Deutsche Asset & Wealth Management. Deutsche AWM Strategic CIO View Market Outlook Slides November 2015

Transcription

1 Deutsche AWM Strategic Market Outlook Slides November 2015

2 Strategic Main Messages GROWTH Global gross-domestic-product (GDP) growth expected to pick up, albeit slowly U.S. recovery to continue at a slightly slower pace but still sufficient to further erode labor-market slack Eurozone: constructive on growth, but geo political headwinds, no change in our overall forecast for the bloc China: 2016 forecast at 6%, necessary SOE* reform to dampen growth short term, policy stimulus expected MONETARY POLICY FIXED INCOME EQUITIES CURRENCIES Central-bank policy first U.S. rate hike imminent First U.S. rate hike expected in December; U.K. to follow suit mid-way through 2016 Additional measures expected from both European Central Bank (ECB) and Bank of Japan (BOJ) Focus on Fed hikes. China fears fading. Move to Neutral on emerging markets (EM) Slow growth, moderate inflation and accommodative monetary policies keep rates in biggest developed countries contained. Some upward pressure from Fed** and BoE*** actions. Monitor inflation expectations Investment grade (IG) and high yield (HY) supported by attractive valuations, HY (ex energy and basic materials) to benefit from low defaults and very modest refinancing needs Move from underweight to Neutral on emerging-markets (EM) debt but expect volatility to remain high Mature equity market with mid-single-digit total-return potential on twelve-month view Modest earnings growth and attractive dividend yields are key drivers, while valuation has peaked Risk has risen that 12-month returns end up in negative territory Developed-market (DM) equities still preferred over EM, otherwise limited regional preferences U.S. dollar (USD) expected to strengthen against EUR, JPY, CNY and EM currencies USD expected to gain versus the EUR**** and the Japanese yen (JPY) due to monetary policy divergence. Renminbi (CNY) adjustments will be limited as China acknowledges role of Renminbi as anchor currency ALTERNATIVES Please refer to Important Information at the end of this presentation. Real estate, t private-equity it and hedge-fund d opportunities but commodities remain challenged Real estate: yields generally remain above sovereign bond yields and new construction risk generally low Commodities: stronger USD environment continues to pose considerable challenge Hedge funds: equity-market-neutral and discretionary-global-macro strategies to be favored but only limited opportunities in distressed Private equity: investment pace remains high in the U.S. and European outlook is also positive Alternative investment may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may Market Outlook Slides prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Source: Investment GmbH, as of Nov * State-owned enterprise **U.S. Federal Reserve Board ***Bank of England ****Euro

3 Global CIO Ideas Strategic View United States U.S. Treasuries (2-year) Europe U.S. Treasuries (10-year) Equity: Regions* Eurozone Germany U.S. Treasuries (30-year) U.K. Gilts (10-year) United Kingdom Rates* Eurozone periphery Japan German Bunds (2-year) Asia ex Japan German Bunds (10-year) Latin America Japanese government bonds (2-year) Infrastructure Japanese government bonds (10-year) Alternatives* Commodities Real estate (listed) US U.S. investment tgrade U.S. high yield Real estate (non-listed) EUR investment grade Hedge funds Private equity Corporates* EUR high yield Asia credit EUR vs USD Emerging-market credit USD vs JPY Emerging-market sovereigns Currencies* EUR vs GBP Securitized Covered bonds EUR vs JPY / U.S. municipal bonds GBP vs USD Specialties* U.S. mortgage-backed securities The colors illustrate the 12-month return opportunities for long-only investors. expectations November Forecasts are positive return potential for long-only only investors based on assumptions, estimates, opinions and hypothetical models or analysis which limited return opportunity as well as downside risk may prove to be incorrect. No assurance can be given that any forecast or target will be high downside risk for long-only investors achieved. *as of 11 Nov 2015 The value of investments can fall as well as rise and you might not get back the Market Outlook Slides amount originally invested at any point in time. 2 CIO ideas may not be suitable for all investors.

