Download - Final citywire cologne 0612
Citywire Germany
June 2012
Challenging times in markets require thinking outside the box
Presented by:
Miles Geldard – Fund Manager
Institutional investors and advisors only. Not for retail investors.
Fund manager views at the time of presentation and will change in the future.
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Investment outlook
European sovereign issues require major structural changes. Buying by official
institutions is not a long term solution
Excessive debt at governmental and personal levels in developed economies
Sovereign bonds overpriced and certainly not risk free
“Fiscal cliff” in the US can’t be ignored but politicians will not want to tip the economy
into recession
Turn in the US housing market should be supportive
Significant valuation anomalies in forex cross rates: USD offers value
Risk assets offer value but macro-economic dangers are significant
Convertibles provide lower risk exposure to equities
Relative valuation of bonds and equities is extreme…
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Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12
Div
iden
d Y
ield
/10 y
ear
go
vern
men
t yie
ld
Div Yld/10yr 6 Exp MvAv +/-2stdev
Source: Bloomberg, Jupiter 31.05.12.
UK Forward Dividend Yield/Bond Yield Ratio
…but are equities cheap or bonds expensive?
0%
2%
4%
6%
8%
10%
12%
14%
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
UK CPI YoY UK 10 Year Gilt
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“Bonds should come with a warning label” Warren Buffett
The problem for many funds during the previous decade was… too much in equities
Will the problem in this decade be… too much in bonds?
Source: Bloomberg, 31.03.89 to 31.12.11.
Real interest rates are -2.2%
Western bond markets will not turn Japanese
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-1
1
3
5
7
1993 1995 1996 1998 2000 2002 2004 2006 2008 2010
10 Y
ear
Real
Rate
(10yr
– C
PI)
US
UK
DE
JP
Source: Bloomberg , Jupiter 31.05.12.
Real 10 year yields
Nominal yields similar, but Western bonds have negative real yields
Current Average
-0.68% 2.38%
-1.35% 3.22%
-0.83% 2.88%
0.45% 1.99%
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Total debt load of major economies is very high
Combining government, business, bank and household debt reveals the true scope of a country’s
obligations
Source: ZeroHedge 23.11.11.
Jupiter Strategic Total Return Fund is a conservative absolute return fund
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Target Risk
Target Return
Money Market &
Liquidity Funds
Lower Risk
Absolute Return
Funds
Traditional Gov’t
Bond Funds
Corporate Bond
Funds
Traditional
Equity & Higher
Risk Absolute
Return Funds
High Yield &
Emerging Equity
Funds
Diversified core investments
Aggressive
funds enhancing
portfolio returns
Cash reserves & cautious
section of portfolio
Jupiter Strategic Total Return Fund
Multi-asset strategy that has evolved since 1998
Global multi-asset portfolio with
absolute return aim
Seeking cash +3% over a rolling
3 year basis
Target volatility <5%
Wide opportunity set of direct
investments
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Global
Multi-Asset
Portfolio
Convertibles
Equities
Corporate
bonds Money
markets
Currency
Sovereign
bonds
These are not fund restrictions but manager aims.
The portfolio managers
Managed multi-asset portfolios for 14 years
Previously head of strategic and tactical
asset allocation at JP Morgan
Proven track record in bonds, currencies,
equities and convertibles
Hands-on experience working in Asia, Africa,
Middle East and Europe
Industry recognition: Sauren gold medal
winners 2009 and 2011 (Germany)
Proven team with long experience in different regions and markets
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Fund Manager:
Lee Manzi
Head of Team
& Fund Manager:
Miles Geldard
Past performance should not be seen as a guide to the future. The awards detailed above were based on the managers’ past performance figures which are a representation of the fund manager’s experience and are not necessarily indicative of the potential performance of the Jupiter Strategic Total Return SICAV or Jupiter Strategic Reserve UT.
Fund manager support and idea sharing
Speed of decision making and flexibility within global fund manager
Jupiter is a highly regarded and
established firm in UK since 1985
Substantial employee ownership
aligns our interests with yours
No investment committees or
mandatory house views
But… active discussion of macro and
micro with experienced managers
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Multi-Asset and Fixed Income team
Jupiter Merlin Fund of Funds
team
Emerging Equity team
Financials team
Developed Equity teams
Our investment philosophy
Long term, value driven
Flexible asset allocation within global opportunity set
Agnostic to asset class – aim to choose assets with best risk-
reward to implement views
Maximum limits, no minima, no neutral positions
If a core asset class is overvalued, then have none
No funds* or structured products
Conservative strategy seeking asymmetric return profile
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*The fund may invest in money market funds for cash management purposes.
