Please refer to important disclaimer and disclosures at the end of this report

June 30, 2014 ED.46

Hedge Fund Holdings: Tech, Biology, Genomics, 3D…NOT Banks.

Paul Schulte, MA, MALD

Paul@schulte-research.com

www.schulte-research.com

(+852) 9705 0777

Gavin Liu, M.Sc. - Associate

Christian Ng - Associate

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Summary

We have done some scraping (sounds naughty!) and looked at all the publicly available data on the

top holdings of the largest hedge funds and the largest Asia-based funds. Findings are:

1. Both the global hedge funds and the Asia funds are underweight banks. Hedge funds are

concentrated in the cutting edge companies in drones, bio-pharma, genomics, fracking, m-

banking, and the all-important "Server". (The CIA admitted last week that it had a new USD 600

million contract with Amazon to 'rent' its cloud server. The CIA is monitoring banks for criminality

and investing in Silicon Valley)!

2. Large caps. The top holdings of the global hedge funds do not include any financials. To show

this, we created an index of tech and bank stocks (Appendix 1). The tech index was 40% smaller

than banks in June 2007 at the peak and is now 50% larger. NO BANKS HERE. This is justified, in our

view.

3. Small Caps. A new development is small caps (which have had wild swings) is investments in

brand new industries such as bio-pharma chip implants, bionics, genomics, 3-D printing and the

big data "server". These have taken a bath recently but are rallying again. (Page 10). This group

had $5 bn in market cap in 2010 and is now $45 bn. NO BANKS HERE.

4. Asia holdings. Top holdings are Samsung (stinker), TSMC, Galaxy, AIA, Hyundai, and Hutchison. NO

BANKS HERE. Asian funds have puny amounts of HSBC, ICBC, Mandiri and K Bank. HSBC is likely a

poor core holding in banks.

Investors need better proxies for banks. Alibaba will be one of them. Switch out of HSBC and into the

Alibaba IPO. There are more financial tech companies which are the "new future" and which will

jeopardize banking. Look at Safaricom.

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Summary

While it is enticing to think that tech will underperform financials after staggering outperformance, I

am skeptical. Banks are battling three issues:

1) Ongoing criminality (Barclays new fraudulent charges over HFT;

2) Margin compression by Silicon Valley (Stan C earnings announcement was stunning);

3) Capital deficiency given large asset bases (Deutsche. Barclays, BNP, JPM).

Global Banks are trading at 1.0x book. Tech is trading at 4.5x. The middle ground between these two

(financial technology) is the future. GS and UBS get this. BCA gets this. So do Scotia Bank, CBA, Hang

Seng Bank, BBVA, and Santander. HSBC, Deutsche and Stan C seem asleep on this. HSBC was a

global leader in the internet age but has been flatfooted on mobile banking.

Many global banks are so busy shrinking, stealing and litigating that they are losing the plot. No

wonder why no one owns them! This is a dangerous time for these banks. The structural underweight is

justified.

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Banks and Technology Companies Total Market Cap Comparison

Source: Bloomberg, Schulte Research EstimateNote: please refer to the appendix for the group constitution details

300

800

1,300

1,800

2,300

2,800

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

Tota

l MK

T C

ap (

USD

BN

)

Total MKT Cap: Banks and Technology Companies

Banks

Technology Companies

Jun-14

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Technology vs Banks: IN 2007, tech at a new high while banks have not recovered their old highs. Banks now trading at a 65% discount to tech.

Source: Bloomberg, Schulte Research EstimateNote: please refer to the appendix for the group constitution details

Industry June 2007Market Cap(in USD TR)

June 2014Market Cap (in USD TR)

% Chg. P/B(X)

P/E(X)

2H 2014 Earnings Growth

Banks 1.8 1.7 -6% 1.1 9 -2%

Tech 1.1 2.5 +127 4.7 25 17%

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Analysis of Top 20 Global Hedge Funds: They own the future which doesn’t include traditional banks. Sad but true. Innovation, Cutting Edge. Sciences.