4 Macro View United States: growth sufficient to justify rate hike U.S. GDP growth sufficient to reduce slack in the economy Some acceleration evident in U.S. GDP growth The U.S. economy has not even regained its pre-recession growth rate, but it has accelerated somewhat in the past two years 3.0 Although weaker than in past cycles, growth has been sufficient to reduce but 2.5 not eliminate the economic slack built up during the great recession 1.9 Third quarter(q3) GDP growth slowed, but largely due to an inventory correction. Domestic demand continues to advance briskly Domestic demand is likely to remain supported by improving labor markets, better household finances, room for catch-up in household formation, supportive monetary policy and less drag from fiscal policy Non-farm-payroll gains have moderated over the last few months, but they are more than enough to reduce labor market slack If the unemployment rate continues to decline, it is still sensible to expect upwards pressures on wages and inflation Avg. annual % chg Real GDP Final sales Domestic demand First four years of current recovery Most recent two years 2.6 Fed hiking: caution remains the watchword Fed rate hike likely timing A December rate hike will require decent labor and other U.S data, further stabilization of financial conditions and a continued easing of fears about the global economy There also needs to be no slippage in labor costs, inflation and inflation expectations in fact, some pick up in these indicators would help Even if the Fed goes ahead, then it should emphasize that the rate hike cycle will be low and slow. Conditions are unlikely to warrant aggressive actions and risk management considerations will also counsel caution The pace of rate hikes is therefore likely to be much slower than in the previous cycle, with the federal funds rate likely to be only ~1% by the end of 2016 The Fed s balance sheet is likely to remain elevated too, with only a very gradual slowing in the pace of reinvestments Q Q Q Q3 Probability that first rate hike occurs in the quarter shown (lhs) Probability that first rate hike occurs in or before quarter shown (rhs) Sources: U.S. Bureau of Economic Analysis, Investment GmbH; as of November Market Outlook Slides expectations November Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove 3 to be incorrect. No assurance can be given that any forecast or target will be achieved

5 Macro View Eurozone growth should prove resilient; China s overcapacity problem Eurozone growth to continue but political risks remain Eurozone purchasing managers indices (PMIs) and other business sentiment measures still suggest continued growth Consumer sentiment may have slipped back but remains at a high level helped by a slowly improving labor market Credit and money growth are improving, step by step, and structural reforms continue in many of the peripheral economies Low inflation in 2015 has been largely due to energy prices, and inflation should rise in 2016, aided by a weak EUR and gently rising unit labor costs ECB policy will also remain very supportive, with a likely prolongation of its current quantitative-easing(qe) program Domestic political risks include the Spanish elections in December and the threat posed to Eurozone unity by the refugees issue. External political risks include Syria and the Ukraine Economic risks include a collapse in consumer inflation expectations, financialmarket instability or home-made problems (e.g. VW) Chinese economy to get further policy support In China, private consumption is still growing healthily, but government consumption has come down sharply Manufacturing investment is still very low, reflecting overcapacity, and housing investment is still trending lower (despite some recovery in housing sales in the last few months) Local infrastructure spending has also fallen, due to financing problems, but central government infrastructure continues to rise High levels of existing overcapacity in the state-owned enterprise (SOE) sector have limited the impact of easy monetary policy so far but private investment should prove more responsive Overcapacity has also pushed down inflation. Producer price inflation has now been negative for three years The structural transformation of the Chinese economy continues, with retail sales growth continuing to outstrip that of industrial production Eurozone: M1 and domestic demand continue to pick up 16% 14% 12% 8% 6% 4% 2% M1 (l.h.s.) China: retail sales and industrial production 25% 2 15% 5% Domestic Demand %yy (r.h.s.) Retail IP 6% 4% 2% -2% -4% -6% Sources: European Commission (EC), Eurostat, Bloomberg Finance L.P., China Statistics Bureau, Investment GmbH; as of November expectations November Forecasts are based on Market Outlook Slides assumptions, estimates, opinions and hypothetical models or analysis which may prove to 4 be incorrect. No assurance can be given that any forecast or target will be achieved.

