This document summarizes a workshop that took place on February 19, 2014 in Leuven, Belgium on the topic of asset management. The workshop covered various topics including: - An introduction to asset management and different asset classes such as equities, fixed income, alternatives, and money markets. - Key concepts in asset management like risk, volatility, diversification, asset allocation, benchmarks, and performance measurement. - Different types of fund management including mandates, UCITS funds, and examples of fund styles. - The document provides an overview of the content that was discussed at the workshop on investing and fund management.

1. Workshop KUL 19-02-2014
Investing in practice
Searching for the winning combination

2. Workshop KUL 19-02-2014
Content
1. Introduction to Asset Management
2. Asset classes
3. Key concepts
4. Fund management
5. ETFs and Index funds
6. Examples of fund & fund styles
7. Conclusion and Q&A

3. Workshop KUL 19-02-2014
1. Introduction to Asset Management

4. Workshop KUL 19-02-2014 | 02/20/14 |
BNP Paribas Investment Partners within BNP Paribas Group
BNP Paribas
Retail Banking
BNP
Paribas
Assurance
BNP Paribas
Wealth
Management
Investment Solutions
BNP Paribas
Securities
Services
Corporate and Investment
Banking
BNP Paribas
Investment Partners
BNP Paribas
Real Estate
4

5. Workshop KUL 19-02-2014 | 02/20/14 |
Who are we?
Global asset management leader
The 6th largest European asset manager with EUR 479 billion(1) in assets under management
and advice
Strong, diverse geographic presence
Competency focus and performance-driven culture with an international multicultural employee base.
Around 3 200(1) staff in 40 countries in Europe, Asia and the Americas
A multi specialist model
A global network of investment experts -’Partners’- offering one of the broadest and deepest
ranges of solutions in the industry with some 60 investment centres and boasting
around 700 investment professionals
Client focused organisation
Around 600 client facing staff serving institutional clients and distributors in 70 countries,
with five core markets in Europe (Belgium, France, Italy, Luxembourg, the Netherlands)
A rigorous investment approach
Fitch Ratings(2) Asset Manager rating: Highest Standards, Stable Outlook
ISAE Type II Report (previously SAS-70 certification) (3)
Backed by BNP Paribas Group
Backed by BNP Paribas Group, one of the best rated banks in the world (A+)(4)
Key features: financial stability, transparency, rigorous risk and compliance control
(1) So31/12/2013urce: BNPP IP, per 30 June 2013
(2) Source: Fitch Ratings April 2013: scope for IP includes BNPP AM, FundQuest Advisory and FFTW
(3) Source : Deloitte July 2012
(4) Source: Standard & Poor’s October 2012
5

6. Workshop KUL 19-02-2014 | 02/20/14 |
Who are we?
International, multi-cultural: Around 3 200 employees(1) in 40 countries
North America (5%)
New York
Boston
Chicago
Toronto
Latin America (4%)
Brazil
Mexico
Chile
Argentina
Colombia
Uruguay
(1) Source : BNPP IP as 31 December 2013
(2) EEMEA: Eastern Europe, Middle East and Africa
Europe (57%)
France
Belgium
UK
Netherlands
Luxembourg
Germany
Italy
Spain
Switzerland
Austria
Portugal
Greece
Nordics (4.5%)
Sweden
Norway
Finland
Denmark
EEMEA(2) (3.5%)
Morocco
Kuwait
Bahrain
Turkey
Russia
Asia-Pacific (26%)
Japan
China
Hong Kong
Singapore
Taiwan
South Korea
Indonesia
Malaysia
Brunei
India
Australia
IP Investment Centres
Distribution Centres
6

7. Workshop KUL 19-02-2014 | 02/20/14 |
A full circle of expertise
A core satellite model capitalising
on both specialist
and partnership capabilities
Multi-expertise investment
BNP Paribas Asset Management, the largest BNPP IP
Partner, encompasses the major asset classes with
investment teams operating around the globe.
Specialist investment partners
Specialists in a particular asset class or field (mainly
alternative and multi management), operating as boutiquelike structures.
Local solution providers
Local asset managers covering a specific geographical
region and/or clientele (the majority in emerging markets).
7

8. Workshop KUL 19-02-2014
Our clients: investors’ profiles
8

9. Workshop KUL 19-02-2014 | 02/20/14 |
Main players
Production
“Managing the
investments” (BNPP IP)
Administration
“Performing
back-office activities” (BPSS)
Distribution
“Selling products/services” (BNPP networks)
Retail
Research
• Information gathering
• Performance analysis
• Recommendations
Asset
allocation
• Investment decisions
• Trading orders
Marketing
• Value propositions • Product
• Advertising/
development
• Pricing
campaigns
• Marketing support
for clients
• Weighting asset classes
Portfolio
management
• Trade support (clearing
settlement)
• Accounting and administration
• Performance analytics
Institutional
Trading
Sales
• Trade execution
Client
service
• Branches
• Agents
• Telemarketing/
direct mail
• Etc
• Clients
presentations
• Prospects
generation
• Response to
• Client relationships
consumer inquiries management
• Reporting and
strategy
discussions
9