Source: Bloomberg, Schulte Research EstimateNote: “The Future” Group is constituted of companies listed in page 10; Large Cap Group is constituted of companies listed in page 8

5

10

15

20

25

30

35

40

1,500

1,700

1,900

2,100

2,300

2,500

2,700

2,900

3,100

Jan

-10

Mar

-10

May

-10

Jul-

10

Sep

-10

No

v-1

0

Jan

-11

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

"Th

e F

utu

re"

Gro

up

To

tal M

kt C

ap (

$B

N)

Larg

e C

ap G

rou

p T

ota

l MK

T C

ap (

$B

N)

Market Cap: Large Cap Vision Stocks & Small Cap Future Stocks

Large Cap Common Holdings The Future

Jun

-14

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Blue Chip Holdings: The “Server”, Government-Sponsored Science, Genomics, Cancer Treatments. NO BANKS.

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Blue Chip Tech: This is ‘average’ portfolio of large caps by the smartest people. Drones, Fracking, e-banking, big data, genomics, and the ‘Server’!

Source: Company Data, SEC, Bloomberg, Schulte Research Estimate

Name Ticker Industry MKT Cap ($BN) P/B (X) P/E (X) YTD Return (%)

Apple AAPL Computers 548 4.6 15.2 14.7

Exxon Mobil XOM Oil Comp-Integrated 438 2.5 13.9 2.2

Google GOOGL Web Portals/ISP 391 4.3 31.3 4.3

Microsoft MSFT Applications Software 345 3.9 14.9 13.1

Berkshire Hathaway BRK Reinsurance 313 1.4 21.0 7.1

Johnson & Johnson JNJ Medical-Drugs 299 3.9 18.7 17.0

Pfizer PFE Medical-Drugs 188 2.4 12.7 -1.7

Amazon AMZN E-Commerce/Products 150 14.5 NA -18.3

Gilead Sciences GILDMedical-

Biomedical/Gene126 9.4 29.6 9.4

21st Century Fox FOXA Multimedia 79 4.5 24.4 0.3

Medtronic MDT Medical Instruments 64 3.3 17.1 13.2

Hess Corp HES Oil Comp-Integrated 31 1.3 13.1 18.2

Cognizant Technology Solution CTSH Computer Services 30 4.5 23.1 -2.2

Northrop Grumman NOC Aerospace/Defense 26 2.4 13.3 6.2

Illumina ILMNMedical-

Biomedical/Gene22 14.0 114.3 54.6

Juniper Networks JNPR Telecommunication Equip 11 1.8 27.5 7.4

L-3 Communications LLL Electronics-Military 10 1.7 14.0 14.7

Average 181 4.7 25.3 9.4

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The Future: A Description Of The Small Caps Held By The Largest Hedge Funds Globally. 3-D, Genomics, Bio-Pharma, Cancer.

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The FUTURE: Hedge Fund Small Cap Portfolio: These are cutting edge firms in pharma, 3-D, m-banking, cancer, genomics, big data, implants. NOT BANKS.

Source: Bloomberg, Schulte Research Estimate

Name Ticker Industry MKT Cap ($BN) P/B (X) P/E (X) YTD Return (%)

Torchmark Corp TMK Life/Health Insurance 7.2 1.7 14.1 5.7

3D Systems Corp DDDComputers-

Integrated Sys6.4 6.3 NA -37.6

Stratasys SSYSComputers-Peripher

Equip5.4 2.1 NA -19.0

Idenix Pharmaceuticals IDIXMedical-

Biomedical/Gene3.6 NA NA 301.3

Theravance THRXMedical-

Biomedical/Gene3.4 12.8 NA 4.2

Riverbed Technology RVBDComputers-

Integrated Sys3.2 3.8 NA 11.8

ViaSat VSAT Wireless Equipment 2.7 2.8 NA -8.7

Puma Biotechnology PBYIMedical-

Biomedical/Gene1.8 9.2 NA -41.4

Monitize MONIInternet Financial

Svcs1.8 3.9 NA -15.3

ExOne XONEMachinery-Print

Trade0.5 3.8 NA -37.8

Voxeljet AG VJETOffice

Automation&Equip0.3 1.0 NA -52.7

Durect DRRX Medical-Drugs 0.2 5.8 NA -9.2

Average 3.0 4.8 NA 8.4

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Small Cap Future Stocks: Cutting edge financial services, 3-D printing, biopharmaceuticals.

