

65

ppy big Fim, gLOOmy mLL Fim

The American ISM index, which has climbed sharply since

last autumn, is dominated by large companies while the

NFIB small business index has recently allen rom a lowlevel. Difculties in obtaining bank loans are one reason.


20/36


mc u

Economic upturn with EM countries in the

drivers seat

Small rate hikes in major OECD countries,larger hikes in small countries and EM

Growing public sector imbalances and

postponed economic burdens

Th word cooic pr h gid rgh d i ow o

rr grod. Gob GDP wi icr b or h 4. pr

c boh hi r d i . Th Ai cooi wi co-

i o b ipor driig orc, d h rgig r-

(EM) phr who wi grow 6.-7 pr c pc

i -. Th pr i h US i bgiig o pic p

ppor ro bor r h i howig w.

Erop i pgd b gor c prob pci

i ohr Erop d h UK b xpior orc r

i dc. Exporr i Gr d h UK r big

ro w crrci. Growh i h -cor rgiio

or Ecooic Cooprio d Dop (ECD) wi d

p rod . pr c i boh r.

Lw l l

io wi ri ow i h idriid cori or

xdd priod, rg pr cpci d high po-

ph dow wg d pric. Thr i i ri h

highr coodi pric wi hr hi ow-iio i-ro. D o iid iio prr d o cocr

bo h riic o h ci , dig cr

b wi procd r cio wih hir ir r

hi.

Howr, ir r wi b rid o rgr c i

h EM cori d xpor-dpd ECD cori.

Dpi ow iio d cio cr b, orig

bod id wi ri owh d o izb borrowig r-

qir d rogr cooic codiio.

Th ri brigh growh ooo do o h hword i rig or cooic iio. Th big

i i dgd, d i hig proc i coiig.

Ur-ow ir r d growig pbic cor db h

d o h popo o dj brd.

Th US cooic rcor h grd brodd. GDP

growh wi rch or h . pr c hi r d r

pr c x r. Th growh coribio ro i-

or bid-p d c i i owig, b hi i big

o o dc x b rogr doic dd.

Epo i oig owrd ipro, b h job-

r wi ow o j bow 9 pr c h d o

. Thi, cobid wih coid dci i cor i-

io (pric icr xcdig ood d rg), wi hp

prd h Fdr Rr o hod o o hiig i r

i Dcbr hi r.

J hl hd

Jp xpor r growig rpid, h o highr d-

d ro Chi d ohr Ai cori ho i h

r or h Jp coo. GDP growh wi rch -.

pr c i -. Dio prr wi pri

i h coo b wi b owh powr. Th go-

r i pcg h coribd o h

Global recover on rmer ground

USA GDP, quarterly change annualisedSource: Reuters EcoWin

2000 2002 2004 2006 2008

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

Percentq/q

annualised

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

gOOD pC OF XpiO i U COOmy

Ater a deep recession late in 2008 and early in 2009,

American GDP grew or three consecutive quarters, but this

expansion was entirely dependent on a turnaround in the

inventory cycle and scal stimulus measures.


21/36


Mcro r

cooic rrod b h rhr xcrbd gor-

c, which r howig dci o pr c o

GDP. Thr i o rgc bo ir r hi h B

o Jp c wi i d w prdic h h wi w i drig h x cop o r.

Th cooic iio i h ro zo h o b ipr-

i drig r . Th c crii i h PGS cori

(Porg, rd, , Grc, Spi) pci i Grc

i crig gr cri. Mwhi hr r ig h

h rcor wi coi, hogh ir pc. Vrio

dig idicor r oig pwrd, d h xpor cor

i big d b h w o h ro. Thi r GDP

growh wi b . pr c, d x r r pr c.

Th rio prob i Grc, ow growh d ow iio

r ro or h Erop Cr B o i r rri pr c i h prig o .

Th Briih coo i o i w p. GDP wi grow b . pr

c hi r d pr c i . Th w gor

c r big chg. Th cor i pgd b dpr

ibc prob h ohr dig cooi; h bdg-

dci xcd pr c o GDP. U h gor

i b o prodc crdib p or rorig c ordr, h

UK orig db rig ri big dowgrdd. Th B

o Egd wi o ri i r i Dcbr .

dc wll w lw h OCD

A GDP growh i h Nordic cori wi d p r-

gig h . pr c i -, bi owr h h

ECD cori who. Swdih d Fiih GDP wi i-

cr h , i boh c wih xpor ipor

gi. Norw h i orc o growh wi b pri

copio, rg h o izb ico icr. Th

Dih rcor i qi rgi, og ohr hig d o

rir dci i ho pric d corcio.

m h l w d

Thr r good propc h Chi h gi o h word

coo wi pror w. Th o ighig o co-

oic poic d crrc pprciio, growh wi dcr

ro . pr c hi r o 9 pr c i , pc br

copib wih owr iio. di o h good growh

poi, hogh pbic bdg dci h rchd bo

pr c o GDP d iio h cibd bo pr

c. Frhr r hi p c ighig r o

rgh h bdg d pric prr wi brig

di GDP growh dow ro 8. pr c hi r o 7. pr

c x r.

l dl L c

Wih growh r o 4.- pr c i -, Li

Aric i i cod pc r Ai. Brzi, Mxico d Chir h -growig rg cooi. A 6-7 pr c, i-

io i h rgio i o h high id, b i ECD

cori boh bdg dci d pbic cor db r

. Nor do prcg o orig o d xr b-

c proid c or cocr.

h p ix oh, Er Erop h bg grd

cooic pr, b o cooi i h rgio r

coiig o dip d dci. Th rcor i b-

ig dri b copii xporr, whi copio d

i wi b wighd dow or ohr whi b riig

po, c ighig d ow cpci iiio.