6 Fixed Income View Rates rise will remain contained Core government-bond yield increases likely to be modest Changing Japanese-government-bond (JGB) ownership The Fed is most likely to start lifting rates in December with the Bank of England following suit in mid We expect the ECB to extend and expand its bond-purchase program and to cut (already negative) deposit rates by a further 10 bps 4 3 The Bank of Japan (BOJ) is also expected to implement additional easing measures in We expect U.S. rates to move gradually higher in response to Fed actions but low inflation and modest growth should keep a lid on their rate of increase Bund yields are likely to increase only slightly from current levels In Japan, rates remain well anchored with the BOJ as the biggest investor (and second-biggest owner). But the country s fiscal situation and the lack of a proper quantitative and-qualitative-easing (QQE) exit strategy remain long-term risks Peripheral bonds remain a core investment and we do not expect that the refugee crisis to have a significant impact A mixed picture on credit and the emerging markets 2 BOJ Banks In nsurance High-yield default rates Public Pensions Pensio on Funds Fo oreigners useholds Ho June 2013 June 2014 June 2015 Others General Gov vernment Valuations for U.S. investment grade are supportive, but market technicals could still create weakness Euro investment grade looks interesting, given where we are in the credit cycle and the likelihood of further ECB monetary-policy easing 3 25% 2 We are generally constructive on the U.S. high-yield (HY) market, excluding energy and metals and mining sectors. We are cautious on the possible 15% volatility in these sectors and the impact of this on the broader HY market We believe that the euro high-yield market provides a good risk/return profile and could benefit from increased demand due to ECB policy easing 5% With emerging-market debt, some volatility is to be expected as we approach 2000 the December Fed meeting and sensitivity to commodity prices should remain high BofA Merrill Lynch US High Yield EU HY EM HY Sources: Japanese Ministry of Finance, Bloomberg Finance L.P., Investment GmbH; as of November expectations November Forecasts are based Market Outlook Slides on assumptions, estimates, opinions and hypothetical models or analysis which may prove 5 to be incorrect. Past performance and forecasts are not reliable indicators of future returns.

7 Equity View Mid-single-digit digit returns with periods of volatility Earnings could be a limiting factor Share of dividend yield in total return is rising* We believe the economic environment in 2016 for equity investors should not be too different from the past twelve months structurally-low global growth and 5 limited inflation 45% After seven years of market recovery since the global financial crisis, both the 4 economy and equity market are at a maturing stage in the cycle 35% Modest earnings growth and the prospect of attractive dividend yields in a low 3 or negative interest-rate environment however keeps us modestly constructive 25% on global equities on a twelve-month horizon 2 It is becoming increasingly difficult for companies to achieve organic revenue growth of above 3%. So earnings growth is increasingly driven by share buybacks and mergers and acquisitions (M&A), particularly in the United States 15% We expect the importance of dividends to rise in 2016 and beyond, in part 5% because of the only modest appreciation forecast for key indices Currency movements will have a significant impact on equity markets and earnings (e) USA Europe Japan A time to focus on industry and stock selection Emerging market earnings have been revised downwards We continue to prefer developed market (DM) over EM equities. EM equities are currently trading at a significant valuation discount but we believe that EM earnings estimates are too high and will have to be revised down even further Our regional preference within DM equities is less pronounced than in previous years, when looking at expected total returns in local currency Strategically, Eurozone and Japanese stocks still offer some profitability catch- up to their U.S. peers. However, following the market recovery since September 2015, most of the relative value upside has already been arbitraged Instead of a highly differentiated regional allocation, we suggest focusing instead on industry and stock selection in 2016 We think that the next economic downturn is still several years away. Therefore we maintain an upward cyclical bias, believing that opportunities may be found in the technology, consumer, health-care and financial sectors * Total return in local currency, gross dividend yields are Deutsche AWM forecasts. Sources: Bloomberg Finance L.P., FactSet Research Systems Inc., Investment GmbH, as of November expectations November Forecasts are based Market Outlook Slides on assumptions, estimates, opinions and hypothetical models or analysis which may prove 6 to be incorrect. Past performance and forecasts are not reliable indicators of future returns.