Source: Bloomberg, Schulte Research Estimate

Name Ticker Industry

MKT

Cap

($BN)

P/B (X) P/E (X)

YTD

Return

(%)

Description

Torchmark Corp TMK Life/Health Insurance 7.2 1.7 14.1 5.8

Torchmark Corporation is an insurance and

financial services holding company. The

Company's subsidiaries offer life and health

insurance, and annuities. Life products include

traditional and interest sensitive whole-life

insurance as well as term-life insurance. Health

products include Medicare supplement, cancer,

accident, long-term care, and limited hospital and

surgical coverages.

3D Systems Corp DDDComputers-Integrated

System6.3 6.3 NA -38.1

It develops, manufactures, and markets solid

imaging systems designed to rapidly produce

three-dimensional objects from computer-aided

design and manufacturing-generated solid or

surface data. The Company utilizes its systems to

produce models, engineering prototypes, mold

patterns, and other parts using CAD/CAM or other

data supplied by its customers.

Stratasys SSYSComputers-Peripher

Equip5.4 2.1 NA -19.4

Stratasys Ltd. manufactures three-dimensional

printers. The printers build three-dimensional

models by depositing multiple layers of resin one

on top of another based on data from three-

dimensional computer aided design files. The

Company's products are used by designers,

engineers and manufacturers to visualize, verify

and communicate product designs.

Idenix

PharmaceuticalsIDIX

Medical-

Biomedical/Gene3.6 NA NA 302.0

Idenix Pharmaceuticals Inc. is a

biopharmaceutical company that discovers and

develops drugs for the treatment of human viral

and other infectious diseases. The Company is

focusing on the treatment of infections caused by

hepatitis B virus, hepatitis C virus, and human

immunodeficiency virus (HIV).

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Molecular medicines distributed from chips, big data, cutting edge cancer treatments. Cellular phone banking.

Source: Bloomberg, Schulte Research Estimate

Name Ticker IndustryMKT Cap

($BN)P/B (X) P/E (X)

YTD

Return

(%)

Description

Theravance THRXMedical-Biomedical/

Gene3.4 12.8 NA 3.9

Theravance Inc., is a biopharmaceutical company.

The Company develops small molecule medicines

for respiratory disease, bacterial infections, and

gastrointestinal disorders.

Riverbed

TechnologyRVBD

Computers-Integrated

System3.2 3.7 NA 10.0

Riverbed Technology, Inc. manufactures and

markets appliances used to connect computers in

wide area networks.

ViaSat VSAT Wireless Equipment 2.6 2.8 NA -9.7

Provide broadband digital satellite communications

and other wireless networking and signal processing

equipment and services. The Company's defense

products include satellite communications products

consisting of modems, terminals, and network

control systems, advanced multifunction

information distribution systems, and simulation test

equipment.

Puma

BiotechnologyPBYI

Medical-Biomedical/

Gene1.9 9.4 NA -40.0

Puma Biotechnology is a development-stage

biopharmaceutical company. The Company

develops novel therapeutics for the treatment of

various forms of cancer. Puma focuses on in-

licensing drug candidates that are undergoing or

have already completed initial clinical testing for

the treatment of cancer and then seeks to further

develop those drug candidates for commercial

use.

Monitize MONIInternet Financial

Services1.8 3.9 NA -16.4

Monitise operates a mobile banking platform that

provides banking, paying and buying transactions

with a mobile device. Its product is used by banks,

payments companies, retailers and mobile

networks to connect people with their money.

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Medicinal treatments, 3-D printing for aerospace & entertainment.

