Asset Allocation Investor Positioning and Flows...3 October 2014 Investor Positioning and Flows Deutsche Bank Securities Inc. Page 3 Figure 1: Equity funds have used the market selloff

Deutsche Bank Research

Global

Asset Allocation

Investor Positioning and Flows

Date 3 October 2014

Extreme Protection Buying

________________________________________________________________________________________________________________

Deutsche Bank Securities Inc.

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.

Parag Thatte

Strategist (+1) 212 250-6605 [email protected]

John Tierney

Strategist (+1) 212 250-6795 [email protected]

Binky Chadha

Chief Strategist (+1) 212 250-4776 [email protected]

Table Of Contents

Equity Positioning Page 12

Bond Positioning Page 19

FX & Commodity Positioning Page 21

Fund Flows Page 23

Buyback Tracker Page 29

Small Cap Tracker Page 30

Put/call ratio high

1400

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2000

0.700.750.800.850.900.951.001.051.101.15

Jan-1

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-13

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-13

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3

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-13

No

v-13

Jan-1

4

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-14

Put/Call volume ratio (5d ma, lhs) S&P 500 (rhs)

Skew spikes

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No

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-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

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4

Sep

-14

No

v-1

4

S&P 500: Skew (lhs) S&P 500 (rhs)

Note: Skew calculated as diff. in 3m implied volatility for 90% minus 110% strike.

As does implied stock correlation

1450

1550

1650

1750

1850

1950

2050

0.27

0.32

0.37

0.42

0.47

0.52

Jan-

13

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-13

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3

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13

Nov

-13

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14

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4

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14

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S&P 500 3m Implied Correlation (lhs) S&P 500 (rhs)

Source: Deutsche Bank

Equity funds cover underweight; lagging outflows extended selloff The initial phase of the sell-off which began 2 weeks ago saw mutual funds remain underweight and equity inflows following the rally to record highs. Mutual funds have since used the market pullback to cover their underweight; indeed the median performance of our mutual fund sample during Wednesday’s sharp selloff was in line with the market. However, strong outflows lagged the sell-off and lengthened it.

Several indicators point to extreme protection buying in equities The put/call volume ratio in US equity options spiked to extremes (98th

percentile since 1995). The ratio now looks to be declining and previous turnarounds after spikes were associated with strong market rebounds;

S&P 500 option vol skew rose rapidly, close to 2 year highs; Implied correlation amongst S&P 500 stocks also spiked close to 2 year

highs as investors positioned for a selloff. Similar spikes around previous selloffs saw the market bottom and rebound strongly.

Small cap outflows continue but short positioning is extreme Small cap funds have seen large outflows of 6% of AUM since Mar 2014 with the pace unabated in recent weeks. Net short positions in Russell 2000 futures have risen sharply in the last 3 weeks and are now at 3 year highs. Small cap mutual funds are underweight but look to be covering while large cap mutual fund exposure to small caps is average and well below highs earlier in the year. The small cap universe issues equity on net and hence unlike large caps does not have the automatic stabilizer of buybacks stepping in during selloffs.

Rates positioning neutral in aggregate but investors looking for curve flattening Bond futures positions are slightly long in aggregate. But across the curve, investors are short the 2y and the 5y; modestly long the 10y, and significantly long the 15+ year maturities. 2y futures shorts are near the highest levels since June 2007. Bond funds have underperformed their benchmark severely over the last two weeks as lingering HY exposure and a duration underweight hurt.

EM selloff not accompanied by extreme short positioning or outflows EM FX sold off sharply over the last 2 months but short positioning is nowhere near as extreme as in the selloff through Feb this year. MXN and BRL shorts are well off earlier extremes. EM equity ETF short interest has also risen only slightly, well below taper highs. EM bond ETF short interest on the other hand has shot up to taper tantrum highs. Inflows into EM equities and bonds which began in March have abated but not yet given way to significant outflows.

Longs in commodities and commodity currencies cut as dollar rally continues Dollar longs continue to rise and while shorts in the Euro and Yen have been relatively flat over the last two weeks, positions in AUD, CAD have been cut from long to slightly short and those in NZD to neutral. GBP longs edged up after the Scotland referendum. In commodities, oil longs have stopped falling but gold and silver longs continue to be cut; copper positions are now very short but not near the extremes seen in previous selloffs over the last 2 years.

3 October 2014


Page 2 Deutsche Bank Securities Inc.