Aog Er Erop cooi Pod i h hd

o h c d w h o EU cor wih poii GDP

growh r.

Tod h hr Bic cori r o chrcrid b

grd xpor-d rcor. Erir xr crr cco

dci h b rpcd b rp. Th rcio h

o hpd o dp iio dric i h Bic.

Sr cooic ibc rhr ppor h

h hr wi b o dio i h rgio.

China, Reserve Requirement RatioIndia, Key RateChina, Key Rate


2002 2004 2006 2008 2010

Percent

2.5

5.0

7.5

10.0

12.5

15.0

17.5

Percent

2.5

5.0

7.5

10.0

12.5

15.0

17.5

WLL-JUiFiD igig mU

Since early 2010, Chinas central bank has raised the reserve

requirement or banks in three steps and India has hiked its

key interest rate twice. High growth in China and ination

worries in India are good reasons or these measures.


2000 2002 2004 2006 2008

0

2

4

6

8

10

12

14

Percenty/y

0

2

4

6

8

10

12

14

igiFiC gOW CCLiO i Ci

At the bottom o its economic slowdown in the rst quarter

o 2009, China recorded a GDP growth rate o more than 6

per cent. Since then the growth rate has climbed to nearly

12 per cent. In the short term, it may accelerate even urther.


22/36


cl:

qu

Strategically, the undamental driving orces

are in place

The extraordinary loan package will create

new opportunities or European equities

Emerging markets again in ocus

Th r hoc h doid Jr d r Fbrr

Chi cooic ighig r, h c prob

o Grc d Prid b propo o ricr b-

ig r cd hr pric o hrp, b r h h

oc r r rd drig h prig. Fig hi r

w cr prpodrc o poii rpri i boh cro

iic d h ow o rig rpor. Eqii o b-

d ro coid high xpior c iro,

pci h xcpio ow ir r priig i

h ECD cori.

Th rgh o hi prig oc r r cod o r-

ch r rog pwig. B hi w ir

copib wih h riio ro h rir ph o rog

r hop rog dri b xpcio o hi ro

o d dciig pro o riig pro o h growh

ph h h oc r h b i ic r , wih

corio o riig corpor pro rig powr

gi. Er i hi growh ph, i i o orhr io o , phoo h o chrcrid

h r qrr o d rhr d h oc r.

So w io h cod qrr, howr, oc r

gi cord hdwid. Th wr i h or o

rpid cig Gr c crii, cod o cdic o-

cic h h prd o ir rfc i Wr Erop

rig i hrp hr pric dci or iri i pricr

d cii rd i d b h US Scrii d Exchg

Coiio gi God Sch, dr cig h

hr pric o b d ohr ci iiio.

Ad hogh h ocic h i o go or h o,

Grc h rcid o oig EUR biio ro h

ro zo d h MF, d h EU/MF pprod r-

gc pcg o EUR 7 biio, hr i ro o h

owh cio opiiic id owrd qii. Th

prob o oig gor db ri d co-oic xpcio ppr bi oo chr.

Drig h prig, oc r pr bc poid b

ro poii cro rpri d h cr prpodr-

c o xpcd good rig i cop rpor, boh

i h ECD cori d h EM phr. A coqc,

ccic xpcio i h oc r chgd hp ro

U o V. A h i, h ood bc icrig

chr. For xp, US opii bo word cooic

prorc i Apri w h high ic h boo r

-6, d h prcg o pii w h ow

i r. Mwhi Aric d h i i

qii c hir iqid o h ow ic h r

o h ii, d oc r hodig b US ho-

hod ro dric.

Gi bcgrod doid b growig gor db

d crr prdoic o xpcd good crogr which bood r xpcio bo h

Short-term risks long-term opportunities


Jan

2009

Apr Jul Oct Jan

2010

Apr

200

225

250

275

300

325

350

Index

200

225

250

275

300

325

350

bULL mk bUmpy iD

From their turnaround in March 2009 until early May 2010,

world stock markets rose about 60 per cent. The upward

ride was not a straight line but was instead rather bumpy,

the usual pattern during a bull market.


23/36

23

cooic pwig w boh opiiic oc r

pr d hohod, b idicio i wi rqir r

poii rpri h icro d/or cro o riggr

rhr hr pric ri.

Th r qrr rpor o i or, o

cop r i o p proi ro or o

i. Mwhi h oc r o h dicod

r cooic rcor h o cooic orc

r prdicig. Thi i dowid ri or h oc r,

oghr wih h ri h ECD cro d wi r r

or ixd d h probb pr gi rpri (

pg 7-9). A h i, hi ri i iid b ro-

b io i o oc r pric/rig rio

i h US r j bo d i Swd j bo , or

xp w pro orc or d o oid - pr c.

W cc w wll lw c

Drig h prig, oc xchg i Swd d h US

prord or rog h ho o h ro zo. Thi

w d o cr poii Swdih d Aric cooic

w, whi h gor db oi i h ro cr-

rc io w dr cri. EM oc r who

ggd bhid h word idx, i d o ggig Chi

hr pric i h w o cooic poic ighig.