8 Alternatives View Liquid strategies and commodities Liquid strategies: monetary policy creates opportunities Discretionary macro and equity-market-neutral strategies are expected to provide good risk-adjusted returns within the absolute-return space Within equity-market-neutral funds, the recent increase in S&P 500 index dispersion to above its ten-year average, coupled with a decline in volatility should provide a more favorable stock-picking environment Growing divergence in monetary policy between developed and emerging economies is creating a more fertile ground for discretionary-macro strategies In contrast we see a very limited opportunity for distressed strategies due to low default rates and little need for refinancing in the short and medium term We have a neutral view on CTAs (Commodity Trading Advisors), credit and event-driven strategies In merger-arbitrage strategies, preference should be given to more nimble and smaller managers which can operate within the small- to mid-cap segments of the equity market Rising dispersion should assist stock-picking environment 9% 8% 7% 6% 5% 4% 3% 2% Dispersion (LHS) Dispersion: 10-year average(lhs) VIX (RHS) VIX 10yr Average (RHS) price index level Any recovery in oil prices will be modest U.S. oil rig count falls further Oil prices have moved down again, following the short-lived rally in August. U.S. rig-count fell again in September and October, following the price fall, having previously increased in September Consistent demand for refined products in the U.S., combined with declining shale production, is likely to put continued pressure on the Brent/WTI* spread Our end-2016 target is $55 per barrel for West Texas Intermediate (WTI) and $60 per barrel for Brent 800 Gold is likely to continue to trade in a close range until the Fed rate hike. But the Fed hike should exert downwards pressure on the gold price 400 A stronger U.S. dollar should continue to create major headwinds for gold Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Sources: Bloomberg Finance L.P., Investment GmbH; as of November U.S. oil rig count Alternative investment may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency. Please refer to Important Information at the end of this presentation. expectations November Forecasts are based Market Outlook Slides on assumptions, estimates, opinions and hypothetical models or analysis which may prove 7 to be incorrect. Past performance and forecasts are not reliable indicators of future returns. r of rigs numbe 2,000 1,600 1,200

9 Alternatives View Real estate, infrastructure and private equity Real-estate estate returns could pick up in some markets In the U.S., consistent rental growth, rising occupancies and the rolling over of leases signed during the downturn to higher market rates should provide meaningful support for cash flow and property However, cap rates (operating income vs. capital value of the investment) are historically low and could rise over the next few years as interest rates rise In Europe, prime-property returns are set to pick up slightly in and investment volumes remain on a steep upwards trajectory. However, some markets are nearing the top of their cycle In Asia, the financing environment remains very accommodative. Capital gains may already have been realized due to the consistent investment market, meaning that t future returns are likely l to be driven more by stable income yields In the listed market, while Real Estate Investment Trusts (REITs) have traded higher over the last month, they continue to trade at a discount to underlying net asset values and this could prove a spur for mergers-and-acquisitions (M&A) activity Private-equity (PE) outlook positive in U.S. and Europe Expected-European European prime-office real-estate estate returns* 3 25% 2 15% 5% Germanic UK & Ireland France & Benelux 2015F Nordics 2016F Southern Europe Acquisition multiples over 10-year average for large U.S. deals** Central & Eastern Europe In the U.S., the pace of investment remains consistent, despite a short-term decline in activity due to fewer larger deals 12.0x 11.0x The outlook for European PE should continue to be positive with increased new deal activity as well so, matching with fund raising and exit levels 10.0x In Asia, macro uncertainty could result in a significant slowdown in PE activity 9.0x across the region but the recent public-market correction could offer opportunities 8.0x Turnaround & distressed has been upgraded to neutral amidst various signs 7.0x pointing towards a more positive outlook Growth in the secondaries market has moderated but remains consistent. Headline pricing however remains stubbornly high (TTM) US Large deals (AVG) US Large deals *Deutsche AWM forecasts ** Deals of over US$500m Source: Baird M&A Outlook Investment GmbH; as of October Alternative investment may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency. Please refer to Important Information at the end of this presentation. expectations November Forecasts are based Market Outlook Slides on assumptions, estimates, opinions and hypothetical models or analysis which may prove 8 to be incorrect. Past performance and forecasts are not reliable indicators of future returns. EBIT TDA-multiple