Summary of positioning and flows

Aggregate equity positioning at neutral MFs have moved to neutral (-0.1pp); L/S HFs have continued to be close to neutral; Macro HFs exposure decreased modestly, but they remain overweight; Hybrid funds short positions increased and they are now further underweight; Across sectors, both MFs and L/S HFs are overweight Consumer Discretionary and

underweight Consumer Staples, Energy, Telecom and Utilities. Over the last month, L/S HFs significantly increased positions in Energy and

Materials. Both MFs and L/S HFs have decreased exposure to Consumer Staples, Telecom and Utilities;

Across regions, Japanese and GEM funds are o/w while Latam, European and global funds are u/w

Rates positions modestly long but positioned for curve flattening; commodity currencies positions turn short; commodity longs continue to be cut

2y shorts were trimmed but remain close to 7 year highs; 5y futures turn short; and 10y longs cut sharply; 15y+ longs rose;

USD longs remain at extreme highs; EUR shorts were trimmed but JPY shorts rose; GBP longs inched up; AUD and CAD positions turn short; Copper short positions raised and are at six month highs; WTI longs flat; Gold and silver longs continued to be cut; Corn longs raised; soybean and wheat shorts trimmed.

Equity outflows across DM while EM sees modest inflows Equities had the first significant outflow in 8 weeks (-$10.1b); US funds saw the bulk of outflows (-$9.6b) after inflows of $13.0b in past 2 weeks;

both MFs (-$2.5b) and ETFs (-$7.1b) saw outflows; Outflows from European (-$1.9b) and Japanese (-$0.5b) funds continue; EM equities receive modest inflows after modest outflows of -$1.7b in the past 2

weeks; inflows to Asia and EMEA while outflows from Latam; Outflows across sizes : large cap (-$4.3b), mid cap (-$1.6b) and small cap (-$2.0b); Growth funds (-$3.0b) continue to see massive outflows while value funds (-$0.7b)

also saw outflows; Inflows into healthcare and cons goods; outflows from energy and financials; Buyback announcements in Q3 ($70b) is the lowest in a quarter since the end of

2012, however, last 12 months announcements is running strong at $438b.

Strong inflows to bonds driven by US, HY outflows rise Bond funds received strong $9.1b inflows after inflows of $3.5b last week; Govt bonds received inflows ($2.4b) after outflows of -$7.1b in previous 5w; Inflows continue Corp IG ($0.7b) after inflows of $8.8b in prior 13w; Outflows rise from Corp HY (-$3.7b) after modest outflows last week and -$5.2b in

prior 2w; US ($8.3b), Europe ($0.4b) and Japan had inflows while EM (-$0.1b) had outflows; Inflows across maturity: long term ($0.8b), intermediate ($6.4b) and short ($2.9b); Outflows from floating rate funds rise (-$1.2b) after outflows of -$6.2b in 11w; Money market funds had outflows (-$3.0b) after huge inflows ($20.8b) last week;

outflows from Europe (-$14.3b) while inflows to US ($9.1b) and Japan ($1.4b). Liquidity ratio of HY funds increased significantly in August while that of govt bond

funds declined.

3 October 2014


Deutsche Bank Securities Inc. Page 3

Figure 1: Equity funds have used the market selloff to cover their underweight

and are now neutral

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Composite Equity Beta (lhs) S&P 500 (rhs)

Source: Factset, Bloomberg Finance LP, Deutsche Bank

Figure 2: Mutual funds performed in-line with the market during Wednesday’s

sell-off

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0.0%

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0.0%US Equity MF returns - Oct 1st

49% of the funds outperformed

S&P 500: -1.32%Median: -1.34%

Source: Factset, Bloomberg Finance LP, Deutsche Bank

3 October 2014



Figure 3: Equity outflows lagged the pullback and prolonged it

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Daily ETF flows ($ mn, lhs) S&P 500 (rhs)

Source: Bloomberg Finance LP, Deutsche Bank

Figure 4: The put/call volume ratio has spiked recently to extremes as

investors bought protection

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0.700.750.800.850.900.951.001.051.101.15

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Put/Call volume ratio 5d ma (lhs) Average: 0.83 S&P 500 (rhs)

Source: CBOE, Haver, Deutsche Bank

3 October 2014



Figure 5: S&P option vol skew rose close to 2 year highs also indicating

protection buying

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S&P 500: Skew (lhs) S&P 500 (rhs)

Note: Skew is calculated as difference in 3m Implied Volatility for 90% minus 110% strike.

Source: Haver, Deutsche Bank

Figure 6: S&P implied stock correlation spiked to 2 year highs indicating

investors positioning for a market selloff through index options

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0.27

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0.37

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0.52

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S&P 500 3m Implied Correlation (lhs) S&P 500 (rhs)

Source: Haver, Deutsche Bank

3 October 2014



Figure 7: Small cap outflows since March have been large and have continued

apace

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Cumulative equity flows since 2013 ($bn)Large CapMid CapSmall Cap

Source: EPFR Global, Deutsche Bank

Figure 8: Shorts in Russell 2000 futures have spiked to 3 year highs

140016001800200022002400260028003000

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Russell 2000 F&O Positions vs Russell 2000Net long Contracts (Thous, lhs) Russell 2000 (rhs)

