NEW YORK 535 Madison Avenue, 19th Floor New York, NY 10022 +1 212 207 1000 SAN FRANCISCO One Market Street, Spear Tower, Suite 3600 San Francisco, CA 94105 +1 415 293 8426 DENVER 999 Eighteenth Street, Suite 3000 Denver, CO 80202 +1 303 893 2899 MEMBER, FINRA / SIPC SYDNEY Level 2, 9 Castlereagh Street Sydney, NSW, 2000 +61 419 460 509 BERKSHIRE CAPITAL SECURITIES LLC (ARBN 146 206 859) IS A LIMITED LIABILITY COMPANY INCORPORATED IN THE UNITED STATES AND REGISTERED AS A FOREIGN COMPANY IN AUSTRALIA UNDER THE CORPORATIONS ACT 2001. BERKSHIRE CAPITAL IS EXEMPT FROM THE REQUIREMENTS TO HOLD AN AUSTRALIAN FINANCIAL SERVICES LICENCE UNDER THE AUSTRALIAN CORPORATIONS ACT IN RESPECT OF THE FINANCIAL SERVICES IT PROVIDES. BERKSHIRE CAPITAL IS REGULATED BY THE SEC UNDER US LAWS, WHICH DIFFER FROM AUSTRALIAN LAWS. 2016 | INVESTMENT MANAGEMENT INDUSTRY REVIEW LONDON 11 Haymarket, 2nd Floor London, SW1Y 4BP United Kingdom +44 20 7828 2828 BERKSHIRE CAPITAL SECURITIES LIMITED IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY (REGISTRATION NUMBER 188637). www.berkcap.com NEW YORK | SAN FRANCISCO | DENVER | LONDON | SYDNEY About Berkshire Capital Partners Berkshire Capital is an independent, employee-owned investment bank specializing in M&A H. Bruce McEver R. Bruce Cameron Caleb W. Burchenal +1 212 207 1001 +1 212 207 1013 +1 303 893 2899 [email protected] [email protected] [email protected] in the financial services sector. With more completed transactions in this space than any other investment bank, we help clients find successful, long-lasting partnerships. Robert P. Glauerdt Ted J. Gooden Bomy M. Hagopian Founded in 1983, Berkshire Capital is headquartered in New York with partners located in San +44 20 7828 0024 +1 212 207 1043 +1 415 293 8426 Francisco, Philadelphia, Denver, London and Sydney. Our partners have been with the firm an [email protected] [email protected] [email protected] average of 13 years. We are recognized as a leading expert in the wealth management, money management, alternatives, real estate and broker/dealer industries. We believe our success as John H. Humphrey Brendan K. Kelly D. Scott Ketner a firm is determined by the success of our clients and the durability of the partnerships we help +44 20 7828 2211 +1 212 207 1040 +1 212 207 1042 them to structure. [email protected] [email protected] [email protected] Ian Martin AM Richard D. Miles Drew R. Murphy +61 2 9221 2271 +1 212 207 1830 +1 212 207 1824 [email protected] [email protected] [email protected] Nicholas J. Sheumack Mitchell S. Spector Jonathan Stern +1 212 207 8094 +1 212 207 1828 +1 212 207 1015 [email protected] [email protected] [email protected] Advisory Directors George W. Morriss Patrick von Stauffenberg +1 212 207 1000 +44 20 7828 2828 [email protected] [email protected] NEW YORK | SAN FRANCISCO | DENVER | LONDON | SYDNEY www.berkcap.com attempt to stabilize prices, Beijing took a series of aggressive The emerging glow dims measures, including buying an estimated $235 billion worth of shares in July and August via state-run investment funds and institutions; imposing broad restrictions on Given its status as the world’s second-largest oil share trading; easing margin requirements; limiting short producer and with a population of just 30 million, selling; and suspending initial public offerings. Beijing also the government of Saudi Arabia rarely needs other people’s money. At the start of 2015, the nation’s New debt-to-GDP ratio was a microscopic 1.6%, and the launchedYork Times insider, authorities trading reviewing investigations trading against records high-profile went so last time the government tapped the bond market Chinesefar as to securitiesask fund managers firms and “why traders. they According sold shares to thewhen the was in 2007. But when you rely on oil to sprinkle market was going down, prompting discussion about basic largesse on a potentially restive public and that commodity nosedives in price, money can quickly investmentUnderscoring strategy.” the interdependence of the global economy, become an issue. Last August, having already sold Federal Reserve Chair Janet Yellen referenced events in off $60 billion in foreign assets to bridge a 2015 China in announcing last September that the long-awaited budget gap that the International Monetary Fund increase in U.S. interest rates would be put on hold yet again, projects at 22% of GDP, the kingdom issued the equivalent of more than $5 billion in bonds for in nine years. That rate hike holds the potential to create purchase by domestic banks. withadditional the Fed stress finally for acting emerging in December markets byfor drawing the first globaltime As the world has catapulted from one crisis to another since 2008, chalk up 2015 as the year that emerging markets added their own