10 Glossary Explanation of terms One basis point (bp) equals 1/100 of a percentage point. A barrel (abbreviated as bbl) is a unit of volume which is commonly used to measure crude oil and is defined as 42 U.S. gallons in the United States and Canada, which is about 159 litres. The basic materials sector includes mining, metals refining, chemical producers and forestry products. Bunds is a commonly used term for bonds issued by the German federal government with a maturity of 10 years. Capital expenditures (capex) are undertaken by a company to acquire or upgrade physical assets. Cap rates are a real estate valuation measure, usually the net operating income of the property divided by its initial purchase price or current market value. Consumer discretionary is a sector of the economy that sells non-essential goods and services. Consumer staples is a sector of the economy that sells essential goods and services. Core inflation is a measure of inflation which excludes some potentially volatile components (e.g. food and energy). A commodity trading advisor (CTA) is an individual or organization providing advice and services related to trading in futures contracts, commodity options and/or swaps. Core real estate is high-quality office, retail, residential or other property. Correlation is a statistical measure of how two securities, markets or other factors move in relation to each other. The DAX (Deutscher Aktienindex) is a blue-chip stock-market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Discretionary macro strategies use directional positions at the asset class level to exploit macroeconomic, policy or political changes. A default is when an organisation or government fails to meet a payment on a debt. A dividend is a payment made to a company s shareholders distributing a portion of its earnings. Euro periphery (bonds) are government bonds issued by countries of the Eurozone deemed to be less advanced in their economic development than core European countries such as Germany or the Netherlands. See also Periphery. The European Central Bank (ECB) is the central bank for the euro. It administers the monetary policy of the Eurozone, which consists of 19 European Union member states. Emerging markets (EM) are those economies which are not yet fully developed in terms of market efficiency, liquidity, and other factors. Equity market-neutral investing strategies aim to deliver superior returns by balancing stock picks as to avoid market-risk exposure. The euro (EUR) is the common currency of states participating in the Economic and Monetary Union and is the second most important reserve currency in the world after the U.S. dollar. The Eurozone (EUZ) is formed of 19 European Union member states t that t have adopted the euro as their common currency and sole legal tender. Event-driven investing strategies seek to exploit pricing inefficiencies that may occur before or after a corporate event, such as a bankruptcy, merger, acquisition or spinoff. Market Outlook Slides 9

