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CONVICTIONS

We remain neutral on the European equities driven by a negative technical analysis following the market appreciation since the beginning of the year.

ECB easing ignited currency war with major central banks adjusting rates lower. QE theme favours spread products. Fed in contrast still contemplates raising rates by mid-year.

FIXED INCOME

Focus on…

EUROPEAN EQUITIES GLOBAL EMERGING EQUITIES

MACROECONOMIC ANALYSIS

’’ ’’ Analysis of the markets environment & core scenario

GLOBAL MULTI-ASSET ALLOCATION

’’ Global green shoots justify an overweight position

in equities Strategic and tactical analysis and allocation

Conclusions of Natixis Asset Management monthly investment committee

March 2015

’’

We stick to our neutral stance on EM Equities. If the current wave of monetary easing is positive for emerging markets, as is the stabilization of commodities prices, we do not see at this stage any signs of positive momentum in economic indicators for EMs.

Recovery in the Euro zone with a non-orthodox monetary policy from the ECB

Document intended for professional clients

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Core macro scenario

The US economy remains on a robust path, but activity indicators appear slightly weaker than in the fall. This is particularly true of the ISM surveys and on orders for capital goods: we perceive a more limited pressure on the upside. This is not the case with the employment figures but we know that it is a lagging indicator compared to the cycle. Tensions are limited and it can be seen by a reduced rate of inflation but also by a breakeven inflation in 5 years 5 years well below 2%.

On macroeconomic data, surprises are rather positive since the turn of the year: retail sales in December and January, industrial production in January in both Germany and France. Certainly surveys have not yet look the same except perhaps in Italy where they reflect a renewed optimism. Spain also sends positive signals. The more robust outlook of the euro zone have to be found in part through the fall in oil prices. This will be maintained and be accentuated by the impact of the decline of the euro and the implementation of QE by the ECB.

The world index is improving modestly. With the exception of Great Britain, the indexes were little changed in February compared to January. The US ISM index continued to slide and in Japan there is a slight decline. The index of the euro zone was stable in February compared to January. The BRIC index has recovered slightly due to the return of China above 50.

The situation lacks of momentum on emerging side. The overall index rose slightly due to China and Russia whose indicator is less negative than in January. Note also that in Brazil the index contracts again after two months of improvement. The decline of the Indian index always causes a query between the adequacy of this measure and the new very optimistic Indian accounts.

Emerging Countries' surveys

The activity is accelerating in the euro zone. This is where we perceive positive surprises early this year, particularly on the consumer side. Eurozone gradually converges to a more robust trajectory. In the US, the situation remains strong even though recent indicators are not as strong as last fall, with the exception of employment. There are no pressures on inflation. That's a good reason to keep accommodative monetary policies. In emerging markets, the profile of activity including BRIC lacks of density. This means that the demand for commodities will remain limited and that prices will not rise again.

MACROECONOMIC ANALYSIS Economic research

The Chinese Economy

Euro Area economy

The American Economy

World Economy PMI/Markit and ISM Surveys

The Chinese economy has just readjusted downward all of its objectives for 2015. The expected growth rate will be only 7% (7.4% seen in 2014 with a target of 7.5%) and an inflation rate of 3% (against an average of 2% in 2014 and a target of 3.5%). Chinese internal dynamics is slowing. This can be seen by the sharp decline already seen in imports since the beginning of the year: -20% in January-February 2015 compared to the same month of 2014. The economic policy will remain flexible.