Ccic cor ch idri d coodi copi

prord or rog h di o i hh cr.

h ECD cooi oo r cr ph r hir

r rog pr ph, cor h r o o ccic wi

bco or rci b o h pr di o,

ic growh i oo o b dc.

m h l

Th rgig r phr ri ppig, pci

Er Erop icdig Ri which i bgiig i co-

oic pwig hi r d Chi, whr h oc r

h qi big d o cooic ighig -

r. Th US i owh or rci h Erop, wih

xporr i h ro zo cor cori i Gr

poii xcpio d o h w ro. Thi i pci

r i h xporr h hir o ipor r i

h EM phr.

Ahogh i h i h oc r prorcwi b i ixd hi r, or i h hi

do o ig h bgiig o br r, b i id

w ph o coid b r.

Srgic i rogh wo-r prpci oc r-

codiio good i h ECD cori h o

iproig cooic codiio d pro, ow iio d

r od ir r hi. EM oc r wi b

ro high cooic growh d rg pro icr, which

wi o rgr ir r hi i h cori. A pr

o hir ccio, ior who r bd i ECD

cor hod o br i id h chc o crrc r

gi o hir i i EM qii.

Investment OutlOOk - may

A c: Eqii

Relative performance MSCI Emerging Markets vs MSCI AC WorldMoving average 20 days


May

2009

Jul Sep Nov Jan

2010

Mar May-2.5

0.0

2.5

5.0

7.5

10.0

12.5

Percent

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

m QUii bi b WOLD iDX

Although the Chinese stock market took quite a beating due

to the governments economic tightening measures, equities

in the EM sphere as a whole perormed relatively well dur-

ing January-April 2010 thanks to good stock market gains in

Latin America and Eastern Europe.

Relative performance EuroSTOXX50 vs MSCI AC WorldMoving average 20 days


May

2009

Jul Sep Nov Jan

2010

Mar May-25

-20

-15

-10

-5

0

5

10

Percent

-25

-20

-15

-10

-5

0

5

10

WiL UO ZO LggD igiFiCLy

As the Greek scal crisis escalated, euro zone stock markets

perormed signicantly worse than the World Index, but

German exporters did well.


24/36


cl:

Fxd c

Central banks are ollowing divergent interest

rate paths

...which aect the trend o government bond

yields

...High Yield still the best ixed income choice

Ar ig ri ppi r i , US orig bod

id ro gi wh ior od gor crii

o b ri ch qii d corpor bod. B

i h cor cori o Erop, gor bod id co-

id dowwrd. ro w h h Gr c crii

cd ior o oid orig bod i h priphr o

h crrc io d id b Gr gor

bod. Th id prd bw -r Gr d Gr

gor bod widd dric h d o Apri

dpi h EUR biio o pcg or Grc. Wh h

EU/MF pcg oig EUR 7 biio w dird r,

howr, h gp hr igic.

Looig hd, how gor bod id o i ri-

o cori wi priri b drid b h cio o

cr b, h dgr o cooic rgh, iio ri

d wh hpp wih pbic cor c, pci i

Erop.

Bc o r ow iio prr d igrig worri

bo h hh o h ci , h o ii

ECD cr b r big ob cio bo dpo-ig hir ir r wpo. or , h US

Fdr Rr wi r i r hiig cc i Dcbr

, d h Fd wi o bgi ig o bod i x

r h ri. Th B o Egd p hd o

rg ci ibc b i whi corod wih

rhr high iio. i rob o h Briih

r hi wi bgi bo h i ho o h Fd.

Cb c d u d luh c

Th iro h h Erop Cr B c i

doid b growig pbic cor db oi, rhr

ggih cooic pr d bow-rg iio. Th rECB r r hi wi h o occr i h prig o .

Th B o Jp (BoJ) wi b h o h jor cr

b o i o. Bc o odr cooic

growh d coid dio, h BoJ wi p i ir

r wpo d i h cod h o .

o idriid cori pci coodi- d

xpor-dpd cori h how highr growh d

rgr iio ri h h ECD rg ir r

wi rh oo b rid. Thi h rd hppd

i Ari d Norw, or xp, d oo h B o

Cd d Swd Rib wi oow i.

Interest rates and ields a complicated mix

US UK Japan GermanySource: Reuters EcoWin

2000 2002 2004 2006 2008 2010

-1

0

1

2

3

4

5

6

7

Percent

-1

0

1

2

3

4

5

6

7

COD-LOW ky FO Om im O COm

The deep nancial and economic crisis per-

suaded the worlds most inuential central

banks to cut their key interest rates to record-

low levels. There is no rush to begin hiking

these rates, since ination risks are minimal,

the nancial system has not been restored tohealth and government debts are cause or

concern.


25/36


A c: Fixd ico

D o rogr cooic di, grr iio d-

gr, igic br ci bc h i h ECD

d ri o bbb, cr b pci i Ai

b o i Li Aric h bg poic ighig, rd h wi doi -. Er Erop, how-

r, r Ri ir r c r i h crd. Pod

cr b wi b h o o i h rgio h wi bgi

rchig p i ir r r hi r.

Th Gr rgd h odd hi wir d prig -

drcord h ociio bw pbic cor c d

orig bod id. Th dric growig prd b-

w Gr d Gr gor bod id hi prig

( chr bow) rcd h c prob o Grc.

