Ef euro bond inglese

Excess Return on the Euro

October 2012

Presentation prepared for Eurizon Capital SA

Excess Return on the Euro Bond sector

with lower volatility

EF Euro Bond I vs JP Morgan Emu Govt Bond Index (Eur)

Excess return and lower volatilityWith respect to the euro bond sector

Epsilon Fund Euro Bond I LU0278427041

YTD since inception

• Excess Return + 3,96% +7.94%

• Sharpe Ratio 1,30 0,52

Information Ratio 1,17 0,51

2/18Eurizon Capital SA. Documento ad uso esclusivo degli Investitori

Istituzionali. È vietata la diffusione al pubblico. Ottobre 2012Document for exclusive use of institutional investors. October 2012

• Information Ratio 1,17 0,51

• Jensen’s Alpha + 4,96% + 1,05%

• Morningstar Rating*

Source: internal elaboration on Bloomberg data as of October 3 rd 2012* Data as of September 28 th 2012

The Fixed Income & FX Team

FIXED INCOME & FX

Paolo Bernardelli

FLEXIBLE FUNDS

2 Fund Managers


Istituzionali. È vietata la diffusione al pubblico. Ottobre 2012

• 55 billion € of assets under management, of which 29 billion € are managed inLuxembourg and 26 billion € in Milan

• 24 Fund managers – Average work experience: 14 years

• 46 portfolios

GOVERNMENT BOND

3 Fund Managers

6 Billions of Euros

MONEY

MARKET

4 Fund Managers

23 Billions of Euros

GOVERNMENT BOND

ACTIVE MANAGEMENT

7 Fund Managers

19 Billions of Euros

CORPORATE

BOND

7 Fund Managers

7 Billions of Euros

Source: Eurizon Capital SGR Elaboration — data as of 28/09/2012Document for exclusive use of institutional investors. October 2012

Investment

objective

• A very well resourced team (supported by 24 PMs) that has

To overperform the JPM Emu Government Bond Index, within a risk limit constraint of 1,9% in terms of TEV.It invests in European Government bonds and marginally (up to 10% on average) in Government Bonds of other major countries (mainly G7 ones) and corporate bonds

Active management through an optimal risk budgeting model

Epsilon Fund Euro Bond IHighlights



Strengths

• A very well resourced team (supported by 24 PMs) that has

worked together for a long time (avg experience 14 years)

• A comprehensive and successful investment process

• A constant research of alpha through the implementation of

active and uncorrelated strategies

• The use of an optimization model that allocates the risk budget

on the basis of the fund manager’s skills

• A rigorous control of the portfolio’s risk

• as of 28/09/2012*

*see disclaimer at the end of the documentDocument for exclusive use of institutional investors. October 2012

Excess return and lower volatility with respect tothe Euro bond sector: GIPS data since inception

Fund name Epsilon Fund Euro Bond

Eurizon Obbligazioni Euro

Annualized excess return(1) + 1.67% + 0.61%

Tracking Error (2) 2.06% 1.52%

Information ratio (3) 0.81 0.40

Probability of positive annual excess return(4) 79% 66%

Greatest expected annual loss with 99% confid.(5) -3.14% -2.92%

Greatest annual loss actually experienced -2.14% -1.98%



(1) Average of the excess return of the fund vs. benchmark calculated in compliance with the GIPS standards

(2) Standard deviation of the excess return

(3) Defined as the ratio of the active return divided by the tracking error

(4) Assuming that excess returns are normally distributed with average equal to the excess return and standard deviation equal to the tracking error

(5) Assuming that excess returns are normally distributed, it shows that the probability of suffering losses higher than the specified value is lower than 1%

(6) It measures the worst cumulative loss of the fund vs. benchmark computed with reference to all the possible time horizons during the reference period

(7) Number of months required to recover all the cumulative loss vs. benchmark suffered by the fund from peak to trough during the maximum drawdown

Greatest annual loss actually experienced -2.14% -1.98%

Maximum drawdown (6) -2.80% -3.65%

Peak to Recovery (7) 7 9

Inception 31/1/2007 30/09/1999

Source: internal elaboration on GIPS data as of September 28 th 2012 Document for exclusive use of institutional investors. October 2012

