JPMorgan Europe High Yield Bond Fund

Transcription

1 AVAILABLE FOR PUBLIC CIRCULATION NEW JPMorgan Europe High Yield Bond Fund Asset Management Company of the Year, Asia + Important information 1. The Fund invests at least 7 in European and non-european below investment grade debt securities denominated in European currencies. The Fund will have limited RMB denominated underlying investments. 2. The Fund is exposed to interest rate risks which may affect the price of bonds, credit, investment grade bond, currency, valuation, liquidity, distribution (no assurance on distribution, distribution rate or dividend yield) and Eurozone sovereign debt crisis risks, and, for currency hedged classes, risks associated with the hedging and class currency. Pertaining to investments in below investment grade or unrated debt securities, these securities may be subject to higher liquidity risks and credit risks comparing with investment grade bonds, with an increased risk of loss of investment. For RMB hedged class, risks associated with the RMB currency and currency hedged classes risks. RMB is currently not freely convertible and RMB convertibility from offshore RMB (CNH) to onshore RMB (CNY) is a managed currency process subject to foreign exchange control policies of and restrictions imposed by the Chinese government. There can be no assurance that RMB will not be subject to devaluation at some point. The Manager may, under extreme market conditions when there is not sufficient RMB for currency conversion and with the approval of the Trustee, pay redemption monies and / or distributions in fund s base currency. 3. Where the income generated by the Fund is insufficient to pay a distribution as the Fund declares, the Manager may at its discretion determine such distributions may be paid from capital including realised and unrealised capital gains. Investors should note that the payment of distributions out of capital represents a return or withdrawal of part of the amount they originally invested or from any capital gains attributable to that original investment. Any payments of distributions by the Fund may result in an immediate decrease in the net asset value per unit. 4. Investors may be subject to substantial losses. 5. Investors should not solely rely on this document to make any investment decision. Hunt for Yield in a Recovering Europe! Capturing the extensive income opportunities across Europe Actively managed to mitigate downside risks Multiple currency classes available with monthly distribution* (*Aim at monthly distribution. Dividend rate is not guaranteed. Distributions may be paid from capital. Refer to important information 3 ) Special initial charge offer # + Issued by The Asset, 2015 award, reflecting performance of previous calendar year. # Valid until Special offers are only applicable to Investment Centre s and J.P. Morgan etrading s clients.

2 Why invest in European high yield bonds? 1. Europe improving fundamentals The Eurozone has made significant economic progress since With the help of low oil prices, a domestic recovery and monetary support from the European Central Bank (ECB), the region looks set to register its fastest annual rate of growth this year since Demand for bank loans on the part of Eurozone households and businesses is improving significantly, helping to stimulate aggregate demand, drive down unemployment and boost consumer confidence. CREDIT DEMAND AND EUROZONE GDP GROWTH Net % of banks reporting positive loan demand, GDP growth Stronger loan demand 6% 4% 5 2% -5-2% Weaker loan demand -4% -6% Consumer credit (lhs) Overall corporate (lhs) Housing loans (lhs) Eurozone GDP growth y/y (rhs) -20 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15-8% Source: ECB, Eurostat, FactSet, J.P. Morgan Asset Management. Guide to the Markets - Europe 1Q Data reflect most recently available as of JPMORGAN EUROPE HIGH YIELD BOND FUND 2

3 2. Europe supportive policy fueling recovery The case for Europe has been sound despite headlines that might have caused concern among investors. The ECB is committed to boosting the Eurozone economy, which provides strong support for the market. Over the past few years, the ECB has been aggressively loosening monetary policy, with its balance sheet seeing rapid expansion. The asset purchase scheme and further cuts to the deposit rate can help to maintain low financing costs, boost credit demand and keep a lid on the value of the euro all of which are positive for the European economy. ECB BALANCE SHEET EUR trillions 5 Forecast '05 '07 '09 '11 '13 '15 '17 Source: ECB, FactSet, J.P. Morgan Asset Management. Guide to the Markets Asia 1Q Data reflect most recently available as of Fiscal tightening has weighed on Eurozone growth over the last five years. But austerity started to give way to a more neutral policy in many countries in This trend is expected to continue in 2016, delivering a modest amount of fiscal easing across Europe as a whole. JPMORGAN EUROPE HIGH YIELD BOND FUND 3