B dr or or circc, hr i -

ociio bw h ig i cor pbic

d pri, ddig p o h crr cco bc d

orig bod id. For xp, -r gor bod

id i Jp r . pr c d h corrpodig id

i h US r . pr c, hogh boh cori h

gor bdg dci o bo pr c o GDP. Thxpio i bi rgr pri ig i Jp,

which h h cor h crr cco rp o

bo pr c o GDP oppod o h US crr cco

dci o bo pr c o GDP.

r cocio i h gor bod id i h US d

h cor cori o Erop wi ri ow drig ch o

, h o iigic iio prr d h c

h cr b wi o bgi o hh hir ir

r wpo bor h d o h ri. Whi

wiig pri progr i h g o c d-

ci, h gor bod id o h priphr o h ro

zo wi, b idicio, ri high. Mwhi rog

cooic codiio d ir r hi wi corib

o riig gor bod id i cori i Swd d

Norw. Pr or h ro, highr bod id r

o ii i rg porio o h EM phr.

Yid i h corpor bod r which ro r i

ior ri ppi wd r rd hir dci,

phig p h pric o h bod. Er i M, howr,

corpor bod rd porr pric bc -

ci worri od. Th ooo i rh good i ri-

o rpc. Ahogh h b priod or corpor bod

w drig 9, hi c wi b ro coid

cooic pr d ow iio. Hioric pig, cor-

por bod h o proidd br rr h

ohr bod drig h r ph o ir r hi, which

ipi h hi c h chc o iiig i -

rci i r w.

D o rir ogh co-cig og wih ow-rrig

op i growh, copi rod h word h icrd

hir pro or h orcd. Aog wih p h h

iprod hir db rcr xdig h rii o

bod odig, iig w hr d bidig p r-

gc iqidi hi h icrd qi/ rio d

h h bii o h corpor cor o cop wih cooic

ri. Br corpor ci hh i rcd, og

ohr hig, i rpid dci i brpci og cop-

i i h High Yid g d rpid icr i corpo-

r crdi rig pgrd.

Rr o corpor bod r priri drid b h

priig id gp gi gor bod d how h

id o h r r oig. Gi igic highr r-

r o High Yid (HY) bod h o Grd (G)

bod d h propc o coid ow gor bod

id i h US d h cor cori o Erop, HY i-

i ppr rci. G bod r ppig,

howr. Gor crii ri rci.

Greece GermanySource: Reuters EcoWin

2005 2006 2007 2008 2009

2

4

6

8

10

12

Percent

2

4

6

8

10

12

vyig i i gk gOvm bOD

The nancial and economic crisis in Greece orced the eurozone and the IMF to provide the country with a large emer-

gency loan. The severity o the crisis was reected in the

record-high yield spread between Greek and German 10-

year government bonds. Ater the subsequent EU/IMF pack-

age was approved, this yield spread narrowed substantially.

AAA BBB CCC and above B BB


Jan

2009

Apr Jul Oct Jan

2010

Apr0

250

500

750

1000

1250

1500

1750

Basis

points

0

250

500

750

1000

1250

1500

1750

COpO bOD Civ

Early in May, there was a temporary setback in the corpo-

rate bond market due to the ongoing scal drama. In the

US, or example, the yield spread between industrial and

government bonds widened at that time. Since then, how-

ever, conditions have again improved or corporate bonds.


26/36


cl:

d ud

somewhat better than a normal year

Quality more important

Short Biased has had a tough time this year

Hdg d r coiig o pror w. So r hi r,

brod hdg d idic h dird rr o rod

pr c r-o-r. No rhig h b h dor,

h rbc i Jr d r Fbrr phic

howd. i o hrd oihig h hdg d

g ocd rod bi i h hor r wh xpcd

occr i h r. A i o rpriig ,

howr, ordir r r o hrdr hi h hdg

d, who i xibii o b h o qicrdj hir d hrb dg o h w

r iio. ddiio, cri rgi pror p-

ci w i i o rb r. Mrch r which

wr h b drig h p ix oh or o howd h

hdg d coci wr cc i h r ci

h prid i h prig o .

E Dri i h rg h h prord h b o r

hi r, h o ri o ro. M corpor rg-

r d cqiiio h pc, ro which gr

o h d h b b o gr . Mrch

o, M & A rcio oig or h USD biio

wr ocd idicio h h r i gi

bgiig o rw. E Dri gr h o

bd ro rio h ch hh cr, which h

h ccdd i xpoiig. Th gr h o b

cc i crdi i. E Dri i rg w

worh co oo, d o worh iig i drig h x

cop o r. gi cor, howr, i h iqidi

i hi pr o h hdg d r i o o h b.

For h Gob Mcro rg, o d h b bi

or chgig, hogh hr h b dir

h d r wih good poi rr. So r hi

r, xpcd chg i h id cr or gorbod, pci o h hor d o h cr, h b

co i r o o rr. Hr h r-p o h Gr

c crii h pd ipor ro. Thr h o

b rr rd h h dd rd rod i

orig xchg diirio, ohig h i difc or orig xchg dr o corrc or i h hor

r. Cop Gob Mcro gr hod rh

h good poi o dir good ri-djd rr dr-

ig h ridr o hi r.

Th prob o rr d how h dr c cri

p o hdg d i worh xiig bor coig

o ohr rgi. Rr ipc o o Gob Mcro

g, b o prhp o grr dgr CTA

(Coodi Trdig Adior) d. Boh io

dir c. B o dirc i h CTA

copr od d oic rdig, whi Gob Mcroi bd o d rdig. Th chr bow how

xp ro 9 h xpi h difci h g-

r c cor i r whr rd rr.

