John Hancock International Core Fund

Transcription

1 John Hancock International Core Fund GMO is the sub-adviser to the John Hancock International Core Fund. John Hancock Funds, LLC is the distributor of the Fund. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL.

2 Firm Overview GMO s Edge: We blend proven traditional judgments with innovative quantitative methods to identify undervalued securities and markets. San Francisco London Boston Amsterdam Success Factors: Discipline, value orientation, investment research, risk control, size limitation. Montevideo Singapore Sydney Rotorua Motivation/Focus: Private partnership founded in 1977; investment management is our only business. Stability: GMO has low turnover of investment professionals. As of 9/30/14 Source: GMO Note: The asset breakout above may not include all underlying assets and thus may not add up to the total AUM figure shown. * Natural Resources include: 1) GMO Renewable Resources assets; and 2) assets of GMO s Resources Strategy. ** Certain Asset Allocation and Absolute Return assets are also accounted for within Equities and Fixed Income strategies. Assets managed by GMO Renewable Resources, a joint venture, is not part of the GIPS compliant firm, GMO. GMO Renewable Resources had assets under management of $1,975,719,284 as of 9/30/14. Current Scale: $120 billion of assets under management, including: Equities: $68 billion Fixed Income: $16 billion Natural Resources: $2 billion* Asset Allocation: $65 billion** Absolute Return: $14 billion** FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. More than 100 investment professionals and more than 550 employees worldwide. 2

3 What Really Matters One true advantage: the long horizon Overpaying is the greatest risk Career risk governs the short run FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 3

4 GMO: This is Who We Are A long history of value, patience, and conviction The 1970s: Nifty Fifty Bubble Bellbottoms were popular. So were large cap stocks. Small caps are the first of many GMO big bets. The 1990s: TMT Bubble The Internet was going to change the world. It did. Internet stocks were going to rise forever. They did not. We observed that small cap value, REITs, and Emerging Markets stocks were much less popular, and much cheaper : GMO Founded The 1980s: Japan Bubble The land under Japan s emperor s palace was said to be worth more than all the real estate in California. Japanese stocks were similarly expensive and made up 60% of EAFE. To avoid these overvaluations, we had to look very different. The 2000s: Risk Bubble This time it was going to be different. The first truly global bubble sent prices of risky assets to record highs. GMO found value in the highest quality, least risky stocks. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 4

5 GMO Philosophy and Approach Harnessing the long horizon Get the Big Picture Right Anchor to Valuation See the Forest AND the Trees Be Contrarian Be Bold FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 5

6 GMO 7-Year Global Real Return Equity Forecasts* Value and growth within large and small stocks, and REITs, as of December 31, % U.S. LARGE U.S. SMALL INT'L. LARGE INT'L. SMALL EMERGING 7.2% 6% Annual Real Return Over 7 Years 4% 2% 0% -2% -4% -1.8% -1.6% -2.1% 0.4% -4.0% -2.9% -1.7% 1.3% -0.5% 3.2% -0.1% 1.2% -0.6% 3.0% 3.8% -6% U.S. Large U.S. Large Growth U.S. Large Value U.S. U.S. High Low Quality Quality U.S. Small REITs Intl Intl Growth Intl Value Japan Intl Small Intl Small Growth Intl Small Value EMG EMG Value Source: GMO *The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward-looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward-looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward-looking statements. U.S. inflation is assumed to mean revert to long-term inflation of 2.2% over 15 years. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 6

7 Getting the Big Picture Right Can Be Enormously Powerful Emerging Int l Small 11.0% spread, compounded for 10 years US Value 8.7% spread, compounded for 7 years US Large 12.7% spread, compounded for 7 years Int l Large US Growth Source: GMO Date: By Region (10 years ending 2011) By Style (7 years ending 2006) By Market Cap (7 years ending 2005) The examples above highlight instances where one group of securities was considerably cheaper than the other based on GMO s asset class forecasts and the cheaper group subsequently outperformed. For example, in 2001, GMO s forecasts indicated that Emerging Markets equities were cheaper than US Large Cap equities; Emerging Markets equities outperformed US Large Caps by 11% annually over the next 10 years. In 1999, GMO s forecasts indicated that US Value equities were cheaper than US Growth equities; US Value equities outperformed US Growth equities by 12.7% annually over the next 7 years. And in 1998, GMO s forecasts indicated that International Small Cap equities were cheaper than International Large Cap equities; International Small Cap equities outperformed International Large Cap equities by 8.7% annually over the next 7 years. As these examples highlight, in each of these instances, buying the cheaper group, with no additional stock selection, generated a significant return differential. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 7