Source: CFTC, Haver, Deutsche Bank

3 October 2014



Figure 9: Small cap funds are still underweight but covering

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Rolling 1m Beta of Small Cap funds to Russell 2000Beta (lhs)Average Since 2010: 0.88Russell 2000 (rhs)

Source: Bloomberg Finance LP, Factset, Deutsche Bank

Figure 10: Large cap fund exposure to small caps is average and well below levels

earlier in the year

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Note: Beta calculated as joint regression of MFs return on S&P 500 and small/large return

MFs beta to Small vs Large factor1m beta Average Since 2010: 0.1

Source: Bloomberg Finance LP, Factset, Haver, Deutsche Bank

3 October 2014



Figure 11: Small cap companies issue equities on net. In contrast large caps

buy back equity which acts as an automatic stabilizer during selloffs

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Net buybacks as % of market cap(Quarterly, Ann)

Russell 2000

S&P 500

Source: Compustat, Deutsche Bank

Figure 12: Rates futures are slightly long

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UST Positions in 10y equivalent (inv lhs, Thous Contracts)US 10y yield (%, rhs)

QE 1 Op TwistQE 2 QE 3

Correl since Mar 2009: -0.78

Op TwistExt.

Taper

Source: CFTC, FRB, Haver, Deutsche Bank

3 October 2014



Figure 13: 2y futures have turned very short and are at Jun 2007 levels as

investors start positioning for a coming Fed hiking cycle

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2 Yr 5 Yr 10 Yr 15+ Yrs

Treasuries: Net Long in 10Yr Equivalent (in '000)

Latest 1 week ago


Figure 14: EM FX such as the Brazilian real has sold off sharply but short

positioning is nowhere near earlier extremes

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USDBRL positoning Net Long Contracts (Thous,lhs) USDBRL (rhs)

Source: Bloomberg Finance LP ,Deutsche Bank

3 October 2014



Figure 15: EM equity ETF short interest has risen modestly but is well below

previous highs

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EM Equity ETFs Short Interest

Short Interest ($bn,lhs) SI % of AUM (rhs)

Source: Factset, Deutsche Bank

Figure 16: EM bond ETF short interest has however spiked and is back to

taper tantrum levels

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EM Bond ETFs Short Interest

Short Interest ($bn,lhs)

SI % of AUM (rhs)

Source: Factset, Deutsche Bank

3 October 2014



Figure 17: EM equities and bonds saw inflows resume in Mar 2014 and while

the pace has abated there haven’t been any significant outflows yet

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EM: Cumulative flows since 2009 ($bn)EM Equity EM Bonds

Source: EPFR Global, Deutsche Bank

3 October 2014



Equity Positioning

Overall Equity Positioning

Figure 18: Composite equity beta

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Composite Equity Beta (lhs) S&P 500 (rhs)

Source: Bloomberg Finance LP Factset, Deutsche Bank

Figure 19: Positioning across fund types – relative to historical average beta exposure

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Hybrid Funds MFs L/S HFs Macro HFs

Positioning by investor class (pp)

1m beta 10d beta


3 October 2014



Equity Positioning by Fund Type

Figure 20: US mutual fund positioning Figure 21: Equity long-short hedge fund positioning

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Large Cap Mutual Funds: Beta to the S&P 500: 1m Rolling

S&P 500 (rhs) Large Cap Mutual Fund Beta (rhs) Beta = 1

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Equity Long-Short Hedge Funds: Beta to the S&P 500:1m rolling

S&P 500 (rhs) Equity Long Short Beta (rhs) Average: 0.29

Source: Bloomberg Finance LP, Factset, Deutsche Bank Source: Bloomberg Finance LP, Factset, Deutsche Bank

Figure 22: Macro hedge fund positioning Figure 23: Hybrid fund positioning

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Macro Hedge Funds: Beta to the S&P 500:1m rolling

S&P 500 (rhs) Macro HF Beta (rhs) Average: 0.1

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Hybrid Funds: Beta to the S&P 500:1m rolling

S&P 500 (rhs) Hybrid Funds Beta (rhs) Average: 0.57

Source: Bloomberg Finance LP, Deutsche Bank Source: Bloomberg Finance LP, Deutsche Bank

Note: Beta to the S&P 500 calculated using a rolling 21 day regression of the fund type daily index returns against daily S&P 500 returns. We create an index of the largest mutual funds and hybrid funds with fund weights based on assets under management.

3 October 2014



Sector Positioning

Figure 24: Sector positioning for mutual funds and equity long-short hedge funds

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1m Correlation of Excess Returns

Mutual Funds

Long Short Funds


Figure 25: One month change in sector positioning

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Change in Correlation of Excess Returns Over Last Month

Mutual Funds

Long Short FundsDecrease in Beta

Increase in Beta


Note: We calculate the 21 day correlation of MF or HF daily excess returns (vs. the S&P 500) and the sector

excess daily excess returns (vs. the S&P 500) to get a timely estimate of over or underweight positioning.

