Global Emerging Markets Fixed Income - June 2018 - AXA IM España
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Global Emerging
Markets Fixed Income
June 2018Agenda
Global Emerging Markets Fixed Income at AXA IM
Investment Process
Emerging Market Strategies
AXA WF Emerging Markets Short Duration Bonds
AXA WF Global Emerging Markets Bonds
Reference material
1Global Emerging Markets Fixed Income at AXA IM
Our Emerging Markets competitive advantages
Differentiated by our philosophy and process
PHILOSOPHY 1 We focus on income generation and downside mitigation
CARRY FOCUS Invest in liquid names covered by thorough credit research to capture upside and
2 provide risk-mitigation against credit events
CREDIT FOCUS
3 Focus more on credit risk management and less on market timing
RISK FOCUS
PROCESS 1 Translate our macro, sector, and credit views into portfolio positioning
TOP-DOWN FRAMEWORK 2 Systematically compare valuations globally across regions and sectors
BOTTOM-UP ANALYSIS Capture relative-value and curve opportunities, while taking advantage of market
3 liquidity
OPENLY OPPORTUNISTIC
Top-down framework supported by bottom-up analysis
3Our Emerging Markets fixed income fund range
Utilising both total return and benchmark-aware approaches
Short Duration Benchmark-aware*
AXA WF Emerging Markets
AXA WF Global Emerging Markets Bonds
Short Duration Bonds
STRATEGY CHARACTERISTICS
• High conviction views – benchmark aware
not benchmark-constrained
• Consistent income with lower volatility
• Aim for consistent returns investing
• Capture income and limit downside risk
mainly in USD Emerging Market debt
• Limit impact of potential rate increases
• Ability to implement off-benchmark
strategies
Managing Emerging Market assets using differing approaches for over 20 years
Past performance is not a guide to future performance
4 *The fund does not have a reference index. The JP Morgan EMBI Global Diversified Index is used as a basis for comparison only.Investment Process • Top-down • Bottom-up • Opportunity set
Macro
EM economies have enjoyed stable growth with subdued inflation
Growth and inflation
• The global macro backdrop remains a positive catalyst for Emerging markets. Growth is expected to remain robust and
the EM/DM growth differential is set to stay intact
• Coming from a low base, inflation has stabilised and remains within central bank targets. On balance central banks are
still expected to keep monetary policy loose
• Unconventional developed central bank action and inflation remain concerns, while we are monitoring the implications
of trade protectionist policies announced by the US
Source: AXA IM, JP Morgan as of November 2017
The above represents our current market views only and does not constitute investment advice
6 Past performance is not a guide to future performance.Valuation
Spreads tight relative to history but still offer value
EM vs DM yields
Yield close to lows but not as extreme as Euro Credit IG Similar trend on the HY side
12 30
CEMBI Broad IG CEMBI Broad HY
10 JULI 25 US HY
Euro HG Euro HY
8 20
Yield (%)
Yield (%)
6 15
4 10
2 5
- -
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
• Despite spreads reaching levels not seen for several years, EM still offers value relative to other asset classes
• Differentiation remains key in positioning with spread compression most visible in high yielding credits. Asia and CEEMEA
on the whole still look tight
• Relatively high carry continues to help attract investors into Emerging Market sovereign and corporate bonds
Source: JP Morgan as of November 2017
The above represents our current market views only and does not constitute investment advice.
CEMBI Broad IG is the JP Morgan CEMBI Broad Investment Grade Index. JULI is the JP Morgan US Liquid Index. Euro HG is the JP Morgan Euro Credit Index.
CEMBI Broad HY is the JP Morgan Broad High Yield Index. US HY is the JP Morgan Domestic High Yield Index. Euro HY is the JP Morgan Euro High Yield Index.
7 Past performance is not a guide to future performance.Sentiment
Positive path of rating action supports risk sentiment
Ratings migration
Excluding sovereign-led actions
• Approximately 30% of both sovereign and corporate forecast issuance has already been successfully placed into the
market. China and MENA region are expected to be the largest issuers going forward
• Dedicated investors remain close to market weight and hold average levels of cash allowing room to increase investment
• Default rates are expected to remain well below their long-term averages, while rating migration trends in EM corporate
credit are at their most positive levels since 2011
Source: AXA IM, JP Morgan as of November 2017
The above represents our current market views only and does not constitute investment advice.
8 Past performance is not a guide to future performance.Technicals
Historically high inflows for the asset class
EM fund flows
AUM benchmarked against the major JPM EM indices
CEMBI Indices
400
Local Market Debt
350 External Debt USD
300
250
$bn
200
150
100
50
-
2012 2013 2014 2015 2016 2017
• Fund flows remain robust in 2018, driven by strategic inflows into the asset class
• Institutional investors are structurally under-invested in Emerging Markets and continue to reduce this underweight
• Despite recent market volatility, EM spreads have remained relatively immune from the rise in US rates since end 2017
Source: AXA IM, JP Morgan. Flow data as of end April 2018. AUM data as of December 2017
The above represents our current market views only and does not constitute investment advice.
