Dan draper credit suisse presentation

DAN DRAPER

Credit Suisse ETFs

November 15th, 2011

Credit Suisse ETFs

Citywire Cabinet

Dan Draper, Global Head of CS ETFs

November 2011

Slide 3

Please see “Important Information” at the end of this material for important disclosures regarding the data and information contained and the views and opinions expressed in this material.

We have seen exponential growth across the ETF market

ETFs are a worldwide phenomenon with more than US$ 1.24 trillion invested across the

globe and a Compounded Annual Growth Rate (CAGR) of 30% over the last 11 years

More than half of current assets are in US domiciled ETFs with Europe accounting for

20% of the market

•Source: CS ETF Sales Strategy, Blackrock

Sep 2011 Regional AUM Market Share

US 68%

Europe 21%

Asia 6%

Others 5%

74 105142

212

310

412

566

796

710

1,034

1,3071,241

0

200

400

600

800

1,000

1,200

1,400

Dec

2000

Dec

2001

Dec

2002

Dec

2003

Dec

2004

Dec

2005

Dec

2006

Dec

2007

Dec

2008

Dec

2009

Dec

2010

Q3

2011

US

$ b

n

Debt and money market

Commodity

Equity

CAGR

Dec 2000 – Q3 2011:

30%

November 2011

Slide 4


2010 2011F 2012F 2013F 2014F 2015F

And this growth trajectory is set to continue into 2015

1 Includes estimates for Americas, Europe, Asia (excluding Japan) and all other regions (eg Japan, Mideast, etc.) 2 Includes all exchange traded products (eg ETF, ETFN, ETC) and baseline steady-state growth (no shocks to system).

Source: McKinsey analysis; ETF Landscape Year-end 2010; industry reports

5-year CAGR

Percent

26.7

16.7

High case

Low case

ETP AUM1,2

US$ trillion

1.5 1.7 2.0 2.3 2.7 3.1

1.8

2.3

2.9

3.7

4.7

Based on current projections, total global ETF AUM could grow from approximately

US$ 1.5 trillion today to between US$3.1 trillion and US$4.7 trillion over the next five

years.

November 2011

Slide 5


Alternative and passive products are expected to keep growing faster than traditional active products

November 2011

Slide 6


The Beta Continuum Capturing risk premia & the evolution of index strategies

Source: The investment expertise of NWQ, Nuveen, Rittenhouse, Santa Barbara, Symphony and Tradewinds

Systematic Risk Premiums Active Returns

Activ

e R

isk

Classic Beta

Bespoke Beta Alternative Beta

Fundamental Beta Enhanced

Beta

Bulk Beta Alpha

CS ETF

DJ Eurostoxx 50

Access to

Broad

Benchmarks

CS ETF

MSCI EMU

Small Cap

Capturing

Local Risk

Premiums

CS ETF

Gold

Access to

Alternative Asset

Classes

CS Holt

"Endogenous

Alpha" via

index construction

Hedge Fund

Indexes

Quantitative

Strategy

Access to

enhanced

Beta

Unconstrained

Active

Management

Fundamental

Law of Active

Management

Traditional long-

only active

management

High Risk but

Big Capacity

November 2011

Page 7


ETFs are attracting a broad and growing investor base

Hedge fund managers; increasing use of listed

products and over-the-counter derivatives

Pension fund managers; ETFs as strategic asset

allocation tools

Private banks; ETFs as core solutions in discretionary

portfolios

Financial advisor community; RDR impetus

Third party platforms and self directed retail

Traditional ETF

investors

New ETF investors

Long only asset managers; including pensions,

endowments, charities and Central Banks

Fund of funds

Wealth management; advisory

November 2011

Slide 8


Eurostoxx 50

11 Mar

12 Aug

14 Jul

26 Oct03 Nov

05 Oct

10 Oct

04 Oct

24 Aug

30 Jun

17 Mar

14 Jan

15 Sep

06 Sep

29 Jul

02 May

17 May

01 Jun

08 Aug24 Oct

28 Oct

20 Sep

22 Jul

1950

2150

2350

2550

2750

2950

3150

Jan 11 Jan 11 Mar 11 Apr 11 May 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11