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Top down macro views combined with bottom up security selection
Asset allocation
decisions
Formal monthly review of a range of macro factors
Proprietary value driven
equity screening model
Jupiter Equity and Fixed
Income Managers
Security selection
Quantitative screening of global opportunity set
Followed by qualitative research of short list
Flexibility in choice of investment instrument to implement view
Long term strategic views across assets, regions and sectors
Opportunistic and agnostic to asset class, geography and sector
Seeking most favourable risk-reward themes
Active discussion / interaction with
macro thinkers in Jupiter
Proprietary credit scoring models
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Portfolio construction, risk controls and limits
Position sizing
Position size dependent on:
Conviction of view
Volatility of security
Liquidity of security
Diversification from other holdings
Stress testing
of positions
and portfolio
Based on real world experience
learnt over a number of
market cycles
Equity: Bonds: Currency:
Maximum 40%
(including CB delta)
Highly diversified holdings
Maximum 5 year duration
Average implied credit quality
investment grade, albeit with no
credit limitation on individual issues
Maximum non-base currency 30%
Lower exposures on single cross
currency positions
Target volatility <5%
Focus on liquidity and traded securities
Portfolio transparency
Not fund restrictions, represents fund manager style.
0.09%
0.13%
0.13% 0.16%
0.11%
0.11%
0.14% 0.07% 0.03%
0.04%
0.10% Long USD Short AUD
Equity
Convertible Bonds
Financial + Corporate Debt
Long S&P Short Russell
Short Sovereign
Bond Futures
Long MXN Short ZAR
Long USD Short JPY
Long USD Short EUR
Strategic Total Return – risk budget
Strict risk budgeting for each position
and portfolio
Stop loss disciplines
Maximum limits but no minima
Blend of traditional strategies with
relative value
Seeking uncorrelated positions
Diversified, liquid portfolio:
10 strategies
74 securities
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Risk budgeting – Absolute VaR per strategy
Source: Jupiter 18.06.12. Note: The VaR shown is the 99% 1-day VaR for the strategy in isolation weighted by the position size - it does not take into account the correlations between strategies and so overstates the risk in the portfolio. The total portfolio 1-day 99% VaR is 0.23%.
Short French
Sovereign
Bond Futures Sovereign
Debt
Jupiter Strategic Total Return (STR)
Lower risk fund
Proven investment approach
Experienced and established team
Flexible asset allocation
Diversified portfolio
Low correlation to traditional
asset classes
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Appendix
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Currency exposure: Deviation from base currency
Asset allocation Key characteristics
Interest rate exposure by maturity (duration)
Source: Jupiter as at 30.04.12. *Note: Corporate Bonds includes FRN.
Current portfolio positioning
-20%
-10%
0%
10%
20%
30%
40%
So
vere
ign
Bo
nd
s
Co
rpo
rate
Bo
nd
s
Bo
nd
Fu
ture
Co
nv
ert
ible
Bo
nd
s
Eq
uit
ies
-6%
-4%
-2%
0%
2%
4%
6%
USD MXN HKD Other EUR JPY AUD ZAR-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
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0.7
0-1 1-3 3-5 5-7 7-10 10+
Years
EUR USD GBP Other
Fund size €126m
Net equity exposure (including hedges) 8%
YTM/P 0.94%
Current yield 2.46%
Modified duration 0.01 years
Average explicit credit rating A+
Average implied credit rating A
No. securities 82
Fund volatility 1.87%
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Proprietary equity screening model factors
Value Factors
Price / Sales
Price / Free Cash Flow
Dividend Yield
Price / 8yr Average Earnings Per Share
Quality Factors Debt / Assets
1yr Earnings Per Share Growth
Price Momentum Price momentum of security; biased toward
medium term price momentum
Built on FactSet, all historical data, no forward looking assumptions
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Flexible exposure to asset classes based on
macro-economic insights. Aims to avoid over-priced assets
Bottom up security selection: Equity, convertible, credit
Equity-related: Regional and sectoral thematic bets
Interest rate:
Duration positioning
Relative value; inter / intra yield curve
Forex: Non core, reserved for long term structural anomalies
Futures used for hedging and relative value strategies
Options: Premium paid to improve asymmetric return profile
Sources of return
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“There’s too much froth in the Australian currency” RBA board member
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AU
D/U
SD
FX
Rate
A
ustr
alian
go
vt.
bo
nd
fo
reig
n o
wn
ers
hip
Australian govt bond foreign ownership AUDUSD
Source: Reserve Bank of Australia, Bloomberg 31.12.11.
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Japan is a rentier economy
Source: MizuhoSecurities, Japan MOF, July 2010.
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Trade balance ratio Income ratio
Contribution from trade balance and income to the current account
Convertibles provide exposure to equities
Source: Nomura 13.06.12.