11 Glossary Explanation of terms The U.S. Federal Reserve Board (Fed) is the board of governors of the Federal Reserve; it implements U.S. monetary policy. The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. Gross domestic product (GDP) is the value of all goods and services produced by a country s economy. Hedge funds are alternative, less regulated investment vehicles using pooled funds that may use a number of different strategies in order to earn active return for their investors. High Yield (HY) describes bonds which are sub-investment grade. The International Monetary Fund (IMF) is an international organization which fosters global monetary cooperation and monitors economic and financial developments. Inflation describes the increase in an economy s overall price level. Investment Grade (IG) describes bonds judged by rating agencies to be of at least medium quality (usually BBB or above). Long/short equity strategies are investing strategies of taking long positions in stocks that are expected to appreciate and short positions in stocks that are expected to decline. Merger arbitrage is a type of hedge-fund strategy where the investor tries to gain from the difference in the price a buyer of a firm agrees to pay, and the stock price after the announcement of the acquisition. Mergers and acquisitions (M&A) are two key methods of corporate consolidation: A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. Monetary policy focuses on controlling the supply of money with the ulterior motives of price stability, reducing unemployment, boosting growth etc. (depending on the central bank's mandate). The MSCI Emerging Markets (EM) Index captures large and- mid cap representation across 23 Emerging Markets (EM) countries. M1 is a money-supply measure that includes both physical money and bank deposits that can be quickly converted to money. The Organisation for Economic Co-operation and Development (OECD) is an international economic organisation of 34 countries, founded in 1961 to stimulate economic progress and world trade. The Organization of the Petroleum Exporting Countries (OPEC) is an international organization with the mandate to "coordinate and unify the petroleum policies" of its meanwhile 12 members. Price-to-earnings (P/E) ratio or multiple compares a company s current share price to its earnings per share. Periphery countries (sometimes referred to as just the periphery) are those that are less developed than the core countries of a specific region (in this case the Eurozone). Purchasing Managers Index (PMI) is an economic indicator derived from monthly surveys of private sector companies from the Institute for Supply Management (ISM). An index of 100 would describe that 10 of the panel reported an improvement to last month. An index of zero would describe the exact opposite. A level above 50 generally indicates an improving ing business sentiment. Quantitative easing (QE) refers to broad-based asset-purchase programs conducted by central banks; these assets can be government bonds, but also other assets like asset-backed securities. Quantitative and qualitative easing (QQE) aims both at increasing the monetary base as well as extending the maturities held by the central bank. Market Outlook Slides 10

12 Glossary Explanation of terms A Real Estate Investment Trust (REIT) is a company that owns, and in most cases, operates income-producing real estate. REITs sell like a stock on the major exchanges and invest in real estate directly, either through properties or mortgages Rolling over refers to the renewal of a lease (or other other financial contract) at maturity, often under different terms. The Russell 2000 Index is a U.S. small-cap index of the bottom 2,000 stocks in the Russell 3000 Index. The S&P 500 Index includes 500 leading U.S. companies capturing approximately 8 coverage of available market capitalization and is widely regarded as the best single gauge of large-cap U.S. equities. Spread refers to the excess yield various bond sectors offer over other financial instruments with similar maturities (e.g. government bonds). When spreads widen, yield differences are increasing between bonds in the two sectors being compared. Treasuries are fixed-interest U.S. government debt securities with different maturities. Treasury bills, also T-bills, mature in one year or less. Treasury notes, also T-notes, mature in two to ten years. Treasury Bonds, also T-Bonds, mature in twenty to thirty years. The U.S. dollar (USD) is the official currency of the United States. Volatility is a statistical measure of the dispersion of returns for a given security or market index. The Japanese yen (JPY ) is the official currency of Japan. Yield describes the income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost. Market Outlook Slides 11

