Demography is destiny identifying the opportunities of an ageing population

Transcription

1 Demography is destiny identifying the opportunities of an ageing population Edward Bonham Carter Vice Chairman Jupiter Fund Management Plc

2 We have two classes of forecasters: those who don t know and those who don t know they don t know. John Kenneth Galbraith No amount of sophistication is going to allay the fact that all of your knowledge is about the past and all your decisions are about the future. Ian Wilson former GE executive Forecasts create the mirage that the future is knowable. Peter Bernstein

3 Agenda Demographic outlook What asset managers need to offer Investment opportunities for asset managers Where we are today

4 Major populations in 2100 Source: The Guardian,

5 Major populations in 2100 Global population in billions Average age of selected populations Nigeria Tanzania 8.08 India 7.16 China UK Germany 2.53 Japan World Source: The Guardian,

6 Investor expectations increased investor responsibility Increased necessity to save as population ages and dependency ratios increase UK population by age 2011 (thousands) UK population by age 2050 (thousands) Female Male Pyramid shape starts to change Female Male House-shape % % % 65 yr % yr % 0 4-3,000-2,000-1, ,000 2,000 3, % 0 4-3,000-2,000-1, ,000 2,000 3,000 Dependency ratio = 27.8 Dependency ratio = 46.7 Source: United Nations Population division, 2015

7 Investor expectations increased investor responsibility Responsibility for pension savings and effective management is shifting to the individual The shift towards DC schemes is growing considerably in the UK, starting to approach US market levels % Netherlands UK US Australia 2% 3% 19% 49% 51% 97% 81% 5% 13% 32% % 99% 68% 60% 87% Source: Willis Towers Watson Global Pension Study, 2011 and DC DB

8 Investor expectations increased investor responsibility Responsibility for pension savings and effective management is shifting to the individual while the annuity market changes will give pensioners more freedom and more responsibility 100% 80% 60% 5% 5% 30% % took income drawdown % took cash % took annuities 40% 90% 61% 20% 0% 9% Source:

9 Agenda Demographic outlook What asset managers need to offer Investment opportunities for asset managers Where we are today

10 What asset managers need to offer The inherent investment cyclicality: asset classes / styles perform differently through the cycle Outperform EM equities UK mid cap UK Comm small mid cap Cash Global Eq Gilts Underperform Div Yld Energy EM bonds Energy EM bonds Gold UK Mid cap HY bonds Div Yld Stocks EM equities UK large eq Global eq Gilts Gold Div Yld Energy Global eq UK small Comm cap UK mid cap UK growth EM equities Mid cap UK Stocks small cap Cash Global eq UK value eq Gilts Gold Energy Expansion Slowdown Recession Recovery Lagging economic indicators GDP robust Tighter rate policy Inflation rising GDP dropping Tight rate policy Inflation slowing GDP contracting Easier rate policy Inflation low GDP picking up Easy rate policy Inflation tamed The views expressed are those of the presenter at the time of preparation and may change in the future.

11 What asset managers need to offer The retirement conundrum Regular Income Retirement Conundru m Inflation Protection Drawdown Protection Risk The views expressed are those of the presenter at the time of preparation and may change in the future.

12 What asset managers need to offer The simple rules investors may want to consider MSCI World returns* MSCI World calendar year returns in falling markets** MSCI World TR MCSI World ex dividend Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q MSCI World TR 8.90 MSCI World High Dividend Yield *Source: FE, bid to bid, net income reinvested, in GBP, **Source: FE, bid to bid, net income reinvested, in GBP,

13 What asset managers need to offer Focus on products that address key macro trends Equity Global income Global emerging markets Fixed Income High yield Emerging markets Flexible / unconstrained global Macro Trends Regulatory focus on low risk Rise of Emerging Markets Ageing population Low rates Multi-asset Income Equity-like returns with lower volatility Inflation/ rate protection Key product success factors Manage the new fixed income environment High yielding fixed income solutions: high yield and emerging market debt Strong flexible / global / fixed income solutions Produce an all weather multi-asset portfolio with more solution oriented capabilities Absolute return strategies Income / inflation / rate focused Strong active / alpha equity capabilities Income/ growth: global dividend and global emerging markets Global / distinctive active equity product suite The views expressed are those of the presenter at the time of preparation and may change in the future.

14 What asset managers need to offer Focus on solving investors problems International Market UK Market 189.4bn Outcome-orientated active strategies 61.7bn Outcome-orientated active strategies 0.5bn Traditional style box - 0.8bn Traditional style box 108.1bn ETF / Index Funds 0.8bn ETF / Index Funds The views expressed are those of the presenter at the time of preparation and may change in the future. Outcome-oriented active strategies includes investment strategies such as multi asset, absolute return, equity income. Traditional style box includes active equity funds with =<1.5%p.a. tracking error. Source: SIM Fund, net new flows, 3 years to

15 Agenda Demographic outlook What asset managers need to offer Investment opportunities for asset managers Where we are today