Convertible bonds richness / cheapness to fair value
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-10
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-2
0
2
4
Jan 11 May 11 Aug 11 Dec 11 Apr 12
Japan AEJ Europe Americas
The portfolio managers – biographies
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Proven, experienced investment team with award winning track record
Lee Manzi
Fund Manager
Lee started his fund management career at JP Morgan Asset Management (formerly Flemings) in 1998, working in the fixed income
team. After spells working on the European fixed income team and UK desk, he took over the management of the firm’s UK Sterling
accounts before joining the Global Portfolios Group in 2001 where he managed the fixed income portion of the balanced funds
He then worked in the Global Multi Asset Group with Miles, focusing primarily on fixed interest and convertibles
In 2006 he moved to MPC / RWC to work with Miles as a Portfolio Manager
Miles Geldard
Head of Team & Fund Manager
In the 13 years prior to his appointment Miles built and managed global convertibles, fixed income and multi asset franchises.
In 2009, he was recognised in the Sauren Awards with three gold medals in the convertibles category, two gold medals in the
absolute return category and two gold medals in the multi strategy international category
Having spent much of his early career managing derivative teams in the Far East, Miles became an adviser on fixed income portfolio
management and foreign exchange to the Central Bank of Botswana in 1994. In 1997 he joined JP Morgan Asset Management
(formerly Jardine Fleming) in Hong Kong and became Head of Fixed Income, Currencies, Convertibles and Balanced
In 2004 Miles moved to London and became Chief Investment Officer and Head of the Global Multi Asset Group and Global Strategy
Team at JP Morgan Asset Management. In addition to building the convertibles business, he also built and managed the JPM Capital
Preservation Fund, a global multi asset absolute return fund. Miles left JP Morgan in 2006 to join RWC Partners (previously MPC
Investors), where he founded and headed the multi asset and convertibles team
Past performance should not be seen as a guide to the future. The awards detailed above were based on the managers’ past performance figures which are a representation of the fund manager’s experience and are not necessarily indicative of the potential performance of the Jupiter Strategic Total Return SICAV or Jupiter Strategic Reserve UT.
Disclosure
Jupiter Asset Management Limited (‘JAM’) is registered in England and Wales (no. 2036243). The registered office is 1 Grosvenor Place, London SW1X
7JJ. JAM is authorised and regulated by the Financial Services Authority for business conducted in the UK whose address is 25 The North Colonnade,
Canary Wharf, London E14 5HS.
This presentation is intended for investment professionals and not for the benefit of private investors. However any one attending the presentation or who
has the opportunity to view the accompanying slides should bear in mind that the value of an investments and the income from it can go down as well as
up. It may be affected by exchange rate variations and you may not get back the amount invested. Initial charges are likely to have a greater proportionate
effect on returns if investments are liquidated in the shorter term. Quoted yields are not guaranteed. Current tax levels and reliefs will depend on the nature
of the holding and details are contained in the key features documents. Past performance should not be seen as a guide to future performance.
This document contains information based on the MSCI AC Pacific and MSCI Pacific Indices. Neither MSCI nor any other party involved in or related to
compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be
obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness
for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party
involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other
damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted
without MSCI’s express written consent.
For your security we may record or randomly monitor all telephone calls. If. Any data or views given should not be construed as investment advice. Every
effort is made to ensure the accuracy of the information but no assurance or warranties are given.
The Jupiter Strategic Total Return Fund can use derivatives to speculate as to the direction a market index, currency or share will move and can cause
periods of high volatility. The Fund may incur losses greater than its initial investment into derivative contracts (although investors will not incur any
liabilities beyond their initial investment). The Fund is able to gain market exposure in excess of its net asset value which can increase or decrease the
value of units to a greater extent than would have occurred had no additional market exposure beyond the Fund’s net asset been in place. The Fund’s
value is unlikely to mirror increases and decreases in line with the respective markets it is invested in to. Further information is contained within the
simplified prospectus.
This fund can invest more than 35% of its value in securities issued or guaranteed by an EEA state, the fund prospectus is available from Jupiter
on request.
This document is for information only. In particular, it does not constitute an offer or solicitation in any jurisdiction where it is unlawful or where the person
making the offer or solicitation is not qualified to do so or the recipient may not lawfully receive any such offer or solicitation. It is the responsibility of any
person in possession of this document to inform themselves, and to observe, all applicable laws and regulations of relevant jurisdictions. The information
and any opinions contained herein have been obtained from or are based on sources which are believed to be reliable, but the accuracy cannot be
guaranteed. No responsibility can be accepted for any consequential loss from this information.
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