Next 11 Emerging Markets June 2013

Emerging Markets: Beyond BRICs Next 11 Emerging Markets

CIVETS VISTA Argentina

South Africa

Colombia

Vietnam

Egypt

Indonesia Turkey

Mexico South Korea

MIST

Bangladesh

Nigeria Pakistan Iran Philippines

Next 11

Kindly note that: Even though Iran is classified as a Next 11 country, the Fund cannot and will not invest in Iran in accordance with legal and regulatory restrictions with regards to investment in Iran. Source: Castlestone Management & Center for Security Studies, ETH Zurich.

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Goldman Sachs’ View Next 11 Emerging Markets

Source: Dominic Wilson and Anna Stupnytska, Goldman Sachs Global Economics Paper No: 153, 28 March 2007, http://www.chicagobooth.edu/alumni/clubs/pakistan/docs/next11dream-march%20%2707goldmansachs.pdf

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Goldman Sachs Next 11 Surpassing BRICs Next 11 Emerging Markets

Source: Castlestone Management & Bloomberg.

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Castlestone N11 (white) & Goldman Sachs N11 (yellow) Next 11 Emerging Markets

Source: Castlestone Management & Bloomberg. Castlestone Next 11 AAA GBP (white) with Goldman Sachs Next 11 (yellow). Data range October 2011 – May 2013.

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Goldman Sachs Closes N11 Fund to New Investors Next 11 Emerging Markets

 Goldman Sachs Asset Management has closed its N11 Equity Fund to new investors less than three years after launch, as assets in the strategy increased beyond $1.7bn (£1.1bn).  New investors can no longer put money into the fund, though existing investors can still add to their holdings.  The reason the N-11 fund has seen so much interest from investors is because it provides diversification around geographies and different stages of growth, and it was designed as a compliment to a global emerging markets portfolio.  These markets were identified as the next global growth markets by Jim O'Neill and the Goldman Sachs Global Investment Research team back in 2005.

Source: Castlestone Management. Investment Week.

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BRIC and GEM: High Overlap Next 11 Emerging Markets

MSCI BRIC Index

MSCI Emerging Markets Index

42% Overlap

China 41.06% Brazil 28.15% India 15.84% Russia 12.83%

China 17.78% Brazil 12.17% India 6.80% Russia 5.61% South Korea 14.74% Mexico 5.11% Indonesia 3.05% Malaysia 3.90%

Source: Castlestone Management & MSCI. Data as 30th May 2013. The pie charts are indicative and for illustrative purposes only.

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Conclusion Next 11 Emerging Markets

 Second tier emerging market equities will outperform equities markets with high levels of Debt-to-GDP.  There are positive inflows into Next 11 Emerging Markets funds with Goldman Sachs’ N11 “assets-undermanagement” exceeding those of BRIC.  Goldman Sachs have “Soft-Closed” their Next 11 Emerging Markets Funds. Castlestone Next 11 Emerging Markets fund is one of the only “true” Next 11 Emerging Market Funds that is open to Retail Investors.  Diversification implies investors should own Next 11 alongside BRIC or GEM.

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