Source: Bloomberg, Schulte Research Estimate

Name TickerMKT Cap

($BN)P/B (X)

P/E (X)

YTD Return(%)

Industry Description

ExOne XONE 0.5 3.6 NA -40.8Machinery-Print

Trade

ExOne is a global provider of 3D printing machinesand printed products to industrial customers. TheCompany's business primarily consists ofmanufacturing and selling 3D printing machines andprinting products to specification for our customersusing our in-house 3D printing machines.

Voxeljet AG VJET 0.3 0.9 NA -54.2Office

Automation&Equipment

Voxeljet AG manufactures industrial 3D printingsystems. The Company offers 3D printers and on-demand parts services to industrial and commercialcustomers in the automotive, aerospace,entertainment, building, engineering and consumerproduct industries.

Durect DRRX 0.2 5.9 NA -8.7 Medical-Drugs

Durect develops and commercializes pharmaceuticalsystems for the treatment of chronic diseases. Thepharmaceutical systems provide therapy for chronicdiseases or conditions by replacing multiple injectiontherapy or oral dosing, improving drug efficacy,reducing side effects, and ensuring dosingcompliance.

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Asia portfolios: Tech, TV, Gambling, Cars, Insurance

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Top Asian Funds Based on 5 yrs Annualized Return

Fund Fund Size 1 yrs 3 yrs 5 yrs Top 5 Holdings

Matthews Asia Small

Companies Fund

530 million 4.4% 3.6% 16.3% 1. Towngas China Co (3.18%)

2. PCHome Online (2.3%)

3. Lee's Pharmaceutical (2.5%)

4. Page Industries (2.1%)

5. Gujarat Pipava Port (2.1%)

Invesco Asia Pacific Growth

Fund

826.45

million

4.2% 6.4% 16.2% 1. Hutchinson Whampoa (3.8%)

2. ICBC (3.2%)

3. Kasikornbank (3.1%)

4. Taiwan Semiconductor (2.9%)

5. Kossan Rubber Industries (2.9%)

Matthews Pacific Tiger Fund 7.59 billion 6% 1.53% 15.6% 1. Amoure Pacific Corp (3.73%)

2. Ping An Insurance (3.2%)

3. Delta Electronics (3.1%)

4. Dongbu Insurance (2.8%)

5. Central Pattana (2.7%)

T. Rowe Price New Asia Fund 3.8 billion 5.4% 3.2% 12.5% 1. Taiwan Semiconductor (5.2%)

2. Hutchison Whampao (3.8%(

3. AIA Group (3.7%)

4. Samsung Electronics (3%)

5. Hyundai Motr (2.9%)

Matthew Asia Growth and

Income Fund

4.5 billion 4.2% 6.6% 11.8% 1. Jardine Matheson (3.6%)

2. Singapore Technologies (3.3%)

3. AIA Group (3.3%)

4. UOB (2.6%)

5. Keppel Corp (2.6%)Sources: Company filings, Bloomberg , US.NewsUpdated as of 2014-06-27

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Fund Fund Size 1 yrs 3 yrs 5 yrs Top 5 Holdings

Fidelity Emerging Asia Fund 1.1 billion 8.2% 1.4% 10.1% 1. Samsung Electronics (6.1%)

2. Taiwan Semiconductor (3.8%)

3. AIA Group (2.5%)

4. Tencent (2.3%)

5. CCB (2.5%)

Ivy Emerging Market 700

million

10.1% -2.5% 5.8% 1. Galaxy Entertainment Group (2.8%)

2. Larsen & Toubro

3. Chicago Bridge & Iron (2.3%)

4. HCL Technologies (2.2%)

5. PT Bank Mandiri (2.07%)

Guinness Atkinson Asia Focus

Fund

21 million -1.5% -7.8% 4.8% 1. Samsung Electronics (5.9%)

2. Galaxy Entertainment (5.6%)

3. Taiwan Semiconductor (4.7%)

4. Kunlun Energy Company (3.9%)

5. Hyudai Mobis (3.9%)

Aberdeen Asia Pacific Equity

Fund

830

million

4.0% 3.8% - 1. Samsung Electronics (4.8%)

