ACTIVE FUNDS VS. BENCHMARK PERFORMANCE COMPARISON ETF_active vs passiv… · Europe Large + Mid...

LYXOR ETF RESEARCH 2 0 1 6

THIS DOCUMENT IS FOR THE EXCLUSIVE USE OF INVESTORS ACTING ON THEIR OWN ACCOUNT AND CATEGORIZED EITHER AS “ELIGIBLE COUNTERPARTIES”OR “PROFESSIONAL CLIENTS” WITHIN THE ME ANING OF MARKE TS IN FINANCIAL INSTRUMENTS DIRECTIVE 2004/39/EC. IT IS NOT DIRECTED AT RE TAIL CLIENTS.

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“There’s this fallacy that people believe that we need active managers for the market to be efficient. That’s only true if they are well-informed active managers, otherwise they just make the market more inefficient.” Fama, Noble Prize Winner in Economics

We have conducted our annual statistical study comparing the performance of European domiciled active funds vs their benchmark for the 15 key universes in terms of ETF AuM.

Our key conclusions are:

Over a 10 year and 5 year period, the 2015 results are similar to those of 2014 : respectively 20% and 23% of European domiciled active funds outperformed their benchmark.

This contrasts with the results found for the year 2015 where on average 47% of active funds outperformed their benchmark, compared to the 25% observed in 2014 .

• In 2015, the top performing universes with the highest number of funds outperforming their benchmark were: France Small & Mid cap, China equity and Europe Large Cap

• The worst performing universes can be found in the fixed income space. The results for the fixed income universe were stable on average at 27% in both 2015 and 2014.

The following key comments can be highlighted and are detailed inside the document.

The performance of Risk Factors explains a significant part of the active funds’ outperformance.

• European active fund managers were overweight Low Beta, Momentum and Quality factors which outperformed their benchmark in 2015 . This mainly explains why 72% of them outperformed the benchmark.

• US large cap active funds were overexposed to the Low Beta, Momentum, Value and Quality factors that performed badly in 2015 , thus explaining why only 25% outperformed their benchmark.

• Japanese active funds were on average overexposed to the Value factor in 2015 which underperformed the benchmark , thus explaining why only 26% outperformed their benchmark.

It is becoming increasingly difficult for active funds to outperform Smart Beta benchmarks. In 2015, only 14% of the universe of European active funds succeeded in outperforming the FTSE Europe Minimum Variance index. This figure even goes below 10% over 10 years. This highlights the difficulty for active fund managers to outperform Smart Beta indices over the short and long term.

ACTIVE FUND PERFORMANCES VS BENCHMARKS

72% 14%

26% 8%

27%

25% 8%1Y 10Y

8%

2%

5%

3%

27%

14%

24%

11% 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y 58%

UNDERPERFORMING FUNDS OVER THE PERIOD

OUTPERFORMING FUNDS OVER THE PERIOD















MSCI EUROPE FTSE EUROPE MIN VAR

TOPIX FTSE JAPAN MIN VAR

MSCI EMERGING MARKETS FTSE EMERGING MIN VAR

MSCI USA FTSE USA MIN VAR

ACTIVE FUNDS VS. BENCHMARK PERFORMANCE COMPARISON

Lyxor ETFMarlène HassineHead of ETF Research+33 1 42 13 59 [email protected]

Special Acknowledgement to Zelia Cazalet , Lyxor Quantitative research and Clement Chaulot , Lyxor Fund selection & solutions for their helpful participations.

Source: Morningstar data from 31/12/05 to 31/12/15. European equities using MSCI for traditional benchmark and FTSE Minimum Variance for Smart Beta benchmark. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

PASSIVE MANAGEMENT ORIGIN 2

METHODOLOGY 7

KEY RESULTSGlobal Key Conclusions 9Key Traditional Benchmark Results 14Key Smart Beta Results 16Performance / Volatility 17

FOCUS BY UNIVERSEFrance Large Caps 20France Smid Caps 22UK Equity 24Europe Large + Mid Caps 26Europe Small Caps 28US Large + Mid Caps 30Japan Equity 32World Equity 34Value Equity 36Global Emerging Equity 38China Equity 40Euro Govies 42Euro High Yield 43Euro Corporate 44Emerging Debt 45

APPENDIXStatistical Analysis 47Universe Description 51Base Currency Calculation 51Glossary 52

CONTENTS


2 THIS DOCUMENT IS FOR THE EXCLUSIVE USE OF INVESTORS ACTING ON THEIR OWN ACCOUNT AND CATEGORIZED EITHER AS “ELIGIBLE COUNTERPARTIES”OR “PROFESSIONAL CLIENTS” WITHIN THE ME ANING OF MARKE TS IN FINANCIAL INSTRUMENTS DIRECTIVE 2004/39/EC. IT IS NOT DIRECTED AT RE TAIL CLIENTS.

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UNDERSTANDING THE ORIGIN AND THE DEVELOPMENT OF PASSIVE MANAGEMENT

It took a long time for investors to accept the ideas of Markowitz, Sharpe, Jensen and the others, but passive management now represents a large part of the asset management industry. According to a BCG study, passive investments represent more than 14% of global Assets Under Management, or EUR 11,000 billion in 2014.

• Modern Portfolio Theory sparked the debate regarding the benefits of active versus passive management. The early works of Markowitz, Tobin and Sharpe laid the foundations for the development of passive fund management. Using the works of Markowitz on the efficient frontier and Tobin on the tangency portfolio, Sharpe first defined the concepts of market risk premium and market portfolio. For Sharpe, under the hypothesis of rational investors and the efficient market, only systematic risk is rewarded, which goes against the idea of stock picking. The risk premium of a stock is therefore equal to the beta of the stock times the market risk premium. Sharpe went even further as he demonstrated that the tangent Markowitz portfolio is the market capitalization portfolio. He writes that investors should hold this portfolio as it is the most efficient.

• For Jensen, if Sharpe is right and what is really important is market beta, then the real performance of a mutual fund can be defined using this notion. He stated that a good measure of active management performance should be the beta-adjusted performance of a fund. In 1968, he introduced the notion of alpha, defined as the excess return of the fund over the market performance adjusted by the beta of the fund times the market risk premium. Analysing the beta-adjusted performances of a universe of 115 US equity active funds, he found a remarkable result: on average the performance of active funds is equal to the performance of the benchmark minus management fees. On average, the alpha of active funds is equal to minus management fees. This was an important step in the development of passive management and allowed Jensen to conclude that: “The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than what we expected from mere random chance”.

• The seminal work of Michael Jensen was indeed the starting point of the development of passive management. Following these studies and after more than six years of hard work, in 1971, John McQuown had the idea to launch the first index fund while working at Wells Fargo. He started by launching a private fund for the Samsonite luggage company (Bernstein, 1992). The index industry was still in its infancy and there was a lot of work to do on indices before being able to use benchmarks as underlyings for index funds. The first real open-ended fund on the S&P 500 was launched two years later in 1973.

• Based on Brinson & Al’s famous 1986 work, studying asset allocations of US pension funds for the period 1990-2008, Michel Aglietta, Marie Briere, Sandra Rigot and Ombretta Signiri (2012) found that the market accounts for 90% of pension fund global allocation net returns. The result even increased to 96% when considering only equities.

For Sharpe, only market risk is remunerated. Therefore investors

should hold the market capitalization portfolio

This important step toward the development of passive management was made by

Jensen in 1968. He found that on average, the alpha of

active funds is equal to minus management fees

In 1971, John McQuown launches the first index fund

In 2012, Aglietta said that the market accounts for 90% of pension fund

global allocation net returns

LYXOR ETF RESEARCH2 0 1 6

3THIS DOCUMENT IS FOR THE EXCLUSIVE USE OF INVESTORS ACTING ON THEIR OWN ACCOUNT AND CATEGORIZED EITHER AS “ELIGIBLE COUNTERPARTIES”OR “PROFESSIONAL CLIENTS” WITHIN THE ME ANING OF MARKE TS IN FINANCIAL INSTRUMENTS DIRECTIVE 2004/39/EC. IT IS NOT DIRECTED AT RE TAIL CLIENTS.

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BREAKDOWN (%) OF PENSION FUNDS’ ACTUAL NET RETURNS 1990-2008 (NET OF FEES)

FACTOR GLOBAL ALLOCATION STOCKS FIXED INCOME CASH

Market 90 96 70 26

Asset Allocation 4 2 3 13

Active management 2 0 20 36

Interaction effect 4 2 7 25

Source : Michel Aglietta, Marie Briere, Sandra Rigot and Ombretta Signiri, rehabilitating the Role of Active Management for Pension Funds 2012

In their influential 1992 paper, “Common Risk Factors in the Returns on Stocks and Bonds”, Eugene Fama and Kenneth French showed that, in addition to the market risk premium, two other factors relating to firms’ size and to value help to explain stock returns.

• In 1993, in an article entitled “Hot Hands in Mutual Funds: Short-Run Persistence of Relative Performance, 1974-1988”, Hendricks, Patel & Zeckhauser showed that even though average alpha is negative, alphas are correlated with past periods, meaning that, over the short term, the best performing funds remained the best performing funds. This is the origin of the notion of the performance persistency of active funds.

In 1995, when trying to understand the typology of active funds in the US (contrarian, value, etc.), Grinblatt, Titman & Wermers (“Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior”) found that 77% of active fund managers were momentum managers. This gave Carhart the idea to introduce a fourth factor in the Fama French 3 factor model: the Momentum factor. Using this four-factor model, he then found that, contrary to what Hendricks & Al had said and based on this new definition of alpha (i.e. calculated vs market beta and factor betas including momentum), alphas are no longer auto-correlated. This means that the short-term persistency of the performance of active funds comes from the persistency of the performance of the risk factors. He therefore stated that alpha can be generated by having the right exposure to the right risk factors.

Factor investing means the attempt to capture particular factor risk premia in a systematic way, for example by building a factor index and replicating it, or by constructing a portfolio that gives you exposure to a range of risk factors. The objective is to combine factors to enhance the long-term performance of portfolio. Size and Value factors have been shown by Fama and French since 1992 to help explain returns. Since then, researchers have provided evidence for the existence of other factors, including Momentum, Low Beta and Quality. Momentum is a well-documented tendency for persistence in stocks’ price returns. The Low Beta factor is a return stream associated with less risky stocks and the Quality factor represents the performance of a subset of more defensive stocks.

But statistical analysis can be and have been used to claim the existence of more and more factors. In fact John Cochrane, president of the American Finance Association, has recently referred to a “zoo” of factors. We recently counted around 250 in published academic papers, and their number has been increasing exponentially.

CUMULATIVE NUMBER OF FACTORS

Carhart: short term persistency of the performance of the

active funds comes from the persistency of the performance

of the risk factors

For Carhart, alpha can be generated by having the

right exposure to the right risk factors

Factor investing means the attempt to capture

particular factor risk premia in a systematic way

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Source: Harvey C.R., Liu Y. and ZhuH. (2014), … and the Cross-Section of Expected Returns, SSRN.



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In their study entitled “Facts and Fantasies About Factor Investing” Roncalli and Cazalet (2015) take a holistic view of risk factors, aiming to demonstrate certain factors’ persistence and suggesting how to allocate between them in portfolios. To avoid getting lost in the factor zoo—so as not to be misled by spurious correlations—they think that there should be solid empirical evidence for the existence of a factor and that there should also be some theoretical justification for its existence. They set up an equity market factor framework focusing on five alternative risk premia: in addition to the Fama- French factors of Value and Size we include Momentum, Low Beta and Quality.

RISK FACTOR SOLUTIONS

Source: Lyxor Asset Management

Thierry Roncalli found that more than 90% of the variability of returns of an appropriately diversified portfolio of randomly selected stocks from the S&P 500 (at least 50) can be explained by market returns. He also found that this figure has significantly increased since 2005, allowing him to state that beta is back, as shown in the graph below. The 6F i.e. six factor model includes the market beta plus the 5 factors described above.

MARKET AND RISK FACTORS CONTRIBUTION TO VARIABILITY OF RETURNS

Source: Thierry Roncalli 2015

It took a long time for investors to accept the ideas of Markowitz, Sharpe, Jensen and Al, but passive management now represents a large part of the asset management industry, as shown in the graph p6.

• According to a BCG study, passive investments represent more than 14% of global Assets Under Management, or EUR 11,000 billion in 2014. This figure has already more than tripled in 10 years, and should continue to increase significantly in the future. The structural shift from active core products to alternative and passive products will continue. In particular, passives are likely to get a disproportionate share of the net flows relative to their current size. They therefore will remain the fastest-growing categories, squeezing the share of active core products and managers as those products suffer net outflows. Active core assets are expected to shrink to about 31% of global AuM by 2018, and passives and ETFs are expected to grow to 35%.

Roncalli and Cazalet (2015) set up an equity

market factor framework focusing on five key

alternative risk premia: Value, Size, Momentum,

Low Beta and Quality

QualityValue

Low Beta

MomentumLow Size

Allocation

A six factor model including market beta plus the 5 factors

described above explains more than 95% of the

variability of returns

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Roncalli, 2015 Beta is back

Passive investments represent more than 14%

of global Assets Under Management, or EUR 11,000 billion in 2014



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Four Main Reasons Behind Passive Management Growth:

1. First, active managers continue to underperform their benchmarks in aggregate. In this study, we show that only 20% of active funds on average outperformed their benchmark over the last 10 years. And the evidence also shows that there is little persistency of performance over time. Managers that beat the benchmark in one year therefore have a poor chance of doing the same the following year.

2. Second, passive funds, including ETFs, have a clear cost advantage in comparison to active funds, leading many investors to decide that they would prefer to track an index rather than try to beat it. Of course, it’s fair to point out that passive funds don’t replicate their indices exactly. All other things being equal, they will trail it by their annual management costs. However, passive funds’ costs are relatively low and have been steadily decreasing.

3. Passive funds now provide access to a broad range of asset classes with a great degree of granularity, offering investors significant choice. Passive funds are typically highly diversified, giving wide access to individual market segments.