13 Important Information represents the asset management and wealth management activities conducted by Deutsche Bank AG or any of its subsidiaries. Clients will be provided products or services by one or more legal entities that will be identified to clients pursuant to the contracts, agreements, offering materials or other documentation relevant to such products or services. offers wealth management solutions for wealthy individuals, their families and select institutions worldwide., through Deutsche Bank AG, its affiliated companies and its officers and employees (collectively Deutsche Bank ) are communicating this document in good faith and on the following basis. This document has been prepared without consideration of the investment needs, objectives or financial circumstances of any investor. Before making an investment decision, investors need to consider, with or without the assistance of an investment adviser, whether the investments and strategies described or provided by Deutsche Bank, are appropriate, in light of their particular investment needs, objectives and financial circumstances. Furthermore, this document is for information/discussion purposes only and does not and is not intended to constitute an offer, recommendation or solicitation to conclude a transaction or the basis for any contract to purchase or sell any security, or other instrument, or for Deutsche Bank to enter into or arrange any type of transaction as a consequence of any information contained herein and should not be treated as giving investment advice. Deutsche Bank does not give tax or legal advice. Investors should seek advice from their own tax experts and dlawyers, in considering i investments t and strategies t suggested dby Deutsche Bank. Investments t with ithdeutsche Bank are not guaranteed, unless specified. Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such. All opinions and estimates herein, including forecast returns, reflect our judgment on the date of this report, are subject to change without notice and involve a number of assumptions which may not prove valid. Investments are subject to various risks, including market fluctuations, regulatory change, counterparty risk, possible delays in repayment and loss of income and principal invested. The value of investments can fall as well as rise and you may not recover the amount originally invested at any point in time. Furthermore, substantial fluctuations of the value of the investment are possible even over short periods of time. Further, investment in international markets can be affected by a host of factors, including political or social conditions, diplomatic relations, limitations or removal of funds or assets or imposition of (or change in) exchange control or tax regulations in such markets. Additionally, investments denominated in an alternative currency will be subject to currency risk, changes in exchange rates which may have an adverse effect on the value, price or income of the investment. This document does not identify all the risks (direct and indirect) or other considerations which might be material to you when entering into a transaction. The terms of an investment may be exclusively subject to the detailed provisions, including risk considerations, contained in the Offering Documents. When making an investment decision, you should rely on the final documentation relating to the investment and not the summary contained in this document. Market Outlook Slides 12

14 Important Information This publication contains forward looking statements. Forward looking statements include, but are not limited to assumptions, estimates, projections, opinions, models and hypothetical performance analysis. The forward looking statements expressed constitute the author s judgment as of the date of this material. Forward looking statements involve significant elements of subjective judgments and analyses and changes thereto and/or consideration of different or additional factors could have a material impact on the results indicated. Therefore, actual results may vary, perhaps materially, from the results contained herein. No representation or warranty is made by Deutsche Bank as to the reasonableness or completeness of such forward looking statements or to any other financial information contained herein. We assume no responsibility to advise the recipients of this document with regard to changes in our views. This document was not produced, reviewed or edited by any research department within Deutsche Bank and is not investment research. Therefore, laws and regulations relating to investment research do not apply to it. Any opinions expressed herein may differ from the opinions expressed by other Deutsche Bank departments including research departments. No assurance can be given that any investment described herein would yield favorable investment results or that the investment objectives will be achieved. In general, the securities and financial instruments presented herein are not insured by the Federal Deposit Insurance Corporation ( FDIC ) FDIC), and are not guaranteed by or obligations of Deutsche Bank AG or its affiliates. We or our affiliates or persons associated with us may act upon or use material in this report prior to publication. DB may engagmanner inconsistent with the views discussed herein. Opinions expressed herein may differ from the opinions expressed e in transactions in a by departments or other divisions or affiliates of Deutsche Bank. This document may not be reproduced or circulated without our written authority. The manner of circulation and distribution of this document may be restricted by law or regulation in certain countries. This document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, including the United States, where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Deutsche Bank to any registration or licensing requirement within such jurisdiction not currently met within such jurisdiction. Persons into whose possession this document may come are required to inform themselves of, and to observe, such restrictions. Past performance is no guarantee of future results; nothing contained herein shall constitute any representation or warranty as to future performance. Further information is available upon investor s request. This document contains information not intended solely for the recipients. The information has been considered in investment decisions of our asset management division. All third party data (such as MSCI, S&P & Bloomberg) are copyrighted by and proprietary to the provider. Market Outlook Slides 13

15 Important Information For investors in the United States: This material is available to institutional investors only as defined by FINRA 4512C. Wealth-management services are offered through Deutsche Bank Trust Company Americas (member FDIC) and Deutsche Bank Securities Inc. (member FINRA, NYSE, SIPC), a registered broker-dealer and investment adviser which conducts investment banking and securities activities in the United States. In the United States, availability of alternative investments is subject to regulatory requirements and are available only for Qualified Purchasers as defined by the U.S. Investment Company Act of 1940 and Accredited Investors, as defined in Regulation D of the 1933 Securities Act. Alternative investment may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency Deutsche Bank AG. All rights reserved. R (11/15) RETAIL-PUBLIC WM-PUBLIC Market Outlook Slides 14