Excess return distribution ofEpsilon Fund Euro Bond since January 2007*

Epsilon Fund Euro Bond I: annual excess return vs. Normal distribution

2.0

3.0

3

4

5

6

equency

Epsilon Fund Euro Bond: excess return annuale vs. distribuzione normale


Istituzionali. È vietata la diffusione al pubblico. Ottobre 2012*Distribution of excess returns on the basis of 12-month-rolling periodsSource: internal elaboration on data as of September 28 th 2012

0.0

1.0

0

1

2

-7.50%

-7.00%

-6.50%

-6.00%

-5.50%

-5.00%

-4.50%

-4.00%

-3.50%

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

Freq

Frequency Normal distribution with mean centered on 0 (zero skill hypothesis)

Document for exclusive use of institutional investors. October 2012

DURATION, CURVE,

AND INFLATION LINKED

COUNTRY SPREAD

AND SWAP

Epsilon Fund Euro Bond IAlpha Sources

EMU

Non EMU

Alpha Sources Main markets Skills & Performance Contribution

EMU

35%

50%



AND SWAP

FOREX

CREDIT

G 10 currencies mainly

EMU Government Guaranteed

EUR Corporate

5%

10%

Source: internal elaboration on data as of September 28 th 2012


Epsilon Fund Euro Bond IInvestment Process: the 4 steps

� Structured and disciplined process

� Seniority supported by a multi-year-experience in European Bonds (14 years on average)

� The fund manager relies on the support of market specialists and

Market

Analysis

View

Generation

KEY SUPPORTING ELEMENTS



support of market specialists and analysts (24 people)

� The process makes use of sophisticated tools for the market analysis and the optimal portfolio allocation

� Rigorous attention to riskmanagement processes

Portfolio

Construction

Optimization


Markets AnalysisInvestment Process (1)

• Cycle and growth• Expected inflation• Monetary policy• Fiscal policy

• Fair value assessment of interest rate curves

Macro Analysis

Fair – value



rate curves• Fair value assessment of the major FX crosses

• Technical analysis indicators• Positioning of “real money” investors• Positioning of speculative investors• Sentiment indicators• Seasonality

Fair – value

Analysis

Technicals &

Positioning

Market

Analysis

View

Generation

Portfolio

Construction

Optimization


Views generation and investment strategiesInvestment Process (2)

Core Strategies

• EUR Duration

• EUR Curve and Swap Spread

• EUR Country Spread / Inflation

Core EMU Govt long

Core Emu steepening

Long Core vs Periph.

+ITA Govt vs Spain

EMU swap spr.tighten.

Emu +5,+30,- 10yrs

Core EMU flattening

Short Core vs Periph

-ITA Govt nom vs IL

Moderate growth

ranging markets

Recession/ Recession/

StagnationStagnation and and

riskrisk aversionaversion

Recovery growth

attraction for risk

CORE STRATEGIES



Cor

• USD, GBP, JPY Duration

• USD Curve, Swap, Inflation

• Currencies USD, GBP, JPY …

•

Spread Strategies

• EUR Gov. Guaranteed, Covered

• EUR Corporate Credit

US Tys stepening

Long USD vs EUR

+ EMU Govt / - IG

+US Govt 10yrs - Ger

Long GBP vs JPY

Long EMU covered

-US Govt nom vs IL

US Govt flattening

+IG vs EMU Govt

CORE PLUS STRATEGIES

SPREAD STRATEGIES

Illustrative strategies


OptimizationInvestment Process (3)

CORE

STRATEGIES

Optimal Risk Budgeting with Skill

(ORBS)

PORTFOLIO

CONSTRUCTIONOPTIMIZATIONINPUTINPUT



STRATEGIES

FUND

MANAGER

SKILLS

(ORBS)

The ORBS framework allows the fund manager to optimally allocate the risk budget across active strategies, taking into

account the correlations between the payoffs of individual bets and the manager skill at timing strategies, within a risk limit of 1,90% in terms of TEV. The aim of the model is to maximise the

alpha.