4. Smart beta – investment strategies, codified as indices, with easy replication in a systematic, transparent method – is an increasingly important phenomenon. Smart Beta is now a key component of portfolios. Smart beta’s place in investors’ portfolios has grown significantly over the last few years. And while most of the smart beta assets under management are within mandates, which make mapping them somewhat difficult, the public figures still speak for themselves: in December 2015, smart beta ETF AuM reached EUR15.1bn in Europe, six times as much as four years before. As for active smart beta funds, these totaled EUR24bn at the end of December 2015, multiplying by 2.5 times in 4 years.

AUM SMART BETA ETF / ACTIVE SMART BETA

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10,000

15,000

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ETF Smart Beta Active Smart Beta

Source: Morningstar and Bloomberg data from 01/01/2011 to 01/01/2016



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GLOBAL AUM, BY PRODUCT (% AND USD TRILLIONS)

9%

*Source : Boston Consulting Group, « Sparking Growth with Go-to-Market Excellence » (2015)

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22

37

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35

2015-2018

100

ESTIMATED SHARE OF CUMULATIVE NET FLOWS (%)

ALTERNATIVES1

ACTIVE SPECIALTIES2

SOLUTIONS LDIS AND BALANCED3

ACTIVE CORE4

PASSIVES AND ETFS5

6 / $2

21 / $8

6 / $2

8 / $3

59 / $21

2003

$36

9 / $4

22 / $10

9 / $4

10 / $4

50 / $23

2008

$46

10 / $7

24 / $17

12 / $8

14 / $10

40 / $27

2013

$69

11 / $8

24 / $18

13 / $9

14 / $11

39 / $29

2014

$74

16% 11%

11%

15%

4%

17%

11%

7%

16%

5%

10%

5%

14%

2%

2014-2018 ESTIMATED GROWTH BY PRODUCT

Sources : BCG Global Asset Management Market Sizing Database 2015; BCG Global Asset Management Benchmarking Database 2015; ICI; Prequin; HFR; Strategic Insight; BlackRock ETP Report; IMA; OECD; Towers Watson; P&I; Lipper; BCG analysis.Note: ETF =exchange-traded fund; LDI = liability-driven investment. Any apparent discrepancies in totals are due to rounding.1 Includes hedge funds, private equity, real estate, infrastructure, and commodity funds.2 Includes equity specialties (foreign, global, emerging market, small and mid cap, and sector) and fixed-income specialties (credit,

emerging market, global, high yield, and convertible).3 Includes absolute-return, target date, global asset-allocation, flexible, income, and volatility funds; LDIs; and multiasset and traditional

balanced products.4 Includes active domestic large-cap equity, active government fixed-income, money market, and structured products.5 Includes passive equity, passive fixed-income, equity ETFs, and fixed income ETFs.6 Management fees net of distribution costs.7 Includes actively managed domestic large-cap equity.8 Includes actively managed domestic government debt.9 Includes foreign, global, and emerging-market equities; small and mid caps; and sectors.10 Includes credit, emerging-market and global debt; high-yield bonds; and convertibles.11 Includes absolute-return, target date, global asset-allocation, flexible, income, and volatility funds.

From 2015 to 2018, Passives and ETFs are

expected to grow to 35%

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Passive fixed income

CAGR, 2014-2018 (%)

Passive equity

LDIs

Equity ETFsFixed income ETFs

BalancedSolutions11

Infrastructure

Private equity

Traditional active products

Passive product and ETFs

Alternative products

Estimated size, 2014 (scale=$1 trillion)

Hedge funds

Funds of private-equity funds

Funds of hedge funds

Net revenue margin6 (basis points)

Equity specialties

Real estate

ComoditiesFixed-income specialities10

Structured

Equitycore7

Money market

Fixed income core8



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METHODOLOGY USED BY LYXOR ETF RESEARCH TO COMPARE ACTIVE FUNDS VS BENCHMARK

This 10-year statistical study aims to identify the best investment opportunities between active funds and their respective benchmark, using 15 universes both in the fixed income and equity space representing universes with the highest AuM for ETFs. It is based on Morningstar open-ended funds domiciled in Europe covering a 10-year period and is updated on a yearly basis.

The calculations are not adjusted for the survivorship bias i.e. merged or liquidated funds are not taken into account in this study, which may lead to overestimate the percentage of active funds that outperformed the benchmark as we can expect merged or liquidated funds to have underperformed the benchmark index.

5 YEAR SURVIVORSHIP

EUR LARGE + MID CAPS EUROPE SMALL CAPS WORLD EQUITY FRANCE SMID CAPS ALL OTHER

UNIVERSES

61% 63% 63% 74% 100%

All data are calculated in Euros. In order to check if we do not take into account a significant currency bias, we calculate the percentage of funds denominated in Euros vs US dollars vs GBP vs JPY. We found that for a majority of the funds, the base currency of our universes is the Euro. For all the universes where there are more than 40% of the funds denominated in another currency than the Euro, we recalculated the performance of the funds using the base currency (see p51 for results). For the UK Equity, the majority of the funds are denominated in GBP. For the China Equity, the majority of the funds are denominated in USD.

FUNDS’ MAIN CURRENCY

UK EQUITYEUROPE LARGE +

MID CAPS

EUROPE SMALL CAPS

US LARGE + MID CAPS JAPAN EQUITY WORLD

EQUITY VALUE EQUITY

99% GBP 77% EUR 78% EUR 48% USD 49% JPY 50% EUR 49% EUR

GLOBAL EM EQUITY CHINA EQUITY EUR GOVIES EUR

CORPORATEEUR HIGH

YIELD EM DEBT OTHER UNIVERSES

63% EUR 84% USD 96% EUR 93% EUR 96% EUR 64% USD 100% EUR

For each class of assets, we define an active fund universe as a composition of funds replicating the same benchmark or included in the same Morningstar category as defined in the glossary and which are available to European investors.

• Performances and volatilities of the universe of funds are calculated on average weighted by the Assets under Management of each fund or on a simple average of all funds (see statistical analysis for details p47-48)

• All the data are collected as of December, 31st of 2015 and refer to the oldest asset class of the funds.

• Alpha and beta are estimated based on 1 year rolling simple regressions on the market factor. As a reminder, beta represents market sensivity of the fund or systematic risk. Alpha is the absolute performance generated by the active fund that cannot be explained by the market factor. Alpha results are the statistics of a distribution weighted by Assets under Management. Beta results are the weighted average beta of the corresponding alpha universe. For example, the weighted average beta of the 25% quantile is the weighted average beta corresponding to the 25% quantile of alpha.



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KEY RESULTS

GLOBAL KEY CONCLUSIONS 9

KEY TRADITIONAL BENCHMARK RESULTS 14

KEY SMART BETA RESULTS 16

PERFORMANCE / VOLATILITY 17

Key results



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GLOBAL KEY CONCLUSIONS

Over a 10 year period which included the 2007 financial market crisis, an average of 20% of European domiciled active funds outperformed their benchmark, which is very similar to the result in 2014.

Over a 5 year period , an average of 23% of active funds outperformed their benchmark, which is also very close to data recorded in 2014.

Over the year of 2015 , an average of 47% of active funds outperformed their benchmark. This is a significant increase compared to the 25% calculated in 2014. Over the year, active funds succeeded in outperforming their respective benchmark by 0.9% on an average weighted basis. When compared to a simple average, the outperformance vs the benchmark is reduced to just 0.4%, highlighting the fact that it is the biggest funds that achieved the highest performances in 2015. Across all universes, this performance was achieved in an environment with on average 8% more volatility than was recorded in 2014.

• Top performing universes: In 2015, the top 3 universes with the highest number of funds outperforming their benchmark were: France Small & Mid Caps, China Equity and Europe Large & Mid Caps. While it is well known that more opportunities can be found in less efficient markets like the first two universes, the latter results for Europe Large & Mid Caps are more surprising.

• Worst performing universes: The bottom 3 results can be found on European Govies, European High Yield and Japan Equity. In an environment of low or even negative interest rates and increased volatility, it has been more difficult for active fund managers to generate outperformance in the fixed income universe. While the percentage of funds outperforming their benchmark in 2015 has doubled in the equity space from 24% to 54%, the results for fixed income are stable at an average of 27% in 2015 and 2014.

There are several changes in the economic and market environment that could explain these trends.

1. First, cash offers a return of virtually zero, or even less than zero in many developed countries due to very low government-bond yields. This limits the potential opportunity in this asset class. Moreover, as shown in the right hand-side graph below, the performance of fixed income fund managers has decreased in 2015 with negative returns in euro corporate bonds and emerging debt. This represents a break in the long term positive performance of this asset class which has stood for over 10 years.

Over 10 years, only 20% of European domiciled

active funds outperformed their benchmark

In 2015, 47% of European domiciled active funds

outperformed their benchmark

Top performing universes were France Small & Mid Caps, China Equity and

Europe Large & Mid Caps

Worst performing universes were European

Govies, European High Yield and Japan Equity

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INTEREST RATES BOTH IN EUROPE AND US ARE NEAR HISTORIC LOWS PERFORMANCE COMPARISON BETWEEN FIXED INCOME UNIVERSES

Source : Bloomberg data from 7/3/1994 to 7/3/2016. THE FIGURES RELA TING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

Source: Morningstar data from 31/12/05 to 31/12/15. Index performances by geographical zone and by universe studied. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA



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2. Secondly, the level of volatility in financial markets significantly increased in 2015 across all markets against a backdrop of divergent monetary policies and uncertain global growth, especially in China. The average level of volatility across our universes of active funds was 15.3% vs 7.4% in 2014. Additionally, in contrast to 2014, the performance across asset classes has diverged significantly as shown in the right hand side graph below. Developed market equities were up 13.6% vs Emerging market equities, which were down 1.3% and fixed income which was down 0.3% on average.

3. The performance of risk factors in 2015

One could be tempted to explain 2015 as one of rather good performance for active funds going by the capacity of active fund managers to beat their benchmark and generate alpha through their stock selection skills. Yet financial theory has demonstrated that more and more results from active fund managers are explained by systematic bias that could be captured using risk factors.

“Almost all of the performance of diversified portfolios, across both equities and fixed income, could be explained by factors”. T. Roncalli 2015

In traditional financial theories such as the Capital Asset Pricing Model (CAPM) of Treynor, Sharpe and others in the 1960s, there is a single equity market risk premium, which is measured by beta. This risk premium compensates investors for holding equities rather than less risky assets. An investor can capture this equity risk premium by holding the market portfolio of stocks.

But since CAPM was introduced, researchers have put forward convincing evidences that there are other systematic sources of return in the equity markets. These alternative return premia, or risk factors group stocks according to their size, valuation, quality, momentum or historical riskiness.

The performance of risk factors is a key determinant of an active fund’s performance. Analysing the contribution of risk factors to active fund performance confirms that a significant part of their performance can be explained by risk factors.

In Europe , there has been a significant increase in the percentage of European large cap active funds that outperform their benchmark, rising from 23% in 2014 to 72% in 2015. This can largely be explained by the performance of factors.

Throughout 2015, active fund managers increased their exposure to the Low Beta factor, while maintaining their quite significant exposure to the Momentum and Quality factors, which were among the top performing risk factors in Europe (as seen in the following left hand side graph). In addition to the increased weighting of factors in European large cap active funds, the excess return of factors vs the benchmark has significantly increased compared to 2014. As shown in the following graph on the right: with the exception of the value factor, all four other factors (Low Beta, Quality, Momentum and Size) generated an excess return of between 4 to nearly 8%. In 2014, these excess returns ranged from only 1 to 5%. Therefore, taking some intentional or unintentional bets vs the benchmark in 2015 generated more outperformance vs the benchmark due to the increasingly diverse returns of risk factors. Most of the outperformance of the European active fund universe can therefore be explained by the strong performance of risk factors leaving little room for alpha generation.

S&P 500 HISTORICAL VOLATILITY INCREASE PERFORMANCE COMPARISON BETWEEN UNIVERSES

Source : Bloomberg data from 16/02/2011 to 15/03/2016. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

Source: Morningstar data from 31/12/05 to 31/12/15. Average index performances by geographical zone and by universe studied. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

0

5

10

15

20

25

30

Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16

1Y Volatility 6M Volatility

-5%

0%

5%

10%

15%

20%

10Y 2014 2015

Fixed Income

Developed Markets

Emerging Markets Equity

In Europe, in 2015, 72% of active funds outperformed

their benchmark

Most of this outperformance can be explained by the

outperformance of European risk factors index



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In the US , the percentage of active funds outperforming their benchmark did not increase significantly in 2015 vs 2014 at 25% vs 18% in 2014. US large cap active funds were overexposed to the Low Beta, Momentum, Value and Quality factors. Yet those factors performed badly in 2015. As opposed to Europe, the dispersion of risk factor returns did not increase between 2014 and 2015 making it difficult in 2015 to generate outperformance as it was in 2014. Thus, in an environment where risk factors do not outperform their benchmark, US active fund managers were unable to outperform their benchmark by any significant margin.

In Japan, on average only 26% of active funds outperformed their benchmark, which is in line with 2014 figures. Japanese active funds were on average overexposed to the value factor in 2015 as shown in the following graph on the left hand side, and underexposed to the momentum and low beta factors. Yet in 2015, the Value factor underperformed the benchmark by 1%, whereas momentum and low beta factors both outperformed the benchmark by 6%. This highlights the fact that selecting the wrong factors caused the poor results of this active fund universe.

