Ashmore : Current investor presentation

Ashmore Group plc

Investor presentation

May 2021

www.ashmoregroup.com

A specialist active manager of Emerging Markets assets

EMERGING MARKETS FUNDAMENTALS UNDERPIN LONG-TERM GROWTH

• EM accounts for majority of world's population (84%), FX reserves (75%), GDP (60%)
• High growth potential: social, political and economic convergence trends with DM
• Large, liquid, diverse investment universe
• Investors are underweight, typically <10% allocations vs 10%-20% EM weight in global indices

LONG-STANDING INVESTMENT APPROACH DELIVERS OUTPERFORMANCE

• Deep understanding of EM underpins an active, value-based investment philosophy
• Inefficient markets mean volatile prices, but significant alpha opportunities
• Investment committees, not a star culture
• Performance track record extends over 28 years

DIVERSIFIED CLIENT BASE

• Global client base diversified by type and location
• Retail markets accessed through intermediaries
• 26% of AuM sourced from EM-domiciled clients

DISTINCTIVE STRATEGY & EFFECTIVE BUSINESS MODEL

• Three phase strategy to capture value from long-term EM growth trends
• Remuneration philosophy aligns interests and provides flexibility through profit cycles
• Disciplined cost control delivers a high profit margin
• High conversion of operating profits to cash (110% since IPO)
• Scalable operating platform, 309 employees in 11 countries
• Network of local EM fund management platforms
• Strong balance sheet supports commercial and strategic initiatives, e.g. seed capital

ASHMORE CHARACTERISTICS

• AuM of USD 89.9bn diversified across eight investment themes
• Consistent investment approach delivers long-term investment performance
• High EBITDA margin (68%)
• Well-capitalised,liquid balance sheet with £580m of excess capital
• Strong alignment of interests between clients, employees and shareholders; employees own ~40% of equity
• More than £1bn of ordinary dividends paid to shareholders since IPO

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Emerging Markets

Emerging Markets outlook

• COVID vaccination programmes critical to further worldwide economic & social progress in 2021
• Extraordinary stimulus by DM governments/central banks
• • underpinned by US election result
  • supportive for markets in near term
  • but medium term impact on growth and potentially leads to currency devaluation, especially US dollar
• EM countries have lower debt/GDP and higher real interest rates, so fiscal & monetary stimulus is manageable
• EM growth premium is intact and fixed income and equity markets offer highly attractive valuations relative to DM
• Macro backdrop is therefore supportive of capital flows to EM as investors seek higher growth and investment returns

GDP growth outlook consistently favours EM over DM (%)

8.0

6.0

4.0

2.0

0.0

(2.0)

(4.0)

(6.0)

(8.0)

2018	2019	2020f	2021f		2022f	2023f	2024f	2025f
			Developed Markets		Emerging Markets

Source: IMF, Ashmore

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Emerging Markets and US interest rates

• US rates will continue to rise as economy exits recession, mostly driven by rising inflation expectations
• Real yields have so far not increased materially
• Several factors suggest EM will not experience a repeat of the
  2013 'taper tantrum':
• • Fed is likely to maintain highly accommodative policy while dealing with COVID-19 pandemic and allowing economy to recover
  • EM current accounts in surplus (+1.3%) vs deficit in 2013 (- 1.8%), so higher USD funding costs have less of an impact
  • EM currencies trading close to record lows and 40% below 2013 levels; REER -12% vs 2013
  • EM bond yields already reflect far tighter financial conditions than DM bond yields, implying Fed Funds rate >3%
  • Rising commodity prices help a significant minority of EM countries, underpinning currencies

10-year US rates: nominal, real and break-even inflation (%)

3.50								1.50
3.00								1.00
2.50								0.50
2.00
								-
1.50
1.00								(0.50)
0.50								(1.00)
0.00								(1.50)
2012	2013	2014	2015	2016	2017	2018	2019	2020
		10yr UST		10yr break-even	10yr real rates (RHS)

EM current account (%, GBI-EM weighted)

2.00

1.50

1.00

0.50

0.00 -0.50-1.00-1.50-2.00-2.50

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Source: JP Morgan, Bloomberg, Ashmore

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