amLeague Portfolio Managers Viewpoint Multi Asset Class Mandate - June 2014

Our Multi asset allocation process is based on four fundamental pillars:

• The economic cycle
• Valuation
• The market cycle
• Specialists by asset class

All Main asset classes ( U.S Equity, Euro Equity, Euro High Yield, Emerging debt, etc ...) are analyzed within these principles. Based on a proprietary Allianz Global Investors model , we attribute a score by asset class relative for a portfolio construction.
For the amLeague ‘Multi Asset Class’ mandate, we constructed the allocation based on this internal model.

At the end of 2013 we reduced the assets invested in emerging market debt and increased our investments in European and U.S. equities. Today our portfolio allocation is positioned to benefit from developed countries equities.

However we become more constructive on asset classes such as emerging market debt and emerging equities. The current momentum in terms of valuation and accommodating monetary policy should continue to benefit for these asset classes.

Primonial Asset Management is a company of “Groupe Primonial” specialized in multi-management. The team of 5 analysts-fund managers have 820 million € AUM through a range of a dozen funds.

Our process is based on active risk management in order to achieve steady growth of the capital under management. Flexibility is the common denominator of all funds managed by the company, whether thematic or diversified.

Therefore, it was natural for Primonial AM to participate in the amLeague mandate ‘Multi Asset Class’ in order to apply our expertise in asset allocation. We mix our convictions and signals from our quantitative tools to build a strong portfolio which generates stable performance.

Since late November 2013, we have joined amLeague and we have already reached the second step on the podium of the ‘Multi Asset Class’ mandate with a performance of + 5.53% vs. + 3.97% for the average of the participants (data as at the 05/06/2014).

We achieved this performance with a well-diversified portfolio on major asset classes with an overweight European and US equity.

In the U.S., prices gradually increased and the next Fed meeting could unveil rising inflation expectations at a time when growth is speeding up and whilst interest rate anticipations are lower than the projections of the FOMC. Hence we stay away from Treasuries; increasing yields could cause a severe correction on the overall bond market. We prefer highly rated corporate bonds which compensate the extra risk. We are also positive on $ denominated 'High Yield with a 4.7% yield to maturity.

We remain invested in U.S. 'Large Cap', but they are becoming expensive and we will trim the position if they continue to rise.

In Europe, the monetary cycle lags far behind the U.S.: macro figures are fuelling fears of deflation, forcing the ECB to unveil non conventional measures.

The context of soft growth and inflation, with the support of a more accommodative ECB, is ideal for European credit that we largely overweight. We remain positive on Eurozone equities, even though their valuations leave little room for disappointment. However, Forex effects should stop weighing on profits in the third quarter.

A long position in U.S. $ is an interesting hedge versus these Euro-denominated assets: indeed, raising awareness on high states indebtedness would halt the continuous rise in European risk assets and would allow the euro to weaken.

In Emerging markets, the worst is over after more than three years of underperformance. The monetary tightening cycle has come to an end and most currencies are stabilized. However, we remain vigilant on macro indicators: inflation remains too high and we monitor food prices, whose sharp rise would undermine these economies. Emerging assets provide diversification to the portfolio.

Finally, we remain cautious on Japan, where the effects of the VAT increase are to be assessed. As for commodities, they provide too little diversification for the time being and remain underweighted.