-80%

-60%

-40%

-20%

20%

0%

40%

60%

80%

2013 2014 2015

Quality, Low Beta and Momentum factors overweighted in 2015

2013 2014 2015

-6%

5%

8% 9%

4%

-10%

10%

36%* 23%* 72%*

-2%

4%

-3%

1%

7%

1% 2%

8%

-15%

-10%

-5%

0%

5%

10%

15% Quality, Low Beta and Momentum factors outperformed in 2015

Market Quality Low Beta Momentum Value Small Quality Low Beta Momentum Value Small



-22.1%

-41.6%

6.7%

8.5% 5.9%

9.8% 10.9%

15.9%

-36.7%

7.4%

9.4%

15.5%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50% Risk factors overweighted in 2015

2013 2014 2015

2%

-2% -1%

5%

-1%

-5%

12%

1% 1% 1% 2%

-1% -1% -5%

-1%

-15%

-10%

-5%

0%

5%

10%

15% 43%* 18%* 25%*

Risk factors underperformed in 2015

2013 2014 2015

19.5%

-30%

-20%

-10%

0%

10%

20%

30%

2013 2014 2015

Value factor overweighted in 2015

-9.1%

14.0%

-14.5%

4.6%

-6.7% -3.0%

-5.5%

-8.8%

50%* 22%* 26%*

Value factor underperformed in 2015

2013 2014 2015

10.9%

16.6% 4.7%

-35.6%

8.9%

16.9%

13.2%

-46.8%

11.4%

27.8%

14.4%

-57.6%

2% 4%

8%

0% -2% -1%

8%

-1%

6%

-3%

9% 6%

-3% -1% -2%

-15%

-10%

-5%

0%

5%

10%

15%

EUROPE LARGE CAP ACTIVE FUND RISK FACTORS OVER/UNDER

WEIGHTS VS BENCHMARK

RISK FACTORS OUT/UNDER PERFORMANCE

VS BENCHMARK

In the US, in 2015, 25% of active funds outperformed

their benchmark. Interestingly most risk

factors underperformed their benchmark

US LARGE CAP ACTIVE FUND RISK FACTORS OVER/UNDER

WEIGHTS VS BENCHMARK


VS BENCHMARK

-80%

-60%

-40%

-20%

20%

0%

40%

60%

80%

2013 2014 2015


2013 2014 2015

-6%

5%

8% 9%

4%

-10%

10%

36%* 23%* 72%*

-2%

4%

-3%

1%

7%

1% 2%

8%

-15%

-10%

-5%

0%

5%

10%





-22.1%

-41.6%

6.7%

8.5% 5.9%

9.8% 10.9%

15.9%

-36.7%

7.4%

9.4%

15.5%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%


2013 2014 2015

2%

-2% -1%

5%

-1%

-5%

12%

1% 1% 1% 2%

-1% -1% -5%

-1%

-15%

-10%

-5%

0%

5%

10%

15% 43%* 18%* 25%*


2013 2014 2015

19.5%

-30%

-20%

-10%

0%

10%

20%

30%

2013 2014 2015


-9.1%

14.0%

-14.5%

4.6%

-6.7% -3.0%

-5.5%

-8.8%

50%* 22%* 26%*


2013 2014 2015

10.9%

16.6% 4.7%

-35.6%

8.9%

16.9%

13.2%

-46.8%

11.4%

27.8%

14.4%

-57.6%

2% 4%

8%

0% -2% -1%

8%

-1%

6%

-3%

9% 6%

-3% -1% -2%

-15%

-10%

-5%

0%

5%

10%

15%

Source: Weighted average of the results of the regression of the performance of all the active funds of the universe by the following five JP Morgan Risk Factors: J.P. Morgan Equity Risk Premia – see the source in the graphe above. The results of the regression gives very statistically significant results with most of the R2 being above 85%. * % of active Funds outperforming the index. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

In Japan, in 2015, 26% of active funds outperformed

their benchmark. Interestingly active funds were overweighted

the value factor which underperformed its benchmark

Source: Weighted average of the results of the regression of the performance of all the active funds of the universe by the following five JP Morgan Risk Factors: J.P. Morgan Equity Risk Premia – Europe MOMENTUM FACTOR Long Only Index, J.P. Morgan Equity Risk Premia – Europe LOW BETA FACTOR Long Only Index, J.P. Morgan Equity Risk Premia – Europe LOW SIZE FACTOR Long Only Index, J.P. Morgan Equity Risk Premia – Europe VALUE FACTOR Long Only Index, J.P. Morgan Equity Risk Premia – Europe QUALITY FACTOR Long Only Index . The results of the regression gives very statistically significant results with most of the R2 being above 85%. * % of active Funds outperforming the index. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA



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4. The outperformance of active funds can also be explained by the intrinsic drawbacks of market cap indices.

Current 2015 results of our study emphasized some of the drawbacks of market cap indices. The simple selection of stocks purely on market capitalizations can create exposure to risk factors that add no value to the portfolio, which explains some of the additional outperformance of active funds vs their benchmark.Large cap bias can be identified as one of the non desired risk premia associated with market cap indices. Studying the MSCI Europe Large Cap index performance for example, we observed that large caps last year underperformed mid and even small cap stocks. The striking results of 2015 can be explained on the one hand that active funds benefited from an improved environment for risk factor performance, and on the other that market cap indices were negatively impacted by their large cap bias.

INDEX PERFORMANCE COMPARISON

2015 2014

Europe Large Cap vs. Standard Index perf -1.4% -0.2%

Europe Large Cap vs. Mid Cap Index perf -7.8% -1.0%

Active Funds vs. Standard Index perf 3.3% -1.2%

Source: MSCI Indices, Bloomberg data from 01/01/2014 to 31/12/2015. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

5. The difficulty for active funds to outperform Smart Beta indices over the short and long term

Smart Beta indices are increasingly being used by investors to enhance portfolio returns, reduce risk or target a better quality of income. If you compare active fund performances not to traditional market cap indices, but to Smart Beta indices, the results for active funds become quite different. On average only a small number of active funds succeeded in outperforming an equivalent Smart Beta index over short or long term periods. Using Morningstar data and FTSE Minimum Variance indices from 31/12/05 to 31/12/15, we calculated that on average, 42% of European domiciled active funds (based on World, Europe, US and Emerging Market universes) outperformed their traditional market cap index in 2015, while only 16% outperformed a Smart Beta strategy (the minimum variance one). Over a 10 year period, these figures decrease to 18% of active funds outperforming their passive index, but only 4% outperforming a Smart Beta index.

JAPAN ACTIVE FUND RISK FACTORS

OVER/UNDER WEIGHTS VS BENCHMARK


VS BENCHMARK

-80%

-60%

-40%

-20%

20%

0%

40%

60%

80%

2013 2014 2015


2013 2014 2015

-6%

5%

8% 9%

4%

-10%

10%

36%* 23%* 72%*

-2%

4%

-3%

1%

7%

1% 2%

8%

-15%

-10%

-5%

0%

5%

10%





-22.1%

-41.6%

6.7%

8.5% 5.9%

9.8% 10.9%

15.9%

-36.7%

7.4%

9.4%

15.5%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%


2013 2014 2015

2%

-2% -1%

5%

-1%

-5%

12%

1% 1% 1% 2%

-1% -1% -5%

-1%

-15%

-10%

-5%

0%

5%

10%

15% 43%* 18%* 25%*


2013 2014 2015

19.5%

-30%

-20%

-10%

0%

10%

20%

30%

2013 2014 2015


-9.1%

14.0%

-14.5%

4.6%

-6.7% -3.0%

-5.5%

-8.8%

50%* 22%* 26%*


2013 2014 2015

10.9%

16.6% 4.7%

-35.6%

8.9%

16.9%

13.2%

-46.8%

11.4%

27.8%

14.4%

-57.6%

2% 4%

8%

0% -2% -1%

8%

-1%

6%

-3%

9% 6%

-3% -1% -2%

-15%

-10%

-5%

0%

5%

10%

15%

Source: Weighted average of the results of the regression of the performance of all the active funds of the universe by the following five JP Morgan Risk Factors: J.P. Morgan Equity Risk Premia – see the source in the first graphs p.11. The results of the regression gives very statistically significant results with most of the R2 being above 85%. * % of active Funds outperforming the index. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

Market cap indices are exposed to risk factors

like the large cap one that added no value to the

portfolio in 2015

It is becoming increasingly difficult for active funds to

outperform Smart Beta indices



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PERCENTAGE OF ACTIVE FUNDS OUTPERFORMING THE BENCHMARK

UNIVERSETRADITIONAL BENCHMARK SMART BETA BENCHMARK

1Y 10Y 1Y 10Y

WORLD EQUITY 30% 13% 25% 3%

GLOBAL EM EQUITY 58% 24% 27% 5%

JAPAN EQUITY 26% 14% 8% 2%

US LARGE + MID CAPS 25% 11% 8% 3%

EUR LARGE + MID CAPS 72% 27% 14% 8%

AVERAGE 42% 18% 16% 4%

Source: Morningstar data from 31/12/05 to 31/12/15. Data based on the average results for World, EM, Japan, US and Europe equities using MSCI and TOPIX for traditional benchmarks and FTSE Minimum Variance Indices for Smart Beta benchmarks. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

EUROPEAN LARGE + MID CAPS: ACTIVE FUND PERFORMANCES VS BENCHMARKS

Source: Morningstar data from 31/12/05 to 31/12/15. European equities using MSCI for traditional benchmark and FTSE Minimum Variance for Smart Beta benchmark. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

6. Lack of consistent performance over the long term

Over a 10 year period, including the 2007 financial market crisis, an average of just 20% of active funds outperformed their benchmark. Based on a strategy of cumulating weekly the average performance of each of our universes buying each active fund in the universe and weighting them according to AuM, and then selling the benchmark (see graphs for each universe from page to page), we calculate that on average for all the active fund universes studied, the 10 year cumulated outperformance was -10%. This means that holding our active fund universe over 10 years would have resulted in a 10% underperformance vs holding the benchmark.

We also show that selecting the best performing fund and holding it for the next 3 years does not lead to a much higher score. On average over the whole period, 38% of active funds outperformed in year 1 but only 14% of these funds still outperformed in year 2, and just 5% in year 3. This illustrates the lack of consistency in performance over time.

OUTPERFORMANCE CONSISTENCY OVER 3Y

UNIVERSEOUTPERFORMANCE CONSISTENCY

AVG YEAR 1 AVG YEAR 2 AVG YEAR 3

EUR LARGE + MID CAPS 38% 15% 6%

GLOBAL EM EQUITY 36% 12% 6%

US LARGE + MID CAPS 34% 11% 3%

JAPAN EQUITY 40% 16% 5%

WORLD EQUITY 40% 16% 5%

AVERAGE 38% 14% 5%

Source: Bloomberg and Morningstar data. Avg year 1: Average percentage of funds outperforming the benchmark the first year from 2006 to 2015, Avg year 2 average percentage of those funds that have outperformed the year one and are still outperforming the benchmark the year 2. Avg year 3: average percentage of those funds that have outperformed the year one and two, and are still outperforming the benchmark the year 3. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

In 2015, only 16% of active funds outperformed a minimum variance smart

beta strategy

On average, only 5% of the active funds outperforming their

benchmark in year 1 still outperformed in year 3

72% 14%

26% 8%

27%

25% 8%1Y 10Y

8%

2%

5%

3%

27%

14%

24%

11% 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y 58%























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KEY TRADITIONAL BENCHMARK RESULTS

PERCENTAGE OF ACTIVE FUNDS OUTPERFORMING THE BENCHMARK OVER 1Y, 3Y, 5Y AND 10Y

UNIVERSE BENCHMARK 1Y 3Y 5Y 10Y

UK EQUITY FTSE All Shares (FTPTTALL) 56% 58% 53% 39%

VALUE EQUITY MSCI World Value (NDUVWI) 58% 36% 26% 38%

CHINA EQUITY MSCI China (NDEUCHF) 72% 64% 27% 32%

EUROPE SMALL CAPS MSCI Europe Small Cap (NCEDE15) 55% 27% 23% 29%

EUR LARGE + MID CAPS MSCI Europe (M7EU) 72% 42% 30% 27%

GLOBAL EM EQUITY MSCI Emerging Markets (NDUEEGF) 58% 44% 24% 24%

FRANCE LARGE CAPS CAC 40 (CACR) 59% 42% 20% 23%

EUR CORPORATE Barclays Capital Euro Corporate Bond (LECPTREU) 41% 37% 35% 23%

JAPAN EQUITY TOPIX Japan (TPXDDVD) 26% 24% 19% 14%

WORLD EQUITY MSCI World (NDDUWI) 30% 17% 10% 13%

US LARGE + MID CAPS MSCI USA (NDDUUS) 25% 23% 12% 11%

EUR GOVIES EuroMTS Global Investment Grade (EMIEG5) 16% 20% 15% 9%

EUR HIGH YIELD Barclays Pan-European High Yield (LP01TREU) 20% 5% 0% 0%

EMERGING DEBT Emerging Markets Local Currency Bond (JGENVUEG) 32% 26% 8% 0%

FRANCE SMID CAPS CAC Mid & Small (CMSN) 80% 41% 39% N/A

AVERAGE EQUITY 2015 54% 38% 26% 25%

AVERAGE FIXED INCOME 2015 27% 22% 15% 8%

AVERAGE 2015 47% 34% 23% 20%

AVERAGE 2014 25% 27% 23% 20%

16%

20%

25%

26%

30%

32%

41%

55%

56%

58%

58%

59%

72%

72%

80%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

EUR GOVIES

EUR HIGH YIELD

US LARGE + MID CAPS

JAPAN EQUITY

WORLD EQUITY

EMERGING DEBT

EUR CORPORATE

EUROPE SMALL CAPS

UK EQUITY

VALUE EQUITY

GLOBAL EM EQUITY

FRANCE LARGE CAPS

CHINA EQUITY

EUR LARGE + MID CAPS

FRANCE SMID CAPS*

10y 1y

16%

20%

25%

26%

30%

32%

41%

55%

56%

58%

58%

59%

72%

72%

80%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

EUR GOVIES

EUR HIGH YIELD

US LARGE + MID CAPS

JAPAN EQUITY

WORLD EQUITY

EMERGING DEBT

EUR CORPORATE

EUROPE SMALL CAPS

UK EQUITY

VALUE EQUITY

GLOBAL EM EQUITY

FRANCE LARGE CAPS

CHINA EQUITY

EUR LARGE + MID CAPS

FRANCE SMID CAPS

2014 2015

% OF ACTIVE FUNDS OUTPERFORMING THE BENCHMARK

Source: Morningstar data in EUR from 31/12/2005 to 31/12/2015. For France Smid Caps, the % of active funds is over 5Y. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA



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ALPHA & BETA ACTIVE FUND PERFORMANCE BREAKDOWN OVER 1 YEAR (AS OF 31/12/2015)

UNIVERSE BENCHMARK

ALPHA BETA

Min 25% quantile

Weighted avg

75% quantile Max 25% alpha

quantileWeighted

avg75% alpha

quantile

FRANCE SMID CAPS CAC Mid & Small (CMSN) -0,05% 0,10% 0,17% 0,19% 0,55% 0,95 0,80 0,55