10. Workshop KUL 19-02-2014
Mandate/UCITS
MANDATE
Segregated account: Mandate or
dedicated fund: contract signed
between an Institution and the Asset
Manager for a bespoke portfolio.
–The client delegates of the assets to an
external manager
–The investment objectives, conditions,
restrictions and legal framework are
defined in the Investment Management
Agreement.
• An Umbrella Fund invests its assets in
different types of securities according to an
investment policy defined prior to the
inception date.
• The total assets are made up of various subfunds; each one of them is an independent
fund with its own management objectives,
portfolio of securities, net asset values and
specific conditions in which it may function.
• The shareholders can buy and sell shares
from the umbrella fund every day, based on
the real value of the assets which
determines the value of the shares (net
asset value - NAV).
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11. Workshop KUL 19-02-2014
Parvest
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12. Workshop KUL 19-02-2014
2. Asset Classes

13. Workshop KUL 19-02-2014
Individual securities vs investment funds
● Individual securities
– Issuer-linked / credit risk
– Liquidity risk
– Market risk / performance risk
– Return / risk
– Choice of security: buy & sell
– Transaction tax
– Custody fee
– Minimum subscription amount
– Limited access
● Investment funds
– Pooled assets
– Managed by specialists
– Advice / action related
– Transaction tax
– Management fee
– Custody fee
– Available form small amounts
– Regulated
– Transparency
– Easy access
– Advanced risk/return profile

14. Workshop KUL 19-02-2014
Can anyone buy ?
● MIFID
– Investor profile
– Investment experience
● Minimum capital required
● UCITS
– European legislation
– Funds registered for public offering

15. Workshop KUL 19-02-2014 | 02/20/14 |
Risk profile and investment horizon
Six main types of investment funds
TARGET RISK-RETURN
Equities
Alternatives
Diversified
Fixed Income
Money
Markets
1 D to 1 Y
1Y to 3 Y
3 Y to 5 Y
INVESTMENT HORIZON
15

16. Workshop KUL 19-02-2014 | 02/20/14 |
Traditional Vs Alternative Asset Classes
Traditional Assets
Alternative Strategies
Relative Strategies
16

17. Workshop KUL 19-02-2014 | 02/20/14 |
European Investment funds market
European Fund Market Calendar AuM (ex Fof in €Bn)
Market size :
€ 6 220 Bn
Source: Lipper FMI - May 2013
17

18. Workshop KUL 19-02-2014
3. Key concepts

19. Workshop KUL 19-02-2014 | 02/20/14 |
What is risk?
● Risk is generally interpreted as the uncertainty of future outcomes
● Uncertainty becomes greater as the variability of returns increases
12-month rolling volatility – June 2003 – June 2012
60%
Which is the riskiest
asset class?
50%
40%
30%
20%
10%
BUND
S&P500
MSCI EM
ENERGY
Precious Metals
EUR ICG
Euro HY
Dec 2011
Jun 2011
Dec 2010
Jun 2010
Dec 2009
Jun 2009
Dec 2008
Jun 2008
Dec 2007
Jun 2007
Dec 2006
Jun 2006
Dec 2005
Jun 2005
Dec 2004
Jun 2004
Dec 2003
Jun 2003
0%
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20. Workshop KUL 19-02-2014 | 02/20/14 |
Volatility
● Measures the dispersion of returns for a given security or market index. Volatility can
be measured by using the standard deviation or variance between returns from that same
security or market index.
● It’s used to measure the risk
greater potential loss.
A higher volatility implies higher potential returns but also
50
45
40
35
30
25
20
15
10
5
0
1
2
3
LOW VOLATILITY
●
4
5
6
7
8
HIGH VOLATILITY
Examples:
– A share X has a stable price around EUR100. The company announces good quarterly results. The price rises
to EUR105 then is stabilized around EUR103. The share is thus not very volatile.
– A share Y has a valuation of EUR100. The same benefits are published. The share has a rise of 25% and thus
gets to EUR125 and is stabilized to EUR120. The security Y is described as volatile.
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21. Workshop KUL 19-02-2014 | 02/20/14 |
21
Which is the riskiest asset class?
● Volatility is measured through the standard deviation of the returns
● Standard deviation is the measure of the dispersion of a set of data from its mean. The more
spread apart the data, the higher the deviation. Standard deviation is calculated as the square
root of variance (the sum of squared differences of each individual return from the average
return).
MSCI USA index
Jan 2000-October 2011
Barclays Capital US Aggregate Gov't
Jan 2000-October 2011
UBS Convertible Global Focus*
Jan 2000-October 2011
400
800
350
700
300
600
250
500
200
400
150
300
100
200
50
100
Source: Bloomberg, BNP Paribas Investment Partners
Volatility does not measure fat tail
risks (i.e. the risk of extreme and
unanticipated events)!
*Hedged in EUR
2.00%
1.60%
1.20%
0.80%
0.40%
0.00%
-0.40%
-0.80%
-1.20%
-1.60%
2.00%
1.60%
1.20%
0.80%
0.40%
0.00%
-0.40%
-0.80%
-1.20%
-1.60%
-2.00%
2.0%
1.6%
1.2%
0.8%
0.4%
0.0%
-0.4%
-0.8%
-1.2%
-1.6%
-2.0%
-
-2.00%
1,000
900
800
700
600
500
400
300
200
100
-

22. Workshop KUL 19-02-2014 | 02/20/14 |
Risk is not only about the volatility of returns…
● There are many different sources of risk: market risk, credit risk, illiquidity risk,
manager risk etc.
● All returns over cash exploit a sort of risk premium:
Default premium
Equity Premium
Liquidity premium
Term premium
Risk free return
Bond return
Loan return
Equity return
Greek Bond return
22

