Sample - Customer Analysis Study_1_Feb 14 by Sutherland Global Services

Samples – Customer Analysis Study Prepared for XXX

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Outline

Global Summary

Regional Analysis

Europe USA Canada

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Retail investors hold the majority of the assets in North America but institutional investors dominate in Europe and Asia-Pacific

Global Net Assets of Natural Resources Mutual Funds by Investor Type

15%

20%

Institutional Investors include: • Banks, Corporate, Financial Institutions, Trusts and Ultra High Net worth Individuals

Retail Investors include: • Mass market investors and High Net worth Individuals

80%

85% 85%

80%

20% Europe

15% USA Retail Investors

Asia Pacific

C anada

Institutional Investors



Retail Investors are mostly recommended to invest in diversified natural resources funds by their financial planners and advisors



However, with the increasing demand supply gap for energy, energy based mutual funds are getting popular across the globe



HNIs and institutional investors with higher risk taking power prefer investing in sector specific funds such as energy, oil and gas, and gold

Source: Sutherland Primary Research, Industry Association, PricewaterhouseCoopers, Cerulli, KPMG

Note: Figures for year 2008 are as of May, 2008

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Retirement planning and higher income are the key objectives while fund and manager’s track record are the key selection criteria

 In Asia Pacific, an individual investor is of middle and young age

Investment Objective

Investment Selection Criteria

with higher income is the main objective for investment into mutual funds  While in USA and Canada, with growing old population, retirement planning is the key investment objective  Past performance of the fund and manager’s track record are the key criteria to select mutual fund by an investor  However, advisor also use fund ratings and expenses and fees charged to sell a fund to an investor  With respect to natural resources funds, investor in all the region consider it as high risk and high return investment

Source: Sutherland Primary Research, PricewaterhouseCoopers, Cerulli, KPMG

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Investors in North America are aggressive and allocate a higher percentage of their portfolio to natural resources funds

•

Investors in Europe and USA are invested in around “7 to 10” schemes, while that for investor in Asia Pacific and Canada is around “3 to 6” schemes

% Allocation to Natural Resources Fund

•

Investors in Canada and USA allocate around “5 percent to 10 percent” of their total fund investment in natural resources schemes, while that for investors in Asia Pacific and Europe is “less than 5 percent”

Risk Reward Perception

•

Investors in all the region perceive investment in natural resources funds as “High Risk High Return” investment

•

“Diversified natural resources fund” is the most popular in all the region

•

“Energy funds” are most popular niche sectors in Europe, USA and Asia Pacific

•

“Metals & mining funds” are most popular niche sectors in Canada

Number of funds in a portfolio

Investment Characteristics

Most Popular Natural Resources Fund Sector

Source: Sutherland Primary Research, PricewaterhouseCoopers, Cerulli, KPMG

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Outline

Regional Analysis - Europe

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Securities, which include mutual funds, account for 38 percent of household investments… Household Investment Pattern

19%

15%

16%

18%

29%

17%

31%

26% 52%

57% 25% 48%

40%

40% 45%

33%

58%

38%

27%

Austria

16%

19%

53% 31%

35%

Belgium

Germany

40%

Spain

31%

33%

Finland

France

Deposits and C urrency

Securities

40% 24%

22%

Italy

Netherlands

Other Financial Assets

Portugal

32%

28%

Euro Area

Life Insurance



Investment portfolio varies substantially from one country to another in Europe



Austrian investors rely more on bank deposits while Italians prefer equities and mutual funds



Insurance products account for more than half of the investment portfolios in the UK and The Netherlands, while it is quite small for other countries



In near future, industry experts foresee a switch to guaranteed return instruments from equity products due to weak equity market performance in the past one year

Note: The “securities” component includes investment in debt securities, mutual fund shares, and shares and other equity. Source: Eurostat, http://www.banque-france.fr/gb/publications/telechar/bulletin/148etud1.pdf