9 Past performance is not a guide to future performance.Credit analysis process
Credits assessed across the MVST* framework
• Initial screening to identify long-term prospects
Fundamentals
• Credits assigned a12-month fundamental outlook
• Identify where our views on fundamentals differ from the market’s
• Delayed market reactions, or unexplained price moves may represent Relative Value
opportunities
• Market sentiment, supply and demand dynamics influence the skew to high
or low-beta names
Sentiment/Technicals
• Focus on liquidity, screen for the most attractive securities
Investment ideas and trades Implementation
10 *MVST: Macro, Valuation, Sentiment, Technicals.Credit analysis process
Sovereign vs Corporate analysis
Our credit analysis process incorporates both quantitative and qualitative analysis to form robust views
Sovereign analysis Corporate analysis
Macro Fiscal Quantitative Qualitative
• Growth • Revenues
• Budget balances
• Economic and political • EBITDA
stability • Structure and • Market positioning
sustainability of debt • Leverage
• Policy coherence and • Geographical distribution
credibility • Financing prospects • Cash Flow
• Economic prospects
• Debt levels
• Ratings
External finances Ratings • Capex
• Margins
• Sustainability and
financing of current • Credit rating outlook
account
• Migration history
• External debt dynamics
A robust and thorough credit analysis framework
11Credit analysis process
Trade example – Brazil; ahead of the curve
110
Brazilian pulp & paper manufacturer
Bond purchased at Tender offer
Suzano 5.875% 23/01/2021 from Suzano to buy the
an average price of 101
108 ⅝ bonds back at 109
106
104
102
Price subsequently
rises
100 Price initially falls as the market buys into
as a result of political the Brazil recovery story
situation and
98 government corruption
scandal
96
Nov Dec Jan Feb Mar Apr May Jun Jul 16 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 17 Aug Sep Oct Nov
15 15 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17 17 17 17
Bottom-up analysis within top-down context led to a positive outcome
Source: AXA IM / Bloomberg as at the dates shown. Past examples shown for illustrative purposes only; this should not be considered as advice or a recommendation.
12 Past performance is not a guide to future performance.Credit analysis process
Trade example – Petrobras; extracting value
1
4.9
Originally owned
Brazilian petroleum the 8 ⅜ 2021 bond since May 2016,
driven by our positive view of Brazil
4.7 company Petrobras
3
Yield to maturity (%)
4.5 2 Identified value
in the 6 ⅛ 2022 bond, which was
4.3 trading wider than historically to the
NEW BOND 4
1 2021 bond, splitting the Petrobras
4.1 position between the two issues
3.9 3
Switched position
3.7 Into the 6 ⅛ 2022 bond, which at the
2 OLD BOND time had a yield pickup of c50bps
3.5
4 Positive outcome
as the spread of the 2022 bond has
compressed by c30bps since (3), while
Petbras 8.375% 5/23/21 Petbras 6.125% 1/17/22 the spread of the 2021 bond has
widened
Identification of relative value across bonds led to yield pickup
Source: AXA IM / Bloomberg as at the dates shown. Past examples shown for illustrative purposes only; this should not be considered as advice or a recommendation.
13 Past performance is not a guide to future performance.Credit analysis process
Trade example – taking advantage of Euro denominated bonds
10%
9%
• Due to the high costs of
EGYPT
8.65%
hedging, EUR-
BTUN
8% 8.08% SENEGL denominated issues can
IVYCST BUENOS 7.74%
7% $ 7.28% receive a significant yield
7.07% $ ROMANI 6.51% boost when hedged back
6.43%
Yield to Worst
6% $
$ € to USD
5% € $ 4.78%
€ €
4%
€
3%
• We have taken advantage
2% of this in countries that
1% have a natural EUR
revenue base or have
0%
Tunisia Ivory Coast Argentina Egypt Romania Senegal
their currency pegged to
EUR
EUR USD EUR hedged to USD
Using the pickup from FX hedging to boost yields
Source: AXA IM / Bloomberg as at 30/04/2018
14 Past performance is not a guide to future performance.Opportunity set
Our short duration fund places a larger focus on corporates
Composition of the AXA WF Emerging
Notable sector deviations
Markets Short Duration Bonds portfolio
25%
0% 20%
23% 15%
10%
Cash & Other 5%
HC Corporates 0%
HC Sovereigns
77%
AXA WF Emerging Markets Short Duration Bonds Index*
• Our Emerging Market debt strategies allocate a significant amount of capital to corporate debt. This provides a broader
opportunity to diversify the portfolio and extract alpha
• The AXA WF Emerging Markets Short Duration Bonds fund employs a total return approach, which means we are not
constrained by index allocations to can fully express our investment views
Access to a broad opportunity set
Source: JP Morgan, AXA IM as of 31/05/2018
15 *ICE BofA Merrill Lynch Emerging Markets Corporate Plus Index.Opportunity set
Corporate fundamentals are improving with benign default levels forecasted
Gross leverage declining Default rates expected to stay low
3,5x
2018
EM Corps Global 3,0x 3,0x 2,9x 2016 2017 YTD
3,0x
(forecast)
2,6x
2,5x
2,5x 2,4x 2,4x Asia 1.0% 0.9% 1.1%
2,1x
Gross Leverage
2,0x EM Europe 3.6% 2.7% 1.5%
2,0x
1,6x
1,5x Latin America 9.2% 1.5% 2.9%
1,0x Middle East &
5.7% 3.2% 3.8%
Africa
0,5x
% EM HY bonds (ex
0,0x 5.1% 1.7% 2.0%
100% quasis)
2008 2009 2010 2011 2012 2013 2014 2015 2016 LTM
• Continuing the strong rebound in 2H16, EM corporate fundamentals strengthened further in 2017 with leverage levels
ticking down both on a gross and net basis
• Default levels are expected to remain below the long-term average, with still improving profitability and steady growth
leading to a default forecast of 2.0% in 2018
A fundamentally strong asset class
16 Source: JP Morgan as of November 2017Opportunity set
EM External Corporate Debt has grown to be a significant part of the investment universe
EM external corporates are a
A rapidly expanding universe
2.069
meaningful asset class
16
High yield & NR 13,9
1.814
Investment grade 1.6341.692 11,1
12
1.379
$trn
8
1.106 5,9 5,6
860 3,8
4
709 2,0 2.0 1,7 1,6
548 561 605 1,0 0,9 0,7 0,5 0,5
0,3
436 0
denominated…
340
267
Treasuries
Munis
Euro HG
Euro HY
EM ext corp
Agency MBS
ABS
CLOs
CMBS
USD HG
USD HY
Agency Debt
DM Sovereigns
Covered Euro
EM ext sov
• EM external corporate debt has grown to over $2 trillion, almost doubling in size over the last five years. The number of
issuers had also greatly increased, representing excellent diversification opportunities
• The asset class represents a meaningful part of the global fixed income opportunity set for investors
An increasingly important part of the investment universe
17 Source: JP Morgan as of November 2017AXA WF Emerging Markets Short Duration Bonds Portfolio characteristics and performance
Why invest in AXA WF Emerging Markets Short Duration Bonds?