23. Workshop KUL 19-02-2014 | 02/20/14 |
The importance of diversification
● From year to year, there’s no telling which asset classes will be the best performers
Best to worst performing asset classes from top to bottom for the years 2002 to 2012.
Source: Allianz Global Investors and Morningstar Direct. Data as of 12/31/12.
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24. Workshop KUL 19-02-2014 | 02/20/14 |
The importance of Asset Allocation
● Asset Allocation is the single most important driver of returns
4.6%
2.1% 1.8%
Factors Explaining Dynamics of
Returns over Long Horizons
Source: BNP Paribas Investment
Partners, Ibbotson and Kaplan
91.5%
*Based on the study by Ibbotson and
Kaplan, 2000
Asset allocation
Security selection
Market timing
Other factors
The asset allocation decision explains up to 90% of portfolio returns*
24

25. Workshop KUL 19-02-2014 | 02/20/14 |
Types of asset allocation
● 3 types of asset allocation differentiated by investment horizon:
– Strategic Asset Allocation: define risk budget (long-term horizon)
– Dynamic Strategic Asset Allocation (“Smart Benchmark”): optimised use of risk budget (5-7 yr horizon)
– Tactical Asset Allocation: benefit from short-term market opportunities (3-12 months)
● The shorter the time horizon, the more flexible the asset allocation should be…
Tactical
Asset
Allocation
Dynamic
Strategic
Allocation
Strategic Asset Allocation
Source: BNP Paribas Investment Partners
Investment horizon
25

26. Workshop KUL 19-02-2014 | 02/20/14 |
Strategic asset allocation
Determining the appropriate risk level of the portfolio
Key considerations
Investment Horizon
Return target
Risk Aversion
The shorter the investment
horizon the less risk should
be taken
What is the minimum level
of return required over the
investment horizon?
Maximum annual loss
tolerance i.e. the investor
will not accept an annual
loss greater than x%
26

27. Workshop KUL 19-02-2014 | 02/20/14 |
Benchmark
● Benchmark: A standard allowing risk/return comparisons and against which the
performance of a mutual fund or investment manager can be measured. Either:
– An Index (ie. Dow Jones, CAC 40, S&P 500, etc.)
– Combination of several indices: synthetic index or composite (ie: BRIC)
– A reference rate (ie. EONIA, EURIBOR, LIBOR…)
CUMULATIVE PERFORMANCE
200
B NPPARIBAS A S L1 E qui ty tB es t Sel ecti on E urope (sCl as si c)
BNP P A RI B L1 Equity Bes Selec tion Europe (Clas ic)
MSC I Europe Net Return Index (v)
175
150
125
117.59
117.59
117.22
100
75
'04
'05
'06
'07
'08
'09
'10
● Tracking-error: the divergence between the performance of a portfolio and that of
the associated benchmark. Higher tracking error means higher risks taken by the
portfolio manager.
27

28. Workshop KUL 19-02-2014 | 02/20/14 |
Performance
● Beta Vs Alpha: Distinction between performance coming from structural
exposure to the market and active management from the portfolio manager
Portfolio
=
Market
Exposure
Beta (β)
+
Active
Management
Alpha (α)
● Net Asset Value (NAV): A fund's price per share:
– The per-share amount of the fund is calculated by dividing the total value of all the securities in
its portfolio, less any liabilities, by the number of fund shares outstanding.
– The performance is measured according to the historical series of NAV.
– NAV per share is computed in general once a day based on the closing market prices of the
securities in the fund's portfolio. All mutual funds' buy and sell orders are processed at the NAV
of the trade date. However, investors must wait until the following day to get the trade price.
28

29. Workshop KUL 19-02-2014 | 02/20/14 |
Standard Investment Process
● Various parties involved in the investment process:
– Strategists and research analysts, portfolio managers, traders, brokers
● Consecutive steps in the portfolio construction and placement of orders:
Investment Process
Fund Manager
Strategy Team
- Macroeconomic
Outlook
- Research and Analysis
- Portfolio implementation
- Risk Management
- Placement of orders
Asset Manager
Dealing Desk
Broker
- Concentration of orders
- Negotiation of prices
- Best-execution policy
- Execution of the orders
- Information and
research provider
External Providers
Risk control in every step of the process
29

30. Workshop KUL 19-02-2014
4. Fund management

31. Workshop KUL 19-02-2014
Fund management
● Many styles exist, many methodologies for fund management have been
developed:
– Active / passive
– Benchmark tilted / free
– Systematic-Quantitative / Qualitative
– Manager styles
– Investing in synthetic instead of ‘real’ underlyings
● BUT alpha-diversification is key !
– Style performances depend on market situation
– Combining manager skills and methodologies increase potential performance

32. Workshop KUL 19-02-2014
Synthetic products vs ‘real’ underlyings
● Many synthetic products are used for risk hedging or portfolio positioning, e.g. in
fixed income
Fixed Income risks
Interest rates
Interest rates
Hedging
Interest rate swaps (IRS) are contracts where floating payments can be
received in exchange of pre-defined fixed amounts.
Bond futures are used to purchase or sell government bonds on a
given forward date at predetermined price.
Credit
Credit
Foreign Exchange
Foreign Exchange
Credit Default Swap (CDS) protect investors from credit events on
specific companies (or countries) against a stream of fixed payment.
FX forwards enable investors to buy or sell on a forward date a given
currency against another currency at a predetermined rate.
If derivatives are used for hedging purposes, they can also be used to
take directional exposures or to implement relative value strategies.