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Higher income is the key objective and past performance is the key criteria for selecting a natural resources fund Key Objectives for Investing in Natural Resource Funds

Criteria for Selection of Natural Resource Funds

High Income

Past Performance

Retirement Planning

Risk Associated with Fund

Reduced Taxable Income

Expenses on Fund

• House or other long-term purchases • Education



• Fund Ratings • Portfolio Objective • Total AUM of the fund

Higher income (capital appreciation) and retirement planning objectives drive the investors towards natural resources based funds



Investors compare past performance along with risk and expenses (such as purchase fees, withdrawal fees, management and performance fees) associated with different funds prior to selecting a fund



Advisors also consider track record of the fund for past one to two year prior to recommending it to the clients

Source: Sutherland Primary Research

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Institutional investors account for 80 percent of the investment in natural resources fund with higher preference for niche funds European Equity Based Natural Resources Funds Market by Investors (2007)

Popularity of Different Types of Natural Resource Funds

Energy Based Funds

Commodity Funds

Gold Based Funds

20%

80%

Institutional Investor



• • • •

Retail Investor

Natural resources funds are popular amongst HNIs and



Within institutional investors category, banks, corporate

Strong performance of energy and gold-based funds have increased their popularity among investors

institutional investors 

Metal & Mining Funds Renewable Energy Funds Utilities based Funds Soft Commodity based Funds



Rising gold prices in the international market has attracted many investors towards gold funds in the past one to two

and financial institutions are perceived to have higher

years

share in comparison with Ultra HNI investors 

Among others, agriculture and renewable energy based funds are gaining popularity due to increased awareness among investors

Source: Sutherland Primary Research, Cerulli, Globefunds.com

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Outline

Regional Analysis â&#x20AC;&#x201C; USA

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Ninety one percent of households in the US invest in mutual funds with 80 percent having equity-based mutual funds in their portfolio US percent Allocation of Household Financial Assets to Mutual Funds (2007)

US Type of Mutual Funds Owned (2007)

Equity

<25% 18% >75% 42%

26% to 50% 18% 51% to 75% 22%

80%

Money market funds

65%

Bond funds

45%

Hybrid funds

45%

Others 0%

7% 20%

Total number of US households: 116.0 million

40%

60%

80%

100%

Per Cent of Households



Mutual fund holdings represent more than half of household financial assets for 64 percent of households that own mutual funds



Of the total mutual fund investment, 80 percent is invested in equity mutual funds

Source: Investment Company Institute

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While retirement planning is the main objective, the fund manager’s experience is the biggest selection criterion for US investors Key Objectives of Investing in Natural Resources Funds

US Criteria for Selection of Natural Resources Funds

Retirement Planning

Fund Manager’s experience

Higher Income

Fund’s Past Performance

Reduced Taxable Income

Fund meets portfolio objectives

• Education • House or other longterm purchases • Emergency



• Diversification- Sector & Geographic • Fund’s fees and expenses

As with most mutual funds, the objective of investing in natural resources funds is generally long-term capital appreciation of wealth that could help investors during their retirement



However, resources funds investors also want to earn better returns in a short period and it is one of their major objectives when they invest in such funds



Respondents said that although the fund’s past performance is a major criteria when selecting natural resource funds, professional advisors look at the track record of the fund manager before they recommend resources funds to their clients

Source: Sutherland Primary Research

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Most investors hold about 7 to 10 mutual funds and restrict their exposure in resources funds to 5 to 10 percent

Share of Resource Funds in the Retail Portfolio

Type of Resource Funds

• Retail investors tend to hold about 7 to 10 mutual funds in their portfolios • In case of HNI’s, this number goes up to 15 to 20 • Exposure to natural resource funds is limited to 5 to 10 percent of the portfolio for an average investor which might be higher for HNI’s in the range of 15 to 20 percent