Investment concept
ATTRACTIVE RISK-RETURN
LARGE OPPORTUNITY SET
PROFILE
• Exposure to sovereign and corporate credits across
• A “Total Return” strategy aiming to deliver an optimal
the credit quality spectrum
risk-return profile throughout the market cycle
• Use of entire Emerging Market credit spectrum
• Low volatility from short duration positioning
allows us to monitor default correlation risk
ANALYSIS & RISK
CLEAR PERFORMANCE DRIVERS
MANAGEMENT
• A set of clear and transparent Internal Investment
• Portfolio performance is mostly driven by carry and Guidelines
reinvestment of coupons • Fundamental-based credit research process across
sovereigns and corporates
Source: AXA IM. The description set forth above represents investment and risk objectives only.
19 No representation is made that the Fund will achieve such objectives.Why invest in short duration Emerging Market bonds?
Income stream drives long-term returns in short duration Emerging Markets
Income Return *
10%
8%
6% Historical market annualised return*
(31/12/ 2001 to 31/12/2016)
4%
2%
0%
Price Return -0.02%
Income Return 6.87%
Price Return*
20%
15% Total Return 6.85%
10%
5%
0%
-5%
-10%
-15%
-20%
Strong focus on maximising income and monitoring downside risk
Source: AXA IM / JP Morgan as at 31/12/2016. *Composite of 1-5 year maturity buckets for 60% CEMBI Broad and 40% EMBIG Diversified. Past performance is not a guide to future
performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred.
The AXA WF Emerging Markets Short Duration Bonds fund does not have a reference index. The index referenced above is given as a basis for comparison only. The index’s
20 performance is calculated on the basis of gross dividend.Why invest in AXA WF Emerging Markets Short Duration Bonds
Maintain yield with reduced volatility and shorter duration
Duration vs the market Yield to worst vs the market 3yr volatility vs the market
8.0 7% 8%
6%
6.0 5% 6%
4%
4.0 4%
3%
2.0 2% 2%
1%
0.0 0% 0%
AXA WF Emerging Markets Short Duration Bonds AXA WF Emerging Markets Short Duration Bonds AXA WF Emerging Markets Short Duration Bonds
HC Sovereigns HC Corporates HC Sovereigns HC Corporates HC Sovereigns HC Corporates
• Duration target of less than three
years • Fund has not given up yield despite • Yield captured without taking
duration restriction additional risk
• Less sensitivity to interest rate
movements • Focus on capturing carry from • Lower volatility compared to the
fundamentally strong credits overall market
• Clearer visibility of cashflows
Capturing yield with interest rate protection and lower volatility
Source: JP Morgan, AXA IM as of 31/05/2018. HC Sovereigns is represented by the JP Morgan EMBI Global Diversified Index. HC Corporates is represented by the JP Morgan CEMBI
Broad Diversified Index. Past performance is not a guide to future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred
21 Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield.Portfolio performance
AXA WF Emerging Markets Short Duration Bonds
Since inception the fund has achieved steady returns while exhibiting low volatility
Gross performance* Annual performance*
Cumulative net performance* Fund Fund
124 Base = 100 Sept 2012 1 month -0.37% 2013 3.66%
122 3 months -0.68% 2014 0.92%
120 6 months -0.85% 2015 0.43%
118 YTD -1.15% 2016 8.52%
116 1 year 1.40% 2017 6.09%
Value of $100 investment
114 3 years 11.09%
112 Since launch 24.74%
110
108 Volatility*
106 Fund
104 1 month 2.52%
102 3 months 1.83%
100 6 months 1.54%
98 YTD 1.66%
1 year 1.37%
3 years 2.72%
Since launch 3.29%
A historically resilient investment proposal
Source: AXA IM as at 31/05/2018. *Performance is calculated using close prices, rebased to 100, for I Accumulation USD shareclass since launch on 06/09/2012. The figures presented
are gross of fees. An investor’s return will be reduced by the management fees and other expenses. Past performance is not a guide to future performance. Performance basis is gross
22 of tax. The deduction of fees reduces the level of return; The client's return will be reduced by the management fees and other expenses.An Emerging Markets offering with a short duration bias
AXA WF Emerging Markets Short Duration Bonds
Fund breakdown by sector2
Key characteristics Fund 25%
20,3%
AUM ($mn) 1,431 20% 16,8%
Yield (%)1 5.07 15% 11,9% 11,8%
Modified duration1 2.80 10% 6,4% 5,0%
4,9% 4,0% 3,9%
5% 2,9% 2,4% 1,7% 1,6%
1,4% 1,2%
Average coupon (%) 5.08
0%
Average maturity (yrs) 3.37
Banking
Sovereign & Quasi
Financial Services
Capital Goods
Retail
Consumer Goods
Real Estate
cash
Energy
Basic Industry
Utility
Telecommunications
Agency
Transportation
Automotive
Average rating3 BB+
Sovereign
Cash position (%) 1.2
Number of holdings 134
Fund breakdown by ratings3
40% 35,4%
29,1%
30%
17,2%
20% 12,2%
10% 2,5% 1,5% 0,9% 1,2%
0%
AA A BBB BB B CCC NR cash
A fully diversified portfolio