A challenging year for the underlying markets and investor confidence

SX5E: -11.05%

SPX: 1.30%

NKY: -10.51%

MXWO: -2.67%*

* Year to date total return, as of 31.10.2011, in local currency

Source: Credit Suisse Global Strategy, Thomson Reuters DataStream, Bloomberg

Slide 8

Fitch cuts Greek

debt to junk

Japan

earthquake

Osama bin

Laden killed

Portugal bailout

approved

Greek government approves

austerity programme and end of

QE2

22: US Debt Ceiling debate intensifies,

Italian 10yr spreads rising

29: Shock downward revisions to US

GDP

08/08: ECB intervenes in bond markets to purchase Italian debt

12/08: US Consumer Sentiment plunges (Aug preliminary). France, Italy, Spain and Belgium place restrictions on short

selling

24/08: Moody's downgrades Japanese Government Debt

06/09: SNB announced intervention in the currency markets, pegging the EUR/CHF at a minimum of 1.20

15/09: ECB, BoE, SNB and BoJ announced liquidity-providing operations via the Fed's dollar liquidity swap line

20/09: S&P downgrades Italian Government Debt

04/10: Moody's downgrades Italian Government Debt

05/10: BoE announces £75b QE

10/10: Sarkozy and Merkel say they have 'a plan'

24/10: Brussels summit part 1, ended 23/11

26/10: Brussels summit part 2

28/10: Over the weekend Papandreou mentions a referendum for Greece

03/11: Referendum plan dropped, ECB cuts policy rate by 25bps

CS ETF Sales Strategy

November 2011

Slide 9

FOR INSTITUTIONAL CLIENTS ONLY

* Year to date total return, as of 31.10.2011, in local currency

Source: CS ETF Sales Strategy, Bloomberg as of 31/10/2011

2011: A challenging year but continued success for ETFs

Exhibit: AUM evolution for ETFs domiciled and listed in Europe

283.49 284.17291.72 298.66

320.11311.78 312.61 315.54

292.55

261.70

284.93

-

50

100

150

200

250

300

350

Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11

US

$ b

n

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Eu

rosto

xx 5

0 l

evel

(po

ints

)

Asset Allocation Debt Equity

Money Market Real Estate Commodity

SX5E Index

Performance YTD

SX5E: -11.05%

SPX: 1.30%

NKY: -10.51%

MXWO: -2.67%

ETFs AUM

YTD

+0.51%

Produced by: CS ETFs Slide 10

ETFs in portfolio construction

Effective asset allocation is widely regarded as the key to optimal

portfolio returns

ETFs are ideal building blocks for implementing a wide range of asset

allocation strategies

A portfolio can be simply restructured to be overweight or underweight

in entire sectors using ETFs

ETFs can be blended with active funds to build efficient investment

portfolios

Produced by: CS ETFs Slide 11

Mutual

Funds

Asset

Managers

Pension

Plans

Hedge

Funds

Private

Banks

Retail

Investors

Strategic Tactical:

ETFs: Effective asset allocation tools

Market exposure: Implement a wide variety of

investment strategies using broad local or

international market reach

Directional views: Use long or shorts to implement

directional market views

Strategic asset allocation: Implement core or

satellite strategies

Rebalancing: Attaining or adjusting asset allocation,

sector or style exposure

Hedging: Achieve neutral market or sector exposure

Dynamic portfolio construction: Fill allocations

required by the investment strategy; gain exposure to

size, style, yield, sector and country

Transition tool: Maintain exposure to a given market

while searching for a specific market

Cash management: Able to invest cash rapidly and

cost efficiently to gain desired market exposure

Derivatives alternative: Ability to set similar or even

wider Delta 1 exposures with single line cash-based

settlement

Exposure management: Easily shift portfolio

emphasis by adjusting exposures (e.g. duration,

credit)

Thematic: Implement thematic exposures

Active risk budgeting: Combine ETFs in managing

total portfolio volatility

November 2011

Slide 12


Satellite 3

Basic return

Broad spread to reduce

risk

Excess return against

benchmark

Active risk management

Tactical allocation and

active timing

Core

investment

Diversifiers

Based on the idea of keeping core investments and diversifiers entirely separate

Permits better risk management

Can be implemented simply and efficiently

Satellite 2

Satellite 1

Core

investment

Source: Credit Suisse

Indexing via Core-Satellite strategy

November 2011

Slide 13


The six stages of the business cycle

Idealised Six Stages of the Business Cycle

Stage I

Stage II

Recovery

Stage III

Stage IV

Bonds

Stage V

Stocks

Stage VI

Commodities

Bonds

Recession

Stocks

Commodities

Bonds turn up

(Stocks &

commodities falling)

