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FIDELITY INTERNATIONAL

Modern Portfolio Theory, 2011Asset Allocation

Peter Duke – Sales Director, Fidelity Middle East July 2011

This presentation is for Investment Professionals only and should not be relied upon by private investors


In the next 10 minutes, we’ll talk about …

Does diversification work - long term correlations3

2 Is average good enough?

What happens when we’re stressed?4

Alternative asset classes – the liquidity premium 5

In summary – what’s the solution 6

1 The story so far – Harry, James and Bill


The man with his feet in the oven

The average doesn’t suffice

…on average he feels pretty good

and his head in the refrigerator..


20 years

15 years

10 years

5 years

3 years

0 2 4 6 8 10 12

10.5

8.5

3.2

4.7

1.1

Average Return

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-40

-30

-20

-10

0

10

20

30

40

Ret

urn

(%

)

S&P 500 – Calendar Year Returns over the past 20 years


0.57 0.74 0.24

0.56 0.75 0.18

0.52 0.71 0.03

0.59 0.74 0.14

0.45 0.56 0.20

0.62 0.73 0.11

0.67 0.70 0.07

0.62 0.76 0.28

0.57 0.56 0.52 0.59 0.45 0.62 0.67 0.62 0.70 0.36

0.74 0.75 0.71 0.74 0.56 0.73 0.70 0.76 0.70 0.19

0.24 0.18 0.03 0.14 0.20 0.11 0.07 0.28 0.36 0.19

Go

vt.

Bo

nd

sGovt. Bonds

0.40 0.08

0.46 0.10

0.30 0.00

0.43 0.17

0.35 0.21

0.45 0.21

0.42 0.25

0.36 0.14

0.22 0.31

0.38 0.13

0.15 0.39

0.40 0.46 0.30 0.43 0.35 0.45 0.42 0.36 0.22 0.38 0.15 0.26

0.08 0.10 0.00 0.17 0.21 0.21 0.25 0.14 0.31 0.13 0.39 0.26Go

ld &

O

ilGold & Oil

0.96 0.90 0.86 0.63 0.86 0.82 0.81

0.96 0.86 0.84 0.63 0.85 0.83 0.80

0.90 0.86 0.82 0.58 0.81 0.78 0.79

0.86 0.84 0.82 0.64 0.98 0.85 0.79

0.63 0.63 0.58 0.64 0.65 0.57 0.69

0.86 0.85 0.81 0.98 0.65 0.91 0.77

0.82 0.83 0.78 0.85 0.57 0.91 0.69

0.81 0.80 0.79 0.79 0.69 0.77 0.69

Eq

uit

yEquity10y correlation on 1m% chg

Diversification works


FTSE UP months 9/30/2007 to 9/30/2010

UK STX ACWI EM STX SM STX SPEC BDS UK REIT HF COMMD UK CORP UK PHYS GOLD UK CSH UK GOVT

UK STX 0.50 0.07 0.72 0.30 0.78 0.15 -0.74 0.50 0.27 -0.63 -0.44 -0.19ACWI 0.50 1.00 0.37 0.36 0.66 0.46 -0.32 -0.50 0.11 -0.04 -0.10 -0.17 0.31

EM STX 0.07 0.37 1.00 0.19 0.43 -0.08 0.30 -0.18 -0.20 -0.35 -0.02 0.13 0.01SM STX 0.72 0.36 0.19 1.00 0.31 0.85 0.04 -0.48 0.33 -0.08 -0.42 -0.18 -0.05

SPEC BDS 0.30 0.66 0.43 0.31 1.00 0.25 -0.15 -0.49 0.43 -0.36 0.10 0.06 0.44UK REIT 0.78 0.46 -0.08 0.85 0.25 1.00 -0.13 -0.54 0.37 0.15 -0.42 -0.42 0.02

HF 0.15 -0.32 0.30 0.04 -0.15 -0.13 1.00 0.02 0.23 0.28 0.08 -0.31 -0.37COMMD -0.74 -0.50 -0.18 -0.48 -0.49 -0.54 0.02 1.00 -0.52 0.03 0.41 0.12 -0.16

UK CORP 0.50 0.11 -0.20 0.33 0.43 0.37 0.23 -0.52 1.00 -0.01 0.04 -0.09 0.25UK PHYS 0.27 -0.04 -0.35 -0.08 -0.36 0.15 0.28 0.03 -0.01 1.00 -0.15 -0.81 -0.51

GOLD -0.63 -0.10 -0.02 -0.42 0.10 -0.42 0.08 0.41 0.04 -0.15 1.00 0.26 0.47UK CSH -0.44 -0.17 0.13 -0.18 0.06 -0.42 -0.31 0.12 -0.09 -0.81 0.26 1.00 0.34

UK GOVT -0.19 0.31 0.01 -0.05 0.44 0.02 -0.37 -0.16 0.25 -0.51 0.47 0.34 1.00

Correlations under Stress

UK STX 0.07

-0.20UK CORP

-0.74-0.50-0.18-0.48-0.49-0.540.021.00-0.520.030.410.12-0.16

UK STXACWI

EM STXSM STX

SPEC BDSUK REIT

HFCOMMD

UK CORPUK PHYS

GOLDUK CSH

UK GOVT

Dubai

U.A.E -2 -1 0 +1 +2-4 -3 +3 +4

Dubai – Where East meets West: Located the same flight distance from London as from Beijing, Dubai has incredibly easy access to most of the world’s population.