Source: AXA IM as at 31/05/2018. Data is unaudited and sourced from our front office portfolio management system. Please note that the yield calculations are based on the portfolio
of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield. Yield figures are not guaranteed and will change in the future. Cash
figure includes equivalents. 1. Yield and duration calculations include cash held within the portfolio, use the next-call method for all Financials in the portfolio and duration/yield-to-
23 worst for all other holdings. 2. ML Lvl 2 breakdown, excludes FX positions. 3. Average rating of securities’ available ratings using scores from the linear scale.Portfolio characteristics
AXA WF Emerging Markets Short Duration Bonds
Description Coupon Maturity date Current yield Country of risk Rating² %
Israel Electric Corp Ltd 5.625% 21/06/2018 7.72% Israel BBB 1.36%
Global Bank Corp 5.125% 30/10/2019 4.24% Panama BBB- 1.30%
Petrobras Global Finance BV 6.125% 17/01/2022 5.14% Brazil BB- 1.28%
YPF SA 8.500% 23/03/2021 6.72% Argentina B 1.25%
Gold Fields Orogen Holdings BVI Ltd 4.875% 07/10/2020 5.31% South Africa BB+ 1.24%
VEON Holdings BV 3.950% 16/06/2021 5.31% Netherlands BB 1.22%
Nemak SAB de CV 3.250% 15/03/2024 3.14% Mexico BB+ 1.18%
Russian
Lukoil International Finance BV 6.125% 09/11/2020 4.10% BBB 1.16%
Federation
Qatari Diar Finance Co 5.000% 21/07/2020 3.74% Qatar AA- 1.15%
United Arab
Emirates NBD PJSC 3.250% 19/11/2019 3.58% A 1.13%
Emirates
• We manage an extremely well diversified portfolio across credit ratings, sectors and issuers to monitor correlation risk
• The portfolio is also diversified geographically, with allocations across all regions. This allows us to add value via our top-down
country selection
Source: AXA IM as at 31/05/2018. Top 10 Holdings: Include only corporate bonds as defined by the level 1 of BofA ML Index and exclude cash and mutual funds. 1. Average rating of
securities’ available S&P, Moody's and Fitch ratings using scores from the linear scale. Data is unaudited and sourced from our front office portfolio management system. The above
24 mentioned stock is shown for illustrative purposes only and should not be considered as advice or a recommendationPortfolio country risk exposure
Current portfolio sovereign and corporate positioning
11%
Hard Currency Sovereign & Quasi Sovereign
10%
Hard Currency Corporates
9%
Cash
8%
7%
6%
5%
4%
3%
2%
1%
0%
Peru
Argentina
Cyprus
Qatar
India
Nigeria
Turkey
Israel
Cote D ivoire
Macedonia
Indonesia
Morocco
Mexico
Hong Kong
Tunisia
Brazil
South Africa
Kuwait
China
Solomon Islands
Colombia
Mauritius
Iraq
Cash
Kenya
Bermuda
Kazakhstan
Chile
Ukraine
Lebanon
Spain
Dominican Republic
Senegal
Bangladesh
Russian Federation
Croatia
Costa Rica
Panama
Egypt
Angola
Singapore
Mongolia
Honduras
Zambia
Azerbaijan
Cayman Islands
United Arab Emirates
ME
Investment across over 40 countries with the aim to monitor default correlation risk
25 Source: AXA IM as at 31/05/2018 Data is unaudited and sourced from our front office portfolio management system. Cash figure includes equivalents.26
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
-3,0%
-2,0%
-1,0%
Angola
Argentina
Azerbaijan
Bangladesh
Brazil
Chile
China
Colombia
Costa Rica
Cote D ivoire
Croatia
Dominican Republic
Ecuador
Egypt
France
Honduras
Hong Kong
Hungary
India
Indonesia
Iraq
Israel
AXA WF Emerging Markets Short Duration Bonds
Kazakhstan
Kenya
Kuwait
Latvia
Lebanon
Lithuania
Luxembourg
Macedonia
Mexico
Mongolia
Morocco
Netherlands
Nigeria
Pakistan
Change in country risk exposure over the last 12 months
Panama
Peru
Philippines
Poland
Qatar
Romania
Russian Federation
Source: AXA IM as at 31/05/2018 Data is unaudited and sourced from our front office portfolio management system. Cash figure includes equivalents.
Senegal
Serbia
South Africa
Spain
Sri Lanka
Supranational
Switzerland
Tunisia
Turkey
Ukraine
United Arab Emirates
Zambia
Dynamic management of country risk to capture opportunities and avoid downside
CashAXA WF Global Emerging Markets Bonds Portfolio characteristics and performance
Why invest in AXA WF Global Emerging Markets Bonds?
Investment concept
FLEXIBLE PORTFOLIO
HIGHLY EXPERIENCED TEAM
MANAGEMENT
• A globally team supported by credit research and • Ability to allocate off-index towards corporate and
investment strategy teams local markets to generate returns
• A long history and track record of managing both • Total return philosophy encourages active portfolio
benchmarked and total return portfolios management
ANALYSIS & RISK
CONVICTION-BASED APPROACH
MANAGEMENT
• Aim to generate performance through careful
strategic positioning, as well as exploiting tactical and • A set of clear and transparent Internal Investment
relative value opportunities Guidelines
• Fundamental-based credit research process across
• A strong total return and trading background within sovereigns and corporates
the team
Source: AXA IM. The description set forth above represents investment and risk objectives only.