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Indicators

Source : Economic research / Natixis AM

Monetary policies

Source : Economic research / Natixis AM

Growth and inflation

Key interest rates

Focus

Inflation is low everywhere. This will not change quickly. The recent rebound in oil prices will not continue for 3 reasons: the sharp slowdown in China earlier this year is not going to reverse the slower trend in energy demand, inventories are high and continue to increase because production is still on the upside. This will prompt central banks to maintain accommodative monetary policy. This will be the case in Europe under the leadership of the ECB. The impact of its strategy, implemented for Euro Zone, will be major for all European countries. It will have a long lasting effect. The quantitative easing policy will weigh further on the euro and all yield curves in the area. European countries will have to adapt including the Bank of England. China will continue to ease monetary policy because its internal demand is reduced and the threat of deflation. In the US, the rise of the dollar is a key component of monetary tightening. The effective exchange rate of the dollar is at its highest since 2004. In the absence of inflationary pressures, resulting from imbalances on the labor market, the Fed will not intervene quickly, probably not in 2015.

Year end Monetary Policy Long Term Interest Rates (10 year)

2012 2013 2014 2015 2012 2013 2014 2015

USA 0-0.25 0-0.25 0-0.25 0.25 1.7 3 2.2 1.8-2.20

Japan 0.1 0.1 0.1 0.1 0.8 0.7 0.3 0.2-0.4

Euro Area 0.75 0.25 0.05 0.05 1.2 1.95 0.5 0.2-0.5

U.Kingdom 0.5 0.5 0.5 0.5 1.8 3.1 1.8 1.5-2

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Theoretical model portfolio

Favorable macroeconomic statistics confirm our scenario of a global cyclical rebound in the coming months and make us overweight equities.

GLOBAL MULTI-ASSET ALLOCATION

Investment and client solutions investment division

The views used as input for the model portfolio are consistent with specialist’s ones but may lead to different relative weighting versus benchmark compared to single asset class model portfolios.

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US consumer confidence stabilizes at a six-year high.

Financial markets

Fixed income

Equities

Currencies

Commodities

The hardening expectations of the Fed monetary policy has already brought up the US 10-year rate of about 50 bps since mid-January and should also impact the European core rate. This increase will be limited in the euro zone, despite historically low levels, given the very accommodative policy of the ECB.

We maintain our positive view on equities in the Eurozone driven by the effects of the euro drop on corporate profits forecasts and on more favorable macroeconomic conditions. However, the year to date strong performance (more than 17% for small caps) argues for partial profits taking.

Since the ECB action in January, the €/$ seems to have reached a floor to the level of 1.11. Meanwhile the macroeconomic indicators have still improved in the euro zone, uncertainty about the Greek situation is postponed and the situation in the US seems to change of paradigm, that’s why we are considering a consolidation movement on the parity.

The macroeconomic improvement in Europe, the fall of the risk perception concerning the Greek and Ukrainian situations, as well as the many rate cuts by central banks, including China, have helped to cyclical sectors to find colors again in February, at the expense of precious metals. The Brent seems to stabilize around $ 60, but the oversupply could still weigh on the short term prices.

Core scenario for global allocation

Global cycle

Ultra-low rates on government bonds fuel search for yield by global investors.

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10-year government bond yields

Source: Bloomberg

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90 92 94 96 98 00 02 04 06 08 10 12 14

US: consumer confidence (Conference Board)

Source: Bloomberg

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Market analyses & outlook

Our positions

MONEY MARKET RATES

MEDIUM AND LONG TERM INTEREST RATES

With no ECB's meeting in February, the QE announced at end-January stayed as the sole thematic really followed by the markets during the month, and this even despite the Greek "vicissitudes". Enhanced by the perspective of these important injections of liquidity, every "risked" markets of the Euro zone were favorably oriented. Money markets returns and credit spreads decreased again. But Eonia average for February fixed at minus 4bp compared to minus 5bps in January. In this context, our fixed and variable rate allocation target for "tactical" funds is again at 75%/25%. Portfolio diversification in corporates securities is still a major topic. Money market funds are allowed to acquire italian and spanish debt securities but no longer than 18 months.

FIXED INCOME Fixed income investment division

ECB easing ignited currency war with major central banks adjusting rates lower. QE theme favours spread products. Fed in contrast still contemplates raising rates by mid-year.