16 What asset managers need to offer Economic development changes sector focus Economic development GDP per capita (current $) India Vietnam Nigeria Infrastructure China Brazil Food / agriculture Russia Commodities Time Japan The views expressed are those of the presenter at the time of preparation and may change in the future. Source: SIM Fund, net new flows, 3 years to European Union United Kingdom Industrials United States Financials Consumer goods / services Healthcare Space travel? Environment

17 What asset managers need to offer The healthcare market in Europe will likely benefit from two-pronged ageing European population over 65* European life expectancy vs. health expenditure** 30% 25% 27% 2,500 2,000 Total health expenditure, $ per capita [lhs] Life expectancy at birth (years) [rhs] % 15% 10% 5% 16% $ 1,500 1, Years 0% E *Source: UN Population Report 2010, Allianz Global Investors Capital market analysis. Chart published in Allianz, Global Investors, October **Source: World Health Organization, European health for all database,

18 What asset managers need to offer Increasing population and prosperity of Emerging Markets Total population* Real GDP ($)** 4,000 BRIC G7 100 BRIC G7 Millions 3,500 3,000 2,500 2,000 1,500 1, $ Trillions E E *Source: Statistical offices in the respective BRIC countries, 2011; Allianz Global Investors Capital Market Analysis. Chart published in Allianz, Global Investors, October **Source: Economist Intelligence Unit, 2011; Allianz Global Investors Capital Market Analysis. Chart published in Allianz, Global Investors, October 2011.

19 Agenda Demographic outlook What asset managers need to offer Investment opportunities for asset managers Where we are today

20 Investor expectations Is lack of risk the biggest risk? UK-domiciled funds AUM by investment type* UK Gilt 10 year yield and UK CPI evolution** bn (4%) Fixed Income Fund of funds Property (14%) 318 (63%) 37 (7%) 59 (12%) Equity Mixed Assets Other 1, (16%) 502 (49%) 96 (9%) 175 (17%) 3 (1%) 65 (6%) (3%) UK Gilt 10 year yield UK CPI Mar-89 Aug-94 Dec-99 Apr-05 Aug-10 Dec-15 *Source: Jupiter / Strategic Insight, **Source: SIMFUND, Bloomberg, December 2015.

21 US 10-year treasury yields since % 13% 11% 9% 7% 5% US 10-year Treasury yield (constant maturity) The US 10-year Treasury yield fell to a 220-year low of 1.36% in July 2016*. US bonds have had the following distinct secular bull and bear markets: : erratic yield fluctuations and then a sustained decline in yields to below 3% : the First Bear Bond Market, yields rise from 3% to 5 6% : the Great Bull Bond Market, yields decline from 5-6% to below 2% : the Second Bear Bond Market, yields soar from 2% to above 15% during % 1% : the Greatest Bull Bond Market, as yields tumble from 15% to 1.4% in 2012 In the past 3 years the direction of Treasury yields has been buffeted by global deflation fears and US recovery hopes Source: BofA Merrill Lynch Global Investment Strategy, Global Financial data. Published in Charting the lowest interest rates in 5,000 years, worst commodity returns in 80 years on *Source: Bloomberg,

22 Growth of world population and the history of technology since 9000 BC Population (millions of people) 6,000 5,000 4,000 3,000 2,000 1,000 1,000 Agricultural Revolution Pottery Invention of plough 1st irrigation Genome project Man lands on Moon High-speed computers Invention of airplane Industrial Revolution 2nd Agricultural Revolution Peak of Rome Peak of Greece 1st cities Metallurgy Writing Mathematics Mobile Internet PCs Nuclear energy DNA discovered Penicillin Automobile Telephone Germ theory Railroads Watt engine Source: BofA Merrill Lynch US Equity & Quant Strategy, Robert Fogel, University of Chicago. Published in Global Investment Strategy. The Longest Pictures research by BofA Merrill Lynch,

23 Investor expectations is lack of risk the biggest risk? Is the 2007 equity picture now relevant for fixed income? Quotes from asset managers* Taking no risk is not the answer; it is actually the biggest risk. Every day your life expectancy increases by 5.5 hrs. How are you going to invest for increasing life expectancy where people need growth without some amount of equity? The huge problem for the government is that the whole system is loaded up on bonds and underweight in equities. It s partly regulatory, partly accounting and partly fashion. But I would say that, from a macroprudential, systemic risk point of view is overweight the wrong asset class. *Quotes source: Asset Management in the UK , published in The IMA Annual survey on August 2013.

24 Forecasts usually tell us more of the forecaster than of the future. Warren Buffet I never think of the future it comes soon enough. Albert Einstein

25 Disclosure This presentation is intended for investment professionals and is not for the use or benefit of other persons, including retail investors This presentation is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the presenter at the time of preparation, are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. This document contains information based on the MSCI world ex dividend, MSCI World TR, MSCI World high dividend yield 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 Jupiter Asset Management Limited is authorised and regulated by the Financial Conduct Authority and its registered address is The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ, United Kingdom. No part of this presentation may be reproduced in any manner without the prior permission of Jupiter Asset Management Limited _68471_DEMOGRAPHY_IS_DESTINY_EBC_0117_ZURICH

26 Tomorrow s Adviser Evolving your business to meet your future clients needs 19th & 20th January 2017 Grosvenor House Hotel, London