Thi r CTA h good poi o dir r r

difc 9, b hr r jor qi dirc, o i i

ipor o i i h righ hdg d. CTA c grdir good rr or i, b pci ipor wi

b h corri rib h hi rg h i robd

Continued good prospects or hedge unds

EUR/USD Brent oil


Jan

2009

Apr Jul Oct Jan

2010

Apr

EUR/USD

1.25

1.30

1.35

1.40

1.45

1.50

1.55

USD/Barrel

30

40

50

60

70

80

90

D vL D O CpU

Although the long-term trend was upward, 2009 was lled

with short trend reversals. This made the CTA and Macro

strategies more difcult.


27/36

27

i. xp i 8, wh r ci i-

hd diro r, whi CTA proidd poii

rr. W h rib. or , CTA

b b o dir good rr hi r w, wh rr xpcd o b chrcrid b biiio. Th rd

oowr cic b ib drig , b dop

ch w c rob po r chg h

picr.

Qi dirc r ipor wh i co o hdg

d, h chr bow how.

Mrch CTA, or Mgd Fr, howd rr rgig

ro -6 pr c wor o + pr c b. Mo hdg

d proidd rr o bw - pr c d bo +8

pr c. Ergig Mr d od pci rg di-

ri, wih rg ro -6 pr c o +8 pr c. i

h r ipor o choo h righ hdg d, d o

ipor o o oid h wor or, which c b r

co.

prio i o oo, w h dr-

cord h d or r horogh o hdg d

d hdg d copi, d ior o d

o g hp wih hi, ic i i xi . W wor

oghr wih K A Mg, which SEB cqird i

7. K A Mg g hdg d o dd h oid ic cpci i hdg d, which w

.

Eqi Log/Shor (L/S) h word w o r hi r,

rrig bo h hdg d idic i gr.

Mrch w r good oh or hi rg wh oc

r wr prorig rog. Eqi L/S i h ir

ow xpor, d gr h cho o b cio

poiiod ic hr r crii i h r.

Eqi L/S hod o b b o proid good rr drig

, wih good riic o h dowid i c worri

hod c.

Th Eqi Mr Nr rg h hd igh difc

i o r drig , wih gi rr h idx

ic h r o h r. Howr, h r ph-g-

rig d h dd good rib o ior or

poroio, o w pprci hir b.

Aohr rg h h r io dri i Eqi Shor

Bid, which i or or w hor i h r. Wh

oc r , h hdg d gr , b

wh oc r go p h did i Mrch, or x-

p h d big. Thir Mrch bc o or

h 6 pr c co hi cr.

gd l hd ud h

Gi h priig r iio, or i h

hdg d h c gr rr o h bi o -

io wihi or bw dir c hi r h

good poi o dir good r. W prdic h

wi b owh br r or hdg d h or

r. W r chooig o p o o or hdg d i-

wih Eqi L/S, Gob Mcro, CTA d Mirg

gr. W r iig i E Dri d i

Mirg, b E Dri i ch rci rg

h w r w dd i o or poroio wihi o or woqrr. W xpc hdg d o corib o i bii.


A c: Hdg d

Distressed Securities, 2008-01-01 = 100Macro, 2008-01-01 = 100

Equity Market Neutral, 2008-01-01 = 100Market Directional, 2008-01-01 = 100


Dec

2007 2008

Aug Dec

2009

Apr Aug Dec

2010

Apr

60

70

80

90

100

110

120

Index

60

70

80

90

100

110

120

Dvg: DiCiOL gi

Directional strategies have been able to benet rom rising

markets, while neutral strategies have had more difculty in

holding their own.

FUND APRIL 2010 MARCH 2010 yTD 2009 2008

FX gll d Fud idx .% .% .% .% -.%

FX qu d idx .% .% .% .% -.%

FX qu m ul idx -.% -.% .% -.% -.%

FX D idx .% .% .% .% -.%

FX mc idx -.% .% -.% -.% .%

FX c Dfd idx .% .% .% -.% .%

FX l vlu idx

.% .% .% .% -.%

Hedge unds will deliver

good earnings this year,

except or Short Biased, but

this strategy may benet

rom market crises. Among

hedge und indices, the CS/

Tremont index is up 3.%,

the HFRI is up 3.% and

Eureka Hedge is up 3.33%

to the end o April. Hedge

unds are thus on track, but

their path may be curvy

when crises arise.Sorc: Hdgd Rrch


28/36


cl:

l

Real estate is recovering, but scal dangers a

threat

Interest rates are alling, prices are rising

Bubble tendencies in China

R c h od rhr i h righ

dircio drig h p w oh b i o ir o

o h wood. h Investment Outlook(Mrch ),

w wro h i w i o r cio iig i r

. W o did o i o o or poroio. Thi i-

r h ci ior h bg o iw r

wih dir h drig h dric ci crii.

Th big i cioig ch br gi, whichi rcig r ior. Fdig opporii r

iproig, d o ri i owr boh or propr copi

d ho who ci i i hi c,

b rr or h ci wod dr ipc

hi c.

R h o cibd i r ic

h bgiig o . Th coqc h b ir

word or propr copi, which o ogr h o worr

bo hir ri d c id cocr o h

o grig rr. R i r (RET)

d hr o r copi h o prord w.Propr rcio r o howig rgh b ioig

or cori, which cor h rgh o h pr.

u ll h l h U

h Uid S, o w ig-i ho cibd

7 pr c oh-o-oh i Mrch, h rg ch i-

cr i 47 r. Th i ro or h rg i w

probb h x crdi o p o USD 8, or r-i b-

r, proidd h igd corc b Apri d h who

rcio co b J . Th chg ro r wir

whr i Fbrr o prig whr i Mrch o h

bd drig h oh. E ig h pci

ro io cco, h Aric ig-i ho r

o b oig owrd biiio, hogh r

ow o cii.