3 October 2014



Mutual Fund Betas Across Regions

Figure 26: Mutual fund betas across regions

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0.8

1.0

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Latam Europe Global UK EMEA US Funds

Asia ex JP

Japan GEM

Regional Mutual Fund Positioning

Overweight: Median beta of region to benchmark is higher than avg (Z-score)

Underweight


Figure 27: Change in mutual fund betas across regions

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

EMEA UK Europe Global Japan Latam Asia ex JP

US Funds

GEM

1m Change in Regional Mutual Fund Beta (Z-Score)Increase

Decrease


Note: For each of the largest dedicated mutual funds in each region, we calculate the rolling 21 day beta of daily

fund returns against the daily returns of their stated benchmark. The betas displayed above represent the z-score

of the median for the respective region versus the historical average.

3 October 2014



Skew across regions

Figure 28: Option skew across regional equity indices

-1.7

-1.3

-0.9

-0.5

-0.1

0.3

0.7

-1.7

-1.3

-0.9

-0.5

-0.1

0.3

0.7

LATA

M

Euro

pe

Asi

a Ex

JP

Japa

n

EMEA U

S

UK

Skew Z-Score

Overweight

Source: Global Equity Derivatives Strategy, Deutsche Bank

Figure 29: Change in option skew across regions

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

EMEA

Euro

pe

Japa

n

LATA

M

Asi

a Ex

JP

US

UK

Skew: 1M Chg in Z-Score

Source: Global Equity Derivatives Strategy, Deutsche Bank

Note: Skew is calculated as difference in 3m Implied Volatility for 90% strike minus 110% strike of respective indices. Indices used for region/country: US: S&P 500, Europe: Stoxx 50, UK: FTSE 100, Japan: Nikkei 225, Asia ex Japan: Average of Hang Seng, Kospi, Nifty 50, Straits Times & Taiwan Weighted, LATAM: Brazil Bovespa & Mexico Bolsa, EMEA: MSCI Russia & MSCI South Africa.

3 October 2014



Equity Short Interest

Figure 30: Total short interest as % of S&P 500 market cap

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Jan-

03

Aug

-03

Mar

-04

Oct

-04

May

-05

Dec

-05

Jul-0

6

Feb-

07

Sep-

07

Apr

-08

Nov

-08

Jun-

09

Jan-

10

Aug

-10

Mar

-11

Oct

-11

May

-12

Dec

-12

Jul-1

3

Feb-

14

Sep-

14

Futures, Cash Equities & ETFs Shorts % of SPX Mkt Cap

Jun 20, 2008 (3.9%)Sep 16, 2011 (3.8%)

Note: S&P Futures data as of Sep 30. Cash equities and ETF shorts data as of Sep 15

Source: NYSE, CFTC, Haver, Factset, Bloomberg Finance LP, Deutsche Bank

Figure 31: S&P 500 net futures speculative positioning

1000

1200

1400

1600

1800

2000

-110

-90

-70

-50

-30

-10

10

30

50

Jan-

10

May

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

Dec

-11

Apr

-12

Aug

-12

Dec

-12

Apr

-13

Aug

-13

Dec

-13

Apr

-14

Aug

-14

Total Net Position (Bigs + Minis) (Thous, lhs) S&P 500 (rhs)

Source: CFTC, Haver, Bloomberg Finance LP, Deutsche Bank

Note: Non-commercial futures positions are open positions held by traders who are in the market for speculative

motives – non-commercial players include individual investors, financial institutions and hedge funds.

3 October 2014



Figure 32: Components of total short interest

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%Ja

n-10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Shorts % of S&P 500 Market CapFutures Cash Equities ETFs

Source: CFTC, Haver, NYSE, Factset, Deutsche Bank

Figure 33: Short interest by sector

-0.42%-0.13%-0.12%-0.10%

0.04% 0.05% 0.14% 0.20% 0.23%

0.77%

1.13%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Fina

ncia

ls

Mat

eria

ls

Con

s D

isc

Indu

stria

ls

Con

s St

aple

s

S&P

500 IT

Hea

lth C

are

Ener

gy

Tele

com

Util

ities

S&P 500 mkt value wtd short interest (Deviation from Average Since 2010)

Source: NYSE, Factset, Deutsche Bank

Figure 34: Change in short interest by sector

-0.18

-0.11 -0.09 -0.09

-0.03 -0.03-0.01 0.00

0.030.08

0.11

-0.20-0.15-0.10-0.050.000.050.100.150.20

-0.20

-0.10

0.00

0.10

0.20

Hea

lth C

are

Mat

eria

ls

Fina

ncia

ls

Con

s S

tapl

es

S&

P 5

00

Indu

stria

ls

Con

s D

isc

Ene

rgy

Tele

com

Util

ities IT

1m change in S&P 500 mkt value wtd short interest as % of o/s shares as of Sep 15, 2014