33. Workshop KUL 19-02-2014
Synthetic products vs ‘real’ underlyings
● Synthetic products need to be treated carefully:
– Volatility / risk possibly higher  focused risk
– Leveraging
– Not accessible to all investors
● But in the hands of specialists they are crucial instruments … in fund management
and risk hedging
● Synthetic products can also be used in the management of ETFs and indexed
funds and are used in the light of structured funds (with capital protection)

34. Workshop KUL 19-02-2014
5. ETFs and Indexed funds

35. Workshop KUL 19-02-2014
Indexed Funds vs. ETFs
Indexed Fund
1976
First vehicle launched in
ETF
1993
Trading
-Daily creation and redemption at NAV
-Trade any time during the stock exchange opening hours
Price information
-Daily NAV
-Real time price, quoted in the stock market
Bid/Offer spread
-No
-Yes
-Strategic allocation, suitable for core investment
-Tactical flexibility possible: short selling, transition
management, intra-day trading, cash management, etc.
- Advanced trading strategies: options on ETFs
Strategy
- Different share classes and fee levels
Fees
Adapted to:
- Total cost of ownership of institutional share classes
not always higher than for ETFs
• Large investments with medium to long
term horizons
• Retail investors who do not need intraday
liquidity
- Management fee: same for institutional and retail clients
• Tactical allocation
• Short-term views
• Gain quick exposure
35

36. Workshop KUL 19-02-2014
Comparison of the 3 replication methods
Synthetic Replication
Cash Replication
Full replication
Constraints
 Investable underlying / Market
access

Advantages
Optimized replication
 Investable underlying / Market access
 Requires an OTC market
Important minimal size
 Simple and straightforward
implementation
 Allows cash replication of large
indices
 Fiscal constraints (stamp duties, PEA)
 Reduced TE

Enlarged choice of replicated indices (e.g.:
emerging equities, commodities, double-short)
 High level of transparency
Disadvantages
 Not always cheaper than full replication
 Less flexible: swap to be rolled at maturity
 Tracking error potentially higher
 Rebalancing costs
 Cost of the swap, impacts fund performance
 Performance and TE depend on a model
 Risks associated to the underlying
exposure
Risks
 Risks associated to the underlying exposure
 Risks associated to the underlying exposure
 Model risk
 Counterparty risks linked to
securities lending (limited to 25% of
the assets for PEA* funds)
 Counterparty risks linked to securities lending
(limited to 25% of the assets for PEA* funds)
 Limited and well identified counterparty risk:
swap value limited to a maximum of 10% of
the NAV
 Collateral risk
36

37. Workshop KUL 19-02-2014
37
Expert in all replication management methods
Full
Replication
Inventory
=
Optimised Replication
Index
 The fund manager buys all the securities
within the underlying index in respective
proportions
 Rigorous rebalancing, corporate actions &
FX risk management
 Various enhancement techniques allows to
offset part of the costs
Semi-Index
…
Index
 The fund manager buys a sample of
the securities within the underlying
index in order to replicate the index as
closely as possible
 Model based
 Various enhancement techniques
allows to offset part of the costs
 Securities lending
 Securities lending
 Dividend optimization
Synthetic Replication
Money Market
or
Basket of
stocks
Swap:
- asset
+ index
Index Perf.
 The fund manager enters into a transaction
with a swap partner
 Depending on whether the index is stock or
bond index, the fund manager buys a basket
of shares or bonds and then swaps its
performance for that of the index
 Counterparty risk is limited to 10% of the total
Assets of the ETF
 Dividend optimization
37

38. Workshop KUL 19-02-2014
Synthetic replication process
Counterparty
ETF
Inventory of synthetic structures
Max. 10%
Derivatives
Inventory
• US or EUR money market instruments (min. AA rating,
average 3 months duration)
or Euro zone stocks
• Derivatives and mutual funds up to 10%
The ETF pays the
performance of the
basket
Transparent
Inventory
Money
market
instruments
–
Performance
Swap
Euro zone
stocks
The ETF gets the
performance of the
replicated index
Index
Swap features
● Open architecture, MIFID
● Maximum maturity: 12 months
● Limited counterparty risk (reset at any time + early
termination option at any time)
● Minimum rating for the counterparties: A1- P1
● Strictly controlled counterparty list
Inventory available upon request

39. Workshop KUL 19-02-2014
39
Risk Mitigation on synthetic funds
• The SWAP replication structure introduces counterparty risk, limited to 10% of fund assets under the UCITS regulation
• The ability to negotiate swap terms is a matter of utmost importance, the swap being an OTC instrument

Open architecture swap bidding process, including multiple counterparties

Strict eligible counterparty list monitored by the Risk Management department
 BNPP IP’s counterparty risk management process requires careful counterparty selection, monitoring and review
 Particular focus is given to the creditworthiness, operational efficiency, best execution capacities, and liquidity
providing capacities of the counterparty

Leverages on the qualified expertise and extensive resources of the Structuring team to negotiate swap terms

Swap renegotiated every 6 to 12 month

Early termination options (without any notice period) allows to rapidly withdraw exposure to a given counterparty