The start of ECB sovereign and agency bond purchases may keep a lid on yields and spreads for the remainder of the year. However, the size of intervention carries operational risks including collateral scarcity and long-term yields in negative territory. Indeed, 7-year Bunds trade at negative levels. Spreads in peripheral markets have narrowed considerably. The premium on Portugal 30-year bonds stands below 170bp despite a non-IG rating. We cannot rule out a correction this spring if the Fed indeed walks the tightening talk. US rate liftoff may occur in June. In the US, 10-year yields hover about 2.10% which we still view at below fair value (c. 2.37% on our models). The spread vs. alternative sovereign bonds still underpins Treasuries, all the more so nearly all G10 Central banks have undertaken monetary easing. In credit space, we observe more of the same. Negative German yields foster purchases of spread products to achieve positive returns. Corporate credit including high yield enjoy inflows. Covered bond spreads continue to shrink in response to heavy ECB buying (€51bn to date).

Following the announcement of the QE by the ECB, we estimative that the impacts could be significant on yields, particularly in Germany. Therefore we reinforced our exposure to peripheral debts because the convergence should also continue. Finally, we raised the global modified duration of our funds above their benchmarks.

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Positive view. We maintain a positive view on credit. Ahead of ECB’s quantitative easing, we are positive on Europe, banks, peripheral countries and long dated investment grade bonds. We will also invest selectively on short-dated hybrids, both non financials and financials, to squeeze out extra yield. Yield hunting is ever stronger in the current context where Euro government bonds with a negative yield now represent 32.5% of the outstanding market. ECB’s €1.1 tln Q.E. is expected to be large enough for this trend to carry on. The average spread over Libor of the Barclays Euro Aggregate Corp index tightened by 5bp over the month, to 51bp, equivalent to a positive performance of 0.58%.

Two month credit view

CREDIT

Sovereign portfolio

We still favour long bias in Core countries (France, Austria and Belgium) and reinforced our overweights on 10Y Italian and Spanish debts.

Convertibles: Positive view on 2015. based on equity factor, fair implied volatility and strong demand for this asset class. So we overweight the global delta. We prefer CB with a Mixed and Equity profile. On the short term we actively trade our positions in order to reallocate the money on the best performer. High Yield: We are positive on high yield for coming months. The quantitative easing initiation from the ECB in March should generate buyer flows on the crossover segment specifically and the high yield as a whole. Investors, looking for yield, should continue their rotation towards longer credits and /or lower ratings. Fundamentals are constructive still and the relative value remains attractive. We expect a spread tightening about 30bp over the next two months .

OVERVIEW 02/2015 03/2015

Duration - Euro:

- Slightly long

- Euro:

-- Long

Yield curve - flattening - flattening

Indexed bonds - Real

euro interest

rates: Neutral

- Real

euro interest

rates: Neutral

Country selection

core Overweight Overweight

semi-core Overweight Overweight

peripherals Overweight Overweight

View 02/

2015* 04/

2015* Sector view (IG)

02/ 2015*

04/ 2015*

Covered** + + Cyclicals = =

ABS + + Defensives = =

Corporate High Yield

+ + Financials + +

Corporate Investment

Grade + +

Banking (Subordinated)

+ ++

Banking (Senior) + +

Convertibles +/+ +/+ Insurance + +

* Applicable until

** One month view

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Our positions

Main related risks

This month, emerging market debt spreads tightened 40 basis points to 358 bps over US Treasuries, reversing the January widening. Year-to-date performance now reached +1.8% for the external debt while, on the other side local market still suffered from a strong USD and posted a 1.3% decline in February and a year-to-date performance of -1.0%. More stable commodity prices, sometimes very wide valuations for high yield issuers (Venezuela close or at recovery value), and some inflows into the asset class explained the better stance of the asset class, despite higher US yields over the month (10y yields up from 1.64% to 1.99%). Thus, global developments have been supportive for risk sentiment although the EM rating trend remained adverse, notably with Russia and Petrobras in Brazil. They both loss their investment grade rating. It did not come as a surprise however, with valuations already quite discounted over past months. Meanwhile, inflation downside surprises continued and emerging central banks kept easing, supporting local rate markets (but not currencies …). Renewed inflows into emerging market bond funds in February, combined with much higher credit amortisation in March ($ 10 bn for the sovereign versus $ 2.8 bn only in February) should continue to support the asset class in the coming month.