Decrease

Increase

Source: NYSE, Factset Deutsche Bank

3 October 2014



Bond Positioning

Bond mutual fund positioning

Figure 35: Broad bond market beta

215

225

235

245

255

265

-0.50

0.00

0.50

1.00

1.50

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

Oct

-13

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Bond Funds Beta to Broad MarketBeta (lhs) Average Beta: 0.84 US Broad Market Index (rhs)


Figure 36: Credit beta

106

108

110

112

114

116

118

120

122

-3.00

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

0.50

1.00

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

Oct

-13

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Bond Funds Beta to Credit (US Corp BBB-AA)Beta (lhs) Average Beta: -0.05 BBB-AA: Rel. Performance (rhs)


3 October 2014



Rates futures positioning

Figure 37: Non-commercial net long positions in US treasuries

-500

-400

-300

-200

-100

0

100

200

300

400

-500

-400

-300

-200

-100

0

100

200

300

400

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Treasuries: Net longs in 10y equivalents (in '000)


Figure 38: Current net speculative positioning in US treasuries

-54.0

-13.3

8.7

83.3

-70

-50

-30

-10

10

30

50

70

90

-70

-50

-30

-10

10

30

50

70

90

2 Yr 5 Yr 10 Yr 15+ Yrs

Treasuries: Net Long in 10Yr Equivalent (in '000)

Latest 1 week ago


3 October 2014



FX & Commodity Positioning Figure 39: USD Positions Figure 40: Euro Positions

6769717375777981

-60

-40

-20

0

20

40

60

80

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

Trade Weighted Dollar F&O Positions vs USD IndexNet Long Contracts (Thous, lhs) US TWI, Major Currencies (rhs)

Trade Weighted Positions in JPY, EUR, GBP,AUD, CHF and CAD are used for calculating USTWI

1.20

1.25

1.30

1.35

1.40

1.45

-250

-200

-150

-100

-50

0

50

100

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Euro F&O Positions vs EURUSDNet Long Contracts (Thous, lhs) EURUSD (rhs)

Source: CFTC, Haver, Deutsche Bank Source: CFTC, Haver, Deutsche Bank

Figure 41: JPY Positions Figure 42: GBP Positions

75

80

85

90

95

100

105

110-150

-100

-50

0

50

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

JPY F&O Positions vs USDJPYNet Long Contracts (Thous, lhs) USDJPY (rhs, inv)

1.43

1.48

1.53

1.58

1.63

1.68

1.73

-80

-60

-40

-20

0

20

40

60

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

GBP F&O Positions vs GBPUSDNet Long Contracts (Thous, lhs) GBPUSD (rhs)


Figure 43: AUD Positions Figure 44: CAD Positions

0.80

0.85

0.90

0.95

1.00

1.05

1.10

-100-80-60-40-20

020406080

100

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

AUD F&O Positions vs AUDUSDNet Long Contracts (Thous, lhs) AUDUSD (rhs)

0.940.960.981.001.021.041.061.081.101.121.14-80

-60-40-20

020406080

100120

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

CAD F&O Positions vs USDCADNet Long Contracts (Thous, lhs) USDCAD (inv, rhs)


3 October 2014



Figure 45: Oil Figure 46: Copper

707580859095100105110115

050

100150200250300350400450500

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

WTI F&O Positions vs WTI PriceNet Long Contracts (Thous, lhs) WTI ($/Barrel) (rhs)

2.72.93.13.33.53.73.94.14.34.5

-35

-25

-15

-5

5

15

25

35

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

Oct

-13

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Copper F&O Positions vs Copper PriceNet Long Contracts (Thous, lhs) Copper ($/Lb) (rhs)


Figure 47: Gold Figure 48: Silver

1000110012001300140015001600170018001900

0

50

100

150

200

250

300

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

Gold F&O Positions vs Gold PriceNet Long Contracts (Thous, lhs) Gold ($/Troy oz) (rhs)

15

20

25

30

35

40

45

50

-5

5

15

25

35

45

55Ja

n-10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

Silver F&O Positions vs Silver PriceNet Long Contracts (Thous, lhs) Silver ($/Troy oz) (rhs)


Figure 49: Corn Figure 50: Soybean

3

4

5

6

7

8

-200

-100

0

100

200

300

400

500

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Corn F&O Positions vs Corn PriceNet Long Contracts (Thous, lhs) Corn ($/Bu) (rhs)

89101112131415161718

-60

-10

40

90

140

190

240

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

Soybean F&O Positions vs Soybean PriceNet Long Contracts (Thous, lhs) Soybean ($/Bu) (rhs)


3 October 2014



Fund Flows

Cross Asset Fund Flows

Figure 51: Equity, bond and money market flows

-1.1-0.9-0.7-0.5-0.3-0.10.10.30.50.7

-1.1-0.9-0.7-0.5-0.3-0.10.10.30.50.7

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Se p

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

4w ma of flows (% of assets)Equities Bonds MM

Source: EPFR Global, Haver, Deutsche Bank

Figure 52: Cumulative equity, bond and money market flows over the last year

-3.5

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

4.5

-3.5

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

4.5

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14Cumulative Flows (last 12m, % of assets)