4 3. Hunt for yield set to continue in a low rate environment Even with the US Federal Reserve gradually raising US interest rates, other major central banks around the world remain accommodative. In particular, the ECB extended its quantitative easing programme and reduced the deposit rate at the end of 2015, as well as adopting negative interest rates. More easing measures are still on the cards to support the economy. This is likely to keep interest rates and government bond yields at low levels globally. 10-YEAR BOND YIELDS 18% 16% 14% 12% 1 8% 6% 4% 2% Oil shock Oil crisis Energy crisis 1979 Black Friday 1987 Average since 1970^ Latest US 6.7% 1.74% Germany 5.9% 0.11% Japan 2.6% -0.07% Fall of Berlin Wall 1989 Britain leaves ERM 1992 Dot com bubble Asian currency crisis Feb /11 attacks 2001 Fed QE 2008 BoJ negative interest rate 2016 Fed rate hike, ECB QE, ECB QE ECB negative interest rate BoJ QQE BoJ QQE 2013 Fed QE BoE QE 2009 Fed QE % '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 Source: FactSet, J.P. Morgan Asset Management. Guide to the Markets Asia 1Q Data reflect most recently available as of Positive yield does not imply positive return. ^Average since October 1972 for Germany and February 1986 for Japan due to data availability. In Asia, the real deposit rate is low across markets and investors have been eager to put their money to work in higher-yielding assets. AVERAGE ANNUAL REAL DEPOSIT RATE Based on respective country s deposit rate less year-over-year inflation 6% YTD 3% 2.5% 2.5% 3.3% 1.8% 0.9% % 0.3% 0.6% 0.6% 0.1% % -0.3% -0.5% % 0.3% 2.6% -3% -6% India Korea Australia Taiwan Japan China Thailand US Malaysia Singapore Hong Kong -2.4% -3.8% Source: Bloomberg, FactSet, J.P. Morgan Asset Management. Guide to the Markets Asia 1Q Data reflect most recently available as of The ongoing search for income has been a major theme for investors, and with interest rates still at an all-time low, this theme will likely become even more important going forward. For income investors, Europe offers an attractive set of opportunities in the high yield bond space. JPMORGAN EUROPE HIGH YIELD BOND FUND 4

5 4. Europe as the place to go for high yield bond investors European high yield bonds are more favourable for investors seeking high yield exposure than other regions. The global high yield sector is not without risk as energy and other commodity prices remain under pressure, with default rates potentially on the rise. However, when it comes to the European high yield space, exposure to energy, metals and mining is significantly less than that of its US counterpart. It also features a higher quality distribution, which means that issuers are less likely to default. SECTOR DISTRIBUTION QUALITY DISTRIBUTION 25% 2 15% 1 5% 21.5% 12.7% Basic Industry EHY USHY 1.5% Energy 11.1% BASIC INDUSTRY DISTRIBUTION % 49.6% 35.1% 37.9% 5.5% EHY USHY 12.5% BB B CCC and below EHY 15.6% USHY 32.2% Building and construction Building materials Chemicals Forestry / Paper Metals & Mining Steel producers Source: Merrill Lynch, J.P. Morgan Asset Management. EHY = HECM (BofA Merrill Lynch Euro Developed Markets Non-Financial High Yield Constrained Index), USHY = HUC0 (BofA Merrill Lynch US High Yield Master II Constrained Index). Data as of While the spread has tightened, European high yield bond default rates have obviously improved the default rate of 0.7% as of end-february 2016 is much lower than the average of 4.8% since EUROPEAN HIGH YIELD: SPREAD TO WORST AND DEFAULT RATES 2 15% 1 5% Default rate 2002: 34% Asset class Average since 1998 Latest HY spread - bps (RHS) HY defaults (LHS) 4.8% 0.7% '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 bps 2,500 2,000 1,500 1, Source: BofA / Merrill Lynch, Credit Suisse, FactSet, J.P. Morgan Asset Management. Spread to worst is BofA / Merrill Lynch Euro Non-Financial High Yield Constrained. Guide to the Markets - Europe 1Q Data reflect most recently available as of JPMORGAN EUROPE HIGH YIELD BOND FUND 5