CORE PLUS

STRATEGIES

SPREAD

STRATEGIES

Market

Analysis

View

Generation

Portfolio

Construction

Optimization


Optimization: how the ORBS model works(Optimal Risk Budget System)

Core StrategiesSkill

EUR DURATION10%

EUR CURVE14%

9%

EUR SWAP SPREAD

21%

EUR COUNTRY

ShortEMU Govt Benchmk

Set to Neutral

ShortEMU Govt 3-7yr vs 10+yr

NeutralEUR 2yr Govt Fut vs 2yr SW

ShortEMU Govt 7-10yr vs 10+yr

Core-Plus StrategiesSkill

USD DURATION13%

USD CURVE15%

15%

USD SWAP SPREAD

15%

USD INFLATION

NeutralUST 10yr Fut Outright

Set to Neutral

NeutralUSD 5yr TSY Fut vs 5yr SW

NeutralUST Fut 3-7yr vs 7-10yr

NeutralUST Fut 3-7yr vs 7-10yr

Spread StrategiesSkill

EUR GOVT GUARANTEED

Swap Related vs EMU Govt 5%

EUR SECURITIZED

EUR COV vs EMU Govt 5%

EMG Local

EMG vs EMU Govt 5%

EUR CORPORATE CREDIT

Neutral

Neutral

Long

Set to Neutral


Istituzionali. È vietata la diffusione al pubblico. Ottobre 2012Source: internal elaboration on data as of September 28 th 2012

EUR COUNTRYvs 6%

vs 6%

vs 6%

vs 6%

vs 6%

EUR INFLATION

10%

LongItaly CUST_Low

NeutralIrelandIreland ItalyItaly

NeutralNetherlandsNetherlands ItalyItaly

NeutralGreeceGreece GermanyGermany

LongEUR IL vs Govt Futures

NeutralN/AN/A N/AN/A

USD INFLATION10%

GBP DURATION

8%

JPY DURATION

5%

FX

vs 6%

vs 6%

vs 6%

vs 6%

CCTs

vs 8%

Neutral

Neutral10yr Futures Outright

Neutral10yr Futures Outright

Long

USD IL Outright

LongCCTs EURCCTs EUR CashCash

USD EUR

LongCHF EUR



EUR CORPORATE CREDIT

5%

1%

14%

Credit Issuer Selection

Funding:

BENCHMARK DEFINITION

0%

100%

Risk Budget bp/y

140Optimize

LongIG vs EMU Govt

Neutral

NeutralHY vs EMU GovtHY vs EMU Govt

Fund EMU Govt (YC hedged)

BOT

EMU

iTraxx.EUR 5yriTraxx.EUR 5yr Neutral


Portfolio ConstructionInvestment process (4)



The table shows the different strategies, investor views, positions in the optimal allocation, with the risk and alpha contributions.

Market

Analysis

View

Generation

Portfolio

Construction

Optimization

Source: internal elaboration on data as of September 28 th 2012Document for exclusive use of institutional investors. October 2012

Epsilon Fund Euro BondPortfolio allocation

Absolute instrument type exposure Time to Maturity (ex money market) Active geographical weigths

63,1%

1,1%

1,0%

0,4%

34,3%

Government

Corporate

Agency

Other

Money market

1,5%

23,0%

0,6%

11,6%

28,9%

5%

10%

15%

20%

25%

30%

35% GERMANY

AUSTRIA

NETHERLAND

FINLAND

SUPRANATIONAL

FRANCE

BELGIUM

ITALY

SPAIN

Fund 30/06

Fund 28/09



Duration Exposure

Absolute Rating Exposure

0% 20% 40% 60%

0%

0-3 3 - 5 5 - 7 7 - 10 10+

-20% -10% 0% 10% 20% 30% 40%

SPAIN

PORTUGAL

IRELAND

-0,35

-0,28

-0,62-0,54

0,85

-0,80

-0,60

-0,40

-0,20

0,00

0,20

0,40

0,60

0,80

1,00

0-3 3 - 5 5 - 7 7 - 10 10+

24,3%

9,1%

0,0%

31,1%

1,2%

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

AAA AA A BBB < BBB

Source: internal elaboration on data as of September 28 th2012Document for exclusive use of institutional investors. October 2012