2. Jardine Strategic Holdings (4.6%)

3. Oversea-Chinese Banking (4.2%)

4. HSBC (3.7%)

5. Housing Development Finance (3.7%)

Columbia Asia Pacific ex-

Japan Fund

654

million

10.2% 2.2% - 1. Taiwan Semiconductor Manufacturing

(3.5%)

2. Samsung Electronics (2.6%)

3. AIA Group (2.5%)

4. National Australia Bank (2.5%)

5. BHP Billion (2.2%)

Top Asian Funds Based on 5 yrs Annualized Return

Sources: Company filings, Bloomberg , US.NewsUpdated as of 2014-06-27

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Stocks in Top 10 Holdings

Company # of Funds

Taiwan Semiconductor

Manufacturing Co Ltd 8

Samsung Electronics 7

AIA 4

Hutchison Whampoa 4

Galaxy Entertainment 3

Hyundai Motor 3

HSBC 2

BHP Billiton 2

Company # of Funds

Sinopec 2

CNOOC 2

ICBC 2

Kunlun Energy Company Ltd. 2

Novatek Microelectronics Corp. 2

PT Bank Mandiri Persero Tbk 2

Soho China 2

Sohu.Com 2

Tencent 2

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Stocks in Top 10 Holdings

Sources:, Bloomberg, Schulte Research Estimates . Updated as of 2014-06-27

Name Ticker Industry MKT Cap ($Bn)P/E(X)

P/B(X)

1 Yr Return

(%)

YTD Return

(%)

ICBC 1398 HK Financial 199.1 5.2 1.0 9.8 -0.2

HSBC 5 HK Financial 194.5 13.2 1.0 2.9 -3.4

Samsung 005930 KS Technology 190.6 10.2 1.4 -1.1 -4.4

BHP Billiton BHP AU Basic Materials 178.7 12.4 2.4 20.0 -2.4

Tencent 700 HK Communications 142.7 48.7 13.6 99.2 20.0

Taiwan Semiconductor 2330 TT Technology 108.9 19.6 4.5 23.5 19.0

Sinopec Corp 386 HK Energy 101.4 10.5 1.2 45.6 20.5

CNOOC 883 HK Energy 79.8 8.8 1.5 12.8 -1.6

AIA 1299 HK Financial 61.2 21.7 2.5 22.1 2.0

Hutchison Whampoa 13 HK Diversified 59.1 14.7 1.2 45.6 10.9

Hyundai 005380 KS Consumer, Cyclical 50.0 11.5 1.1 6.4 -2.7

Galaxy Entertainment 27 HK Consumer, Cyclical 32.8 25.1 7.8 58.7 -13.0

Bank Mandiri BMRI IJ Financial 18.8 12.0 2.6 13.0 26.0

Kunlun Energy 135 HK Energy 13.3 15.0 2.0 -3.8 -5.1

Soho China 410 HK Financial 4.1 3.2 0.7 4.6 -8.1

Novatek 3034 TT Technology 2.9 19.6 3.6 8.3 18.0

Sohu.Com SOHU US Communications 2.2 - 1.7 -7.9 -22.3

Average: 84.7 15.7 2.9 21.2 3.1

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Appendix 1: Total Mkt Cap Group Constitution of Page 4.

Banks Technology Companies

Jpmorgan Chase Applied Materials

Wells Fargo Apple

Bank Of America Google

Citigroup Microsoft

Goldman Sachs Group Oracle

Morgan Stanley Intel

Royal Bank Of Scotland Siemens

Barclays Cisco Systems

HSBC Holdings Yahoo!

Credit Suisse Group Comcast Corp

UBS AG Qualcomm

Westpac Banking Corp Ebay

Aust And Nz Banking Group Micron Technology

Commonwealth Bank Of Australia Baidu

Fifth Third Bancorp Tencent

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The analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal views of the analyst(s) with

regard to any and all of the subject securities and companies mentioned in this report and (ii) no part of the compensation of the analyst(s) was, is,

or will be, directly or indirectly, related to the specific recommendation or views expressed by that analyst herein.

Required Disclosures

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information will be made available upon request.

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