Rcig o h gr, corcio-rd hr

oo o i US oc xchg. W hod o rd oo ch

io h gr h, b h c h h grrpd orc i orc o hop h h rcor

i rogr h o xpc. Grd h 9 pr

c o h US ig-i ho r coi o xiig

ho, b i hi b-r oo, Mrch iic howd

cr icr h r i or oh.

Th br o r rcio i coiig o

icr ro ow , corig h or poii r

dcp which bg o rg drig h cod

h o 9.

Aid ro icrig rcio o, pric r o

riig. Th ir h ior cod r i h w o

h crii h prio b r high (d pric h ow),

which w r. For h p qrr or o, howr, rio

pr o h r h bg pricig r i w,

highr w. Thi h rd i owr ir ico or i-

or. prcic, hi pric h go p, d h

r xpcd o coi riig.

Continued positive signals, but there aredangers

Exist ing home sales New home salesSource: Reuters EcoWin

1990 1995 2000 2005

Millio

ns

2.5

3.5

4.5

5.5

6.5

7.5

Millio

ns

0.3

0.5

0.7

0.9

1.1

1.3

U igL-FmiLy Om L Op FLLig

The market or new and existing single-amily homes in the

US is beginning to recuperate, as sales gures are showing.

Two main actors have contributed to this: the economic

recovery and the temporary tax credit.


29/36

29

g c h

B o rhig i poii i h r r. Thr

r o dgr. o h i h ri h cori wi

d o hir db. Grc i h cor wih h big-

g prob h o. h c worri wr oprd, i wod o b gi, probb icig h

pp o crdi i b or h bod r. Rwd co-

oic bc wod o b gi or r . Th

ppi o h xiig iio ri, pci i pr

o Ai. Ao o h gi id, hr i cri bo

how big h cooic coqc wi b wh jor c-

r b bgi ighig hir or poici, ohig

h h cr b i ch cori Ari, Norw

d di h rd bg o do. cori, ir-

r hi wi prb o bgi i i or

r , b i i ipor o p pci wch

o ir r rd.

ddiio, hr r cr pric-bbb dci i cri

pr o h r r i Chi. Th Chi gor-

h bg o igh i cooic poici, or xp

b booig h rr rqir or b d ig

rio ohr p o ri r ir r. Th hori-

i r o coig h g h Chi -owd

copi which r o r copi hod o

bid w propri. ri o b how ch c

h r wi h, b i h pric rd i porio o

h Chi r r coi i crr pc,

h r crrid o o r wi o b ogh. Sigpor

h irodcd p d, xp o ohr hod

o r o p h pric rd i h r r drcoro.

mxd w

M c h grd rcord, d hi i ow

o r i porio o r c. Th proc-

h b dri b ior who w rr o hir

cpi. To growig x, h h rgrdd r

i good w o gr ow-ri rr. W-

gd propri i good ocio h b h oc o

hi r ior-d rcor ph, wih h r h h

pric d o-o- rio or h propri r iir

o wh w prio bc ccod o. For w--

gd propri, h iio c h b rg coidrd

orid.

Th iio i dir or propri h r o w--

gd, d i ordr or hi r o ori, h x ph

o h pr wi d o bgi. Th word coo

ipro rhr, d wh w w o bo i h

cori g po dr coro. Th r

ig o hi h o co, b h proc b gh

d copx.

h hor r, hr r ri wh cr b wihdrw

hir i r (ci hir xi poic), b hdowid or h r r i i o b iid or

ior wih i horizo o r or ogr. h x

w r, w xpc rr h r rogh q o or-

og-r rr: ri-r ir p - pr c.

W h r i h rpr w pr c

o o o or g d. W xpc o b b

o icr hi prcg i b i h word coo-

ic rcor coi, b coidrig c crii d

bbb dci i Chi, w r hrrig ow.

A c: R


0

50

100

150

200

250

300

350

North America Europe Asia

USDB

illion

2005 2006 2007 2008 2009 2010*

vOLUm i COvig WOLDWiD...

Measured in volume terms, commercial real estate invest-

ments are rising, though rom a low level. Financial investors

have changed their view o real estate and are now daringto enter the market.

0

10

20

30

40

50

60

70

2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

2010Q1

Investments(EUR

billion

Europe UK France Germany

...D UOp mk piCkig Up

Major European markets are showing largely the same

trend or commercial real estate investments. Ongoing

worries about Greece may, however, aect the credit supply

ahead.

Sorc: Jo Lg LS

Sorc: PMA Propr Mr Ai


30/36


cl:

p qu

The private equity (PE) market is unctioning

again

Increasing supply and attractive prices are

providing good business opportunities

Despite uncertainty about regulations and

unding, we have a positive view o PE, given

good quality selection

Th word ci r r coiig o ori. Th

xic o h cooic rcor i o qiob, -

hogh i rgh growh dic i op o dicio.

Thi i good w or h pri qi (PE) idr d ircd, og ohr hig, i good idx rd or id

PE copi.

Th or picr i h drig bi i o

brighr, b h i or copx. Pr o h PE

idr r i grppig wih jor prob. M o h

d/copi h d ggri, high rgd i-

i h cooic xpio r i coroig

difci. Mwhi bi opporii r

good or ho ior who poroio copi r i

good hp d who h o o i.

L l h qu

Th drig hic i pcic o PE i. A

o pop ow, PE copi (or d) hir c

i or priod o r. or who pricip

ro h r dr o dir o h d b

copi. A d h rd drig h p r 8-

9 prhp hd i o o o or w cop

i bor h crii hi. Thi h i-

or i h rg riig obigio o PE d.