CHINA EQUITY MSCI China (NDEUCHF) -0,42% 0,05% 0,11% 0,16% 0,45% 1,00 0,95 0,98

EUROPE SMALL CAPS MSCI Europe Small Cap (NCEDE15) -0,47% 0,02% 0,10% 0,17% 0,64% 0,96 0,82 0,69

EUR LARGE + MID CAPS MSCI Europe (M7EU) -0,44% 0,00% 0,07% 0,13% 0,39% 0,96 0,87 0,78

VALUE EQUITY MSCI World Value (NDUVWI) -0,25% -0,01% 0,05% 0,10% 0,53% 0,91 0,86 0,83

FRANCE LARGE CAPS CAC 40 (CACR) -0,37% 0,00% 0,04% 0,06% 0,24% 0,96 0,87 0,82

GLOBAL EM EQUITY MSCI Emerging Markets (NDUEEGF) -0,18% -0,01% 0,03% 0,08% 0,23% 0,89 0,87 0,84

UK EQUITY FTSE All Shares (FTPTTALL) -0,12% 0,00% 0,03% 0,03% 0,35% 0,92 0,89 0,83

WORLD EQUITY MSCI World (NDDUWI) -0,66% -0,01% 0,02% 0,07% 0,44% 0,80 0,85 0,85

US LARGE + MID CAPS MSCI USA (NDDUUS) -0,44% -0,03% 0,01% 0,05% 0,26% 0,92 0,91 0,87

EUR CORPORATE Barclays Capital Euro Corporate Bond (LECPTREU) -0,08% -0,01% 0,00% 0,01% 0,29% 0,90 0,92 0,91

JAPAN EQUITY TOPIX Japan (TPXDDVD) -0,30% -0,03% 0,00% 0,05% 0,22% 1,00 0,99 0,98

EUR GOVIES EuroMTS Global Investment Grade (EMIEG5) -0,19% -0,02% -0,01% 0,00% 0,47% 1,18 0,86 0,71

EMERGING DEBT Emerging Markets Local Currency Bond (JGENVUEG) -0,31% -0,04% -0,02% -0,01% 0,25% 0,97 0,97 0,94

EUR HIGH YIELD iBoxx € Liquid High Yield 30 Ex-Financial (IBOXLH3T) -0,16% -0,03% -0,02% -0,02% 0,15% 0,75 0,71 0,68

AVERAGE -0,30% 0,00% 0,04% 0,07% 0,36% 0,94 0,88 0,82

Source: Morningstar data in EUR from 31/12/2014 to 31/12/2015. See methodology for Alpha and Beta detailed definition. In red, the top 2 and the bottom 2 Alpha/Beta. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA.

OUTPERFORMANCE CONSISTENCY

AVERAGE CONSISTENCY

UNIVERSE Year 1 Year 2 Year 3

FRANCE LARGE CAPS 34% 13% 5%

FRANCE SMID CAPS 44% 17% 7%

UK EQUITY 45% 23% 13%

EUR LARGE + MID CAPS 38% 15% 6%

EUROPE SMALL CAPS 42% 19% 6%

US LARGE + MID CAPS 34% 11% 3%

JAPAN EQUITY 40% 16% 5%

WORLD EQUITY 40% 16% 5%

VALUE EQUITY 38% 14% 1%

GLOBAL EM EQUITY 36% 12% 6%

CHINA EQUITY 45% 18% 7%

EUR GOVIES 36% 14% 5%

EUR CORPORATE 41% 20% 9%

EUR HIGH YIELD 66% 41% 25%

EMERGING DEBT 31% 10% 2%

Source: Morningstar data, Avg year1: Average percentage of funds outperforming the benchmark the first year from 2006 to 2015, Avg year 2 average percentage of those funds that have outperformed the year one and are still outperforming the benchmark the year 2. Avg year 3: average percentage of those funds that have outperformed the year one and two, and are still outperforming the benchmark the year 3. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

KEY TRADITIONAL BENCHMARK RESULTS



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KEY SMART BETA RESULTS

72% 14%

26% 8%

27%

25% 8%1Y 10Y

8%

2%

5%

3%

27%

14%

24%

11% 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y 58%





















72% 14%

26% 8%

27%

25% 8%1Y 10Y

8%

2%

5%

3%

27%

14%

24%

11% 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y 58%





















72% 14%

26% 8%

27%

25% 8%1Y 10Y

8%

2%

5%

3%

27%

14%

24%

11% 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y 58%





















GLOBAL EMERGING MARKETS: ACTIVE FUND PERFORMANCES VS BENCHMARKS

JAPAN EQUITY: ACTIVE FUND PERFORMANCES VS BENCHMARKS

EUROPEAN LARGE + MID CAPS: ACTIVE FUND PERFORMANCES VS BENCHMARKS

Source: Morningstar and Bloomberg data from 31/12/05 to 31/12/15. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

72% 14%

26% 8%

27%

25% 8%1Y 10Y

8%

2%

5%

3%

27%

14%

24%

11% 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y

1Y 10Y 1Y 10Y 58%





















US LARGE + MID CAPS: ACTIVE FUND PERFORMANCES VS BENCHMARKS



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PERFORMANCE / VOLATILITY

1Y PERFORMANCE/VOLATILITY COMPARISON BETWEEN ACTIVE FUNDS AND THE BENCHMARK

1YPERFORMANCE

PERFORMANCE VOLATILITY% ACTIVE FUNDS

OUTPERFORMING THE BENCHMARK

UNIVERSE INDEX ACTIVE FUNDS* INDEX ACTIVE FUNDS*

FRANCE SMID CAPS 20,1% 24,8% 16,2% 14,3% 80%

EUR LARGE + MID CAPS 8,2% 11,5% 18,1% 17,3% 72%

CHINA EQUITY 2,6% 7,9% 27,3% 26,9% 72%

FRANCE LARGE CAPS 11,9% 13,0% 19,7% 18,5% 59%

GLOBAL EM EQUITY -5,3% -4,2% 19,2% 18,7% 58%

VALUE EQUITY 6,0% 7,2% 16,9% 16,9% 58%

UK EQUITY 6,3% 7,5% 18,2% 17,6% 56%

EUROPE SMALL CAPS 23,5% 26,4% 14,7% 14,2% 55%

EUR CORPORATE -0,6% -0,5% 3,4% 3,9% 41%

EMERGING DEBT -5,2% -6,0% 13,6% 13,5% 32%

WORLD EQUITY 10,4% 9,6% 17,7% 17,4% 30%

JAPAN EQUITY 23,7% 21,9% 19,9% 20,4% 26%

US LARGE + MID CAPS 12,1% 10,3% 17,6% 17,8% 25%

EUR HIGH YIELD 2,9% 1,1% 6,1% 5,0% 20%

EUR GOVIES 1,7% 0,9% 5,3% 7,5% 16%

Source : Morningstar data in EUR from 31/12/2014 to 31/12/2015. * Average performance/volatility of the funds weighted by the AUM, as defined in the methodology. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA


3YPERFORMANCE




CHINA EQUITY 7,8% 11,3% 19,2% 18,9% 64%

UK EQUITY 10,8% 11,8% 12,3% 12,1% 58%

GLOBAL EM EQUITY -0,5% 1,0% 14,1% 13,9% 44%



FRANCE SMID CAPS 19,6% 19,5% 12,8% 11,9% 41%

EUR CORPORATE 3,3% 3,4% 3,0% 3,3% 37%

VALUE EQUITY 14,9% 13,7% 11,0% 11,5% 36%


EMERGING DEBT -3,9% -5,0% 10,7% 10,7% 26%

JAPAN EQUITY 18,2% 17,8% 14,8% 15,1% 24%

US LARGE + MID CAPS 22,0% 20,9% 12,0% 12,4% 23%

EUR GOVIES 5,6% 4,7% 4,2% 6,5% 20%

WORLD EQUITY 17,0% 14,8% 11,5% 11,8% 17%

EUR HIGH YIELD 6,6% 4,4% 4,4% 4,2% 5%

Source : Data in EUR from Morningstar from 31/12/2012 to 31/12/2015. * Average performance/volatility of the funds weighted by the AUM, as defined in the methodology. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA



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5YPERFORMANCE




UK EQUITY 9,2% 9,8% 12,0% 12,8% 53%

FRANCE SMID CAPS 11,1% 11,7% 14,4% 13,5% 39%

EUR CORPORATE 4,9% 4,8% 3,7% 3,9% 35%


CHINA EQUITY 4,9% 5,3% 19,3% 18,6% 27%

VALUE EQUITY 10,9% 9,8% 10,7% 11,8% 26%

GLOBAL EM EQUITY -0,8% 0,3% 14,9% 14,4% 24%



JAPAN EQUITY 9,5% 8,8% 14,8% 15,4% 19%

EUR GOVIES 6,1% 5,1% 4,5% 8,0% 15%

US LARGE + MID CAPS 16,5% 15,0% 11,2% 11,9% 12%

WORLD EQUITY 12,1% 10,2% 11,0% 11,9% 10%

EMERGING DEBT 0,7% -0,5% 9,8% 10,0% 8%

EUR HIGH YIELD 8,7% 6,0% 7,7% 7,6% 0%

Source : Data in EUR from Morningstar from 31/12/2010 to 31/12/2015. * Average performance/volatility of the funds weighted by the AUM, as defined in the methodology (see p7). THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA


10YPERFORMANCE




UK EQUITY 4,8% 5,0% 14,8% 15,6% 39%

VALUE EQUITY 4,7% 4,5% 13,7% 14,5% 38%

CHINA EQUITY 11,1% 11,5% 24,3% 23,0% 32%



GLOBAL EM EQUITY 4,5% 5,3% 19,3% 18,5% 24%


EUR CORPORATE 4,1% 3,6% 4,0% 4,5% 23%

JAPAN EQUITY 1,8% 0,9% 14,7% 15,4% 14%

WORLD EQUITY 5,9% 5,3% 13,4% 14,2% 13%

US LARGE + MID CAPS 7,6% 6,5% 13,7% 14,5% 11%

EUR GOVIES 4,6% 3,9% 4,3% 6,5% 9%

EUR HIGH YIELD 8,8% 5,5% 12,2% 11,6% 0%

EMERGING DEBT 5,2% 3,1% 9,8% 9,6% 0%

FRANCE SMID CAPS N/A 7,7% N/A 16,4% N/A

Source : Data in EUR from Morningstar from 31/12/2005 to 31/12/2015. * Average performance/volatility of the funds weighted by the AUM, as defined in the methodology (see p7). THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

PERFORMANCE / VOLATILITY



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FRANCE LARGE CAPS 20

FRANCE SMID CAPS 22

UK EQUITY 24

EUROPE LARGE + MID CAPS 26

EUROPE SMALL CAPS 28

US LARGE + MID CAPS 30

JAPAN EQUITY 32

WORLD EQUITY 34

VALUE EQUITY 36

GLOBAL EMERGING EQUITY 38

CHINA EQUITY 40

EURO GOVIES 42

EURO HIGH YIELD 43

EURO CORPORATE 44

EMERGING DEBT 45

Focus by universeFOCUS BY UNIVERSE



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Source: Morningstar data as of 31/12/15. Active Funds EW Avg is the average weight of the Active Fund Universe. In red, the top 2 and the bottom 2 of the spread between active funds and benchmark weight

FRANCE LARGE CAPS

ACTIVE FUNDS VS THE BENCHMARK 1/2

BREAKDOWN BY SECTOR AND SIZE OF THE ACTIVE FUND UNIVERSE VS. THE BENCHMARK


FRANCE LARGE CAPS BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance 11,9% 12,4% 0,5%

Sector

Industrials 15,4% 19,2% 3,8%

Technology 6,0% 7,7% 1,7%

Consumer Cycles 15,3% 16,6% 1,3%

Communication Services 3,3% 4,1% 0,8%

Utilities 2,3% 2,4% 0,1%

Financial Services 16,3% 16,2% -0,1%

Health Care 11,2% 10,9% -0,3%

Consumer Defensive 11,6% 9,8% -1,8%

Energy 9,8% 7,5% -2,3%

Basic Materials 8,8% 5,7% -3,1%

Size

Medium 0,5% 14,0% 13,5%

Small 0,0% 3,2% 3,2%

Large 99,5% 82,7% -16,8%

Over a one year period, 59% of active funds outperformed their benchmark, with on average 0.04% of alpha being generated as of 31/12/2015. Over 10 years, the figure goes down to 23% of active funds outperforming their benchmark.

On average, active French large cap funds outperformed their benchmark by 0.5% in 2015. This can be partly explained by the 3% and 2% underexposure to two underperforming sectors, respectively Basic Materials (-8.6% for the CAC Basic Materials index in 2015) and Energy (+0.8% for the CAC Oil & Gas index in 2015) vs. +11.9% for the CAC40 index. The mid cap bias of active funds also explains this outperformance. Mid caps represent 14% of the average composition of active funds vs. 0.5% for the benchmark while the CAC Mid Cap outperformed the CAC 40 in 2015 by 6.3% (CAC Mid Caps +18.2% vs. +11.9% for the CAC 40 in 2015).

Yet, the percentage of funds outperforming is not consistent over time since the figure gets divided by nearly 3 over 10 years.