Dubai: Hotel guest by region

Arab 29%

Europe 28%

Asia/Pacific 25%

Amer-icas 8%Africa

6%Russia/CIS/Baltic 5%

► McKinsey study in 2010 shows that companies moving from worst to best in corporate governance can expect 10% to 12% increase in their market valuation

► More than 75% executives surveyed by McKinsey in 2010 said that environmental, social, and governance (ESG) initiatives create corporate value in the long term

► Sustainability-focused companies outperform peers

10

ESG companies deliver better results

UtilitiesTelecommunications

TechnologyOil and Gas

Industrial goods and servicesConstruction and material

HealthcareInsurance

Financial servicesBanks

Travel and leisureRetailMedia

Personal and household goodsFood and beverage

Automobiles and partsChemicals

Basic resources

Industry average better Sustainability focused companies better

7% 9%

5% 13%

12% 15%

11% 23%

-8% -2%

12% 13%

15% 21%

17% 25%

4% 11%

5% 10%

10% 17%

28% 33%

-4%-6%

9% 16%

20% 33%

18% 30%

5% 10%

-10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40%

Indexed stock price performance percentage differential to market

6 months

3 months (positive)

3 months (negative)

5% 7%

Source: Green Winners, AT Kearney, 2009

► Serving the interests of all major stakeholders—employees, suppliers, customers, creditors, communities, the environment—is not at odds with the goal of maximizing corporate value. It’s essential to achieving that goal

Source: Competing for Growth –Ernst & Young

The new normal

Cost Competitive-

ness

Operational Agility

Customer Reach

Stakeholder Confidence

The markets a company is in determines their opportunity

A company’s profitability is determined by the competitiveness of their cost base

A company’s growth is determined by the their ability

to respond

A company’s value and ability to fund growth is determined by the confidence

of their stakeholders

11

New drivers of corporate leadership

Trust► Trust and transparency are as important to corporate reputation as the quality of

services offered by a company

12

42%

45%

83%83%

Source: 2010 Edelman Trust Barometer Report

Contributing to key markets growth

13

Key Markets

ASSET

REINFORCES:

► Performance

► Trust

► Leadership

Core

Business

► Performance

► Trust

► Leadership

Our focus has changed

14

Abraaj Thought Leadership

Social Investing

Transparency and Governance

Partner Company Engagement

Stakeholder Engagement Platforms

ASSET

4

5

3

2

1

The road ahead

15

None of this is quick and easy. An organization that benefits society as well as shareholders requires leaders at all levels who never stop reflecting on who they are and who they want to be, who can blend their own personal vision with those who see the world differently, who tell the truth about obstacles and recognize their own personal responsibility in creating them, and who know there are no final answers or formulas. This takes, literally, forever.

Peter Senge, Director of the Center for Organizational Learning,

MIT Sloan School of Management

GDP real growth rate of 6.7%

The UAE has an economy with high per capita income and a sizeable annual trade surplus. Abu Dhabi Emirate enjoys the highest per capita in the world. The nations wealth is based on oil and gas output.

Abu Dhabi holds approximately 10 % of the world’s proven oil reserves and 90% of U.A.E oil and 5 percent of its gas. the income from which has been wisely invested to create a flourishing modern metropolis with a first class infrastructure.

At the same time great care has been taken to protect the country’s setting of Abu Dhabi’s natural scenic beauty with over 200 Islands, 1300km of coastline and to preserve the authentic spirit of Arabia.

Abu Dhabi EconomyAbu Dhabi Economy

Real Estate Projects ContactAbout Us Vision/Mission Abu Dhabi

Geographical Catchment Area

Diversified Economy GDP Growth

Middle East Growth - Staff

Sta

ff N

um

ber

s

0

200

400

600

800

1000

1200

1400

1600

April 99 April 00 April 01 April 02 April 03 April 04 April 05 April 06 April 07

Staff based in Middle East

Middle East Projects

Projection

Architectural concept Architectural detail Interior design Structural design Building services Highway design Technical Supervision of

construction Oil and Gas engineering Design Services

Services & Skills

Buildings 54%

Transport 18%

Other 5%

Rail 11%

Oil & Gas 12%

Business Summary Middle East & India

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2001 2002 2003 2004 ’05/’06 ’06/’07 ’07/’08 ’08/’09 ’09/’10 ’10/’11

% G

row

th

Period

Oil Price > $40

Oil Price > $30

Business Summary Strategy vs Statistics

High Oil Price

Arqaam Capital LimitedLevel 4 - Building GV05 5The Gate BuildingDubai International Financial CentrePO Box 506687 DubaiUnited Arab EmiratesTel: +971 (0)4 507 1700Fax: +971 (0)4 507 1701