A sharp and prolonged sell off of commodities associated with downward revision of the global economy and a deterioration of the situation in Russia.

CORE SCENARIO

Developed bond yields are likely to remain low, although US bonds could see moderate upward pressures. Risk sentiment should stay supportive for spread products. We continue to overweight high yielders even if we know we will have to stomach volatility in the short run.

Emerging sovereign high yield spread versus emerging sovereign investment grade

GLOBAL EMERGING

TAUX EMERGENTS

Market analyses & Outlook

January spread widening has been reversed. Emerging market high yield issuers offset the impact of rising US yields on the asset class.

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Main related risks CORE SCENARIO

Our positions

Market analyses & outlook

Source: Bloomberg

MSCI Europe Small Caps DNR € / MSCI Europe DNR

EURO STOXX 50 / S & P 500 implicit volatility

Source: Bloomberg

EUROPEAN EQUITIES European equities investment division

We remain neutral on the European equities driven by a negative technical analysis following the market appreciation since the beginning of the year.

Deflation Risk in the Euro zone. Prices evolution in France. Consumption in Europe. Political situation in Russia

Despite an improving macro economic environment in Europe, we remain neutral on the European equities which become less attractive in terms of absolute valuation after the market appreciation. In terms of sector allocation we overweight Healthcare, Insurance, Telecommunications, Technology and Real Estate for the dividend yield. In the sector of the Discretionary consumption, we overweight Media and underweight luxury goods. We are neutral on Energy, Banks, Consumer staples, Capital goods and Utilities. We globally underweight the materials except chemicals and carton board . We favour the Euro zone and the small capitalizations.

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CORE SCENARIO

Our positions

Main related risks

Market analyses & outlook

GLOBAL EMERGING EQUITIES

Emerging region performances

& World Index (€ DNR, source MSCI)

Source: MSCI, Natixis AM – 02/27/2015

In February, oil prices coming back to the 60$ level fueled a market rebound of the largest producing countries such as Russia (+23.6%), Mexico (+8.1%) or the UAE (+9.3 %). In addition, the stabilizing PMI indicators in China, combined with the activism of monetary authorities, allowed the Chinese market to do well over the month (+ 3.9%). Apart from these markets, EMs overall are trailing behind (India and Korea notably), with a +3.72% return in February well below the +6.50% recorded by the MSCI World. Looking at regions, EMEA (+5.48%) outperforms thanks to Russia and Greece (+20.5%), followed by Latam (+4.84%) and Asia (+3.03%). Year-to-date, emerging markets (+11,89%) are performing in line with developed markets (+12,13%).

We stick to our Neutral stance on EM Equities. If the current wave of monetary easing is positive for emerging markets (China, Turkey in February), as is the stabilization of commodities prices, we do not see at this stage any signs of positive momentum in economic indicators for EMs. Moreover, the Q4 results season is currently below expectations, which puts questions on the attractive valuation argument for EMs.

• Renewed episodes of tensions on US Treasuries triggering outflows and weaker EM currencies.

• Weaker for longer commodity prices. • Overall inertia/deterioration in EM

macro data compared to DM. • Deteriorating investor sentiment

towards EM

From a pure fundamental point of view, the lack of positive momentum on economic activity (particularly compared to developed countries), combined with a Q4 earnings season so far below expectations, does not validate the attractive valuation argument for emerging markets. Moreover, the strong US dollar environment continues to be a drag on the performance of the asset class. Positive on: China, Mexico, Thailand and Turkey. Negative on : Brazil, Russia and Malaysia.