Epsilon Fund Euro BondPortfolio allocation

FUND BMK Duration 0-3 3-5 5-7 7-10 10+

Germany 1,3 1,5 -0,1 -0,1 -0,4 -0,1 -0,3 0,8Austria 0,0 0,3 -0,3 0,0 0,0 0,0 -0,1 -0,1

Netherlands 0,1 0,4 -0,3 0,0 0,0 -0,1 -0,1 -0,1Finland 0,0 0,1 -0,1 0,0 0,0 0,0 0,0 0,0

Supranational 0,2 0,0 0,2 0,2CORE 1,7 2,3 -0,6 -0,2 -0,5 -0,2 -0,5 0,7

France 1,4 1,6 -0,1 -0,1 -0,2 -0,1 -0,2 0,4

Allocation yield curve/country GOVT CORP AGENCY OTHER TOT

0-1yrs 0,0% 1,1% 0,0% 0,0% 1,1%1-3yrs 1,0% -0,6% 0,0% 0,0% 0,4%3-5yrs 22,4% 0,3% 0,0% 0,3% 23,0%5-7yrs 0,4% 0,2% 0,0% 0,0% 0,6%7-10yrs 11,6% 0,1% 0,0% 0,0% 11,6%10-20yrs 12,3% 0,0% 0,0% 0,0% 12,4%>20yrs 15,5% 0,0% 1,0% 0,0% 16,5%

Maturity / Asset Class (absolute exposure)



France 1,4 1,6 -0,1 -0,1 -0,2 -0,1 -0,2 0,4Belgium 0,4 0,4 -0,1 0,0 -0,1 0,0 -0,1 0,1

FR+BE 1,8 2,0 -0,2 -0,1 -0,2 -0,2 -0,3 0,6

Italy 1,5 1,3 0,2 -0,1 0,6 -0,1 0,2 -0,3Spain 0,4 0,5 -0,2 -0,1 0,0 0,0 0,0 -0,1

IT+ES 1,8 1,8 0,0 -0,1 0,6 -0,2 0,2 -0,5

Portugal 0,1 0,1 0,0 0,0 0,0 0,0 0,0 0,0Ireland 0,0 0,1 -0,1 0,0 0,0 0,0 0,0 0,0

PT+IE 0,1 0,2 -0,1 0,0 0,0 0,0 0,0 0,0Other + Cash 0,0 0,0 0,0 0,1 -0,1

TOT 5,3 6,3 -0,9 -0,3 -0,3 -0,6 -0,5 0,9

GOVT CORP AGENCY OTHER TOT

AAA 23,2% 0,0% 1,0% 0,0% 24,3%AA 9,0% 0,0% 0,0% 0,1% 9,1%A 0,9% -0,9% 0,0% 0,0% 0,0%

BBB 29,0% 1,8% 0,0% 0,3% 31,1%< BBB 1,0% 0,2% 0,0% 0,0% 1,2%

TOT 63,1% 1,1% 1,0% 0,4% 65,7%

Rating / Asset Class (absolute exposure)

16,5%TOT 63,1% 1,1% 1,0% 0,4% 65,7%


EF Euro Bond I beated the JPM Emu GovtBond Index € on all maturities

Cumulative Performance

3M 6M YTD 1YR 3YR Launch

Portfolio 5.79% 4.57% 11.99% 11.47% 15.58% 37.22%

Benchmark 4.77% 4.40% 8.03% 7.52% 11.15% 29.28%

Overperformance 1.02% 0.17% 3.96% 3.95% 4.43% 7.94%

Top Holdings



Duration Rating S&PGovernment 3.71 BBB+Government 7.36 BBB+Government 3.95 BBB+Government 17.09 AA+Government 21.84 AAAGovernment 8.56 AAAGovernment 6.77 BBB+Government 6.62 AA+Government 0.37 BBB+Government 4.02 BBB+Government 19.99 AAAGovernment 3.52 BBB+Government 17.00 AAGovernment 8.72 AA+Government 14.95 AAAGovernment 10.72 AA+Government 9.26 BBB+