Equities Bonds MM funds


3 October 2014



Figure 53: Fund flows across assets for the last 4 weeks

-1.0-0.8-0.6-0.4-0.20.00.20.40.60.8

-1.0-0.8-0.6-0.4-0.20.00.20.40.60.8

MM Govt Bonds

Corp IG EM Bonds

Corp HY Bal Funds

Div Funds

DM Equity

EM Equity

Cross asset flows as a % of assets (last 4 weeks)Sep-10 Sep-17 Sep-24 Oct-01

Safer Riskier


Figure 54: Bond flows across regions Figure 55: Equity flows across regions

-1.5

-1.0

-0.5

0.0

0.5

1.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

US Europe Japan Latam Asia ex Japan

EMEA

Bond Flows (last 4 weeks, % of assets)Sep-10 Sep-17 Sep-24 Oct-01

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

US Europe Japan Latam Asia ex Japan

EMEA

Equity flows (last 4 weeks, % of assets)Sep-10 Sep-17 Sep-24 Oct-01

Source: EPFR Global, Haver, Deutsche Bank Source: EPFR Global, Haver, Deutsche Bank

3 October 2014



Bond Flows – Regions, Sectors

Figure 56: Global bond flows across sectors Figure 57: US and Europe bond flows across sectors

-12

-9

-6

-3

0

3

6

9

12

-12

-9

-6

-3

0

3

6

9

12

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct

-14

Cumulative Bond Flows (last 12m, % of assets)Govt Bonds Corp IG Corp HY EM Bonds

-5

0

5

10

15

20

25

30

35

40

45

-5

0

5

10

15

20

25

30

35

40

45

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct

-14

Cumulative Bond Flows (last 12m, % of assets)US HG US HYEurope HG Europe HY


Figure 58: DM bond flows Figure 59: EM bond flows

-2

0

2

4

6

8

10

-2

0

2

4

6

8

10

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Cumulative Bond Flows (last 12m, % of assets)US Europe Japan

-26

-21

-16

-11

-6

-1

-26

-21

-16

-11

-6

-1

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct

-14

Cumulative Bond Flows (last 12m, % of assets)EM Bonds Latam Asia ex Japan EMEA


Figure 60: Global bonds flows by tenor Figure 61: EM hard and local currency fund flows

-3

2

7

12

-3

2

7

12

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct

-14

Cumulative Bond Flows (last 12m, % of assets)Long Term Short TermIntermediate Term Floating rate

-18-16-14-12-10-8-6-4-202

-18-16-14-12-10-8-6-4-202

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct

-14

EM bonds: Cumulative flows (last 12m, % of assets)Hard Currency Local Currency


3 October 2014



Equity Flows – Regions, Sectors, Styles

Figure 62: Developed market regions Figure 63: Emerging market regions

-2

0

2

4

6

8

10

12

-2

0

2

4

6

8

10

12

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Cumulative Equity Flows (last 12m, % of assets)US Europe Japan

-22

-17

-12

-7

-2

3

-22

-17

-12

-7

-2

3

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Cumulative Equity Flows (last 12m, % of assets)GEM EM Equity Latam Asia ex Japan EMEA

Source: EPFR Global, Haver, Deutsche Bank Source: EPFR Global, Haver ,Deutsche Bank

Figure 64: Cyclical sectors Figure 65: Defensive sectors

-8

-3

2

7

12

17

22

27

-8

-3

2

7

12

17

22

27

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Cumulative Equity Flows (last 12m, % of assets)Materials Energy Financials Industrials Technology

-13

-8

-3

2

7

12

17

-13

-8

-3

2

7

12

17

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Cumulative Equity Flows (last 12m, % of assets)Cons Goods Health Care Real Estate Telecom Utilities


Figure 66: Size Figure 67: Style

-8

-6

-4

-2

0

2

4

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May

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Jul-1

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Sep

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Oct

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Cumulative Equity Flows (last 12m, % of assets)Large Cap Mid Cap Small Cap

-5

-4

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-2

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1

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Jul-1

4

Aug

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Sep

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Oct

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Cumulative Equity Flows (last 12m, % of assets)Growth Value


3 October 2014



Country-wise Equity Flows

Figure 68: Europe country flows Figure 69: Other developed market country flows

-35-25-15-55152535455565

-35-25-15-55

152535455565

Oct

-13

Nov

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14

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Mar

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Apr

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Cumulative Flows (last 12m, % of assets)UK France Germany ItalySpain Switzerland Netherlands

-20

-15

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-5

0

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15

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-5

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Mar

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Ap

r-14

May

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Jul-1

4

Aug

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Sep

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Oct

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Cumulative Flows (last 12m, % of assets)Australia Hong Kong Korea (South)New Zealand Singapore Canada