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(1) Source: Natixis Asset Management – 31/12/2014. (2) Seeyond is a brand of Natixis Asset Management (3) Mirova is a subsidiary of Natixis Asset Management. (4) Impact investing: investments with a strong social and environmental impact.

NATIXIS ASSET MANAGEMENT – In brief With assets under management of €313.3 billion and 648 employees(1), Natixis Asset Management ranks among the leading European asset managers. Natixis Asset Management offers its clients (institutional investors, companies, private banks, retail banks and other distribution networks) tailored, innovative and efficient solutions organised into 6 expertises: ■ Fixed income covers the entire European bond universe: money market, sovereign debt, credit, inflation, aggregate, convertible, etc; ■ European equities delivers active fundamental management and value approach in European large, mid and small cap stocks; ■ Investment and client solutions offers tailored products and services for global allocation, especially for institutional clients, large companies, banks and life insurance companies. ■ Global emerging equities provides active conviction-based management in equity emerging markets. ■ Structured and volatility, developed by Seeyond(2), offers innovative solutions that conciliate performance and risk reduction research through structured management, flexible asset allocation, active volatility management, model-driven and active protected equity management. ■ Responsible investing, (developed by Mirova(3)) offers a global responsible investing approach: equities, bonds, infrastructure, Impact investing(4), voting and engagement. Natixis Asset Management’s offer is distributed through the global distribution platform of Natixis Global Asset Management, which offers access to the expertise of more than twenty management companies in the United States, Asia and Europe.

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CONTRIBUTORS

Natixis Asset Management Limited liability company - Share capital €50,434,604.76 Regulated by AMF under no. GP 90-009 RCS Paris n°329 450 738 Registered Office: 21 quai d’Austerlitz – 75634 Paris Cedex 13 - Tel. +33 1 78 40 80 00 This document is intended for professional clients only. It may not be used for any purpose other than that for which it was intended and may not be reproduced, disseminated or disclosed to third parties, whether in part or in whole, without prior written consent from Natixis Asset Management. No information contained in this document may be interpreted as being contractual in any way. This document has been produced purely for informational purposes. It consists of a presentation created and prepared by Natixis Asset Management based on sources it considers to be reliable. Natixis Asset Management reserves the right to modify the information presented in this document at any time without notice, and in particular anything relating to the description of the investment process, which under no circumstances constitutes a commitment from Natixis Asset Management. Natixis Asset Management will not be held liable for any decision taken or not taken on the basis of the information in this document, nor for any use that a third party might make of the information. Figures mentioned refer to previous years. Past performance does not guarantee future results.

Michael AFLALO – Head of Institutional and network solutions - Investment and client solutions investment division Matthieu BELONDRADE – Head of Global emerging market equities – Global emerging equities investment division Philippe BERTHELOT – Head of Credit – Fixed income investment division Axel BOTTE - fixed income strategist – Fixed income investment division Emmanuel BOURDEIX - co-CIO of Natixis AM - Head of volatility and structured investment division (Seeyond) Olivier DE LAROUZIERE – Head of Fixed income – Fixed income investment division Laurence FRETILLE - Product specialist – European equities investment division Raphaël GALLARDO - Strategist – Investment and client solutions investment division

Ibrahima KOBAR - co-CIO of Natixis AM – Head of Fixed income investment division Brigitte LE BRIS - Head of International fixed income and currencies – Fixed income investment division Yves MAILLOT – Head of European equities - European equities investment division Franck NICOLAS – Head of Investment and client solutions – Investment and client solutions investment division Alain RICHIER – Head of Money markets – Fixed income investment division François THERET – Head of Global and emerging equities – Global emerging equities investment division Philippe WAECHTER – Chief economist - Economic research

Coordination: Investment and Client Solutions investment division of Natixis Asset Management – Natixis Asset Management’s Communications Department Source: Strategic Investment Committee

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