Funds holdings composed of UCITS eligible securities with high liquidity :
 For Equity EasyETFs, the funds invest in Eurozone large capitalization stocks (stocks of the Euro Stoxx 50 index)
 For Commodity EasyETF, the fund invests in 3-months US treasury bills

Fund holdings and counterparty list available upon request

40. Workshop KUL 19-02-2014
6. Examples of fund & fund styles

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Best Selection Equity Europe

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Three key pillars
A differentiated approach to fundamental long term investment
•
A long-term stock picker
– 3 to 5 year holding period
– ‘Straw hats in winter’ idea generation
•
Play to our strengths – fundamental research
– In-depth fundamental research undertaken by a large and experienced team
– Peer review decision making process
– Risk budget allocated appropriately
•
A focus on industry structure
– Identify and invest in companies offering a sustainable competitive advantage in wellstructured industries

43. Workshop KUL 19-02-2014
Investment philosophy
The importance of industry structure in practice: the Herfindahl-Hirschman Index
● The key to assessing the strength and sustainability of a company’s earnings profile is to
understand the structure of that company’s industry. Companies that operate in well-structured
industries have a greater ability to generate attractive and sustainable excess returns, and can do
so with less risk
● The European Equity Select team uses the Herfindahl-Hirschman Index (HHI*) to assess the quality
of an industry’s structure. This index is used by the US Department of Justice to help “properly
define and measure industry concentration”
“A merger is unlikely to create or enhance market power or to facilitate
its exercise unless it significantly increases concentration and results in
a concentrated market, properly defined and measured”
US Department of Justice Horizontal Merger Guidelines
*HHI is defined as the sum of the squares of the market shares of each individual firm and can range from <1 to 10,000, moving from a very large
number of very small firms jostling for market share to a single monopolistic producer dominating the market.

44. Workshop KUL 19-02-2014
Investment philosophy
Practical application of the HHI
Global beer industry structure and profit margins of market leaders by country
Source: BoA Merrill Lynch and BNP Paribas Asset Management, January 2012
For illustration purposes only.
44

45. Workshop KUL 19-02-2014
Investment process
Overview
Idea generation
HHI
industry
structure
‘Straw
hats’ in
winter *
Risk
Management
screens
BNPP IP
global
research
Industry analysis
Company analysis
not at ne ml p m
i
e I
Stock risk
management
Stock knowledge
Industry structure
Peer scrutiny
DCFs / models
Peer review process
Portfolio risk
management
Portfolio construction
Risk mgt systems
Sector limit
Stock limit
*‘Straw hats in winter’ = a contrarian approach, focusing on out-of-favour industries.
45

46. Workshop KUL 19-02-2014
Overall performance
Parvest Equity Best Selection Europe cumulative performance from February 2008 to January
2014
Parvest Equity Best Selection Europe cumulative performance (gross of fees)
160
32%
Cumulative excess return (RHS)
Best Select Europe (LHS)
*
MSCI Europe NR (LHS)
140
27%
22%
120
17%
100
Outperformance in
both declining and
rising markets
80
7%
60
2%
40
-3%
Source: BNP Paribas Asset Management (Gross of fees performance, end
January 2014, In Euro)
Past performance is not indicative of current or future performance
•Benchmark applicable from 01 January, 2009: MSCI Europe (NR) Index (€).
Previous benchmark : MSCI PAN-EURO (NR) Index
•On May 17th 2013, BNP Paribas L1 Equity Best Selection Europe was
transferred into a sub-fund of the PARVEST Luxembourg SICAV, creating
PARVEST Equity Best Selection Europe
•All performance and risk indicators numbers presented in this document
prior to May 17th 2013 are those of the former BNP Paribas L1 Equity Best
Selection Europe
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n
i
u
j
2
1
t
û
o
a
2
1
.
t
c
o
2
1
.
c
é
d
3
1
.
r
v
é
f
3
1
.
r
v
a
3
1
n
i
u
j
3
1
t
û
o
a
3
1
.
t
c
o
3
1
.
c
é
d
0
1
t
x
d
I
c
n
a
m
o
f
r
e
P
12%
46

47. Workshop KUL 19-02-2014
Quantitative fixed income

48. Workshop KUL 19-02-2014
Example : BNPP B Control Quam Dynamic Bonds
What is it ?
DYNAMIC BONDS PORTFOLIO
Uses the full fixed income universe, from money market to high yield and
convertible bonds
 Fund of funds, open architecture
 Regular rebalancing's, dynamic asset allocation
Purely based on a quantitative strategy : tracking momentum whilst
controlling risk
 Risk in line with a classic fixed income fund, flexibility much higher
48

49. ASSET ALLO CATION
Workshop KUL 19-02-2014
100%
80%
60%
40%
20%
0%
2000
Max
Average
Min
2001 2002
MoneyMarket
Global
Corporate
Money
Market
100.00%
6.35%
1.12%
MediumS hort Term
29.08%
1.69%
0.00%
Flexible
Simulations
2003
2004
Absolute
return
42.83%
4.69%
0.00%
2005 2006 2007 2008
Medium-Short Term
Long duration
High Yield
Global
5.13%
0.37%
0.00%
2009
2010 2011 2012
Absolute return
Convertible
Emerging Markets
Long Term Convertibles Corporate
96.64%
34.51%
0.00%
Adaptable
55.16%
7.47%
0.00%
High Yield
43.15%
3.94%
0.00%
Control
82.83%
18.83%
0.00%
Emerging
Markets
67.46%
22.14%
0.00%