FRANCE LARGE CAPS 1Y 3Y 5Y 10Y

% of Active Funds outperforming the Benchmark

59% 42% 20% 23%



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1Y PERFORMANCE, RISK PROFILE 1Y, 3Y, 5Y, 10Y PERFORMANCE DISTRIBUTION (%)

1Y ROLLING ESTIMATED ALPHA GENERATION 1Y ROLLING ESTIMATED BETA

OUTPERFORMANCE INDICATOR 10Y CUMULATED PERFORMANCE

Source : Lyxor and Morningstar data from 31/12/2005 to 31/12/2015. See methodology of active funds outperforming the benchmark ** average performance of the funds weighted by the AUM. Outperformance indicators: Funds outperforming the benchmark over 10Y in percentage of AUM.THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA

13

14

15

16

17

18

19

20

21

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Vola

tility

%

Return %

59% *

Weighted average **

11,9% 12,0%

7,9%

3,5%

--10%

--5%

0%

5%

10%

15%

20%

25%

30%

1Y 3Y 5Y 10Y

% of active funds outperforming the benchmark

Index Weighted Average Perf

Equal Weighted Perf 59%

42%

20%

23%

Index

Inde

x

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

Quantile 25% Weighted average Quantile 75%

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

Weighted average Beta of 25% alpha quantile Weighted average Beta

Weighted average Beta of 75% alpha quantile


0%

20%

40%

60%

80%

100%

-

Asset-weighted outperformance indicator

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15

Universe/Benchmark

90

92

94

96

98

100

102

104

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%



0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10




0%

20%

40%

60%

80%

100%

-



Universe/Benchmark

90

92

94

96

98

100

102

104


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FRANCE SMID CAPS




FRANCE SMID CAPS BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance 20,1% 25,3% 5,2%

Sector

Technology 9,0% 19,6% 10,6%

Consumer Defensive 2,3% 7,1% 4,8%

Basic Materials 4,3% 4,5% 0,2%

Consumer Cyclical 18,8% 19,0% 0,2%

Communication Services 1,6% 1,5% -0,1%

Industrials 26,8% 26,2% -0,6%

Utilities 2,3% 1,5% -0,8%

Energy 2,1% 0,5% -1,6%

Health Care 14,6% 11,6% -3,0%


Size

Small 24,2% 43,0% 18,8%

Medium 40,7% 41,4% 0,7%

Large 35,1% 15,6% -19,5%

Over a one year period, 80% of active funds outperformed their benchmark, with on average 0.17% of alpha being generated as of 31/12/2015. The outperformance of active funds against the benchmark has not been consistent over 5 years however as the percentage of outperforming funds was twice as small over this period at 39%.

Over a one year period, this universe shows the best performing results of our study. The significant one-year alpha generation can mainly be explained by the biggest fund in terms of AuM, concentrating 20% of the total AuM of the universe.

On average, active funds overweighted the Information Technology sector which performed particularly well in 2015: +44.2%. Active fund managers benefited from this positive trend as they were overexposed to Information Technology (19.6%) compared to 9.0% for the index.

The average beta of the active fund universe was 0.80, one of the lowest of our universe. This confirms that on average active funds had different exposures from the benchmark and that they took advantage of the great dispersion of returns within this segment. The inter-quartile spread (performance spread between the top and the bottom quartile) observed in 2015 is 7% vs. 3.5% in 2014.

FRANCE SMID CAPS 1Y 3Y 5Y 10Y


80% 41% 39% N/A



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9

10

11

12

13

14

15

16

17

18

15 17 19 21 23 25 27 29 31 33 35 37

average**

80% *

Vola

tility

%

Index Weighted average **

Return %

Inde

x

20,1% 19,6%

11,1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1Y 3Y 5Y

80% 41%

39%



Equal Weighted Perf

-0.50%

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%



0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10




0%

20%

40%

60%

80%

100%



Universe/Benchmark

90

95

100

105

110

115

120


-0.50%

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%



0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10




0%

20%

40%

60%

80%

100%



Universe/Benchmark

90

95

100

105

110

115

120



FRANCE SMID CAPS



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UK EQUITY


UK EQUITY BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance 6,3% 7,6% 1,3%

Sector


Industrials 9,0% 10,7% 1,7%

Health Care 8,8% 9,6% 0,8%



Financial Services 20,5% 20,8% 0,3%


Utilities 4,2% 3,6% -0,6%

Energy 11,2% 9,5% -1,7%


Size

Medium 19,0% 21,6% 2,6%

Small 5,0% 7,1% 2,1%

Large 76,0% 71,4% -4,6%


Active UK equity managers were well positioned to take advantage of the positive performance of small cap stocks in 2015: +15.1% for the FTSE Small Cap compared to +6.3% for the FTSE All Shares. Indeed, active funds were on average slightly overexposed to small cap equities: 7.1% vs. 5.0% for the benchmark.

Moreover, the outperformance could be attributed to an overexposure to the Consumer Discretionary and Technology sectors in 2015. Both sectors outperformed the benchmark in 2015: FTSE All Shares Consumer Services: +15.9%, FTSE All Shares Technology: +24.7% vs. FTSE All Shares +6.3%. Their underexposure to the Energy and Basic Materials sectors was also supportive as both sectors underperformed the benchmark in 2015: FTSE All Share Oil & Gas Producers: -10.9% in 2015 and FTSE All Share Basic Materials : -35.5%.

The spread between Asset Weighted and Equal Weighted performance is negative with -9bps. As a result, the outperformance is not only explained by the biggest funds.

UK EQUITY 1Y 3Y 5Y 10Y


56% 58% 53% 39%




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UK EQUITY

-0.50%

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%



0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

Weighted average Beta of 25% alpha quantile Weighted average Beta Weighted average Beta of 75% alpha quantile


0%

20%

40%

60%

80%

100%



Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-15 Jan-14 90

92

94

96

98

100

102

Universe/Benchmark

15

16

17

18

19

20

0 3 6 9 12 15 18

Vola

tility

%

Weighted average **

Return %

56% *

Index

Inde

x

6,3%

10,8% 9,2%

4,8%

-5%

0%

5%

10%

15%

20%

25%

30%

1Y 3Y 5Y 10Y

56%

58%

53%

39%



Equal Weighted Perf

-0.50%

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%



0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

Weighted average Beta of 25% alpha quantile Weighted average Beta Weighted average Beta of 75% alpha quantile


0%

20%

40%

60%

80%

100%



Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-15 Jan-14 90

92

94

96

98

100

102

Universe/Benchmark



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EUROPE LARGE + MID CAPS


EUR LARGE + MID CAPS BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK


Sector



Health Care 13,5% 14,4% 0,9%

Industrials 11,0% 11,8% 0,8%


Energy 6,3% 5,7% -0,6%

Utilities 3,9% 3,2% -0,7%




Size

Medium 8,0% 13,6% 5,6%

Small 0,1% 0,8% 0,7%

Large 91,9% 85,7% -6,2%

EUR LARGE + MID CAPS 1Y 3Y 5Y 10Y


72% 42% 30% 27%

Over a one year period, 72% of active funds outperformed their benchmark, with on average 0.07% of alpha being generated as of 31/12/2015. Even if a significant number of active funds outperformed their benchmark in 2015, the alpha generation remained limited on average. Over 10 years, the percentage of active funds outperforming their benchmark is not persistent and drops to just 27%.

In 2015, the asset weighted performance for this universe benefited from the underexposure to Basic Materials and Energy sectors (see table below) which underperformed the benchmark: -8.4% for MSCI Europe Materials Sector and -7.0% for MSCI Europe Energy Sector vs. 8.2% for the MSCI Europe in 2015.

On the other hand, active funds generated outperformance thanks to an overweight of the Technology and Consumer Discretionary sectors that both outperformed the benchmark in 2015: MSCI Europe Technology +15.8%, MSCI Europe Consumer Discretionary +12.9% vs. MSCI Europe +8.2%.

Moreover, active funds on average took advantage of their overweight in mid cap equities that outperformed the benchmark in 2015: +15.4% for the MSCI Europe Mid Caps vs. MSCI Europe +8.2%.




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EUROPE LARGE + MID CAPS

13

14

15

16

17

18

19

20

21

3 6 9 12 15 18 21 24

Index

Vola

tility

%

Return %

72% *

Inde

x

Weighted average **

8,2%

11,5%

8,4%

4,2%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1Y 3Y 5Y 10Y

72%42%

30%

27%



Equal Weighted Perf

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10


0%

20%

40%

60%

80%

100%

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jan-06 7Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 jan-15

Quantile 25% Weighted average Quantile 75% Weighted average Beta of 25% alpha quantile Weighted average Beta Weighted average Beta of 75% alpha quantile

Asset-weighted outperformance indicator Universe/Benchmark

85

87

89

91

93

95

97

99

101

103

105

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10


0%

20%

40%

60%

80%

100%

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jan-06 7Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 jan-15



85

87

89

91

93

95

97

99

101

103

105



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EUROPE SMALL CAPS


EUR SMALL CAPS BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance 23,5% 25,0% 1,5%

Sector

Technology 10,2% 14,9% 4,7%


Industrials 22,1% 22,5% 0,4%




Health Care 7,9% 7,1% -0,8%

Utilities 1,9% 0,6% -1,3%

Energy 3,5% 1,5% -2,0%


Size

Small 28,7% 38,7% 10,0%

Large 0,2% 3,0% 2,8%

Medium 71,1% 58,3% -12,8%

EUROPE SMALL CAPS 1Y 3Y 5Y 10Y


55% 27% 23% 29%

Over a one year period, 55% of active funds outperformed their benchmark, with on average 0.10% of alpha being generated as of 31/12/2015. Over 10 years, the percentage of active funds outperforming their benchmark is not persistent and drops to just 29%.

On average, active European small cap managers benefited from their underexposure to the Energy sector that underperformed in 2015: MSCI Energy Small Cap -19.5% in 2015 vs. MSCI Europe Small Cap +23.5%. On the other hand, they were overexposed to the Technology and Consumer Discretionary sectors which performed well in 2015: MSCI Small Cap Europe Technology +35.2% and MSCI Small Cap Consumer Discretionary +27.4%.

The observed beta was one of the lowest levels amongst the study (0.82) confirming that on average, active funds had different exposures from the benchmark and took advantage of the great dispersion in this segment: the annualized volatility of the MSCI Europe Small Cap was 14.7%.




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ACTIVE FUNDS VS THE BENCHMARK2/2

EUROPE SMALL CAPS

7

9

11

13

15

17

19

12 17 22 27 32 37 42

Vola

tility

%

Return %

Weighted average ** 55% *

Index

Inde

x

23,5%

20,6%

13,0%

8,2%

-5%

5%

15%

25%

35%

45%

55%

1Y 3Y 5Y 10Y

55%

27%

23%

29%



Equal Weighted Perf

-0.50%

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 0.60

0.70

0.80

0.90

1.00

1.10


0%

20%

40%

60%

80%

100%




Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Universe/Benchmark

80

85

90

95

100

105

110

-0.50%

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%


0.70

0.80

0.90

1.00

1.10


0%

20%

40%

60%

80%

100%





Universe/Benchmark

80

85

90

95

100

105

110



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APPEND

IX



US LARGE + MID CAPS


US LARGE + MID CAPS BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance 12,1% 9,5% -2,6%

Sector




Energy 6,3% 6,5% 0,2%

Health Care 15,1% 15,3% 0,2%



Utilities 2,9% 2,8% -0,1%

Consumer Cyclical 13,7% 12,0% -1,7%

Technology 20,8% 18,4% -2,4%

Size

Large 60,6% 80,6% 20,0%

Small 0,2% 1,7% 1,5%

Medium 39,3% 17,7% -21,6%

US LARGE + MID CAPS 1Y 3Y 5Y 10Y


25% 23% 12% 11%

Over a one year period, 25% of active funds outperformed their benchmark, with on average 0.01% of alpha being generated as of 31/12/2015. Moreover, over 10 years, the proportion of active funds beating their benchmark is even smaller at just 11%. These results confirmed the idea that opportunities are more difficult to be found in a very competitive and efficient market as these types of stocks are followed and scrutinized by a large number of analysts around the world.

These figures are among the lowest in the equity space of our universes. The performance spread (equal-weighted average performance of active funds minus index performance) is also the lowest of the segment at -2.6%. On average, active US large and mid cap funds underperformed their benchmark in 2015.

Sector biases explain part of the underperformance. Active funds were underexposed on average to Consumer Discretionary and Technology sectors that outperformed the benchmark: MSCI USA IT +18.1%, MSCI USA Consumer Discretionary +17.2% vs. MSCI USA +12.1% in 2015.




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US LARGE + MID CAPS

15

16

17

18

19

20

21

22

23

-7 -2 3 8 13 18 23

Vola

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%

Return %

Weighted average **

25% *

Index

Inde

x

0,1%

0,2%

0,2%

0,1%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

1Y 3Y 5Y 10Y

25%23%

12%

11%



Equal Weighted Perf

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.50

0.60

0.70

0.80

0.90

1.00

1.10


0%

20%

40%

60%

80%

100%

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15



85

87

89

91

93

95

97

99

101

103

105

Universe/Benchmark

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.50

0.60

0.70

0.80

0.90

1.00

1.10


0%

20%

40%

60%

80%

100%




85

87

89

91

93

95

97

99

101

103

105

Universe/Benchmark



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IX



JAPAN EQUITY


JAPAN EQUITY BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance 23,7% 21,1% -2,6%

Sector

Technology 10,0% 13,1% 3,1%


Energy 0,8% 1,4% 0,6%




Utilities 2,1% 1,6% -0,5%


Health Care 7,5% 6,7% -0,8%

Industrials 20,4% 18,8% -1,6%

Size

Medium 14,0% 20,0% 6,0%

Large 72,0% 77,1% 5,1%

Small 13,0% 2,9% -10,1%

JAPAN EQUITY 1Y 3Y 5Y 10Y


26% 24% 19% 14%

Over a one year period, 26% of active funds outperformed their benchmark, with on average 0.0% of alpha being generated as of 31/12/2015. Over 10 years, only 14% of active funds outperformed their benchmark.

In 2015, active funds of this universe underperformed the benchmark by 2.6% which is among the lowest in the equity space of our universe.

Furthermore, the beta observed is at the highest level (0.99), meaning active managers took almost the same exposure as the market, but significantly underperformed their benchmark. This is roughly confirmed by the table below where the average sector exposure of the active fund universe was very close to that of the benchmark, except for the Information Technology sector. On average, the active fund universe was overweighting IT by 3.1%; yet this sector underperformed the benchmark significantly (TOPIX IT +17.1%, vs. TOPIX +23.7% in 2015).




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JAPAN EQUITY

17

18

19

20

21

22

23

24

11 13 15 17 19 21 23 25 27

Vola

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%

Return %

Weighted average **

26% *

Index

Inde

x

23,7%

18,2%

9,5%

1,8%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1Y 3Y 5Y 10Y

26%

24%

19%

14%



Equal Weighted Perf

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.60

0.70

0.80

0.90

1.00

1.10

1.20


0%

20%

40%

60%

80%

100%




80

85

90

95

100

105

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.60

0.70

0.80

0.90

1.00

1.10

1.20


0%

20%

40%

60%

80%

100%




80

85

90

95

100

105



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WORLD EQUITY


WORLD EQUITY BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance 10,4% 7,7% -2,7%

Sector

Technology 13,3% 14,4% 1,1%



Health Care 13,0% 13,7% 0,7%

Industrials 11,2% 11,8% 0,6%




Utilities 3,5% 2,5% -1,0%

Energy 6,4% 4,9% -1,5%

Size

Medium 13,7% 15,5% 1,8%

Small 0,1% 1,6% 1,5%

Large 86,3% 82,9% -3,4%

Over a one year period, 30% of active funds outperformed their benchmark, with on average 0.02% of alpha being generated as of 31/12/2015. Over 10 years, the percentage gets divided by almost 3 with 13% of active funds outperforming their benchmark. The same results were found over the same time period in 2014.