Top Holdings

WeightBTP 2,1% 09/16 I/L 9.60% GovernmentBTPS 5 1/2 11/01/22 6.11% GovernmentBTPS 4 3/4 05/01/17 4.18% GovernmentOAT 4,5% 04/41 3.86% GovernmentDBR 2,5 07/04/44 3.25% GovernmentBUNDES 6,25% 01/24 2.79% GovernmentSPANISH 5,85% 01/22 2.52% GovernmentOAT 3,5% 04/20 2.43% GovernmentCCT TV 03/17 2.35% GovernmentBTPS 4 3/4 06/01/17 1.92% GovernmentDBR 3,25%07/2042 1.87% GovernmentSPGB 4,25% 10/16 1.86% GovernmentBELGIAN 4,25% 03/41 1.80% GovernmentOAT 4,25% 10/23 1.67% GovernmentBUNDES 4,75% 07/34 1.59% GovernmentFRANCE O.A.T.3,5%4/26 1.52% GovernmentBTP 6,5% 01/11/27 1.48% Government


Epsilon Fund Euro BondFund data

Fund name Epsilon Fund Euro Bond I

Benchmark JP Morgan Emu Govt Bond Index (Eur)

Category Euro Area Government Bond

Domicile Luxembourg, UCITS III, FCP

Launch date January 8 th 2007

Dealing Daily

Nav Daily, in €

Fees (%) Management: 0,25% annual.

AUM distribution for Investor Type

Wholesale Clients 142,722,632 44%

of which Fund Users 126,938,343 39%of which Private 15,784,289 5%

Captive Clients 147,565,631 45%

of which Retail 130,741,159 40%

of which Private B. 16,824,472 5%

Wealth Management 35,391,397 11%

Total 325,679,660 100%



Fees (%) Management: 0,25% annual.

Performance: 15% of annual extra performance

Codes Isin: LU0278427041 Bloomberg: EURZEUB LX

Riskconstraints

Max TEV : 1,9%

Management Company

Eurizon Capital SA

CustodianBank & Paying Agent

State Street Bank Luxembourg SA

Fund manager Paolo Bernardelli


Disclaimer

The content of this document is for information purposes only and is targeted solely to institutional investors.

To the best of the knowledge, information and belief of Eurizon Capital S.A., all information contained herein is accurate as at the date of

publication and is provided on an "AS IS" basis and without any warranties of any kind, either expressed or implied. However, neither

Eurizon Capital S.A. nor its affiliates nor any directors or employees can or does warrant, guarantee or represent, either expressly or by

implication, the accuracy, validity or completeness of such information.

This document contains information covering different Luxembourg-domiciled UCITS III umbrella funds, managed and registered in many

locations worldwide. In particular the Funds are registered for marketing in some, but not all EU countries. As such, access to the information

contained herein may be restricted by laws and regulations applicable to the user. This information is not intended to be published or made

available to any person in any jurisdiction where doing so would result in breach of any applicable laws or regulations. In particular,

marketing of certain Funds is restricted to certain jurisdictions only.

The user should ensure that the use of this information and any investment made as a result does not breach any such restrictions. It is the

user's responsibility to be informed and to observe all applicable laws and regulations of any relevant jurisdiction.



user's responsibility to be informed and to observe all applicable laws and regulations of any relevant jurisdiction.

In particular, the information contained in this document does not constitute investment advice or an offer to sell or the solicitation of any

offer to buy any securities or services in the United States to or for the benefit of any United States persons (being residents of the United

States or partnerships or corporations organised under the laws of the United States). The Funds have not been registered in the United

States under the Investment Company Act of 1940 and units or shares of the Funds are not registered in the United States under the

Securities Act of 1933.

The document is not directed at investors in Hong Kong and its content has not been approved by the Hong Kong Securities and Futures

Commission.

Under no circumstances may the information contained herein, or any part thereof, be copied, reproduced or redistributed without the

express permission of Eurizon Capital S.A.. Neither Eurizon Capital S.A. nor its affiliates, or any directors or employees shall be liable for any

damage arising from any person's reliance on such information and shall not be liable for any errors or omissions (including but not limited

to errors or omissions made by third parties) in such information.

The information provided herein is subject to change without further notice.


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