28 No representation is made that the Fund will achieve such objectives.29
0%
1%
2%
3%
4%
5%
6%
MEXICO
CHINA
INDONESIA
TURKEY
RUSSIA
PHILIPPINES
BRAZIL
ARGENTINA
COLOMBIA
PERU
PANAMA
CHILE
KAZAKHSTAN
SOUTH AFRICA
UKRAINE
HUNGARY
MALAYSIA
EGYPT
OMAN
ECUADOR
Source: JP Morgan EMBI Global Diversified Index as of 31/05/2018
POLAND
URUGUAY
Fixed Income Emerging Markets
LEBANON
DOMINICAN…
SRI LANKA
CROATIA
NIGERIA
ROMANIA
AZERBAIJAN
An investable universe spanning across 67 countries
EL SALVADOR
PAKISTAN
VENEZUELA
COSTA RICA
JAMAICA
LITHUANIA
INDIA
ANGOLA
COTE D'IVOIRE
KENYA
SERBIA
IRAQ
MONGOLIA
PARAGUAY
TRINIDAD AND…
JORDAN
ZAMBIA
GUATEMALA
SENEGAL
MOROCCO
GABON
GHANA
A rapidly expanding and diversified investable universe
BELARUS
BOLIVIA
HONDURAS
VIETNAM
SLOVAK REPUBLIC
NAMIBIA
GEORGIA
ARMENIA
ETHIOPIA
TUNISIA
CAMEROON
LATVIA
MOZAMBIQUE
SURINAME
TAJIKISTAN
BELIZEPortfolio performance
AXA WF Global Emerging Markets Bonds
Gross performance*
Cumulative gross performance* Fund Benchmark Relative
220 1 month -1.44% -0.94% -0.50%
3 months -2.62% -2.10% -0.52%
200 6 months -3.50% -3.38% -0.12%
YTD -4.31% -4.08% -0.23%
1 year -0.15% -0.56% +0.41%
180 3 years 16.20% 14.13% +2.07%
Value of $100 investment
5 years 24.44% 23.68% +0.76%
160
Annual performance*
Fund Benchmark Relative
140
2013 -5.99% -5.25% -0.74%
2014 6.79% 7.43% -0.64%
120 2015 1.78% 1.18% +0.60%
2016 10.86% 10.15% +0.71%
100 2017 11.25% 10.25% +1.00%
Risk*
80
Information
Volatility Tracking error
ratio
60 1 month 8.31% 2.69% -1.91
Apr-09
Apr-11
Apr-13
Apr-15
Apr-17
Dec-09
Dec-11
Dec-13
Dec-15
Dec-17
Aug-08
Aug-10
Aug-12
Aug-14
Aug-16
3 months 5.28% 2.01% -0.96
6 months 4.70% 2.15% -0.11
YTD 5.04% 2.30% -0l22
AXA WF Global Emerging Markets Bonds I USD 1 year 4.55% 1.14% +0.36
JPMorgan EMBI Global Diversified TR USD 3 years 5.61% 0.80% +0.79
5 years 6.27% 1.05% +0.12
Source: AXA IM as at 31/05/2018. *Performance is calculated using close prices, rebased to 100, for I Accumulation USD shareclass since its launch on 25/08/2008. The fund was
launched on 13/09/2005. The figures presented are gross of fees. An investor’s return will be reduced by the management fees and other expenses. Past results are not necessarily
indicative of future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred. The gross returns do not reflect the deduction
of investment advisory fees. Your returns will be reduced by fees and any other expenses. The fund does not have a reference index. JP Morgan EMBI Global Diversified TR USD, is
30 given as a basis for comparison only.Portfolio analysis
AXA WF Global Emerging Markets Bonds
Spread duration contribution
Key characteristics Fund Market by maturity bucket
AUM ($mn) 135.6 - 3,0
2,4
Yield (%) 5.50 5.64 2,5
2,1
Modified duration 6.50 6.33 2,0 1,7
1,5 1,5
Years
Spread to government (bps) 327 289 1,5
Number of issuers 90 152 0,9
1,0 0,7 0,7
0,6
Average rating* BB- BB+ 0,4
0,5 0,3
0,1
Cash position (%) 1.4 -
0,0
1-3 Years 3-5 Years 5-7 Years 7-10 Years 10-20 Years 20 years +
Fund Index
Fund breakdown by maturity bucket
40% 33%
Benchmark-aware rather than benchmark-
30%
20% 15% 17% 14%14%
23%
18% 19%
12%
constrained, giving us the freedom to express our
investment views
10% 11%
10% 5% 7%
1%
0% Ability to allocate towards off-index credits in
0-1 Year 1-3 Years 3-5 Years 5-7 Years 7-10 10-20 20 years +
Years Years
corporate and local markets
Fund Index
Source: AXA IM as at 31/05/2018. Market reference: the JP Morgan EMBI Global Diversified Index. The fund does not have a reference index. JP Morgan EMBI Global Diversified Index,
is given as a basis for comparison only. Yield and duration calculations include cash held within the portfolio, use the next-call method for all Financials in the portfolio and
duration/yield-to-worst for all other holdings. Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in
31 the fund may receive as a distribution yield. *Average rating of securities’ available S&P, Moody's and Fitch ratings using scores from the linear scale.Portfolio country risk exposure
AXA WF Global Emerging Markets Bonds
0,15
0,10 Top and bottom contributors to relative duration
0,05
0,00
-0,05
-0,10
-0,15
-0,20 Nigeria
Kenya
Philippines
Senegal
Indonesia
Chile
Colombia
Hungary
Ukraine
Cote D ivoire
Ecuador
Angola
Iraq
Jordan
China
Pakistan
Dominican Republic
Argentina
Lebanon
Uruguay
Careful management of country duration exposure
32 Source: AXA IM as at 31/05/2018 Data is unaudited and sourced from our front office portfolio management system.Reference material
Why invest in Emerging Markets Bonds at AXA IM?