On average, active World equity funds underperformed their benchmark by 2.7% in 2015. The average sector exposure was very close to that of the benchmark. Active funds were slightly overweighting the Information Technology that outperformed the benchmark (+17.5% for the MSCI World IT vs. MSCI World +10.4% in 2015). On the other hand they were slightly underweighting the Energy sector that massively underperformed the benchmark (-13.6% for the MSCI World Energy vs. MSCI World +10.4% in 2015).

WORLD EQUITY 1Y 3Y 5Y 10Y


30% 17% 10% 13%




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WORLD EQUITY

11

13

15

17

19

21

23

25

27

-5 0 5 10 15 20

Vola

tility

%

Return %

Weighted average **

30% *

Index

Inde

x

10,4%

17,0%

12,1%

5,9%

-25%

-15%

-5%

5%

15%

25%

35%

45%

1Y 3Y 5Y 10Y

30% 17%

10%

13%



Equal Weighted Perf

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0,50

0,60

0,70

0,80

0,90

1,00

1,10


0%

20%

40%

60%

80%

100%




80

85

90

95

100

105

110

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0,50

0,60

0,70

0,80

0,90

1,00

1,10


0%

20%

40%

60%

80%

100%




80

85

90

95

100

105

110



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VALUE EQUITY


VALUE EQUITY BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK


Sector


Health Care 10,4% 14,8% 4,4%

Technology 9,6% 11,9% 2,3%





Utilities 6,4% 3,4% -3,0%

Energy 10,9% 7,7% -3,2%


Size

Medium 12,2% 15,9% 3,7%

Small 0,1% 2,3% 2,2%

Large 87,7% 81,8% -5,9%

Over a one year period, 58% of active funds outperformed their benchmark, with on average 0.05% of alpha being generated as of 31/12/2015. Over 10 years, the percentage is one of the highest of our study with 38% of active funds outperforming their benchmark.

A significant number of active value equity funds outperformed their benchmark in 2015. The average performance of the universe is 7.1% vs. 6% for the benchmark. The outperformance of the active funds could be partly attributed to the overexposure to the Consumer Cyclical and Health Care sectors that outperformed the benchmark: MSCI World Consumer Discretionary Value +17.4%, MSCI World Health Care Sector Value +21.6% vs. MSCI World Value +6.0% in 2015. The active funds’ performance was also positively impacted by the underexposure to the Energy Sector that significantly underperformed: MSCI World Energy Sector Value: -11.9% in 2015.

VALUE EQUITY 1Y 3Y 5Y 10Y


58% 36% 26% 38%




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VALUE EQUITY

10

12

14

16

18

20

22

-4 0 4 8 12 16 20

Vola

tility

%

Return %

Weighted average ** 58% *

Index

Inde

x

6,0%

14,9%

10,9%

4,7%

-10%

0%

10%

20%

30%

40%

1Y 3Y 5Y 10Y

58%

36%

26%38%



Equal Weighted Perf

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%


0.55

0.65

0.75

0.85

0.95

1.05

1.15


0%

20%

40%

60%

80%

100%




80

85

90

95

100

105

110

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%


0.55

0.65

0.75

0.85

0.95

1.05

1.15


0%

20%

40%

60%

80%

100%




80

85

90

95

100

105

110



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APPEND

IX



GLOBAL EMERGING EQUITY


GLOBAL EM EQUITY BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK

Performance -5,3% -4,2% 1,1%

Sector




Health Care 2,7% 2,9% 0,2%

Technology 21,8% 21,7% -0,1%

Utilities 3,3% 3,0% -0,3%




Energy 7,1% 5,1% -2,0%

Size

Medium 9,3% 13,0% 3,7%

Small 0,5% 2,9% 2,4%

Large 90,1% 84,2% -5,9%

Over a one year period, 58% of active funds outperformed their benchmark, with on average 0.03% of alpha being generated as of 31/12/2015. Over 10 years, only 24% of active funds outperformed their benchmark.

In 2015, more than half of active emerging equity funds outperformed their benchmark. However active funds outperformed their benchmark by 1.1%. One of the main reasons for the outperformance vs. the benchmark is that active funds were overexposed by 2% to small cap stocks which outperformed the benchmark in 2015: -3.4% for the MSCI Emerging Markets Small Cap vs. -5.3% for the MSCI Emerging Markets. They were also helped by their consumer sectors overweight that outperformed the benchmark: MSCI Emerging Markets Consumer Discretionary -1.2% and MSCI Emerging Markets Consumer Discretionary Sector +1.2% in 2015.

GLOBAL EM EQUITY 1Y 3Y 5Y 10Y


58% 44% 24% 24%




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GLOBAL EMERGING EQUITY

10

12

14

16

18

20

22

24

26

28

-12 -10 -8 -6 -4 -2 0 2 4

58% *

Vola

tility

%

Return %

Weighted average **

Inde

x

Index

-5,3%

-0,5% -0,8%

4,5%

-15%

-10%

-5%

0%

5%

10%

15%

1Y 3Y 5Y 10Y

58%44% 24%

24%



Equal Weighted Perf

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%


0.70

0.80

0.90

1.00

1.10

1.20




0%

20%

40%

60%

80%

100%



Universe/Benchmark

90

92

94

96

98

100

102

104

106

108

110

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%


0.70

0.80

0.90

1.00

1.10

1.20




0%

20%

40%

60%

80%

100%



Universe/Benchmark

90

92

94

96

98

100

102

104

106

108

110



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APPEND

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CHINA EQUITY


CHINA EQUITY BENCHMARK ACTIVE FUNDS EW AVG SPREAD BETWEEN ACTIVE FUNDS AND BENCHMARK


Sector


Health Care 2,2% 4,4% 2,3%





Energy 6,7% 6,5% -0,2%

Utilities 3,8% 3,0% -0,8%


Technology 20,3% 15,7% -4,6%

Size

Medium 0,5% 5,6% 5,1%

Small 0,0% 3,1% 3,1%

Large 99,5% 91,3% -8,2%


In 2015, active Chinese equity funds outperformed their benchmark by 3.7% in a slowing growth environment. One of the main explanations was their overexposure to small and mid cap equities: 9% vs. 0.5% for the broad benchmark. The MSCI China Small Cap was up +15.2% and the MSCI China Mid Cap index was up 17.07% (USD Net in EUR) while the MSCI China increased by only 2.64% in 2015.

Additionally, the outperformance could largely be explained by that of the biggest funds (in terms of AuM), as the spread between asset weighted average and equal weighted average is one of the widest of our universe at 1.61%.

CHINA EQUITY 1Y 3Y 5Y 10Y


72% 64% 27% 32%




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CHINA EQUITY

20

21

22

23

24

25

26

27

28

29

30

-19 -14 -9 -4 1 6 11 16 21 26 31

72% *

Vola

tility

%

Return %

Weighted average **

Inde

x

Index

2,6%

7,8% 4,9%

11,1%

-20%

-10%

0%

10%

20%

30%

40%

1Y 3Y 5Y 10Y

72%

64%

27%32%



Equal Weighted Perf

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%


0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10


0%

20%

40%

60%

80%

100%




90

92

94

96

98

100

102

104

106

108

110

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%


0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10


0%

20%

40%

60%

80%

100%




90

92

94

96

98

100

102

104

106

108

110



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APPEND

IX


ACTIVE FUNDS VS THE BENCHMARK

EURO GOVIESEURO GOVIES 1Y 3Y 5Y 10Y


16% 20% 15% 9%

0

1

2

6

7

8

-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 0

1

2

6

5

4

3

7

8

-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5

Vola

tility

%

Return %

Weighted average **

Inde

x

Index

1,7%

5,6% 6,1% 4,6%

-10%

-5%

0%

5%

10%

15%

20%

25%

1Y 3Y 5Y 10Y



Equal Weighted Perf

16%20%

15%

9%

16% *

-0.05%

-0.03%

-0.01%

0.01%

0.03%

0.05%

0.07%


0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20


0%

20%

40%

60%

80%

100%




90

92

94

96

98

100

102

104

-0.05%

-0.03%

-0.01%

0.01%

0.03%

0.05%

0.07%


0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20


0%

20%

40%

60%

80%

100%




90

92

94

96

98

100

102

104

1Y PERFORMANCE, RISK PROFILE 1Y,3Y,5Y,10Y PERFORMANCE DISTRIBUTION (%)



Over a one year period, 16% of active funds outperformed their benchmark, with on average -0.01% of alpha being generated as of 31/12/2015. Over 10 years, the figure goes down to 9%.

The figures are among the lowest of our universe. Only a small number of active Euro govie funds succeeded in outperforming their benchmark.

The limited percentage of outperforming funds combined with the negative alpha generation illustrates the advantage of holding passive funds for the European government bond category.

This conclusion is also justified by the negative performance spread (weighted average performance of active funds minus index performance): on average, active funds underperformed the benchmark in 2015. As the asset weighted performance is below the equal weighted performance, the underperformance is mainly attributed to that of the biggest funds (in terms of AuM).




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EURO HIGH YIELDEURO HIGH YIELD 1Y 3Y 5Y 10Y


20% 5% 0% 0%

2

3

4

5

6

7

-2 -1 0 1 2 3 4 5

Vola

tility

%

Return %

Weighted average **20% *

Index

Inde

x

2,9%

6,6%

8,7% 8,8%

-10%

-5%

0%

5%

10%

15%

20%

25%

1Y 3Y 5Y 10Y

20%

5%

0% 0%



Equal Weighted Perf

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20


0%

20%

40%

60%

80%

100%



Benchmark Universe

60

65

70

75

80

85

90

95

100

105

110


-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20


0%

20%

40%

60%

80%

100%



Benchmark Universe

60

65

70

75

80

85

90

95

100

105

110





Over a one year period, 20% of active funds outperformed their benchmark, with on average -0.02% of alpha being generated as of 31/12/2015. Over 5 years, the number of active funds outperforming their benchmark dropped to 0%.

The limited performance of active funds is also confirmed by the negative performance spread (weighted average performance of active fund universes minus index performance): on average, active funds underperformed the benchmark in 2015 by 1.8%.

Moreover, the underperformance is mainly explained by that of the biggest funds (in terms of AuM) since the spread between asset weighted performance and equal weighted performance is negative.

The conclusion is the same as for the other fixed income universes: holding passive funds exposed to European High Yield can be interesting.




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APPEND

IX



EURO CORPORATE

1

2

3

4

5

6

7

8

-4 -3 -2 -1 0 1 2

Vola

tility

%

Return %

Weighted average **

41% *

Index

Inde

x

-0,6%

3,3%

4,9% 4,1%

-10%

-5%

0%

5%

10%

15%

1Y 3Y 5Y 10Y

41% 37%

35%23%



Equal Weighted Perf

-0.20%

-0.15%

-0.10%

-0.05%

0.00%

0.05%

0.10%

0.15%


0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40


0%

20%

40%

60%

80%

100%



90

92

94

96

98

100

102

104


-0.20%

-0.15%

-0.10%

-0.05%

0.00%

0.05%

0.10%

0.15%


0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40


0%

20%

40%

60%

80%

100%



90

92

94

96

98

100

102

104





EURO CORPORATE 1Y 3Y 5Y 10Y


41% 37% 35% 23%

Over a one year period, 41% of active funds outperformed their benchmark, with on average 0.00% of alpha being generated as of 31/12/2015. Over 10 years, the figure goes down to 23%.

Only a minority of active Euro corporate bond funds managed to outperform their benchmark, with no alpha generation on average.

The result confirms the interest in holding passive funds for the European Corporate bond category.




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EMERGING DEBT

10

11

12

13

14

15

16

17

-11 -9 -7 -5 -3 -1 1 3

Vola

tility

%

Return %

Weighted average **

32% *

Index

Inde

x

-20%

-15%

-10%

-5%

0%

5%

10%

1Y 3Y 5Y 10Y

32%

26%8%

0%

-5.3% -4.5%

-0.5%

3.1%



Equal Weighted Perf

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


-0.30

-0.10

0.10

0.30

0.50

0.70

0.90

1.10


0%

20%

40%

60%

80%

100%



80Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

85

90

95

100

105

110

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%


-0.30

-0.10

0.10

0.30

0.50

0.70

0.90

1.10


0%

20%

40%

60%

80%

100%



80Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

85

90

95

100

105

110




EMERGING DEBT 1Y 3Y 5Y 10Y


32% 26% 8% 0%

Over a one year period, 32% of active funds outperformed their benchmark, with on average -0.02% of alpha being generated as of 31/12/2015. Over 10 years, there were no active funds outperforming the benchmark in the Emerging Debt universe.

Only a limited number of EM debt active funds outperformed their benchmark with no alpha generation on average, among the lowest figures of our study. These results are strengthened by the negative performance spread (weighted average performance of active funds minus index performance): on average, active funds underperformed the benchmark in 2015 by 0.8%.

Additionally, the spread between asset weighted performance and equal weighted performance is below zero. This means that the underperformance can mainly be explained by that of the biggest funds (in terms of AuM).

The result confirms the benefit of holding passive funds exposed to Emerging Debt.