Figure 70: Asian emerging markets country flows Figure 71: Other emerging markets country flows

-18

-13

-8

-3

2

7

-18

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Apr

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Aug

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14

Oct

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Cumulative Flows (last 12m, % of assets)China India IndonesiaMalaysia Taiwan Thailand

-40-35-30-25-20-15-10-505

-40-35-30-25-20-15-10-505

Oct

-13

Nov

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Dec

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14

Feb-

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Mar

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Apr

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May

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Jul-1

4

Aug

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14

Oct

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Cumulative Flows (last 12m, % of assets)Brazil Chile Mexico Russia South Africa


3 October 2014



Fund Liquidity Ratios Figure 72: Equity funds – US and EM Figure 73: Hybrid funds

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Dec

-03

Dec

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Dec

-05

Dec

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Dec

-07

Dec

-08

Dec

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Dec

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Dec

-11

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Dec

-13

Dec

-14

Liquidity Ratio (%)EM Equity US Equity

5

6

7

8

9

10

11

12

5

6

7

8

9

10

11

12

Dec

-03

Dec

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Dec

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Dec

-07

Dec

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Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Liquidity Ratio (%)Hybrid Funds

Source: ICI, Haver, Deutsche Bank Source: ICI, Haver, Deutsche Bank

Figure 74: Government bond funds Figure 75: Corporate bond funds

-7

-5

-3

-1

1

3

5

-7

-5

-3

-1

1

3

5

Dec

-03

Jul-0

4

Feb-

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p-05

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1

Feb-

12Se

p-12

Apr

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Nov

-13

Jun-

14

Liquidity Ratio (%)Govt Bond

-2-10123456789

-2-10123456789

Dec

-03

Jul-0

4Fe

b-0

5S

ep-0

5A

pr-0

6N

ov-0

6Ju

n-07

Jan-

08A

ug-0

8M

ar-0

9O

ct-0

9M

ay-1

0D

ec-1

0Ju

l-11

Feb

-12

Sep

-12

Ap

r-13

Nov

-13

Jun-

14

Liquidity Ratio (%)Corp Bond


Figure 76: High yield bond funds Figure 77: World bond funds

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

11.5

3.5

4.5

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9.5

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11.5

Dec

-03

Jun-

04D

ec-0

4Ju

n-05

Dec

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Jun-

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ec-0

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n-11

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ec-1

2Ju

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Dec

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Jun-

14D

ec-1

4

Liquidity Ratio (%)

HY Bond

3

5

7

9

11

13

15

17

3

5

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9

11

13

15

17

Dec

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Dec

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Dec

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Dec

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Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Liquidity Ratio (%)World Bond


3 October 2014



Buyback Tracker Figure 78: Recent S&P 500 buyback announcements

Date Ticker Company Name Sector Industry Group $mn % of mcap

9/30/14 MAS Masco Corp Industrials Capital Goods 8,358 1,196 14.3% 2.4%9/30/14 NOV National Oilwell Varco Inc Energy Energy 32,682 3,000 9.2% -3.0%9/29/14 FDX FedEx Corp Industrials Transportation 51,573 2,433 4.7% 1.6%9/25/14 LMT Lockheed Martin Corp Industrials Capital Goods 56,317 2,000 3.6% 2.5%9/19/14 COL Rockwell Collins Inc Industrials Capital Goods 10,799 500 4.6% 2.9%9/18/14 ORCL Oracle Corp Information Technology Software & Services 184,399 13,000 7.0% -3.7%9/16/14 HUM Humana Inc Health Care Health Care Equipment & S 20,419 2,000 9.8% 2.9%9/11/14 TYC Tyco International Ltd Industrials Commercial & Professiona 20,187 1,000 5.0% 0.6%9/11/14 ABT Abbott Laboratories Health Care Health Care Equipment & S 63,997 3,000 4.7% -0.3%9/11/14 EFX Equifax Inc Industrials Commercial & Professiona 9,552 400 4.2% -0.2%9/4/14 JWN Nordstrom Inc Consumer Discretionary Retailing 13,283 1,000 7.5% 1.1%8/19/14 JEC Jacobs Engineering Group Inc Industrials Capital Goods 6,951 500 7.2% 2.2%8/15/14 VAR Varian Medical Systems Inc Health Care Health Care Equipment & S 8,689 505 5.8% -1.2%8/13/14 ORLY O'Reilly Automotive Inc Consumer Discretionary Retailing 15,805 500 3.2% 0.1%8/13/14 PCP Precision Castparts Corp Industrials Capital Goods 33,795 1,000 3.0% 2.2%

Mkt Cap ($ mn)

Buyback Programs Excess Ret (-1d to +1d)


Figure 79: Weekly buybacks and rolling 3m sum Figure 80: Sector buyback announcements