Stocks turn up

(Bonds risking,

commodities falling)

Commodities

turn up

(All three markets

rising)

Bonds turn

down

(Stocks &

commodities rising)

Stocks turn

down

(Bonds dropping,

commodities rising)

Commodities

turn down

(All three markets

dropping)

Source: The six stages of a typical business cycle through recession and recovery. InterMarket Review by Martin J. Pring www.Pring.com, 2004

http://www.pring.com/

November 2011

Slide 14


Strategic asset allocation

Conservative allocation Balanced allocation

Fixed Income

CS ETF (IE) iBoxx EUR Govt 1-3


CS ETF (IE) iBoxx USD Govt 1-3

CS ETF (IE) iBoxx EUR inflation linked

CS ETF (IE) iBoxx USD inflation linked

Developed Equity

CS ETF (IE) EURO STOXX 50

CS ETF (IE) FTSE 100

CS ETF (IE) MSCI EMU

CS ETF (IE) S&P 500

Other

CS ETF (CH) on Gold*

CS ETF (IE) on EONIA

Emerging Equity

CS ETF (LUX) on MSCI EM*

CS ETF (IE) on MSCI EM Asia

CS ETF (IE) on Latin America

CS ETF (IE) on EM EMEA

For illustrative purposes only

* Please note these funds are domiciled in Luxembourg and Switzerland respectively

November 2011

Slide 15


Sector rotation throughout the business cycle

Technology Basic Industry Staples Utilities

Cyclicals Industrial Energy Services Finance

Full Recession Early Recovery Full Recovery Early Recession

Market Bottom Bull Market Market Top Bear Market

Legend: Market Cycle Economic Cycle Source: Intermarket Analysis, John J Murphy, 2004

November 2011

Slide 16


Tactical asset allocation

Balanced allocation

Fixed Income



CS ETF (IE) iBoxx USD Govt 1-3

CS ETF (IE) iBoxx EUR inflation linked

CS ETF (IE) iBoxx USD inflation linked

Developed Equity

CS ETF (IE) EURO STOXX 50

CS ETF (IE) FTSE 100

CS ETF (IE) MSCI EMU

CS ETF (IE) S&P 500

Other

CS ETF (CH) on Gold*

CS ETF (IE) on EONIA

Emerging Equity

CS ETF (LUX) on MSCI EM*

CS ETF (IE) on MSCI EM Asia

CS ETF (IE) on Latin America

CS ETF (IE) on EM EMEA

Tactical overlays to strategic asset allocation:

Exposure to thematic equity:

CS ETF (IE) on Credit Suisse Global Alternative energy

Increase Latin America exposure with single country

focus:

CS ETF (IE) on MSCI Brazil

CS ETF (IE) on MSCI Chile

For illustrative purposes only

* Please note these funds are domiciled in Luxembourg and Switzerland respectively

November 2011

Slide 17


2012 will see a return to the fundamentals of ETFs

The traditional benefits of ETF

investment: Simplicity, transparency,

liquidity and low cost

Benchmark exposure through a

transparent, direct replication wrapper:

‘own’ the index

Nearly two decades of continued

growth and investor trust

A focus on physical replication…

Assets managed by a regulated

fiduciary

Minimal conflicts of interest

Increasing importance of fund

governance at the Board of Directors

level

Converging regulatory landscape

across the EU

… Within an asset management framework

Turbulent markets and regulatory uncertainty continues

Demand for less complex, more transparent investment products

November 2011

Slide 18


Why Credit Suisse ETFs

*Source: CS ETF Sales Strategy 04.11.2011 ** Source: CS ETF Sales Strategy, Bloomberg, 30.09.2011

Asset

Management

Expertise

The second largest provider of physically replicated ETFs in Europe

Credit Suisse Asset Management is a pioneer of index investment solutions with

a 17 year track record in delivering consistent performance

Zurich based team of portfolio management professionals managing over CHF

70bn

A Leading

ETF Provider

4th largest ETF provider in Europe with $17.2bn of AUM*

The largest ETF provider in Switzerland – 29% market share*

One of the most experienced ETF providers in the European market: ETFs since

2001, indexing solutions since 1994

A Regulated

Fiduciary

CS ETFs is 100% owned by Credit Suisse Asset Management

Operates solely within Credit Suisse Asset Management’s fiduciary framework,

minimising conflicts of interest to the greatest degree possible

November 2011

Slide 19


Credit Suisse ETFs: Quality, Transparency, Trust

Physical Replication

46 Funds

Synthetic Replication

12 Funds

Physical replication structure applied as preference

Managed by experienced index team in Zurich

Total transparency: index constituents published daily on

www.csetf.com

No securities lending on Irish domiciled fund range

Synthetic replication applied when underlying index

is difficult to access via physical replication

Minimal counterparty risk: daily swap reset and Credit

Suisse as sole counterparty

Total transparency: swap spread and substitute basket

published daily on www.csetf.com

Collateral quality: 100% stoxx 600 securities, fully owned

by the fund (unfunded swap set up)

