Samples – Market Sizing Study for Equity Natural Resources Fund Prepared for XXX
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Outline
Global Summary
Regional Analysis
USA
Europe Asia Pacific Canada
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90 percent of the natural resources funds are equity funds of which 57 percent are European domiciled funds Net Assets of Natural Resources Funds from Bottom-up Approach – US$277 bn Equity Funds - US$248.6 bn
Commodity Funds - US$28.4 bn AsiaPacific 3%
Europe 57%
Canada 6%
USA 87%
Others 1%
USA 35% AsiaPacific 3%
Others 3%
Europe 3%
Canada # of Equity Funds by Region
# of Commodity Funds by Region
2%
53
52
7 49 48
169
165
7 7
150
11 7
118 340
330 269
6
4 2
218
27 29
58
3 1
4
25 23
33 47
33
2005
2006
2007
2008
2005
2006
Canada
Europe
USA
Others
4
5
5
3
3
2007
2008
4
3
Asia Pacific
4
1
Asia Pacific
Canada
Europe
USA
Others
Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
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… and most of the sales origination is domestic for all the funds except for offshore funds domiciled in Europe
Domicile Region
Total No. of funds by Domicile Type – Bloomberg
Domestic
Offshore
Total No. of different class of funds by Sales Region – Lipper
Domestic
AUM split by Domicile Type – Bloomberg (US$ bn)
Offshore
Domestic
Europe
182
162
453
302
43.21
Asia Pac
55
02
171
03
7.82
US
101
02
664
37
102.24
Canada
37
01
127
02
6.44
Remarks
Offshore
91.25
Significant share of sales origination from outside Europe
$0.06
Most of the sales origination from the region of domicile
2.9
Most of the sales origination from the region of domicile
0.36
Most of the sales origination from the region of domicile
European offshore funds, although lesser in numbers than domestic funds, have however managed to penetrate more in value terms comparatively by almost double.
About 95% of the overall US based global resource funds are sold primarily in US alone, coupled with 97% AUM penetration.
Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
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Natural resources funds have seen consistent growth in the past few years Region
AUM % Change FY 2006
AUM % Change FY 2007
AUM % Change FY 2008
% Fund Flow Increase in 2007 over 2006 Fund Flows
Global
80.0%
32.0%
26.0%
38.0%
Europe
73.0%
43.0%
-11.0%
251.0%
81.0%
28.0%
52.0%
27.0%
NA
NA
NA
NA
74.0%
32.0%
3.0%
-37.0%
United States
Asia-Pacific
Canada
AUM increase in 2006 was mainly due to: • Increase in new fund launches: There were 101 new funds launched in 2006 as against 62 in 2005 • Attractive performance of overall commodity sector lead by emerging markets: MSCI commodity producer index for emerging markets increased by 42 percent as against 30 percent in 2005 Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
Note: Figures for year 2008 are as of May, 2008
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High net fund flows in utilities and precious metals funds in 2007 over that in 2006 have resulted in high net fund flows of the sector # of Funds and % AUM Increase
Number of Funds Break up by Category
14.00%
28.00%
Utilities
100 80 60 40 20 0
64%
51
62
2005
2006
Precious Metal
11.00%
47.00%
136
155
2006
60
59
2006
400
*Diversified Natural Resources Fund include funds investing in soft commodities along with funds with diverse commodity focus
200
254 60%
184
192
39%
37%
2007
2008
73%
100% 80% 60% 40% 20% 0%
66.0
46%
32.4
34%
113.6
-13%
AUM Increase (%)
68
2007
73
250% 200% 150% 100% 50% 0%
2008
AUM Increase (%)
305
318
80% 60% 40%
18%
100
22%
0
20% 0%
2005
2006
Total Funds
Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
40.2
AUM Increase (%)
39%
Total Funds
200
20%
2008
50% 2005
300
2007
44
0
Energy
31%
225%
80
20
60% 40%
78
94%
Total Funds
40
% Fund Flow Increase (06-07)
0%
2005
Diversified Natural Resources*
AUM FY 2008 (US$ bn) 80%
92
Total Funds
250 200 150 100 50 0
71%
2007
2008
AUM Increase (%)
Note: Figures for year 2008 are as of May, 2008
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Strong performance of all natural resources coupled with high demand from emerging economies have resulted in increased activity in natural resources funds sector