Drig h 9 crii, rg porio o h PE r roz

cop. Ao o w d wr rd, d i h

codr r (rdig i xiig hodig i d obig-io o PE d), wordwid o ro USD biio

i 8 o USD 8 biio. c hrd rpri o h h

prir r did o. Th ggih o h codr

r w o -id, b i w rg bc -

r d br ood r pr rgrdig rob pric.Mwhi o o ior wr dr prr o ,

ic h d h rd i h r j bor h crh,

d h wr o id, wr o ci i big

copi. Thi h h wr o cocig or

cpi ro hir ior.

vu c hd h h ul

Tod h r i rpid hwig. Th dig iio h

brighd coidrb. Grd h rgr prcg o

qi i ow rqird, b hr i i o o bi

or PE copi. Th or poii gr cooic

picr i ohr coribig cor bhid rpioo cqiiio b PE copi d d. A r, or

d r drwig cpi ro hir ior, orcig -

ci w ior o gi p prio id o

wh h r o cpb o ig w dd or

cpi. Thi cr god oppori or ho who h

cpi o i, ig good or idiig qi

i. h c i i o dg o b w-

cocd i h PE idr, ic o o h hodig do

o rch h brod r.

Favourable situation or good private equit

0

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010E 2 011E

CODy mk kig OFF

(biio)

The secondary market or private equity roze during the

2009 crisis. An unexpectedly rapid recovery is leading to

new record volume, creating good business opportunities.


31/36

31

W poid o i h Investment Outlook(Mrch )

h good PE copi o h hir b priod r

rcio. Th i o r hi i rod, d prhp

o grr x h coidrig h dph o hdowr. Lid copi r ow crrig o jor co-

cig o brod ro, which wi d o good oprio

rg oc dd o, d highr rgi wi d

o rg pro icr. Thi o ppi o o h PE

copi poroio r.

Widprd qio r big rid bo cop db,

d hi w o db worri o obrr. A rcord

br o corpor bod d crdi wi d drig

h x w r. M PE copi h rpodd o

hi wih o xio, corpor rrcrig d ohr

r o rdc hir iii. or jdg, h PEidr i i cpb o hdig h iio.

Aohr or cod cocr rgio. Dicio r

drw o boh id o h Aic bo ighig h

r or h ci cor, icdig h PE idr. No

propo wi b ipd, b h US gor

iio o prohibi b ro owig PE i

r w bco ri. Sic b ow r pr c

o Aric PE i, hi wod cr pp prr

h wod hr pric i h codr r, b i wod

o cr good big opporii or ho wih cpi

o i.

A w wro i h Investment Outlook, i i ipor o

diigih bw good d bd PE. W r i ocig o

i h cri criri h, i or jdg,

rc good PE i h priig r iio:

Operational resources to pursue the reform process in

rg copi

Target companies that have captured market share during

h crii

Few problem companies in their portfolio

"Dry powder for new investments

Log-r riohip wih oc dr wr prio

ohr ipor cor, b hi ow ppr ipor

ic h crdi r h orid.

A or id PE, w c h i pric prorc h

coi b good. Th LPE idx h coid i

rcor b h og w o go bor pprochig i od

p. Mwhi h copi r coiig o rd

dico i rio o hir (NAV). Th

rg dico i rod pr c. Thi i bi

r dico h h ow poi r go, b i o

pr wih h ow ro h prio rcio. Th

hioric rg i dico o h pr c.

hod o b od hr h h dico ccordig o

h copi r ccd r cori. Aog

ohr hig, hr r o dj or iiqidi.

L dcu v huld h

ro or h coid rg dico b h

ior ir . A rcio h ow

rd, w h copi d o b od pric

bo h d (cori) NAV. hi rd pri,

NAV hod b ccordd grr codc, which hod

ji r dico. Add o hi h NAV hod b b

o icr i od or poii cooic iro.

r cocio i h h hr i roo or izb pric i-

cr o id PE, hogh wih gr oii dpdig o

h ow o w bo poib rgio d ohr r.

W o or coid r good bi opporii

i h codr r. A iod bo, h pp i

i o grow PE copi r hir i d

h rq or cpi ro ior who i o c

r ci prd. W r coiig or or o idi

rci i ri i hi g whi r-

iig d, i w c, rgig or id pri qi

hodig.


A c: Pri qi

LPX50 TR Index, 2003-01-01 = 100

MSCI World Gross Index, 2003-01-01 = 100


2003 2004 2005 2006 2007 2008 2009

50

75

100

125

150

175

200

225

250

275

Index

50

75

100

125

150

175

200

225

250

275

p piC UpU FO p COmpi

Listed PE company indices have climbed

sharply since bottoming out last autumn, but

during the crash PE companies ell more than

the stock market as a whole. These companies

have a long way to go beore reaching their

previous peaks.


32/36


Price setback early in then spring rally

Strong association between change in growthrate and commodity prices

Market orces pulling in dierent directions

Thi r bg wih izb coodi pric bc d

o cocr rd o Gr gor c, cooic

ighig r i Chi d Prid b propo-

o ricr r or b. B drig h prig, coodi-

i gi bc or xpi, h o rghig

word coo, pp rricio i o coodi

g d highr ri ppi og ci ior.