November 2011

Slide 20


Credit Suisse Exchange Traded Funds (CS ETFs) may not be suitable for all investors. Credit Suisse AG does not guarantee the performance of the shares or

funds. The value of the investment involving exposure to foreign currencies can be affected by exchange rate movements. We remind you that the levels and

bases of, and reliefs from, taxation can change. Affiliated companies of Credit Suisse AG may make markets in the securities mentioned in this document. Further,

Credit Suisse AG and/or its affiliated companies and/or their employees from time to time may hold shares or holdings in the underlying shares of, or options on,

any security included in this document and may as principal or agent buy or sell securities.

Credit Suisse Asset Management Limited (CSAML) who is authorised and regulated by the Financial Services Authority (25 The North Colonnade, Canary Wharf,

London E14 5HS), has issued this document for access in the UK only and no other person should rely upon the information contained within it. CS ETF (IE) plc

(“the Company”) is an open-ended investment company with variable capital having segregated liability between its funds organised under the laws of Ireland and

authorised by the Financial Regulator. Most of the protections provided by the UK regulatory system do not apply to the operation of the Company, and

compensation will not be available under the UK Financial Services Compensation Scheme on its default. The Company is a recognised scheme for the purposes

of the Financial Services and Markets Act 2000. Important information is contained in the relevant prospectus, the simplified prospectus and other documents,

which may be obtained free of charge from Credit Suisse Funds AG, Zurich or by writing to Credit Suisse Asset Management Limited, ETF Business Development,

One Cabot Square, London, E14 4QJ.This document has been compiled with great care and attention to accuracy, however this material is not the result of a

substantive research or financial analysis and does not constitute investment research or a research recommendation. This material is provided for information

purposes, is intended for your use only and does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. The

information provided is not intended to provide a sufficient basis on which to make an investment decision. Information and opinions presented in this material have

been obtained or derived from sources believed by Credit Suisse to be reliable, but Credit Suisse makes no representation as to their accuracy or completeness.

Credit Suisse accepts no liability for loss arising from the use of this material. The price and value of investments mentioned and any income that might accrue may

fluctuate and may rise or fall. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is

suitable or appropriate to individual circumstances, or otherwise constitutes a personal recommendation to any specific investor. Any reference to past performance

is not necessarily indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any products mentioned in this

document. Alternative investments, derivative or structured products are complex instruments, typically involve a high degree of risk and are intended for sale only

to investors who are capable of understanding and assuming all the risks involved. Investments in emerging markets are speculative and considerably more volatile

than investments in established markets. Risks include but are not necessarily limited to: political risks; economic risks; credit risks; currency risks; and market

risks. Before entering into any transaction, investors should consider the suitability of the transaction to individual circumstances and objectives. Credit Suisse

recommends that investors independently assess, with a professional financial advisor, the specific financial risks as well as legal, regulatory, credit, tax and

accounting consequences. The issuer of the securities referred to herein or a Credit Suisse company may have acted upon the information and analysis contained

in this publication before being made available to clients of Credit Suisse. A Credit Suisse company may, to the extent permitted by law, participate or invest in

other financing transactions with the issuer of the securities referred to herein, perform services or solicit business from such issuers, and/or have a position or

effect transactions in the securities or options thereof. NEITHER THIS DOCUMENT NOR ANY COPY THEREOF MAY BE SENT, TAKEN INTO OR DISTRIBUTED

IN THE UNITED STATES OR TO ANY US PERSON. This material is not directed at, or intended for distribution to or use by, any person or entity who is a citizen

or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would

subject Credit Suisse and/or its subsidiaries or affiliates to any registration or licensing requirement within such jurisdiction. This document may not be reproduced

either in whole or in part, without the written permission of Credit Suisse.

Copyright © 2011 Credit Suisse Group and/or its affiliates. All rights reserved.

Important Information

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