30507090110130150170190210230

05

10152025303540455055

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10A

pr-1

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Weekly Announced Buybacks: S&P 500Amount ($bn, lhs) 3m sum ($bn, rhs)

02468101214161820

0.0%0.1%0.2%0.3%0.4%0.5%0.6%0.7%0.8%0.9%Te

leco

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Announced Buybacks (Last 3m)

$bn (rhs)

% of Mkt Cap (lhs)


Figure 81: Quarterly history of buyback announcements Figure 82: Actual buybacks net of issuance

0

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100

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Buyback Announcements (quarterly, ann)Buybacks $bn (rhs) Buybacks as % of Mkt Cap (ann, lhs)

-3.0%

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600

800

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96Ja

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Jan-

04Ja

n-05

Jan-

06Ja

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Jan-

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Jan-

10Ja

n-11

Jan-

12Ja

n-13

Jan-

14Ja

n-15

Actual Net Repurchases vs S&P 500Quarterly net repurchases as % of Mkt Cap (ann, rhs)

-11%


3 October 2014



Small Cap Tracker Figure 83: Small cap mutual fund equity positioning Figure 84: Small cap value and growth fund positioning

1400

1600

1800

2000

2200

2400

2600

2800

3000

0.65

0.70

0.75

0.80

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Jan-

10A

pr-1

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Oct

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Rolling 1m Beta of Small Cap funds to Russell 2000Beta (lhs)Average Since 2010: 0.88Russell 2000 (rhs)

0.60

0.65

0.70

0.75

0.80

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0.90

0.95

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0.65

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1.00

1.05

1.10

Jan-

10

Apr

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Jul-1

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Jan-

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Apr

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Apr

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Oct

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Apr

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3

Oct

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Jan-

14

Apr

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Jul-1

4

Rolling 1m Beta of Small Cap Growth & Value FundsValue Growth


Figure 85: Small cap fund sector positioning Figure 86: Small cap equity flows

-0.70

-0.50

-0.30

-0.10

0.10

0.30

0.50

0.70

-0.70

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Fina

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1m Correlation of S&P 600 Sectors Excess Returns

Current 1m Change

-11

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-7

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1

-11

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-7

-5

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-1

1

Oct

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Nov

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Dec

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Feb-

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Mar

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Apr

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May

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Jun-

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Jul-1

4

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Sep

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Oct

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Cum. Equity Flows (Smallcap, last 12m, % of assets)

Small Cap Growth Value

Source Bloomberg Finance LP, Factset, Deutsche Bank Source: EPFR Global, Haver, Deutsche Bank

Figure 87: S&P 600 short interest Figure 88: Russell 2000 net speculative futures

4%5%6%7%8%9%10%11%12%13%14%

4%5%6%7%8%9%

10%11%12%13%14%

Sep-

04

Apr

-05

Nov

-05

Jun-

06

Jan-

07

Aug

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Mar

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Oct

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May

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Dec

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Feb-

11

Sep-

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Apr

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Nov

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14

Aug

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S&P 600 Mkt cap wtd Short Interest as % of o/s shares

140016001800200022002400260028003000

-80

-60

-40

-20

0

20

40

Jan-

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May

-10

Sep

-10

Jan-

11

May

-11

Sep

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Jan-

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May

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Sep

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Jan-

13

May

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Sep

-13

Jan-

14

May

-14

Sep

-14

Russell 2000 F&O Positions vs Russell 2000Net long Contracts (Thous, lhs) Russell 2000 (rhs)

Source NYSE, Bloomberg Finance LP, Factset, Deutsche Bank Source: CFTC, Deutsche Bank

3 October 2014



The primary author of this report, Parag Thatte, wishes to acknowledge the contributions made by Prakash Chithambaram, Karthik Prabhu, Manish Kothari and Magesh Kumar employees of Irevna, a division of CRISIL Limited, a third-party provider of offshore research support services to Deutsche Bank.

3 October 2014



Appendix 1

Important Disclosures Additional information available upon request For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Parag Thatte/John Tierney/Binky Chadha Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

47 % 48 %

5 %

38 % 32 %

13 %0

200

400600800

1000120014001600

Buy Hold Sell

Global Universe

Companies Covered Cos. w/ Banking Relationship

3 October 2014



Regulatory Disclosures

1. Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2. Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com. 3. Country-Specific Disclosures Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483. EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures. Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of Deutsche Securities Inc. (DSI) are written by Deutsche Bank Group's analysts with the coverage companies specified by DSI. 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David Folkerts-Landau Group Chief Economist

Member of the Group Executive Committee

Guy Ashton Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Richard Smith and Steve Pollard Co-Global Heads Equity Research

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Asia Pacific Research

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Deutsche Bank Research, Germany

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Equity Research, Germany

Steve Pollard Regional Head

Americas Research

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Asset Allocation Investor Positioning and Flows...3 October 2014 Investor Positioning and Flows Deutsche Bank Securities Inc. Page 3 Figure 1: Equity funds have used the market selloff