50. Workshop KUL 19-02-2014
DYNAMIC BONDS UNIVERSE
3 YEAR ROLLING RETURN
TRADITIONAL FI UNIVERSE rolling 3 yr returns
Short/Medium Term
Government
BNP Paribas B Fund II QuAM Bonds
50%
Inflation linked
Absolut Return
Long Term
Dynamic Bonds
42.0
%
40%
30%
24.4%
20%
10%
14.6%
0%
-10%
2003
5.1%
2004
2005
Dynamic Bonds
Max
Min
41.98%
5.05%
2006
2007
2008
2009
2010
BNP Paribas B Fund
S hort/
II QuAM Bonds
Medium Term
14.63%
17.67%
5.99%
3.98%
Consistentency
Concentration
Vs. dispersion
2011
Inflation
linked
23.74%
-1.27%
6.0
%
1.3%
2012
Long Term
Government
23.81%
0.03%
24.39%
2.20%
Absolut
Return
23.56%
4.43%
Asymmetry
Bron: ETS

51. Workshop KUL 19-02-2014
DYNAMIC BONDS UNIVERSE
HIGHER RISK FI UNIVERSE rolling 3 yr returns
3 YEAR ROLLING RETURN
Emerging Markets
Convertibles
Corporate
Dynamic Bonds
High Yield
BNP Paribas B Fund II QuAM Bonds
84.0%
70%
42.0
%
20%
14.6%
5.1
%
-30%
2003
2004
2005
2006
2007
2008
2009
2010
2011
6.0
%
2012
-25.6%
Dynamic Bonds
Max
Min
41.98%
5.05%
BNP Paribas B Fund
II QuAM Bonds
14.63%
5.99%
Consistency
* Results Dynamic bonds based on simulations
Emerging
Markets
60.58%
-6.99%
Concentration
Vs. dispersion
Corporate
High Yield
Convertibles
37.77%
-11.33%
84.04%
-25.63%
40.03%
-20.10%
Asymmetry
51

52. Workshop KUL 19-02-2014
The GURU methodology

53. Workshop KUL 19-02-2014
GURU methodology and construction: The investment process
Uniform methodology for all regions: Combining the advantages of both active and passive investments
Advantage of Active
Investments:
Advantage of Passive
Investments:
Transparency and
systematic approach
Selection of companies
Universe
Selection
1
2
Company
Selection
3
Liquidity
Profitability
Simplicity
Selection of the most liquid
securities in every region
●Is the company
profitable?
●Profitability, perspectives and
valuation are of equal
importance in the company
selection process
1/3
Europe
●
US
Prospects
●
Asia (ex Japan)
●
Global Emerging
●Is the company
going the right way?
●
I S AB E HT OT KCAB
●
Global Developed
●
All Countries
1/3
Valuation
1/3
●Is the company
a good bargain?
The GURU
Strategy
Portfolio
Construction
Liquidity
●Monthly rebalancing of a
fraction of the portfolio
‘Long Only’ GURU indices
●US
●Europe
●Asia ex Japan
●Global Emerging
●World Developed
●All Country
‘Long/Short’ GURU indices
Risk Control
●US
●Volatility control
mechanism
●Europe + US
●Europe

54. Workshop KUL 19-02-2014
GURU “Long only” approach
Example company scores (as of end of December 2013)
"To me, it's obvious that the winner has to bet very selectively. It's been obvious to me since very early in life. I don't
know why it's not obvious to very many other people."
(Charlie Munger)
●
A balanced approach based on analyzing companies’ fundamentals according to three groups of criteria:
–
–
–
Profitability
Prospects
Valuation
10.0
10.0
10.0
10.0
10.0
EPS
mom.
9
8
10
10
8
Price
mom.
10
10
9
9
10
Info
ratio
9
9
9
10
10
10
10.0
9
8
9
10
9.0
10.0
9
10
10
10.0
8
8.0
RoEA
Fresenius
Roche Holding
Reed Elsevier
Next
Anheuser-Bush Inbev
Distribubidora Intnac.
de Alimentacion
Grifols
Novo Nordisk 'B'
Intercontinental Hotels
Group
William Hill
Profitability
10
10
10
10
10
Indices
Number of securities in the final selection
Prospects
PEG
9.3
9.0
9.3
9.7
9.3
6
8
6
7
6
EV/EBIT
to Gth
5
5
3
2
3
8
8.3
7
10
10
10
10
9.7
10.0
8
10
9
9
10
10
GURU US
40
P/FCF
Valuation
9
7
10
8
9
6.7
6.7
6.3
5.7
6.0
GURU
Score
8.67
8.56
8.56
8.44
8.44
21.0%
15.3%
19.7%
20.0%
21.8%
GURU
Europe*
1
1
1
1
1
7
5
6.3
8.22
32.5%
1
9
7
7
3
2
3
6.0
4.3
8.22
8.11
32.6%
21.4%
1
1
9.0
3
3
9
5.0
8.00
24.8%
1
9.7
3
9
6.0
7.89
22.2%
1
GURU Europe, GURU Asia ex Japan, GURU Emerging
6-mth Vol
GURU Developed, GURU All Country
30
*A “1” in the GURU Europe column means that the stock has been selected for the month, if there is a “0”, it means that the stock has not been selected for the monthly selection.
Sources: BNP Paribas and Bloomberg. For illustrative purpose only, subject to change. Scoring scale from 0 to 10 for columns RoEA to Valuation
50