• Retail investors, in order to diversify risk, tend to prefer diversified natural resources funds • HNI’s with high risk appetite tend to prefer niche sector specific fund and diversify their risk amongst natural resources by investing in multiple sector specific funds

Customer Risk Perception

• Natural resources funds are perceived to be high risk high return funds as prices of resources are susceptible to a high degree of volatility

• Performance fees are generally not charged by mutual funds as this kind of fees are more popular in

Performance Fees

case of hedge funds • However, respondents said that investors would be willing to pay a performance fee as long as the fund is giving them the expected returns

Source: Sutherland Primary Research

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Retail investors hold a lion’s share of resources fund investments with most of them preferring diversified resources funds

US Equity-Based Natural Resources Fund Market by Investors

US Preferred Natural Resource Funds

15%

Diversified Natural Resources

Energy-Based Funds

Gold-Based Funds

85% • Metals & Mining Funds • Utilities Funds

Institutional Investors



Retail Investors

Business corporations, financial institutions, non-profit organizations, and other institutional investors hold about 14 percent of US mutual fund assets and the same trend seems to be followed in case of resources funds as well



Secondary and primary research indicate that fund sponsors often create special share classes or funds expressly for institutional investors including natural resource funds



Respondents said that investors generally look to diversified resources fund for making investments as it gives them exposure to various sectors amongst resources



However, HNI’s and institutional clients are ready to expose themselves to a higher degree of risk by investing in resources funds based on energy, gold or metals and mining

Source: Sutherland Primary Research; Investment Company Institute

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Outline

Regional Analysis â&#x20AC;&#x201C; Canada

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Seventeen percent of Canadian non-pension financial assets are invested in mutual funds Canada Percent Allocation of Non-Pension Financial Assets to Mutual Funds (2006)

Other Financial Assets 17%

Canada Type of Mutual Funds Owned (2007)

10%

Deposits in Financial Institution s 41%

1% 9%

44%

Stocks 25% Mutual Funds 17%

36%

Equity

Balanc ed

Bond

Spec ialty

Money Market



The Investment Funds Institute of Canada estimates that one in every three Canadians is a mutual fund investor



Equity-based funds and balanced funds are the most popular in Canada holding over 80 percent share of the total market for mutual funds in Canada

Source: Stats Canada; Investment Funds Institute of Canada

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While retirement planning is the main objective, fund’s past performance is the biggest selection criterion for Canadian investors Key Objectives for Investing in Natural Resource Funds

Canada Criteria for Selection of Natural Resource Funds

Retirement Planning

Fund’s Past Performance

Reduced Taxable Income

Fund Manager’s experience

Higher Income

Risk Associated with the Fund

• Education • House or other longterm purchases • Emergency



• Diversification- Sector & Geographic • Fund meeting portfolio objectives

As is the case with most mutual funds, the objective of investing in natural resource funds is generally long-term capital appreciation of wealth which could help investors in their retirement



However, resources funds investors also want to earn better returns in a shorter period and it is one of their major objectives when they invest in such funds



Canadian investors look at many factors while investing in resources funds, the highest among them being the fund’s past performance, the fund manager's experience and the risk associated with the fund

Source: Sutherland Primary Research

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Retail investors are the major investors in resources funds with diversified resources funds being popular amongst them Canada Equity-Based Natural Resource Fund Market by Investors

Canada Preferred Natural Resource Funds

Diversified Natural Resources

Metals & Mining

Energy Funds

20%

80%

• Gold-based funds

Institutional Investors



Retail Investors

Primary research indicates that fund sponsors often create special share classes or funds expressly for institutional investors including natural resource funds



Respondents said that investors generally look to diversified resources funds for making investments as it gives them exposure to various sectors amongst resources



However, metals and mining is a very popular sector in Canada as many mining companies are listed on the TSX index



A high number of Canadian investors are in the age group of 45 to 65 and are more likely to invest in low-risk funds rather than resources funds as they would like to preserve their savings

Source: Sutherland Primary Research; Stats Canada