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AppendixSTATISTICAL ANALYSIS 47

UNIVERSE DESCRIPTION 51

BASE CURRENCY CALCULATION 51

GLOSSARY 52



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STATISTICAL ANALYSIS

1Y PERFORMANCE COMPARISON BETWEEN ASSET WEIGHTED ACTIVE FUNDS, EQUALLY WEIGHTED ACTIVE FUNDS AND THE BENCHMARK

PERFORMANCE

UNIVERSE INDEX AW FUNDS* SPREAD EW FUNDS** SPREAD

CHINA EQUITY 2,6% 7,9% 5,2% 6,3% 3,6%

FRANCE SMID CAPS 20,1% 24,8% 4,7% 25,3% 5,3%

EUR LARGE + MID CAPS 8,2% 11,5% 3,3% 10,7% 2,5%

EUROPE SMALL CAPS 23,5% 26,4% 2,9% 25,0% 1,4%

VALUE EQUITY 6,0% 7,2% 1,2% 7,1% 1,1%

UK EQUITY 6,3% 7,5% 1,1% 7,6% 1,2%

FRANCE LARGE CAPS 11,9% 13,0% 1,1% 12,4% 0,5%

GLOBAL EM EQUITY -5,3% -4,2% 1,1% -4,2% 1,1%

EUR CORPORATE -0,6% -0,5% 0,1% -0,6% -0,1%

EMERGING DEBT -5,2% -6,0% -0,8% -5,3% -0,1%

EUR GOVIES 1,7% 0,9% -0,8% 1,0% -0,7%

WORLD EQUITY 10,4% 9,6% -0,8% 7,7% -2,7%

JAPAN EQUITY 23,7% 21,9% -1,8% 21,1% -2,6%

US LARGE + MID CAPS 12,1% 10,3% -1,8% 9,5% -2,6%

EUR HIGH YIELD 2,9% 1,1% -1,8% 1,3% -1,6%

AVERAGE 7,9% 8,8% 0,9% 8,3% 0,4%

Source : Morningstar data in EUR from 31/12/2014 to 31/12/2015. * Average performance/volatility of the funds weighted by the AUM, as defined in the methodology (see p7). ** Simple average performance/volatility of the funds as defined in the methodology (see p7). Spread : performance spread between the active funds and the index. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA


PERFORMANCE


CHINA EQUITY 7,8% 11,3% 3,5% 9,5% 1,7%

GLOBAL EM EQUITY -0,5% 1,0% 1,6% -0,5% 0,0%

UK EQUITY 10,8% 11,8% 1,0% 11,9% 1,1%

EUR LARGE + MID CAPS 11,5% 12,1% 0,6% 11,1% -0,3%

FRANCE LARGE CAPS 12,0% 12,4% 0,4% 11,5% -0,5%

EUR CORPORATE 3,3% 3,4% 0,0% 3,2% -0,1%

FRANCE SMID CAPS 19,6% 19,5% -0,1% 19,6% 0,0%

JAPAN EQUITY 18,2% 17,8% -0,4% 16,8% -1,4%

EUR GOVIES 5,6% 4,7% -0,9% 4,4% -1,2%

EMERGING DEBT -3,9% -5,0% -1,1% -4,5% -0,5%

US LARGE + MID CAPS 22,0% 20,9% -1,1% 19,6% -2,4%

VALUE EQUITY 14,9% 13,7% -1,3% 13,7% -1,3%

EUROPE SMALL CAPS 20,6% 19,1% -1,5% 18,1% -2,5%

WORLD EQUITY 17,0% 14,8% -2,1% 12,4% -4,6%

EUR HIGH YIELD 6,6% 4,4% -2,2% 4,0% -2,5%

AVERAGE 11,0% 10,8% -0,2% 10,1% -1,0%


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PERFORMANCE


GLOBAL EM EQUITY -0,8% 0,3% 1,1% -1,8% -1,0%

FRANCE SMID CAPS 11,1% 11,7% 0,6% 11,1% 0,0%

UK EQUITY 9,2% 9,8% 0,5% 9,7% 0,4%

CHINA EQUITY 4,9% 5,3% 0,3% 3,3% -1,6%


EUR CORPORATE 4,9% 4,8% -0,2% 4,5% -0,4%

FRANCE LARGE CAPS 7,9% 7,5% -0,5% 6,8% -1,1%

JAPAN EQUITY 9,5% 8,8% -0,7% 8,5% -1,1%

EUR GOVIES 6,1% 5,1% -1,1% 4,7% -1,4%

VALUE EQUITY 10,9% 9,8% -1,1% 9,2% -1,7%

EMERGING DEBT 0,7% -0,5% -1,1% -0,5% -1,2%


US LARGE + MID CAPS 16,5% 15,0% -1,5% 13,7% -2,9%

WORLD EQUITY 12,1% 10,2% -1,9% 7,8% -4,4%

EUR HIGH YIELD 8,7% 6,0% -2,7% 5,2% -3,6%

AVERAGE 8,2% 7,6% -0,6% 6,7% -1,5%



PERFORMANCE


FRANCE SMID CAPS N/A 7,7% N/A 6,6% N/A

GLOBAL EM EQUITY 4,5% 5,3% 0,8% 2,9% -1,6%

CHINA EQUITY 11,1% 11,5% 0,4% 9,6% -1,4%

UK EQUITY 4,8% 5,0% 0,2% 4,6% -0,2%


VALUE EQUITY 4,7% 4,5% -0,2% 4,4% -0,3%

FRANCE LARGE CAPS 3,5% 3,1% -0,4% 2,8% -0,7%

EUR CORPORATE 4,1% 3,6% -0,4% 3,6% -0,4%

WORLD EQUITY 5,9% 5,3% -0,6% 3,8% -2,1%


EUR GOVIES 4,6% 3,9% -0,7% 3,5% -1,1%

JAPAN EQUITY 1,8% 0,9% -1,0% 0,4% -1,4%

US LARGE + MID CAPS 7,6% 6,5% -1,1% 5,7% -1,9%

EMERGING DEBT 5,2% 3,1% -2,1% 2,9% -2,2%

EUR HIGH YIELD 8,8% 5,5% -3,3% 4,8% -4,0%

AVERAGE 5,6% 5,2% -0,6% 4,4% -1,4%


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1Y PERFORMANCE QUANTILES

PERFORMANCE

UNIVERSE 25% Quantile 50% Quantile 75% Quantile Benchmark

FRANCE LARGE CAPS 10,6% 12,5% 14,3% 11,9%

FRANCE SMID CAPS 21,9% 25,6% 29,7% 20,1%

UK EQUITY 4,3% 6,7% 10,0% 6,3%

EUR LARGE + MID CAPS 7,8% 10,0% 13,7% 8,2%

EUROPE SMALL CAPS 20,8% 24,5% 29,5% 23,5%

US LARGE + MID CAPS 6,7% 10,0% 12,1% 12,1%

JAPAN EQUITY 19,4% 21,7% 23,6% 23,7%

WORLD EQUITY 4,9% 8,4% 11,1% 10,4%

VALUE EQUITY 3,6% 6,5% 9,8% 6,0%

GLOBAL EM EQUITY -6,4% -4,3% -1,9% -5,3%

CHINA EQUITY 2,3% 6,0% 11,2% 2,6%

EUR GOVIES 0,1% 0,8% 1,5% 1,7%

EUR CORPORATE -1,3% -0,8% -0,1% -0,6%

EUR HIGH YIELD 0,0% 1,0% 2,2% 2,9%

EMERGING DEBT -7,1% -5,7% -4,0% -5,2%

Source: Morningstar data in EUR from 31/12/2014 to 31/12/2015. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA


PERFORMANCE



FRANCE SMID CAPS 16,2% 18,5% 21,3% 19,6%

UK EQUITY 9,6% 11,4% 13,9% 10,8%



US LARGE + MID CAPS 17,7% 20,0% 21,7% 22,0%

JAPAN EQUITY 15,3% 17,0% 18,1% 18,2%

WORLD EQUITY 9,7% 13,3% 16,0% 17,0%

VALUE EQUITY 11,4% 13,8% 16,2% 14,9%

GLOBAL EM EQUITY -2,2% -0,8% 0,9% -0,5%

CHINA EQUITY 6,2% 9,1% 12,7% 7,8%

EUR GOVIES 2,8% 4,7% 5,4% 5,6%

EUR CORPORATE 2,5% 3,1% 3,6% 3,3%

EUR HIGH YIELD 3,1% 4,1% 4,9% 6,6%

EMERGING DEBT -5,6% -4,9% -3,9% -3,9%


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PERFORMANCE



FRANCE SMID CAPS 9,3% 10,5% 12,5% 11,1%

UK EQUITY 8,1% 9,3% 11,2% 9,2%



US LARGE + MID CAPS 12,1% 14,0% 15,7% 16,5%

JAPAN EQUITY 7,0% 8,5% 9,1% 9,5%

WORLD EQUITY 5,4% 8,7% 10,6% 12,1%

VALUE EQUITY 7,6% 9,6% 11,0% 10,9%

GLOBAL EM EQUITY -2,6% -1,8% -1,0% -0,8%

CHINA EQUITY 1,6% 3,3% 5,2% 4,9%

EUR GOVIES 3,7% 5,0% 5,8% 6,1%

EUR CORPORATE 4,0% 4,6% 5,1% 4,9%

EUR HIGH YIELD 4,2% 5,6% 6,4% 8,7%

EMERGING DEBT -1,3% -0,8% 0,1% 0,7%



PERFORMANCE



FRANCE SMID CAPS 6,3% 7,0% 7,6% N/A

UK EQUITY 3,5% 4,5% 5,7% 4,8%



US LARGE + MID CAPS 4,6% 5,9% 6,9% 7,6%

JAPAN EQUITY -0,9% 0,4% 1,2% 1,8%

WORLD EQUITY 2,6% 3,8% 5,1% 5,9%

VALUE EQUITY 3,3% 4,3% 5,1% 4,7%

GLOBAL EM EQUITY 2,1% 2,9% 4,2% 4,5%

CHINA EQUITY 8,1% 10,4% 11,6% 11,1%

EUR GOVIES 3,1% 3,7% 4,2% 4,6%

EUR CORPORATE 3,1% 3,7% 4,0% 4,1%

EUR HIGH YIELD 4,2% 5,3% 6,0% 8,8%

EMERGING DEBT 2,1% 3,4% 3,8% 5,2%


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UNIVERSE DESCRIPTION

UNIVERSE BENCHMARK SELECTION CRITERIASTART DATE INDEX

NB OF FUNDS

AUM AS OF

31/12/2015 (M€)

% AUM OF €

FUNDS

% AUM OF £

FUNDS

% AUM OF $

FUNDS

MANAGEMENT FEES

FRANCE LARGE CAPS CAC 40 (CACR) Morningstar Category France Large Cap 1987 144 31 601 100% 0% 0% 1,5%

FRANCE SMID CAPS CAC Mid & Small (CMSN)

Benchmarked by the main France Small & Mid Caps indices : (MSCI France Small Cap, MSCI France Mid Cap, CAC Mid&Small, Cac Mid 60,

CAC Small Cap)

2008 51 4 165 100% 0% 0% 2,0%

UK EQUITYFTSE All Shares

(FTPTTALL)

Funds which Morningstar Category is UK Large Cap Blend Equity and which Primary Prospectus

Benchmark is the FTSE All Shares1985 222 139 048 0% 99% 1% 0,9%

EUR LARGE + MID CAPS MSCI Europe (M7EU) Morningstar Category Europe Equity Large Cap 1998 765 230 573 77% 1% 15% 1,3%

EUROPE SMALL CAPSMSCI Europe Small Cap

(NCEDE15)

Funds which Morningstar Category is Europe Small-Cap Equity or which Global Investor Fund Sector is Europe Small Equity or which Primary Prospectus Benchmark corresponds to one of

the main Europe Small Caps indexes

2000 168 29 806 78% 3% 7% 1,5%

US LARGE + MID CAPS MSCI USA (NDDUUS)Morningstar Category US Large Cap Equity

(Blend+Value+Growth)1969 732 246 204 19% 23% 48% 1,1%

JAPAN EQUITY TOPIX Japan (TPXDDVD) Morningstar Category Japan Equity 1989 87 26 983 9% 14% 13% 1,1%

WORLD EQUITY MSCI World (NDDUWI) Benchmarked by the MSCI World 1969 501 147 850 50% 4% 41% 1,3%

VALUE EQUITYMSCI World Value

(NDUVWI)Morningstar Category Global Large Cap Value

Equity1974 216 63 894 49% 12% 14% 1,2%

GLOBAL EM EQUITYMSCI Emerging Markets

(NDUEEGF)Benchmarked by the MSCI Emerging Markets 1998 106 25 442 63% 16% 5% 1,3%

CHINA EQUITY MSCI China (NDEUCHF) Morninstar Category EUR China Equity 1998 83 24 249 9% 6% 84% 1,5%

EUR GOVIESEuroMTS Global

Investment Grade (EMIEG5)

Morninstar Category EUR Governments Bonds 2004 276 82 810 96% 0% 0% 0,5%

EUR CORPORATEBarclays Capital

Euro Corporate Bond (LECPTREU)

Morninstar Category EUR Corporate Bonds 1998 135 53 588 93% 5% 0% 0,6%

EUR HIGH YIELDBarclays Pan-European High Yield (LP01TREU)

Morninstar Category EUR High Yield Bonds 1999 123 40 819 96% 0% 0% 0,9%

EMERGING DEBTEmerging Markets

Local Currency Bond (JGENVUEG)

Morninstar Category Global Emerging Markets Bond - Local Currency

2002 131 44 134 19% 12% 64% 1,0%

Source : Morningstar data in EUR from 31/12/2005 to 31/12/2015. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA,

PERCENTAGE OF ACTIVE FUNDS OUTPERFORMING THE BENCHMARK (CALCULATION BASED ON BASE CURRENCY DATA)

UNIVERSE BENCHMARK 1Y 3Y 5Y 10Y

UK EQUITY FTSE All Shares (FTPTTALL) 57% 60% 53% 39%

US LARGE + MID CAPS MSCI USA (NDDUUS) 25% 23% 12% 11%

JAPAN EQUITY TOPIX Japan (TPXDDVD) 21% 22% 19% 14%

CHINA EQUITY MSCI China (NDEUCHF) 72% 66% 29% 32%

EMERGING DEBTEmerging Markets Local

Currency Bond (JGENVUEG)33% 26% 8% 0%

Source : Morningstar data in EUR from 31/12/2005 to 31/12/2015. THE FIGURES RELATING TO PAST PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDI-CATOR FOR FUTURE RESULTS. THIS ALSO APPLIES TO HISTORICAL MARKET DATA



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Asset-Weighted Average Performance: It is defined as the average performance of all funds weighted by their AUM.

Equal-Weighted Average Performance: It is defined as the arithmetic average performance of the total number of funds composing the universe.