Slide Title

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Header

Footer

Header

Footer

Header

Footer

Slide Footer Client’s logo

Slide Title

Footer

Header Weights

Feb-05 Feb-06 Feb-07 Feb-080

100

200

300Basket vs. Tadawul Index

Basket Values SASEIDX Index

Footer

Header

Footer

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Client’s logo

Logistics Landscape in Dubai

David HarrisDirector, International Logistics

Fahad Al ThaniInvestment Manager

Foreign Investment OfficeDepartment of Economic Development

Smart 2009

UAE Projected GDP

UAE Projected GDP(US$ Billion)

Source: IMF

2008 2010 2012

260

236

280

Regional GDP Figures

Saudi Arabia

Iran UAE Kuwait Qatar Iraq Oman Bahrain0

100

200

300

400

5002008

2009

2010

2011

2012

(Billion US$)Source: IMF

Regional Population Growth

Bahra

in

Qatar

Oman

Kuwai

tUAE

Azerb

aijan

Kaza

khstan

Yem

en

Saud

i Ara

bia

Uzbek

istan

Afgha

nistan Ira

qIra

n

Egyp

t

India

China

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

2005 2010 2015

Fertility Variant (Thousands)Source: Department of Economic and Social Affairs, United Nations

Projected Passenger Growth – Dubai International Airport

Million PAX

Source: DWC

1997 2008 2021

9.1

34.3

82.3

Source: DWC

Total Growth

EK Growth

DNATA Growth

Tones (Million)

2002 2009 2015

0,84

2,09

0,49

1,49

3,00

0,35

0,75

1,03

4,03

Projected Cargo Growth – Dubai

DWC – Al Maktoum International Airport

160 million passengers

12 million tons of cargo

DWC – Al Maktoum International Airport

Abdul Aziz Abdulla MalikDirector of Public Transport Dept., Dubai,

UAE

Abdul Aziz Abdulla MalikDirector of Public Transport Dept., Dubai,

UAE

58th UITP World Congress and Mobility & City Transport Exhibition

2009

58th UITP World Congress and Mobility & City Transport Exhibition

2009

D U B A IUnited Arab Emirates

Dubai – DevelopmentDubai – Development

No. of BusesNo. of Buses

‘91‘91 ‘05‘05

43

500

No. of Passengers

No. of Passengers

‘95‘95 ‘04‘04‘00‘00

360%

MEED PROJECTSGCC EXITDEMOSALES KIT

http://www.meedprojects.com/

THE GCC – A BOOMING ECONOMY

The World’s 16th largest economy

2003 GDP $350 billion


Middle East - A rapidly evolving project sector

0

10

20

30

40

50

60

70

80

Year

1995

2000

2003

The Engine Major Projects Future Growth Data Gathering Middle East Map


FUTURE GROWTH 2004-2006 (Projects)


11088

73

12801

1201

36330

1210

53630

5265

47033

5273

52098

6153

0

10000

20000

30000

40000

50000

60000

Bahrain Oman Kuwait Saudi Arabia UAE Qatar

Budget

Awarded



UNITED ARAB EMIRATES

GENERAL STATISTICS - 2003 GDP per Capita $19,728 million Population $ 3.6 million Exports $ 47,900 million Imports $ 35,000 million

CONTINUOUSLY GROWING REGION Abu Dhabi Breakwater Island Development Dubai Airport Expansion Natural Gas Distribution Network, Abu Dhabi Burj Dubai North East Abu Dhabi Development, Adco




Your Gateway to UAEMaximising Opportunities

United Arab Emirates

UAE Formation 1971

UAE Economy

Non-oil

exports 53.3%

Oil exports 46.7%

UAE exports

Non – oil GDP

64.1%

Oil GDP35.9%

Components of UAE GDP

mubadalainspired investingMay 2008

Why invest in Sharjah?Ideal business hub that welcomes foreign investment

Trade relations with 126 countries

Good infrastructure and all essential modernised services

Policies foster continuing sustainable development

At the forefront of industrialization in the UAE

Dedicated industrial areas, international airport

Al Tayer GroupCorporate Profile

Financial Performance

287

582

915

1205

1760

20082007200620052003

Revenue growth$ milion

Buyershosted

catalogs

Buyershosted

catalogs

Buyers hosted cataloguesBuyers hosted catalogues Sellers hosted cataloguesSellers hosted catalogues

100’s of integration projects

100’s of integration projects

Point to PointIntegration

Point to PointIntegration

Tejari hosted Catalogues

Tejari hosted Catalogues

Single Point IntegrationFor Buyers

Single Point IntegrationFor Buyers

Single Point IntegrationFor Sellers

Single Point IntegrationFor Sellers

Dubai Office

309, CNN building, Dubai Media City, PO Box. 72280, Dubai, UAE

Tel: +971 4 3914840Fax: +971 8 4480876Web: www.satellite.aeEmail: [email protected]

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