€447 billion in Fixed Income, c.120 investment professionals
Team
Emerging Market FI investment experts located in each major
market around the world, ensuring our
clients benefit from local insights
20 London
Years’ experience managing Philosophy 20 FI investment
Emerging Market FI assets focused on income generation and professionals
downside mitigation while aiming at Greenwich
32 FI investment Frankfurt
$10.4bn optimising the risk/return profile over the
market cycle
professionals 5 FI investment
professionals
Tokyo
3 FI investment
US billion in Emerging Market professionals
FI strategies globally Paris
Process
52 FI investment Zurich
a global, top-down approach professionals 5 FI investment
12 complemented by bottom-up research Mexico City
2 FI investment
professionals
Investment professionals specific to the drivers of each sub-asset professionals
dedicated to Emerging Market class Hong Kong
FI strategies globally 5 FI investment
Solutions professionals
proven ability to provide bespoke
4 solutions to meet our clients’ evolving
Locations represented locally, needs
across Europe, Latin America
and Asia Scale
critical size, particularly in corporate
credit, affords us excellent access to the
markets
Robust global framework bringing together local experts
34 Source: AXA IM as at 30/04/2018. AUM data as at 31/03/2018 (latest available).The Emerging Markets assets we manage
Managing c$10 billion of EM Fixed Income assets,
with c$2 billion managed in open-ended funds
London
$3.17 billion of assets managed
Majority of assets from Paris,
London, Milan and Frankfurt
Mexico City
$2.30 billion of assets managed
100% institutional client base
Paris
$2.61 billion of assets managed Hong Kong
Most assets split across Belgium, $2.31 billion of assets managed
France, Germany and Ireland
Most of assets from Hong Kong
and Singapore
35 Source: AXA IM as at 31/03/2018 (latest available).Emerging Markets and Asia Fixed Income solution range
Client toolbox
AXA WF Emerging AXA WF Global AXA WF Asian AXA WF Asian AXA WF China
Markets Short Emerging Markets Short Duration High Yield Bonds Short Duration
Duration Bonds Bonds Bonds Bonds
• $1,431mn AUM • $136mn AUM • $125mn AUM • $29mn AUM • $25mn AUM
• Global focus • Global focus • Asian focus • Asian focus • China focus
• Short duration bias • Full maturity profile • Short duration bias • Full maturity profile • Short duration bias
• Total return approach • Benchmark-aware • Total return approach • Total return approach • Total return approach
A comprehensive range of solutions to meet our clients’ evolving needs
For indicative purposes only. Past performance is no guarantee of future results.
36 Source: AXA IM - Data as of end May 2018Global investment process
1 Define macro 2 Define active 3 Portfolio
environment strategies construction
Top-down inputs combine to Alpha Group forecasts /
Alpha Groups define market
form a global macro view, used recommendations feed portfolio
expectations and active strategies
as a framework by each Alpha construction, ensuring efficient
using MVST analysis
Group* use of risk budget
Active portfolio management
Risk is continuously monitored,
driven by continuous MVST
with multiple levels of control
analysis and performance review
Continuous 5 Risk 4
strategy review monitoring
Strong top-down focus complemented by rigorous bottom-up research
*Alpha Groups: small sub teams of the FI team split by expertise: country allocation/term structure/inflation/investment grade/high yield/emerging markets. MVST: Macro,
37 Valuation, Sentiment, Technicals.A single common investment language: MVST
Investment teams assess performance potential based on four factors:
M V S T
Macro Valuation Sentiment Technicals
A regular review of the global A consideration of how current Ongoing review of market Analysis of likely changes in
economic and policy outlook levels reflect interest rates and positioning, consensus views and supply and demand and
allows Portfolio Managers to credit risks. Deviations from fair market commentary regulatory factors (government
assess the likely macro influences; value are assessed in terms of the supplemented by our own funding, cash-flows, corporate
taking into account potential likely contribution to expected Portfolio Manager Survey to issuance) and the expected
changes in the level of risk free return. reach an understanding of how impact of these on yield and
yields and credit spreads and how potential changes in sentiment spread changes.
this will affect returns. may affect investor behaviour.
Expected negative Scores reflect qualitative views and provide a consistent Expected positive
impact on returns impact on returns
(yields higher / spreads wider)
framework across our teams globally (yields lower/ spreads tighter)
-2 -1 0 +1 +2
…spoken by all investment teams globally
38Portfolio Engineering & Solutions
Solution design, portfolio optimisation and risk monitoring
• Global team of eight engineers and strategists, embedded within local investment teams and working
side-by-side with portfolio managers
• Quantitative experts responsible for:
Designing bespoke solutions across the full FI risk spectrum
Scenario analysis / stress testing
Portfolio optimisation
Risk monitoring and oversight
Performance attribution
Developing and maintaining the sophisticated suite of tools used throughout the process
• Adds an additional layer of risk monitoring within the investment team, and brings a different perspective
to the investment process
Quantitative experts providing a different perspective to the process
39 Source: AXA IM as at 30/04/2018Portfolio Engineering & Solutions
A range of complimentary systems – both proprietary and third party
Portfolio construction Risk monitoring Performance attribution
UBS Delta
3rd party risk management system which provides detailed risk reports, volatility and correlation calculations, overall portfolio tracking error decomposition and performance attribution.
Used for ad-hoc requests where additional flexibility is required (historical VaR, stress tests, etc).
BAWIFI
Or (“Building Allocation Within Fixed Income”): a proprietary portfolio
Synview iPA/FIA
optimisation tool used during the quarterly Forecasting process to determine A proprietary Fixed Income portfolio decision-making tool which enables A performance attribution tool (developed by an independent team) which is
the optimal allocation within the Fixed Income asset class (i.e. between portfolio managers to monitor overall opportunities and potential new extremely flexible, very user friendly and accurate over very long periods of
government bonds, inflation-linked, IG credit, HY, proxy swaps). It uses our strategies relative to sources of risk. time. The scope includes all Fixed Income funds globally.
own Fixed Income portfolio managers’ views, risk / return factors and other
optimisation criteria.
The Credit Allocation Optimiser
A proprietary optimisation tool used during quarterly Forecasting in order to
determine relative sector allocation within the credit universe.
The Global Credit Allocation Optimiser
A proprietary optimisation tool used during quarterly Forecasting in order to
determine relative allocation between investment grade credit markets in
different currencies.
thinkFolio®
Third party front-to-back office tool used globally which enables Fixed Income portfolio modelling, trade order management,
compliance and cash management .
