final market: towards a new hierarchy of risks ?
DESCRIPTION
Presentation by Jean-François Bay, Managing Director, Morningstar France on the 3rd of July 2012 at Paris Europlace.TRANSCRIPT
Financial Markets :
Towards a New Hierarchy of Risks?
× Paris Europlace
× Jean-François Bay, Managing Director, Morningstar France
<#>
© 2012 Morningstar, Inc. All rights reserved.
× Jean-François Bay, Managing Director, Morningstar France
× Tuesday July 3, 2012
Long-term Shift : From Developed Countries to Emerging Countries
Important, Fast & Furious Change Since 2000
60
70
80
90
POPULATION & GDP%
2
0
10
20
30
40
50
60
1960 1970 1980 1990 2000 2012
POP. Dev. Countries GDP. Dev. Countries POP. Emg. Countries GDP. Emg. Countries
Source : FMI / Morningstar
Long-term Shift : From Developed Countries to Emerging Countries
Leveraging and Doping in order to Stay in the Race
LEVEL OF DEBT / GDP IN 2012
3
Source : FMI / Banque de France / Fed / Eurostat / Morningstar
% Debt / GDP
Medium-term Shift : Deleveraging of the World is Underway
Low Demographic Growth, Low Economic Growth, Low Returns
STOCKMARKETS
Dow Jones Ind. Index since 1900 Source : Morningstar
Medium-term Shift : More Black Swans More often
Paradox : Lower Returns, Higher Risks
STANDARD DEVIATION
Standard Deviation of Dow Jones Ind. Index since 1950 / Source : Morningstar
1950 1960 1970 1980 1990 2000 2010
Medium-term Shift : An Inter-penetrated World
Increasing Correlation = Decreasing Diversification
LEVEL OF CORRELATION
0.4
0.5
0.6
0.7
Correlation of Indexes since 1990 (rolling period of 1 year) Source : Morningstar
0
0.1
0.2
0.3
0.4
Etats-Unis - France
Etats-Unis - Royaume-Uni
US / France
US / UK
1990 2000 2010
Short-term Shift : After Convergence, Divergence
Eurobonds Already Existed (Between 1998 and 2008)
10
12
14
16
Taux d'intérêts longs en %
Espagne
Italie
France
En %10 YEAR INTEREST RATES IN EUROZONE
Spain
Italy
France
7
0
2
4
6
8
France
Allemagne
Source : Morningstar
France
Germany
1993 1996 1999 2002 2005 2008 2012
Short-term Shift : The Flight to Liquidity, Security, Quality…
Bund as the Riskless Asset
12
14
16
18
20
OBLIG ZONE EURO INFLATION
10 YEAR GERMAN INTEREST RATES & INFLATION
German Bond Inflation
0
2
4
6
8
10
12
1982 1985 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
German Interest Rate and German Inflation Rate since 1982 - Source : Morningstar
Short-term Shift : The Japanese Scenario
Deflation, Recession, Ageing of the Population …
6
7
8
9
10
Japon
Allemagne
En % 10 YEAR INTEREST RATES IN GERMANY & JAPAN
Germany
Japan
9
0
1
2
3
4
5
6
oct.-
82
déc.
-83
févr
.-85
avr.-8
6
juin
-87
août
-88
oct.-
89
déc.
-90
févr
.-92
avr.-9
3
juin
-94
août
-95
oct.-
96
déc.
-97
févr
.-99
avr.-0
0
juin
-01
août
-02
oct.-
03
déc.
-04
févr
.-06
avr.-0
7
juin
-08
août
-09
oct.-
10
déc.
-11
Source : Morningstar
Consequence : 2012 = 2008/2009
Cash is King !
FUND FLOWS IN EUROPE
Monthly Fund Flows in Europe – OE Funds - Source : Morningstar
×Structurally : Solvency II, Basel III…
×Conjuncturally :
× Cash
× EBE : Everything But the Euro!
CATEGORIE APRIL 2012 YTD 2012
High Yield Debt USD 1 010 5 038
Corporate Debt GBP 713 2 611
Consequence : From Asset Management to Yield Management
Nothing but the Yield ! Everything but the Euro !
Corporate Debt GBP 713 2 611
Globales Bond 620 143
Emerging Debt Glob. 616 4 168
Emerging Debt Local Currency 491 2 702
High Yield Bond Hedge 483 4 375
Corporate Debt USD 476 1 934
Flexible Bond GBP 441 773
Flexible Bond USD 417 2 325
Bond CHF 395 1 475
Top 10 5 662 25 544
Others 62 Bond Categories 291 16 795
Catégories avec la collecte nette la plus importante en avril 2012 (millions d'euros) / Source : collecte nette Morningstar Direct.