chapter to the long-running saga. The culprits: a commodity price bust; a continuing soft global Emerging Funk economy; and a worrying buildup in sovereign, corporate GDP GROWTH and household debt in many of those markets. In its October 2015 World Economic Outlook, the IMF projected growth 2007 2015* 2016* in emerging markets at 4%, down from 4.2% in its July forecast, the 4.6% achieved in 2014, and half the pre-crisis Emerging Markets 8.3% 4.0% 4.5% level. The IMF pegs export growth in emerging markets at China 13.0 6.8 6.3 just 3.9% and import growth at 1.3%. In 2007, emerging market export and import growth stood at 9.8% and 13.8%, India 9.4 7.3 7.5 respectively. Growth in world trade volume in goods and ASEAN 6.3 4.6 4.9 services that year was 7.3% compared with the 3.21% projected for 2015. “For most emerging market economies, Russia 8.1 (3.8) (0.6) Emerging Europe 5.5 3.0 3.0 IMF. “While currency depreciation will help net exports, the Brazil 5.7 (3.0) (1.0) external‘pull’ from conditions advanced are economies becoming will more be somewhat difficult,” writes more the modest than previously forecast, given their weak recovery L.Amer/Carib 5.7 (0.3) 0.8 Global 5.2 3.1 3.6 andThe moderatedominant prospectssuch market, for China,medium-term played the growth.” role of both * Projected diminished star and emerging markets spoiler, as its slowing Source: IMF economy pinched commodity-dependent emerging market exporters from Brazil to South Africa. Chinese imports capital to U.S. Treasuries and other U.S. securities. In 2015, including a 19% plunge in October from the year-earlier declinedperiod. At every 6.8%, month the IMF’s in the projection first 11 months for 2015 of Chinese 2015, GDP growth is in line with the government’s projections and emerging market capital flows went sharply negative for the first time in 27 years: The Institute of International Finance (IIF)As they projected reviewed net the outflows various at pressures $540 billion. on emerging itsgrowth longer-term could be “new a percentage normal” targetpoint or in twothe 6.5%lower range. based on market economies, including the buildup of debt, analysts Buttheir many review observers of such datadistrust as trade, official industrial numbers production, and believe railway freight volume and electricity use. weighed the potential for another financial crisis. The IMF In response to the domestic slowdown, Beijing went into putsthe level corporate 10 years debt earlier. among During nonfinancial that time, emerging the average market stimulative overdrive, lowering interest rates multiple times, firmsemerging as of market 2014 at corporate $18 trillion, debt-to-GDP or more than ratio four has times climbed announcing multiple infrastructure projects and relaxing 26 percentage points to nearly 75%. For corporations that borrowed in foreign denominations, which represent about sector, the government cast its reformist intentions aside one-third of the $3 trillion in bond-related debt, there’s the bankwhen reserve the overheated standards stock to spur market lending. began In tanking the financial last added burden of weaker local currencies. “A key risk for the June, erasing more than $4 trillion in market capitalization emerging market corporate sector is a reversal of postcrisis before it began a sharp upward move in late August. In an INVESTMENT MANAGEMENT INDUSTRY REVIEW | 2016 accommodative global financial conditions,” writes the IMF. 1 fund, a major investor in emerging markets, was down more than 6% year-to-date through September, with Slower Trade Lanes TRADE IN GOODS & SERVICES (% GROWTH) AUMof their having assets declined in emerging by $10 markets billion securities.to $58 billion. All told, EPFR Global figures global bond funds have a hefty 16% 2007 2015* 2016* In the U.S., 2015 proved challenging for asset managers Global (total) 7.3% 3.2% 4.1% after three straight years of double-digit returns on the Standard & Poor’s 500 index, as volatility spooked Advanced Economies (imports/exports) many investors and see-sawing markets tempered asset 4.7/6.3 4.0/3.1 4.2/3.4 growth. According to the Investment Company Institute, Emerging Economies (imports/exports) 13.8/9.8 1.3/3.9 4.4/4.8 U.S.fund equity assets funds down experienced 3.5% from the net year-earlier outflows of period.$113 * Projected billion in the first three quarters of 2015, with U.S. equity Source: IMF At the same time, global equity funds had net inflows ofslightly $103 frombillion, September although 2014.assets BlackRock were down mirrored 4.1%. Bond fund flows were up slightly while assets were down of 2015, governments in more than 30 emerging markets the(although larger itstrend, leading as its iShares mountainous asset base was flat Sovereignsaw their debt debt downgraded is another issue.