Expert practitioners who know how to get the best out of a wide variety of tools
40 Source: AXA IMInvestment information
AXA WF Emerging Markets Short Duration Bonds
Risk and Reward profile
Investment objective & strategy
Lower risk Higher risk
Investment objective To seek performance by investing mainly in short duration debt securities
issued in the emerging debt universe in USD over a medium term period.
Potentially lower risk Potentially higher reward
Investment universe Transferable debt securities issued by emerging countries governments,
1 2 3 4 5 6 7 corporations, public or private companies and supranational entities. The
Fund* may invest up to 15% of its assets in bonds in local currency
The risk category is calculated using historical performance data and Investment horizon Minimum Three years
may not be a reliable indicator of the Sub-Fund's future risk profile.
The risk category shown is not guaranteed and may shift over time. Investment team Sailesh Lad , Mikhail Volodchenko
The lowest category does not mean risk free. Risk profile taken from
I Capitalisation USD Key Investor Information Document. The most
recent risk category, which may be different for each share class, is
available in the latest KIID. Fund* structure Luxembourg SICAV
Launch date 06 September 2012
Additional Risks
• Credit Risk : risk that issuers of debt securities held in the Sub-Fund may default on their obligations or have their credit rating downgraded, resulting in a decrease in
the Net Asset Value.
• Liquidity Risk: risk of low liquidity level in certain market conditions that might lead the Sub-Fund to face difficulties valuing, purchasing or selling all/part of its assets
and resulting in potential impact on its net asset value.
• Counterparty Risk: risk of bankruptcy, insolvency, or payment or delivery failure of any of the Sub-Fund's counterparties, leading to a payment or delivery default.
• Impact of any techniques such as derivatives: certain management strategies involve specific risks, such as liquidity risk, credit risk, counterparty risk, legal risk,
valuation risk, operational risk and risks related to the underlying assets. The use of such strategies may also involve leverage, which may increase the effect of
market movements on the Sub-Fund and may result in significant risk of losses.
• Geopolitical Risk: investments in securities issued or listed in different countries may imply the application of different standards and regulations. Investments may be
affected by movements of foreign exchange rates, changes in laws or restrictions applicable to such investments, changes in exchange control regulations or price
volatility.
*Fund = AXA WF Emerging Markets Short Duration Bonds, a sub-fund of Luxembourg SICAV AXA WF
41 Source: AXA IM as at 30/12/2016.Investment information
AXA WF Global Emerging Markets Bonds
Risk and Reward profile
Investment objective & strategy
Lower risk Higher risk
Investment objective To seek both income and growth of your investment, in USD, from an actively
managed, risk-adjusted emerging markets bond portfolio.
Potentially lower risk Potentially higher reward
Investment universe Debt securities issued in emerging countries (Latin America, Eastern Europe,
1 2 3 4 5 6 7 Asia, Africa, Middle East) by governments or quasi government issuers as well
as private or public companies denominated in USD, Euro or local currencies
The risk category is calculated using historical performance data and Investment horizon Six years
may not be a reliable indicator of the Sub-Fund's future risk profile.
The risk category shown is not guaranteed and may shift over time. Investment team Sailesh Lad , Mikhail Volodchenko
The lowest category does not mean risk free. Risk profile taken from
I Capitalisation USD Key Investor Information Document. The most
recent risk category, which may be different for each share class, is
available in the latest KIID. Fund* structure Luxembourg SICAV
Launch date 13 September 2005
Additional Risks
• Credit Risk : risk that issuers of debt securities held in the Sub-Fund may default on their obligations or have their credit rating downgraded, resulting in a decrease in
the Net Asset Value.
• Liquidity Risk: risk of low liquidity level in certain market conditions that might lead the Sub-Fund to face difficulties valuing, purchasing or selling all/part of its assets
and resulting in potential impact on its net asset value.
• Counterparty Risk: risk of bankruptcy, insolvency, or payment or delivery failure of any of the Sub-Fund's counterparties, leading to a payment or delivery default.
• Impact of any techniques such as derivatives: certain management strategies involve specific risks, such as liquidity risk, credit risk, counterparty risk, legal risk,
valuation risk, operational risk and risks related to the underlying assets. The use of such strategies may also involve leverage, which may increase the effect of
market movements on the Sub-Fund and may result in significant risk of losses.
• Geopolitical Risk: investments in securities issued or listed in different countries may imply the application of different standards and regulations. Investments may be
affected by movements of foreign exchange rates, changes in laws or restrictions applicable to such investments, changes in exchange control regulations or price
volatility.
*Fund = AXA WF Global Emerging Markets Bonds, a Sub-Fund of Luxembourg SICAV AXA WF
42 Source: AXA IM as at 30/12/2016.AXA IM Fixed Income: specialist investment streams
Investment streams Closely supported by
Buy and Maintain Active Structured Fundamental Credit Research Team
38 dedicated analysts
Government Money Markets Alternative Credit
Euro – Sterling – Global Euro – Sterling Global
Portfolio Engineering & Solutions
Leveraged Loans & 8 embedded risk managers / portfolio strategists
Aggregate Inflation
Euro – Sterling – Global Euro – Sterling – Global
Private Debt
European, US
Liquid Securitisation & Investment Strategy & Macro
Investment Grade Credit Government Research
Euro – Sterling – US – Global Euro – Sterling – Global
Structured Assets
European 12 dedicated economists / strategists1
Illiquid Securitisation &
Emerging Markets Aggregate
Euro – Sterling – Global
Structured Assets Fixed Income Trading Desk
European
23 dedicated traders
Investment Grade Credit
Euro – Sterling – US – Global
Responsible Investment Team
10 dedicated RI analysts
High Yield
European – US – Global
Independent Risk Management
Emerging Markets
Global Over 200 professionals
Specialised streams supported by vast shared resources
43 Source: AXA IM as at 30/04/2018. (1) Including 11 from the Research & Investment Strategy team, and one dedicated US FI strategist.Our Global Emerging Markets Fixed Income team
Biographies
• Sailesh is the Head of Active Emerging Markets Fixed • Mikhail is a Portfolio Manager with over nine years’
Income with over 20 years’ industry experience industry experience covering both the quantitative
within the Global Emerging Markets Fixed Income and fundamental aspects of EM Fixed Income.
team, where he is responsible for managing global
emerging markets portfolios since joining AXA IM in • Mikhail has comprehensive knowledge in evaluating
2015. EM local, sovereign and currency markets through
use of quantitative and qualitative analysis and
• Sailesh has extensive investing experience in the use models, as well as investing experience in derivate
of emerging markets derivatives and FX as well as and cash bonds across the whole EM universe,
cash hard and local currency bonds in portfolio including Frontier economies.
management.