40%
30%
20%
• Grece / 47.82%
Consequence : A New Hierachy of Risks
Corporate Bonds, Banks and Sovereign Debt
Exemple de taux actuariels – 5ans échéance 2017 en mars 2012 / Source : Morningstar
20%
10%
8%
6%
4%
2%
1%
0%
• France / 1.70%
• Ireland / 5.17%
• Italie / 4.33%
• Portugal / 13.78%
• Espagne / 4.80%
• Allemagne / 0.70%
• BNP Paribas / 4.11%
• Bank Tier 2 / 7.09%
• Bank Tier 1 / 12.23%
• Air Liquide (A) / 1.77%• Auchan / 1.96%• Bouygues / 2.20%• ENI / 2.74%
• Telefonica / 4.40%
Etats Banques Entreprises
• Renault (BB) / 4.57%
• Alcatel (B) / 7.51%
• Brésil / 2.01%
• USA / 1.01%
Consequence : Mainly a Crisis of Confidence
The Cash Run (in France) and the Bank Run (Spain, Greece…)
Livret A
Other Savings
Accounts CEL Cash Deposits Total (bn€) Diff
2007 140 258 38 246 682
2008 164 351 36 243 794 16%
2009 183 280 36 262 761 -4%
2010 186 281 36 269 772 1%
2011 197 294 36 275 802 4%
2012 214 309 36 285 844 5%
march-12 222 317 36 279 854 1%
900
CASH DEPOSITS IN FRANCE
Evolution des dépôts à vue et livrets réglementés chez les ménages français / Source : Banque de France
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 march-12
Consequence : High Returns for Safe Haven Assets
Gold, Swiss Franc, Govies…
TOP & BOTTOM CATEGORIES : SHORT, MEDIUM & LONG-TERM
Category / Risk Return (ann,) YTD (%) 3M (%) 1Y(%) 3Y%) 5Y(%) SD 3ANS
1 Gold 1,96 -5,48 5,37 16,17 15,69 23,42
2 Global Bond CHF 3,26 -2,53 1,57 18,02 13,27 10,72
3 Global Bond Hedge 4,84 -0,84 10,08 17,67 11,60 10,28
4 Bond AUD 1,77 -1,05 15,44 18,57 10,90 7,61
5 Global Bond Aggregate CHF 3,54 0,59 6,81 13,40 10,14 9,84
6 Bond CHF 5,28 1,45 5,57 14,10 9,75 10,43
7 Money Market AUD 0,36 -2,29 10,23 14,59 8,95 7,95
8 Global Bond 5,58 3,99 15,82 10,78 7,87 8,52
9 Aggregate Bond USD 7,28 7,30 23,24 12,40 7,71 12,36
10 Money Market CHF 1,20 0,46 1,57 8,38 7,51 9,86
11 Corporate Bond USD 8,49 6,52 21,96 13,78 7,28 11,35
223 Equity Small & Mid Caps France -5,10 -20,80 -37,57 4,81 -8,63 17,38
224 Equity Small Caps Europe 3,68 -10,19 -16,64 9,67 -8,87 17,14
225 Equity Large Cap "Value" Europe -2,55 -10,97 -13,77 3,63 -9,35 15,86
226 Equity Large Cap Euro -3,12 -13,50 -20,22 0,77 -10,05 18,07
227 Equity Large Cap France -2,10 -12,09 -21,39 -0,50 -11,09 18,02
228 Equity Spain -14,12 -17,08 -27,40 -4,22 -11,61 21,07
229 Equity Belgium 2,46 -7,58 -16,04 6,13 -11,84 14,42
230 Equity Polish -1,71 -16,04 -32,49 3,29 -13,42 26,15
231 Equity All Caps Euro -0,14 -11,56 -21,87 -1,44 -13,96 18,29
232 Equity Italy -4,56 -16,19 -28,78 -7,08 -16,86 19,82
233 Equity Greece -24,13 -29,58 -53,20 -31,35 -32,86 29,25
Performances sur 1 an, 3 ans et 5 ans des catégories Morningstar de fonds. Source : Morningstar / June 2012
Consequence : New Regulation at the Worst Possible Time !
Solvency II, Basel III, UCITS IV …
THE DECREASING OF THE EXPOSURE TO STOCKS : NOT ONLY A MARKET EFFECT !
15,00%
20,00%
25,00%
30,00%
Source : AF2i / Morningstar
0,00%
5,00%
10,00%
15,00%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
___ : % of Equity in the Asset Allocation by French Institutional Investors (base 100 in 1999)___ : CAC40 Index (base 100 in 1999)
Conclusion : A New Hierarchy of Opportunities ?
Opportunities for Experts in their Respective Fields
× Specialists in EmergingMarkets
× Specialists in Credit
× Specialists in Sovereign Debt
× Specialists in Risk Management, Volatility
× Specialists in Correlation/Decorrelation
…
× Specialists in Correlation/Decorrelation
×…
Conclusion : A New Hierarchy of Opportunities ?
Opportunities in Stock Markets ?
YIELD OF MAIN ASSET CLASSES
4%
5%
6%2012
Average 10Y
Source : Morningstar / End of June 2012
0%
1%
2%
3%
European Equities Bund 10Y Govies US 10Y Corporate Bonds (A) Euribor 3M
Chicago
Toronto
Amsterdam
Copenhagen
Bangkok
Hong Kong
Seoul
Shenzhen
Singapore
Taipei
Tokyo
Morningstar
Global Operations
Morningstar
×We’re a leading provider of independent
investment data and research.
×We serve clients globally through our
presence in North America, South America,
Europe, Asia, and Australia.
×Our 3,500+ employees work in
offices worldwide, offering local market Copenhagen
Frankfurt
London
Luxembourg
Madrid
Milan
Munich
Oslo
Paris
Stockholm
Zurich
Auckland
Sydney
Mexico City
Santiago
Sao Paulo
offices worldwide, offering local market
expertise.
×Since 1984, we’ve been recognized for
pioneering contributions to the investment
industry.
×Our global database includes
approximately 380,000 funds.
19