Estimated Alpha: Alpha is defined as the absolute performance generated by the active fund that cannot be explained by the market factor. The estimation is based on 5 year rolling simple regressions on the market factor.

Estimated Beta: Beta represents market sensitivity of the fund or systematic risk. The estimation is based on 5 year rolling simple regressions on the market factor.

Fees: The fund returns are net of fees.

Percentage of Funds Outperforming the Index: In this study, it is the percentage of existing active funds that outperformed the benchmark over N years. The reader

of this study should be aware that this percentage does not take into account the funds that were liquidated or merged over this period and understand that this figure is potentially overestimated.

Quantile Breakpoints: 75% of the funds outperform the 25% quantile (and 25% underperform the quantile), 50% of the funds outperform the Median (50% quantile), 25% of the funds outperform the 75% quantile. Box plots used in this study allow us to compare the index performance with the funds performance.

Survivorship (%): It is the percentage of funds that survived (neither merged nor liquidated) over a defined period.

Survivorship Bias: Merged or Liquidated funds are not taken into account in this study, which may lead to overestimate the percentage of funds that outperformed the benchmark as we can expect merged or liquidated funds to have underperformed the benchmark index.

BENCHMARK DESCRIPTIONS BY BLOOMBERG AND INDEX PROVIDERS

Barclays Capital Euro Corporate Bond: The Barclays Euro Corporate Bond Index is a broad-based benchmark that measures the investment grade, euro-denominated, fixed-rate corporate bond market. Inclusion is based on the currency denomination of a bond and not the country of risk of the issuer.

Barclays Pan-European High Yield: The Barclays Pan-European High Yield Index measures the market of non-investment grade, fixed-rate corporate bonds denominated. Inclusion is based on the currency of issue, and not the domicile of the issuer. The index excludes emerging market debt.

CAC Mid & Small: The CAC Mid and Small Index is a market capitalization weighted index adjusted for free float. The index is composed of mid and small cap equities listed on the Euronext Paris Bourse. Net return index history for 1, 3 & 5 year calculation, price return for 10y.

Emerging Markets Local Currency Bond: The Emerging Markets Local Currency Bond is designed to reflect the performance of debt securities denominated in emerging markets currencies (Local Currency Debt Securities) from countries whose economies or bond markets are less developed (emerging markets).

EuroMTS Global Investment Grade: The EuroMTS Investment Grade Index measures the total return of a portfolio of Euro-denominated sovereign bonds issued by Eurozone countries with at least two investment grade credit ratings from the main rating agencies and listed on the MTS platforms.

FTSE Minimun Variance: Index based on minimising global portfolio volatility thanks to optimal selection and weighting of stocks.

FTSE UK Series FTSE All Share: The FTSE All-Share Index is a capitalization-weighted index comprising of the FTSE 350 and the FTSE Small Cap Indices.

MSCI China: The MSCI China Index captures large and mid cap representation across China H shares, B shares, Red chips and P chips. With 141 constituents, the index covers about 85% of this China equity universe.

MSCI Emerging Markets: The MSCI Emerging Markets Index captures large and mid cap representation across 23 Emerging Markets (EM) countries. With 834 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI Europe: The MSCI Europe Index captures large and mid cap representation across 15 Developed Markets (DM) countries in Europe*. With 437 constituents, the index covers approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe.

MSCI Europe Small Cap: The MSCI Europe Small Cap Index captures small cap representation across the 15 Developed Markets (DM) countries in Europe*. With 918 constituents, the index covers approximately 14% of the free floatadjusted market capitalization in the European equity universe.

MSCI USA: The MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. With 617 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in the US.

MSCI World: The MSCI World Index captures large and mid cap representation across 23 Developed Markets (DM) countries. With 1,612 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI World Value: The MSCI World Value Index captures large and mid cap securities exhibiting overall value style characteristics across 23 Developed Markets countries. The value investment style characteristics for index construction are defined using three variables: book value

GLOSSARY



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price, 12-month forward earnings to price and dividend yield. With 819 constituents, the index targets 50% coverage of the free float-adjusted market capitalization of the MSCI World Index.

TOPIX: The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization weighted index of all companies

listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968. This Index represents the total return of the Topix Index.

MORNINGSTAR CATEGORIES (MORNINGSTAR DEFINITIONS):

China Equity : China Equity funds invest principally in Chinese companies listed on the stock exchanges in China and Hong Kong, and companies that derive significant revenues from or have substantial business ties with the China market. These funds invest at least 75% of total assets in equities, and at least 75% of equity assets in Chinese or China-related companies defined as above. The funds usually invest less than 10% of total assets in Taiwanese equities. EUR Corporate Bonds: EUR Corporate Bond funds invest principally in investment grade corporate issued securities denominated in or hedged into EUR. EUR Governments Bonds: EUR Government Bond funds invest principally in government or explicitly government-backed agency securities denominated in or hedged into EUR. EUR High Yield Bonds: EUR High Yield Bond funds invest principally in sub-investment grade securities with a credit quality equivalent to BB, or lower and denominated in or hedged into EUR. Europe Equity Large Cap: Europe equity large cap portfolios invest predominantly in equity securities domiciled in Europe. These portfolios tend to focus on those stocks that are in the top 70% of the capitalization of the European equity market. Europe Small Cap Equity: Europe Small-Cap Equity funds invest principally in the equities of small-cap European companies. Equities in the bottom 10% of the European equity market (including the UK) are defined as small-cap. At least 75% of total assets are invested in equities and at least 75% of equity assets are invested in European equities. France Large-Cap Equity: France Large-Cap Equity funds invest principally in the equities of large-cap French companies. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. These funds invest at least 75% of total assets in equities, and invest at least 75% of equity assets in French equities. Global Emerging Markets Bond – Local Currency: Global Emerging Market Bond funds are dedicated to fixed income securities of issuers in emerging market countries, denominated in local currencies. They should invest across the global emerging markets universe without a single country or regional focus and they do not hedge their currency exposure. Hedged classes of such funds are excluded from the category.

Global Emerging Markets Equity: Global Emerging Markets Equity funds tend to divide their assets among several emerging markets in Asia, Latin America, Europe, Middle East and/or Africa. These funds invest at least 75% of their total assets in equities, and invest at least 75% of equity assets in global emerging markets. Global Large Cap Value Equity: Global Large-Cap Value Equity funds invest principally in the equities of large-cap value companies from around the globe. Most of these funds divide their assets among many developed markets and invest at least 20% of equity assets in North America and 15% in Greater Europe. Equities in the top 70% of the capitalisation of each of the seven regional Morningstar style zones are defined as large-cap (the style zones are Europe, US, Canada, Latin America, Japan, Asia ex-Japan, and Australia/New Zealand—please see the Morningstar Style Box Methodology for further information). Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow). At least 75% of total assets are invested in equities. Japan Large-Cap Equity: Japan Large-Cap Equity funds invest principally in the equities of large-cap Japanese companies. Equities in the top 70% of the capitalisation of the Japanese market are defined as large-cap. These funds invest at least 75% of total assets in equities, and invest at least 75% of equity assets in Japanese equities. UK Large-Cap Blend Equity: UK Large-Cap Blend Equity funds are fairly representative of the overall UK equity market in size, growth rates and price. Equities in the top 70% of the European equity market (including the UK) are defined as large-cap. The blend style is assigned to funds where neither growth nor value characteristics predominate. These funds tend to invest across the spectrum of UK industries. At least 75% of total assets are invested in equities and at least 75% of equity assets are invested in UK equities. US Large Cap Equity (Blend): US Large-Cap Blend Equity funds are fairly representative of the overall US equity market in size, growth rates, and price. Equities in the top 70% of the capitalisation of the US equity market are defined as large cap. The blend style is assigned to funds where neither growth nor value characteristics predominate. These funds invest at least 75% of their total assets in equities, and invest at least 75% of equity assets in US equities.

GLOSSARY



IMPORTANT INFORMATIONThis document is for the exclusive use of investors acting on their own account and categorized either as “eligible counterparties” or “professional clients” within the meaning of Markets in Financial Instruments Directive 2004/39/EC. It is not directed at retail clients. In Switzerland, it is directed exclusively at qualified investors. In accordance with MiFID as implemented in France, this publication should be treated as a marketing communication providing general investment recommendations. This document has not been prepared in accordance with regulatory provisions designed to promote the independence of investment research. This document is of a commercial nature. It is each investor’s responsibility to ascertain that they are authorised to subscribe, or invest into this product. Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. Lyxor UCITS ETFs are French or Luxembourg open ended mutual investment funds respectively approved by the French Autorité des Marchés Financiers or by the Luxembourg Commission de Surveillance du Secteur Financier, and authorized for marketing of their units or shares in various European countries (the Marketing Countries) pursuant to the article 93 of the 2009/65/EC Directive. Société Générale and Lyxor International Asset Management (LIAM) recommend that investors read carefully the “risk factors” section of the product’s prospectus and the “Risk and reward” section of the Key Investor Information Document (KIID). The prospectus in French for French Lyxor UCITS ETFs and in English for Luxembourg Lyxor UCITS ETFs and the KIID in the local languages of the Marketing Countries are available free of charge on www.lyxoretf.com or upon request to [email protected]. Updated composition of the product’s investment portfolio is available on www.lyxoretf.com. Indicative net asset value is published on the Reuters and Bloomberg pages of the products, and might also be mentioned on the websites of the stock exchanges where the product is listed. The products are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on the exchange, assuming normal market conditions and normally functioning computer systems. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them. These products include a risk of capital loss. The redemption value of these products may be less than the amount initially invested. In a worst case scenario, investors could sustain the loss of their entire investment. The indexes and the trademarks used in this document are the intellectual property of index sponsors and/or its licensors. The indexes are used under license from index sponsors. The Funds based on the indexes are in no way sponsored, endorsed, sold or promoted by index sponsors and/ or its licensors and neither index sponsors nor its licensors shall have any liability with respect thereto. The indices referred to herein (the “Index”) are not sponsored, approved or sold by Société Générale or Lyxor International Asset Management (LIAM). Société Générale and Lyxor International Asset Management (LIAM) shall not assume any responsibility in this respect. The accuracy, completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawn from sources reasonably believed to be reliable. Subject to any applicable law, Société Générale and Lyxor International Asset Management (LIAM) shall not assume any liability in this respect. This document does not constitute an offer for sale of securities in the United States of America. Units or shares of the UCITS ETF have not been and will not be registered under the United States Securities Act of 1933 (as amended) or the securities laws of any of the States of the United States. Units or shares may not be offered, sold or delivered directly or indirectly in the United States, or to or for the account or benefit of any “US Person”. Any re-offer or resale of any units or shares in the United States or to US Persons may constitute a violation of US law. The UCITS ETFs will not be registered under the United States Investment Company Act of 1940, as amended. Applicants for units or shares will be required to certify that they are not US Persons. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor International

Asset Management (LIAM) or any of their respective subsidiaries to purchase or sell the product referred to herein. Société Générale is a French credit institution (bank) authorised by the Autorité de contrôle prudentiel et de résolution (the French Prudential Control Authority). Lyxor International Asset Management (LIAM) is a French investment management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS Directive (2009/65/CE). © COPYRIGHT 2016 LYXOR INTERNATIONAL ASSET MANAGEMENT ALL RIGHTS RESERVED Notice to investors in the United Kingdom: This material is issued in the United Kingdom by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658 Notice to investors in Switzerland: This document is directed exclusively at qualified investors in Switzerland. Some of the UCITS ETFs presented herein are not authorized for the offer and distribution to non qualified investors in Switzerland or from Switzerland. To verify the authorisation status of the UCITS ETFs presented herein, please contact [email protected] Regarding UCITS ETFs authorized for the offer and distribution in Switzerland or from Switzerland: This document and the information contained therein do not constitute an issue prospectus according to articles 652a and 1156 of the Swiss Code of Obligations (“CO”) or a listing prospectus according the Listing Rules of the SIX Swiss Exchange. The products are authorized for the offer and distribution in Switzerland or from Switzerland pursuant to the Swiss Federal Act on Collective Investment Schemes (CISA). The Swiss Financial Market Supervisory Authority FINMA has authorized Société Générale, Zurich Branch (Talacker 50, Case postale 1928, 8021 Zürich), to act as Swiss Representative and Paying Agent of the Funds in Switzerland. The product’s documentation (prospectus, KIID, articles of association, annual and semi-annual reports) can be obtained free of charge at the Swiss representative’s office. Regarding UCITS ETFs NOT authorized for the offer and distribution in Switzerland or from Switzerland: The products presented herein have not been and will not be registered with, or approved by, the Swiss Financial Market Supervisory Authority FINMA (FINMA) for the distribution to non-qualified investors under the Swiss Federal Act on Collective Investment Schemes (CISA). Therefore, the information presented herein or in the fund’s legal documentation does not necessarily comply with the information standards required by FINMA in the case of distribution of collective investment schemes to non-qualified investors. The products must not be distributed to non-qualified investors in or from Switzerland, and may be distributed exclusively to Qualified Investors as defined in article 10 of the CISA and related provisions in the Swiss Federal Ordinance on Collective Investment Schemes (CISO) in strict compliance with applicable Swiss law and related regulations. This document is personal and does not constitute an offer to any person. This document must be distributed or otherwise made available in Switzerland only and exclusively to Qualified Investors, without distribution or marketing to non-qualified investors in or from Switzerland. This document may be used only by those Qualified Investors to whom it has been handed out in connection with the offering described therein, and it may neither be distributed nor made available to other persons without the express consent of Lyxor International Asset Management (LIAM) or Société Générale. It may not be used in connection with any other distribution and shall in particular not be copied and/or distributed to non-qualified investors in Switzerland or in any other country. This document, or the information contained therein, does not constitute a prospectus as such term is understood pursuant to article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus pursuant to the listing rules of the SIX Swiss Exchange or any other exchange or regulated trading facility in Switzerland or a simplified prospectus, a key information for investors document, or a prospectus, as such terms are defined in the CISA. The product’s documentation (prospectus, KIID, articles of association, annual and semi-annual reports) can be obtained free of charge at the office of Société Générale, Zurich Branch (Talacker 50, Case postale 1928, 8021 Zürich), Swiss Representative and Paying Agent of the product in Switzerland.

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