Th pric r w d b idri , pci ic,ii d coppr.

h hor r, boh ECD d EM pr growh wi c-

cr. i, hi i i o coid ri i

coodi pric, ic hior how h h co-ric

bw chg i h growh r (cod drii) d

coodi pric i rog. Drig h p dcd, hi cor

h xpid bo 4 pr c o coodi pric, whi h

growh (r drii) h b ch ipor,

wih o pr c xpor .

A i o r cooic growh, h o ccic co-

odii rg d idri h ri h o

i pric, d h h o h o drig cooicp. Sic h r o h ii, h drd d-

iio or h coodii h b r 4 pr c,

coprd o o bo pr c or prcio d

gricr coodii. So i w o rpriig h h

prig pric r w d b br o idri d

h oi o bc coidrb or xpi.

Dd or coodii b Chi h gi o h word

coo i crr o coiig o grow. Rcig

hi, h cor crd oi ipor r co o rcord-izd

d i prch o coppr r growig dobd-digi

r. h US, h hi o ior-bidig wi coi orohr whi, big h coodii r, d wh

hi d h Erop ior cc wi o ic i or

whi. Coodii o h ghir ior cc h

h gr cc, o coodi prch or ocpiig

pri or ogr.

Ch h u

r cr b or h coodii r i o howig

ri. High Chi growh d h ccopig orhig

ri h cd horii i Chi o h rio ir-

rcr projc d bgi ighig cooic poici.

Thr i o cocr h growh i h ECD cori wi

dcr h poii c o h ior rrod

d i r d. ddiio, h c prob

h r ow rig p ri ig h br ci o

growh d prdig ci ior o ri

. Fi, hr r r h or xpi oi d

pro wi dri prchig powr, poi h ood o

bi d hohod d d o iio worri i h

xd ico r d og cr b.

Th ri do o oo rg, howr. No owig h

Chi coo o rh io orhig i poii, d

rio o h ribi () o p i Chi

cooig-o poic wod i i o b poii or co-odii, ic ipord coodii wod h bco

chpr or h Chi. Jdgig ro h pb g

Man orces afecting commodities

cl:

Cd


Jan

2010

Feb Mar Apr May450

500

550

600

650

700

750

800

Index

450

500

550

600

650

700

750

800

iCkL Wiig iDUiL mL

This spring was characterised by a price rally or industrial

metals, with nickel as the winner, but in late April there was

a reversal as risk appetite in the markets dwindled.


33/36

33

ro dig idicor d h highr orc o GDPgrowh i rio ECD cori ( pg -), h odd

gi hig rbig dob-dip rcio r r

high, hogh dcrio i h xpio r i i h

crd r hi r. Gigic bdg dci d rw

gor db r idd orc o igic cocr,

b h hr c o ECD growh h h ci

ibc wi c wi i occr bi r.

h hor r, oi pric r w cib i rpo

o coid high Chi dd, h pprochig high

o or driig i h US d h cor o o prodc-

io cpci i h Norh S d o ic wor.Drig h cod h o , pric r i o b i h

USD 7-8 pr brr rg. Fcor poiig i hi dircio

icd ior owdow i growh d coodi dd

i h ECD cori d high oi prodcio w r-

r cpci d rg oi ocpi. A xpcd rpid

icr i rq oi prodcio wod coi dowid

ri. Wihi h rg ix, r g pric r i o

bi coqc o hrp icrd pp i

h US.

pc ll dul l ud

Drig h prig, idri bd ro rog

dd ro d-r boh i h ECD cori d h

EM phr, w hriig oc d ri d

oprio prob i. L i Apri, howr, hr

w hrp corrcio. Dcrig growh i h ECD i

o ro o rg h idri pric wi o cib

drig h cod h o . Thr i pid chc or

coppr d dowid ri or ic.

Low r ir r, Chi dd, h di wd-

dig o, gob ci ri d cr b dd

wi prop p dd or god. ordr or h pric o cibrhr, howr, i wi probb b cr or h o

drgo rio (probb) d/or or h US dor o

w ( probb). Pi d pdi, which r

i prodcd i Soh Aric whr copiio or -

rg wi icr hi J d J d o h oob Word

Cp, which dirp prodcio coi o h

h b ooo. Mwhi dd or h ro

h ooi idr wi coi o icr.

Pric o gri-coodii rhr hi r d

r , d i i difc o b opiiic bo iz

(cor), wh d o b, dpi crr ow pric -. B i igh ogr i r, propc wi ipro

owh, d og ohr hig o icrd ho pro-

dcio ro iz d grr dd or w

i d coqc o gob cooic rcor.


A c: Coodii


2000 2002 2004 2006 2008 2010

0

25

50

75

100

125

150

USD/Barrel

0

25

50

75

100

125

150

WLL-LUbiCD OiL mk

In April, oil prices rose to around USD 85 per barrel. Ater a

decline in May, they may rebound due to such actors as the

American driving season. In a longer perspective, prices will

probably be in the USD 70-80 range.

S&P/GSCI Agricultural TRS&P/GSCI Precious Metals TRS&P/GSCI I ndustrial Metals TR

S&P/GSCI Energy TR


2000 2002 2004 2006 2008 2010

0

500

1000

1500

2000

2500

3000

3500

Index

0

500

1000

1500

2000

2500

3000

3500

gi-COmmODii Lggig biD

Many commodities have risen in price during

the past year, mainly thanks to the global

economic recovery, the need or inventory-

building and very high demand rom China.

While precious metals, energy and industrial

metals have perormed strongly, prices o agri-

cultural commodities have not kept pace. A biturther ahead, howeve

seb report: risky investments still a good long-term bet

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