16 Important Information RISK WARNING Investments are subject to investment risk, including market fluctuations, regulatory change, possible delays in repayment and loss of income and principal invested. The value of investments can fall as well as rise and you might not get back the amount originally invested at any point in time. Investments in Foreign Countries - Such investments may be in countries that prove to be politically or economically unstable. Furthermore, in the case of investments in foreign securities or other assets, any fluctuations in currency exchange rates will affect the value of the investments and any restrictions imposed to prevent capital flight may make it difficult or impossible to exchange or repatriate foreign currency. Foreign Exchange/Currency - Such transactions involve multiple risks, including currency risk and settlement risk. Economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments may substantially and permanently alter the conditions, terms, marketability or price of a foreign currency. Profits and losses in transactions in foreign exchange will also be affected by fluctuations in currency where there is a need to convert the product's denomination(s) to another currency. Time zone differences may cause several hours to elapse between a payment being made in one currency and an offsetting payment in another currency. Relevant movements in currencies during the settlement period may seriously erode potential profits or significantly increase any losses. High Yield Fixed Income Securities - Investing in high h yield bonds, which h tend to be more volatile than investment t grade fixed income securities, is speculative. These bonds are affected by interest rate changes and the creditworthiness of the issuers, and investing in high yield bonds poses additional credit risk, as well as greater risk of default. Commodities - The risk of loss in trading commodities can be substantial. The price of commodities (e.g., raw industrial materials such as gold, copper and aluminum) may be subject to substantial fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. Additionally, valuations of commodities may be susceptible to such adverse global economic, political or regulatory developments. Prospective investors must independently assess the appropriateness of an investment in commodities in light of their own financial condition and objectives. Not all affiliates or subsidiaries of Deutsche Bank Group offer commodities or commodities-related products and services Real Estate - Investment in real estate may be or become nonperforming after acquisition for a wide variety of reasons. Nonperforming real estate investment may require substantial workout negotiations and/ or restructuring. Environmental liabilities may pose a risk such that the owner or operator of real property may become liable for the costs of removal or remediation of certain hazardous substances released on, about, under, or in its property. Additionally, to the extent real estate investments are made in foreign countries, such countries may prove to be politically or economically unstable. Finally, exposure to fluctuations in currency exchange rates may affect the value of a real estate investment. Hedge Funds - Hedge funds may not be suitable for certain investors and no assurance can be given that the fund's investment objective will be achieved. Investments in hedge funds are speculative and involve a high degree of risk. Investors should be aware of the attendant risks including, but not limited to the lack of liquidity, the potential for higher fees, lack of transparency, lack of regulatory oversight, and involvement with complex tax structures. Hedge funds may use a single manager or employ a single strategy, which may result in a lack of diversification, and consequently higher risk. Hedge funds may also use leverage, which may increase profits, but may also magnify losses. The use of hedging strategies may cause a portfolio's value to fluctuate at a greater rate than if such techniques were not used. No assurance can be made that investors will receive a return of all or part of their investment. Investments in hedge funds are suitable only for persons who can afford to lose their entire investment. Private equity - Investment in private equity funds is speculative and involves significant risks including illiquidity, heightened potential for loss and lack of transparency. The environment for private equity investments is increasingly volatile and competitive, and an investor should only invest in the fund if the investor can withstand a total loss. In light of the fact that there are restrictions on withdrawals, transfers and redemptions, and the Funds are not registered under the securities laws of any jurisdictions, an investment in the funds will be illiquid. Investors should be prepared to bear the financial risks of their investments for an indefinite period of time. In certain jurisdictions, an investment in a private equity may only be suitable for investors who are qualified purchasers and accredited d investors. Additional risks to consider involve interest rates, currencies, credit, political, liquidity, time value, commodity and market risks. Please consider carefully before investing. Market Outlook Slides 15