55. Workshop KUL 19-02-2014
Historical performance and risk analysis of the fund
THEAM Quant Equity Europe Guru vs. traditional benchmarks*
225
205
185
The Fund THEAM Quant Equity Europe
Guru based on the strategy index BNP
Paribas Guru Equity Europe Long was
launched on 7 May 2009.
THEAM Quant Equity Europe Guru
STOXX Europe 600
Euro Stoxx 50
165
145
125
105
85
* Source: Bloomberg, BNP Paribas as of 30 December 2013. Fund performance is expressed net of management fees and in EUR.
Past performance or achievement is not indicative of current or future performance.
May 09 – December 13
Cumulative performance
Annualised return
Volatility
Sharpe ratio
Information ratio
Beta
Tracking Error
Historical VaR 95% (5 working days)
Historical VaR 95% (1 year)
Max Drawdown
Corresponding period
Recovery time (in days)
THEAM Quant Equity Europe Guru
STOXX Europe 600
Euro Stoxx 50
103.54%
16.49%
18.93%
0.85
0.48
1.02
0.06
-3.85%
-0.12
-28.46%
Jan. 2011 - Oct. 2011
302
82.18%
13.75%
17.77%
0.75
-3.59%
-0.10
-24.41%
Feb. 2011 - Sep. 2011
236
50.42%
9.17%
22.78%
0.38
-4.81%
-0.20
-33.26%
Feb. 2011 - Sep. 2011
408
* Source: Bloomberg, BNP Paribas as of 30 December 2013. Historical performances of share A - EUR since May 2009. Past performance is not a reliable indicator of future results. Fund performance is expressed net of management
fees. The Fund is launched since 7th of May 2009. Benchmarks: Stoxx Europe 600, Bloomberg code: <SXXR Index>. Euro Stoxx 50, Bloomberg code: <SX5T Index>.

56. Workshop KUL 19-02-2014
Low Volatility Equity investing

57. Workshop KUL 19-02-2014
Do high risk stocks generate higher returns?
Empirical evidence (based on average returns)
Global Universe, MSCI World Index – in USD
Low volatility stocks have higher Sharpe
ratios than higher volatility stocks
The same applies to other regions: USA, Europe,
Japan, Emerging Markets, Asia (ex Japan), etc.
Sharpe 0.70
Ratio
0.60
Sharpe Ratio of stocks ranked by volatility into equally weighted quintiles
Global Universe: Jan 95 - Dec 10
0.50
0.40
0.30
0.20
0.10
-
Annualised returns
Excess Return over cash rates (%)
Volatility (%)
Sharpe Ratio
1 - Low Vol
2
3
4
8.6
13.9
0.61
8.2
16.7
0.49
9.1
18.9
0.48
7.9
21.5
0.37
Source : BNPP IP, MSCI, Exshare
5 - High Vol
9.4
27.4
0.34

58. Workshop KUL 19-02-2014
The Volatility Anomaly goes beyond defensive sectors
Empirical evidence (unpublished results based on average returns)
● The low volatility anomaly can be found across the board within global sectors
Global universe, developed countries, Jan 95 - Dec 11
1.0
0.9
1.0
Sharpe ratio
Low vol deciles
all
High vol deciles
0.9
0.8
0.5
0.4
0.4
0.3
0.3
0.2
0.2
0.1
0.1
0.0
High vol deciles
0.6
0.5
all
0.7
0.6
Low vol deciles
0.8
0.7
Sharpe ratio
0.0
CONS DISC
Annualised return
Volatility
low vol
10.5%
13.6%
CONS STAPLES
high vol
11.1%
31.4%
low vol
13.2%
10.6%
high vol
9.7%
20.7%
ENERGY
low vol
17.4%
16.3%
high vol
18.3%
41.8%
FINANCIALS
low vol
11.8%
12.9%
high vol
11.9%
56.3%
HEALTH CARE
low vol
12.8%
12.3%
high vol
14.2%
33.1%
INDUSTRIALS
low vol
11.6%
12.4%
high vol
5.3%
30.3%
INFO TECH
low vol
12.9%
17.3%
high vol
9.0%
49.1%
MATERIALS TELECOM SCVS
low vol
12.1%
15.7%
high vol
18.1%
32.7%
low vol
15.8%
17.2%
high vol
11.8%
48.6%
The least volatile stocks have higher Sharpe ratios in all the 10 GICS sectors
Average Sharpe Ratio across sectors
Lowest volatility decile: 0.68
All deciles: 0.45
Highest volatility decile: 0.25
Source: BNPP IP, MSCI, Exshare.
UTILITIES
low vol
13.5%
12.3%
high vol
14.5%
31.5%

59. Workshop KUL 19-02-2014
Investment process
A systematic investment process, aiming at controlling the tracking error risk rather than
minimising absolute volatility
Portfolio Construction
Beginning Universe
Application of
constraints
Low Volatility Universe
High
Low
Consumer Discretionary
Consumer Staples
Energy
Portfolio Implementation
10%
10%
Screening
10%
Optimisation
1. Long- only constraint
2. Weights of stocks
Finance
10%
Health Care
10%
3. Beta constraint
Industry
10%
4. Turnover constraint
Information Technology
10%
Telecommunication
Specific event risk
10%
Utilities
Execution
and
controls
10%
Materials
Final portfolio
10%
Liquidity
Risk assessment
Monthly rebalancing
Characteristics
Exposure to equities
Risk reduction objective
Tracking error
100%
20% vs. MSCI World
5% to 7%
Max. stock weight
Beta ex-ante
Turnover (monthly)
2%
0.8
8% (100% p.a.)