6 Why invest in the JPMorgan Europe High Yield Bond Fund? With an aim to achieve a return in excess of European bond markets, the JPMorgan Europe High Yield Bond Fund invests at least 7 of its non-cash assets in European and non- European below investment grade debt securities denominated in European currencies. Actively managed to mitigate downside risks The Fund is actively managed to mitigate downside risks. In view of slowing global growth, record high inventories, and continued oversupply, we currently maintain a defensive positioning in the energy sector. Similarly, we are underweight in metals and mining as the sector remains challenged by the growth slowdown, overcapacity (especially in China) and severe cyclical swings in global demand patterns. INITIAL PORTFOLIO TARGET ALLOCATION SECTOR BREAKDOWN Energy 0.4% Cash 5.6% Others 7.8% Consumer Goods 3.4% Healthcare Retail 4.2% 5.7% 14.9% Basic Industry - Metals & Mining 4.2% 13.3% Automotive 5.7% Financial Services 6.6% Services 8.5% Telecommunications 12.5% Media 11.4% Capital Goods Source: J.P. Morgan Asset Management, as of The above allocation is the Investment Manager s targets only and is subject to change depending on market conditions. There is no guarantee that these will be achieved. JPMORGAN EUROPE HIGH YIELD BOND FUND 6

7 INITIAL PORTFOLIO TARGET ALLOCATION Average duration 3.7 years Average rating BB- Source: J.P. Morgan Asset Management, as of The above allocation is the Investment Manager s targets only and is subject to change depending on market conditions. There is no guarantee that these will be achieved. Capturing the extensive income opportunities across Europe In the Eurozone, many economies implemented important reforms in order to improve the business environment. These reforms are now starting to bear fruit, with several peripheral economies growing faster than core countries such as France and Germany. With around 5 of its assets in core Europe, the Fund also has exposure to the peripheral European countries, where stronger recovery signs have been seen. INITIAL PORTFOLIO TARGET ALLOCATION COUNTRY BREAKDOWN Cash 5.6% Other 0.6% Eastern Europe 1.1% North America 6.9% UK 16.4% 49.4% Core Europe Greece, Ireland, Italy, Portugal & Spain (GIIPS) 20. Source: J.P. Morgan Asset Management, as of The above allocation is the Investment Manager s targets only and is subject to change depending on market conditions. There is no guarantee that these will be achieved. INITIAL PORTFOLIO TARGET ALLOCATION - RATING BREAKDOWN Cash 5.6% CCC 16.1% 42.4% BB B 36. Source: J.P. Morgan Asset Management, as of The above allocation is the Investment Manager s targets only and is subject to change depending on market conditions. There is no guarantee that these will be achieved. RMB investor friendly The Fund offers an RMB-hedged share class, giving RMB investors another avenue for investment. The Fund is also available in USD Hedged, HKD Hedged, EUR and AUD Hedged classes, with a monthly distribution* feature, to help meet varying needs of investors. * Aim at monthly distribution. Dividend rate is not guaranteed. Distributions may be paid from Refer to important information 3 capital. JPMORGAN EUROPE HIGH YIELD BOND FUND 7

8 Who might consider investing in the JPMorgan Europe High Yield Bond Fund? Investors seeking: High yield bond opportunities across Europe, including peripheral economies Active management to mitigate downside risks An alternative avenue for their RMB assets Investors should seek professional advice regarding the suitability of any investment products. QUICK FUND FACTS: Investment Objective Fund Manager To achieve a return in excess of European bond markets by investing at least 7 of its non-cash assets in European and non-european below investment grade debt securities denominated in European currencies. Peter Aspbury Current Charges Initial: 3. of NAV Redemption: Management Fee: 1. p.a. Available Classes USD Hedged (mth) Class HKD Hedged (mth) Class EUR (mth) Class AUD Hedged (mth) Class RMB Hedged (mth) Class Dealing and Valuation Financial Year End Daily 30 September For more information, please call us or visit our Investment Centre: 7 th Floor, Chater House, 8 Connaught Road Central, Hong Kong The RMB Hedged (mth) Class is not available in the J.P. Morgan Asset Management Investment Centre. The AUD / RMB Hedged Classes are not recommended for investors whose base currency of investment is not in the aforesaid currencies. The information contained in this document does not constitute investment advice, or an offer to sell, or a solicitation of an offer to buy any security, investment product or service. Informational sources are considered reliable but you should conduct your own verification of information contained herein. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated. The (mth) classes aim at monthly distribution. Dividend rate is not guaranteed. Distributions may be paid from capital. Refer to important information 3 Investment involves risk. Past performance is not indicative of future performance. Please refer to the offering document(s) for details, including risk factors before investing. This document has not been reviewed by the SFC. Issued by JPMorgan Funds (Asia) Limited. If, at any time, you do not wish to receive marketing materials from us, please write to GPO Box 11448, Hong Kong and we will cease to send you marketing materials without charge. MKT D JPMORGAN EUROPE HIGH YIELD BOND FUND 8