High growth rate in emerging economies of India, China and East European countries is driving Demand from emerging economies
Rising commodity prices
the demand for natural resources
High demand for resources have resulted in all time high prices of all the commodities
Staggering performance by the companies engaged in commodity industries have resulted High performance of into higher returns for the funds investing in these companies commodity sector
High growth of natural resource funds
Growing Awareness
Increased media coverage about natural resource funds has increased awareness among retail investors leading to increased interest in sector specific funds over traditional diversified natural resource funds
Source: Sutherland Primary Research
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Outline
Regional Analysis – USA
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The US market for natural resources funds has grown at a robust pace and is valued at US$105.2 bn as of May, 2008 US Net Assets of Mutual Funds (in US$ Billion) and Number of Mutual Funds 12,500 11,500 10,500 9,500 8,500 7,500 6,500 5,500 4,500 3,500 2,500
Net Assets
Number of Funds
12,021
8,150 8,100
8,118
Investors’ demand for mutual funds increased substantially in 2007 largely due to disruptions in the financial markets which began in the latter part of 2007 leading to switch from direct equity investments to mutual fund investments
8,050
8,041
8,029 7,975
2004
8,200
8,126
2003
The US mutual fund market, remains the largest in the world, accounting for 46 percent of the US$26.2 trillion in mutual fund assets worldwide
8,250
8,905
8,107
8,300
10,412
7,414
8,350
8,000 7,950 7,900
2005
2006
2007
CAGR 12.84%
US Number of Natural Resource Funds and percent Increase in Net Assets 150
100%
Total AUM 2008*= US$105.2 bn
130
The market for natural resource funds has also increased with most investors seeing a positive outlook for the natural resources sector
Due to rising demand, prices of all the resources have reached an all time high
High commodity prices have led to attractive performance of companies in commodity sector and in turn performance of natural resource funds
The performance has resulted into high growth in AUM of the natural resource funds
80% 81%
110 90
94
100
107 52%
76
70
60% 40% 20%
28%
50
0% 2005
2006 Number of Funds
2007
2008
% increase in AUM
Source: Investment Company Institute; Bloomberg; Lipper; Morningstar; Sutherland Analysis
Note: Figures for year 2008 are as of May, 2008
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Only precious metals witnessed positive fund flow in 2007 and accounts for 44% of natural resources assets under management % AUM Break up by Category
9%
# of Funds and % AUM Increase
Utilities
25 20 15 10 5 0
14
18 28%
Precious Metal
22
2005
1%
2007
75% 50%
9.05
-54%
46.71
36%
1.30
NA
48.14
-16%
2008
28
26
25 119%
44%
2006
2007
53%
150% 120% 90% 60% 30% 0%
2008
AUM Increase (%)
8 6 4 2
46%
100%
AUM Increase (%)
Total Funds
Diversified Natural Resources
72%
26%
% Fund Flow Increase (06-07)
0% 2006
Total Funds
44%
19
25% 2005
30 25 20 15 10 5 0
19
AUM FY 2008 (US$ bn)
0
5
6
6
2006
2007
2008
2 2005
Total Funds
Energy
60 50 40 30 20 10 0
37
45
54 38%
62%
6%
100% 75% 50% 25% 0%
2005
2006
Total Funds
Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
49
2007
2008
AUM Increase (%)
Note: Figures for year 2008 are as of May, 2008
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More than 90% of the sales of US domiciled funds originate from the US with Chile as the largest overseas market Total AUM (Offshore funds: $2.96 bn) Country Wise # of US Funds Sold in Canada Country Canada
Total number of offshore funds in US: 37
Total count
Country Wise # of US Funds Sold in Latin America Country
03
Chile
NORTH AMERICA
ASIA PACIFIC
25
LATIN AMERICA
EUROPE Country Wise # of US Funds Sold in Europe Country
Country Wise # of US Funds Sold in Asia Country
Total count
Total count
Total count
Austria
02
Germany
03
Switzerland
02
Singapore
02
Denmark
01
Korea
01
Luxembourg
01
Netherlands
04
Italy
01
About 95% of all US based funds are only sold to domestic investors . Chile followed by Europe, form the largest markets for US based offshore funds.
Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
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Outline
Regional Analysis - Europe
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Natural resources funds have shown negative growth in 2008 after outpacing the industry in 2006 and 2007 Net Assets of Mutual Funds (in US$ Billion) and Number of Mutual Funds 35.2
10,000
33.2
8,000 6,000
28.5
30.1
29.3
4,000 2,000
4,683
7,804
6,002
5,640
8,983
0 2003
2004
2005
Net Assets ($ Bn)
2006
36 34 32 30 28 26 24 22 20
2007
Net assets of the total mutual fund industry reported an 18 percent CAGR over the last five years
The net asset growth was the highest in 2006 at 30 percent, in 2007 it halved to 15 percent
The above was mainly due to higher number of fund launches in 2006
Number of Funds ('000)
CAGR 18%
Growth in Net Assets of Natural Resource Funds (in US$ Billion) and Number of Mutual Funds Total AUM in 2008* = US$134.46 Billion
344
340 320 300 280 260 240 220 200
324 73%
43%
263
-11%
211 2005
2006
No of Funds Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
2007
90% 70% 50% 30% 10% -10% -30% -50%
Net assets of global natural resource funds totaled US$134 billion in May 2008
In the first five months of 2008, however, the net assets have witnessed negative growth after two years of high performance
2008*
% increase in AUM Note: Figures for year 2008 are as of May, 2008
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Singapore, Chile and Bahrain appear to be attractive sales destination for Europe domiciled funds as per number of funds sold in these countries
Total AUM (Offshore funds: $91.25 bn) Country Wise # of European Funds Sold in Asia Pacific Country
Total number of offshore funds in Europe: 302
# of Funds
Country Wise # of European Funds Sold in Latin America Country
# of Funds
Singapore
264
Chile
99
Taiwan
54
Peru
02
Macau
38
Korea
08
Hong Kong
77
Country Wise # of European Funds Sold in Middle East Country
# of Funds
Bahrain
96
Lebanon
08
ASIA LATIN AMERICA PACIFIC
MIDDLE EAST
AFRICA Country Wise # of European Funds Sold in Africa Country
# of Funds
South Africa
10
•
UCIT regulations and its acceptance in different countries has allowed many Europe domiciled funds to originate sales out of Europe
•
Of the Europe domiciled offshore funds, Luxembourg is a key country with 255 funds attracting sales from other region
•
Asia Pacific is the most important region in terms of offshore sales of Europe domiciled funds
•
As per industry reports, Asia pacific accounted for almost 30% of the total fund flows of European equity funds in fist half of 2007
•
Also, Blackcock raised around US$5 billion from Taiwan in 2007 for its different funds
•
Bahrain and Chile also have high attraction for Europe domiciled funds
•
UAE, also, is amending the regulation to allow sale of UCIT in the country
Source: Bloomberg; Lipper; Sutherland Analysis
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High growth of funds flow in natural resources funds was mainly due to higher funds flow in precious metal funds % AUM Break up by Category
# of Funds and % AUM Increase
Utilities
60 50 40 30 20 10 0
19.60% 21.30%
105%
32
37
2005
2006
Precious Metal
55
66
30 10
37.70%
100%
48
9%
50%
2007
2008
30 20
2005
2006
Total Funds
81
83 -15%
2007
2008
0%
28.7
-28.8%
50.7
-18%
AUM Increase (%)
35
36
50%
-34%
2007
105
131
AUM Increase (%)
160
60% 40% 163 -5%
0 2005
2006
Total Funds
250% 200% 150% 100% 50% 0% -50%
2008
35%
150 100
Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis
818%
40% 20%
29%
54%
200
50
28.6
60%
0
Energy
92%
AUM Increase (%)
225%
40 20
52
-20% 2006
Total Funds
Diversified Natural Resources
26.3
150%
115%
49%
2005
21.40%
% Fund Flow Increase (06-07)
0% Total Funds
100 80 60 40 20 0
AUM FY 2008 (US$ bn)
2007
20% 0% -20%
2008
AUM Increase (%)
Note: Figures for year 2008 are as of May, 2008
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Outline
Regional Analysis – Asia Pacific
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The Asia-Pacific natural resources funds market is valued at US$7.9 billion.. Asia-Pacific Net Assets of Mutual Funds¹ (in US$ Billion) and Number of Mutual Funds² Net Assets
4,000
Number of Funds
14,847
3,500 13,479
2,500
3,678
2,000
1,000
Asia Pacific has emerged as a strong market for mutual funds over the past five years primarily due to emerging economies of China and India
Net assets of mutual funds witnessed a CAGR of 28.2 percent (over 2003-07 period) recording the highest growth rate globally
Number of mutual funds have witnessed a 6.3 percent CAGR, reflecting higher investments in existing funds
14,000
3,000
1,500
15,000
11,641
12,427
11,617
1,939
1,361
1,678
2003
2004
13,000 12,000
2,457
11,000 2005 2006 CAGR 28.2%
2007
Asia-Pacific Number of Natural Resources Funds Total AUM in 2008* = US$7.90 Billion
Number of global natural resources funds in Asia-Pacific doubled between 2006 and May 2008
Strong equity market growth in the past three years coupled with rise in industrialization and infrastructure growth led to rising interest in natural resources funds
100 80 60 40 20
23
29
2005
2006
49
60
0 2007
2008*
¹Includes Australia, China(2007), Hong Kong, India, Japan, Korea, New Zealand, Pakistan, Philippines, Taiwan ²Includes China (2007), Hong Kong, India, Japan, Korea, New Zealand, Pakistan, Philippines, Taiwan
Source: Investment Company Institute; Bloomberg; Lipper; Morningstar; Sutherland Analysis
Note: Figures for year 2008 are as of May, 2008
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Only 3 funds domiciled in Asia Pacific attract sales from other countries indicating low international sales of Asia Pacific funds
Asia Pacific funds are currently exploring its own markets for meeting their sales targets. Only about 0.8% of the overall AUM is managed for overseas clients.
Sr. No
Fund Name
1
JF Five Elements
2
Reliance Diversified Power
3
United Gold & General Fund
Domicile Country
Sales Region Other than Domicile Country
Hong Kong
Singapore
India
Bahrain
Singapore
Taiwan
Source: Lipper
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