60. Workshop KUL 19-02-2014
Parvest Equity World Low Volatility
Performance since implementation of the strategy (April 1st 2011)
PERFORMANCE
Cumulated
Annualised
RISK
Monthly annualised
Tracking Information
Volatility
error
ratio
1M
3M
YTD
1Y
2Y
3Y
Since
inception
29/11/2013
30/09/2013
31/12/2012
31/12/2012
30/12/2011
31/12/2010
31/03/2011
31/12/2013
31/12/2013
31/12/2013
31/12/2013
31/12/2013
31/12/2013
31/12/2013
Parvest Equity World Low Volatility
0.98%
5.13%
17.20%
17.20%
14.28%
-
12.96%
7.79%
-
-
MSCI World Net Return Index
0.90%
6.10%
21.20%
21.20%
17.54%
-
11.88%
9.07%
5.02%
0.22
31/03/2011 - 31/12/2013
Returns gross of fees in euro
● Returns are in line with our expectations, in a bullish but uncertain market, mainly driven by macroeconomic data
● Our stock selection based on the least volatile stocks has been profitable
● Since inception of the strategy, the fund has outperformed the market cap index with lower risk
Source: BNPP IP, as of 31/12/2013
Performance gross of fees in EUR. Past performance is not an indicator to the current nor future performance.

61. Workshop KUL 19-02-2014
GURU and Low Vol combination
An example of alpha-diversification

62. Workshop KUL 19-02-2014
Guru and Low Vol offer complementary systematic strategies
● Low Vol is a defensive process (less volatile than the benchmark)
– It’s over-performance is based on the “Low Vol Anomaly” factor
– Low Vol All country is reconstructed by combining the 2 flagships : Low Vol developed and Low Vol
Emerging
● Guru is a high conviction process (more volatile than the benchmark)
– It’s over-performance is based on Value, Momentum and Profitability factors
– Guru is the All Country version used in the flagship
● The only common point of the 2 systematic strategies is to consider that
classical “benchmarked” investing is sub-optimal.
● A combination of the 2 should however compare favorably to benchmarks, since
both are an improvement and of a different type…

63. Workshop KUL 19-02-2014
A 50% repartition doubles returns of the bench, at similar risk
Past 10y Risk and Return Profiles
Return
(in USD, yearly, gross of fees)
Based on MSCI All Country, Monthly data from Dec 2002 to Dec 2013, in USD, gross of fees, annualized
Risk
(annual volatility ex-post)

64. Workshop KUL 19-02-2014
On a yearly basis, years of global underperformance are rare
In the last 10 years, only 2012 would have been underperforming (before fees)
Monthly data from Dec 2002 to Dec 2013, in USD, gross of fees, annualized

65. Workshop KUL 19-02-2014
7. Conclusion and Q&A

66. Workshop KUL 19-02-2014
Investing in practice
● Investing is more than just equities or bonds only
● Risk profile and investment horizon of the investor are key elements for an
investment decision
● Risk of the different asset classes has an important impact on the asset
allocation of the investor’s portfolio
– Diversification is key
– Both synthetic and ‘real’ underlying instruments can be used to build a portfolio
● Different management styles are complementary

67. Workshop KUL 19-02-2014 14/10/2013
Disclaimer
This material has been prepared by LEARN SAS¹ for licensing to BNP Paribas Asset Management S.A.S. (“BNPP AM”)², a member of BNP Paribas Investment Partners (BNPP IP)³ .
This material is produced for information purposes only and does not constitute:
1.
an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or
2.
any investment advice.
This material makes reference to certain financial instruments (the “Financial Instrument(s)”) authorised and regulated in its/their jurisdiction(s) of incorporation.
No action has been taken which would permit the public offering of the Financial Instrument(s) in any other jurisdiction, except as indicated in the most recent prospectus, offering document or any other information material, as
applicable, of the relevant Financial Instrument(s) where such action would be required, in particular, in the United States, to US persons (as such term is defined in Regulation S of the United States Securities Act of 1933).
Prior to any subscription in a country in which such Financial Instrument(s) is/are registered, investors should verify any legal constraints or restrictions there may be in connection with the subscription, purchase, possession or
sale of the Financial Instrument(s).
Opinions included in this material constitute the judgment of LEARN SAS at the time specified and may be subject to change without notice. LEARN SAS is not obliged to update or alter the information or opinions contained
within this material. Investors should consult their own legal and tax advisors in respect of legal, ac-counting, domicile and tax advice prior to investing in the Financial Instrument(s) in order to make an independent
determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no
assurance that any specific investment may either be suitable, appropriate or profitable for a client or prospective client’s investment portfolio.
This document is directed only at person(s) who have professional experience in matters relating to investments (“relevant persons”). Any investment or investment activity to which this document relates is available only to
and will be engaged in only with Professional Clients as defined in the rules of the Financial Services Authority. Any person who is not a relevant person should not act or rely on this document or any of its contents.
¹ LEARN SAS (www.learn.fr) is a training & consulting company registered in France under number 750 820 037
² BNPP AM is an investment manager registered with the “Autorité des marchés financiers” in France under number 96-02, RCS Paris 319 378 832.