• Prior to joining AXA IM, Mikhail worked for over two
• Prior to AXA IM, Sailesh worked for three years at years in the EM team at Old Mutual Global Investors,
Ignis Asset Management where he was the Deputy helping to run both local and external currency debt
Head of Emerging Markets, responsible for managing funds. Before that, Mikhail spent six years at Ignis
both the external and local currency debt positions. Asset Management within the Emerging Markets
Prior to that, Sailesh worked for six years at team and Risk team, helping to manage both
Henderson Global Investors within their emerging absolute and benchmarked emerging market debt
markets team. Before that, Sailesh worked as a trader funds.
Sailesh Lad in Emerging Markets at BlueBay Asset Management
Mikhail Volodchenko, CFA
for four years. Sailesh started his career at Moore • Mikhail is a CFA Charterholder, holds a Master’s
Head of Active Emerging Portfolio Manager degree (Distinction class) in Finance from Imperial
Capital Management as an economic strategist and
Markets Fixed Income then as a trader Business School and a Bachelor’s degree (Upper
Second class) in Mathematics with Management
• Sailesh holds a Bachelor’s degree (1st class) in Studies from University College London.
Financial Economics from Coventry University.
Source: AXA IM as at May 2018
44 There is no assurance that any particular individual will be involved in the management of the portfolio for any given period of time, if at all.Disclaimer Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly. This promotional communication does not constitute on the part of AXA Investment Managers a solicitation or investment, legal or tax advice. This material does not contain sufficient information to support an investment decision. Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision. Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice. The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors. AXA WF Emerging Markets Short Duration Bonds, AXA WF Emerging Markets Short Duration Bonds, and AXA WF Global Emerging Markets are sub-funds of AXA World Funds. AXA WORLD FUNDS ‘s registered office is 49, avenue J.F Kennedy L-1885 Luxembourg. The Company is registered under the number B. 63.116 at the “Registre de Commerce et des Sociétés” The Company is a Luxembourg SICAV UCITS IV approved by the CSSF and managed by AXA Funds Management, a société anonyme organized under the laws of Luxembourg with the Luxembourg Register Number B 32 223RC, and whose registered office is located at 49, Avenue J.F. Kennedy L-1885 Luxembourg. Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. References to league tables and awards are not an indicator of future performance or places in league tables or awards and should not be construed as an endorsement of any AXA IM company or their products or services. Please refer to the websites of the sponsors/issuers for information regarding the criteria on which the awards/ratings are based. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding. Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries. 45
Disclaimer El presente documento está destinado exclusivamente a clientes profesionales de conformidad con las normas MiFID (Directiva sobre Mercados de Instrumentos Financieros). La información detallada y, en su caso, los datos financieros reseñados tienen exclusivamente una finalidad informativa y, en ningún caso, están dirigidos a clientes minoristas y/o inversores finales. La información contenida en el documento está destinada a clientes profesionales y contrapartes elegibles tal y como son definidos en los artículos 205 y 207 del Texto Refundido de la Ley del Mercado de Valores, presumiéndose, por tanto, la experiencia, conocimientos y cualificación necesarios para tomar sus propias decisiones de inversión y valorar correctamente sus riesgos y el de sus clientes. Igualmente, la información y, en su caso, los datos económicos y financieros reseñados no suponen asesoramiento en materia de inversión ni una promoción financiera ni invitación o recomendación de adquisición o inversión, ni constituyen, por sí mismas, una base para la toma de decisiones inversoras ni suponen una garantía de rentabilidad futura de inversiones financieras. El mercado financiero es fluctuante y está sujeto a variaciones y los tipos de cambio pueden sufrir oscilaciones que incidan directamente en la rentabilidad de las inversiones, tanto al alza como a la baja. No debe tomarse como referencia la rentabilidad pasada de los productos pues no implica que se comporte de igual forma en el futuro. El receptor de esta información debe tener presente que la evolución de las variables económicas y los valores de los mercados financieros pueden cambiar significativamente y ser diferentes a los análisis e indicaciones que figuran en este documento. En el supuesto de que se haga referencia a una o varias Instituciones de Inversión Colectiva en particular se recomienda visitar la página web www.axa-im.es con el fin de (i) tener un conocimiento más detallado de las mismas (ii) acceder a información sobre su disponibilidad y registro para su distribución y (iii) conocer sus términos, características y condiciones mediante el análisis del Documento de Datos Fundamentales para el Inversor (DFI) y del correspondiente folleto informativo disponibles en el precitado sitio web. AXA INVESTMENT MANAGERS (AXA IM) no asume responsabilidad alguna por cualquier acto u omisión derivada del mal o incorrecto uso de la información facilitada, declinando toda responsabilidad por el uso incorrecto o inadecuado del presente documento. AXA INVESTMENT MANAGERS GS LIMITED SUCURSAL EN ESPAÑA, tiene su domicilio social en Madrid, Paseo de la Castellana núm. 93, 6ª planta, se encuentra inscrita en el Registro Mercantil de Madrid, hoja M-301801, y se encuentra registrada en la CNMV bajo el número 19 como ESI del Espacio Económico Europeo con Sucursal. 46
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