8 Mean Reversion Drives Everything The realized performance of our equity forecasts since June Median Real Return Over Next 7 Years (%) to -8-8 to -6-6 to -4-4 to -2-2 to 0 0 to 2 2 to 4 4 to 6 Real Return Forecast (%) 6 to 8 8 to to to 14 As of 12/31/14 Source: GMO Analysis uses 7-year GMO asset class forecasts for 16 equity asset classes from June-1994 until Dec-2006 (start date is September-1996 for REITS and July-2004 for U.S. Quality and U.S. Junk). GMO began making 7-year asset class forecasts in 2002 and previously made 10-year asset class forecasts. 10-year asset class forecasts are converted into 7-year forecasts by assuming 3 years of equilibrium returns at the end of the 7-year period. These forecasts are forward-looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward-looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward-looking statements. Returns and forecasts are annualized. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 8

9 Bottom-Up Security Selection Seeing the trees in addition to the forest High Quantitative Analysis applies a common approach to value every security in the market. Breadth of Coverage Fundamental Analysis provides customized valuations for a small number of securities. Low Depth of Analysis High FOR FINANCIAL FOR PROFESSIONAL FINANCIAL PROFESSIONAL USE ONLY. USE ONLY. NOT NOT FOR FOR USE USE WITH WITH THE THE PUBLIC PUBLIC AS AS ORAL ORAL OR WRITTEN OR WRITTEN SALES MATERIAL. SALES MATERIAL. 9 9

10 John Hancock International Core FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 10

11 GMO Global Equity Allocation Strategy Depth and breadth across dedicated teams Asset Allocation Ben Inker, Co-Head (22) Sam Wilderman, Co-Head (18) Global Equity David Cowan, Co-Head (10) Tom Hancock, Co-Head (19) 16 Investment Professionals 37 Investment Professionals Overall investment oversight Develop top down views 7-Year Asset Class Forecasts Developed market security selection Portfolio management Day to day implementation Value Orientation Focus on Collaborative Research Blend Fundamental and Quantitative (xx) = years of industry experience As of 6/30/14 FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 11

12 Global Equity Investment Process From forecasts to portfolio Investment Universe Big Picture: Asset class valuations define the overall shape of the opportunity set Simple Process: Positions are sized to the opportunity, subject to liquidity and diversification Group Valuation Valuation Assessments Portfolio Construction, Management, and Review Security Valuation Broad: Quantitative analysis refines asset class forecasts Narrow: Fundamental analysis identifies opportunities not present at the asset class level Portfolio Value Oriented Best Ideas: Our best value ideas within the universe at the asset class and security level FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 12

13 Bottom-Up Security Selection: Quality-Adjusted Value Price to: - Earnings historical - Earnings forecast - Cash flow - Book value - Sales - Dividends GMO Quality means: - Higher profitability - Stable profitability - Low debt For example: Novartis 1.30/1.33 = (-2.3%) Market Premium or Discount GMO Quality Adjusted Fair Price vs. Peers Potential Opportunity Novartis 33% 30% -2% Fair Value Nestle 7% 22% 14% Cheap Sanofi 3% 30% 26% Cheap High Quality Novo Nordisk 79% 33% -26% Expensive Banco Santander -43% -40% 5% Fair Value E.ON -40% -30% 17% Cheap Telefonica -53% -19% 73% Cheap Low Quality Airbus 17% -18% -30% Expensive As of 12/31/14 Source: GMO The securities identified above represent a selection of securities identified by GMO quantitative measures. These specific securities are selected for presentation by GMO based on their underlying characteristics and are not selected on the basis of their investment performance. These securities are not necessarily representative of the securities purchased, sold or recommended for advisory clients, and it should not be assumed that the investment in the securities identified will be profitable. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 13

14 GMO s Approach To Fundamental Analysis Sound familiar? One true advantage: the long horizon Industry: short-horizon and benchmark-relative analysis GMO: what the company is worth in the long-term, not just what it will earn next quarter Overpaying is the greatest risk Industry: themes, trends, and benchmark weight GMO: whether the company is trading for less than it s worth Career risk governs the short run Industry: don t be different, don t get fired GMO: focus on process, be willing to take career risk, and own only best ideas FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 14

15 Why GMO? Consistent Focus on Long-Term Valuation Willingness to be Unconventional History, Experience, Track Record FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 15

16 John Hancock International Core Fund Top holdings as of December 31, 2014 Company Sector % of Equity Total SA Energy 3.90 AstraZeneca Group PLC Health Care 2.92 Royal Dutch Shell PLC, A Shares Energy 2.66 Daimler AG Consumer Discretionary 2.52 BP PLC Energy 2.49 Telefonica SA Telecommunication Services 2.37 Sanofi Aventis Health Care 2.12 BASF SE Materials 1.99 Nissan Motor Company Consumer Discretionary 1.87 E.ON AG Utilities 1.83 TOTAL The groups indicated above represent exposures determined pursuant to proprietary methodologies and are subject to change over time. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 16

17 John Hancock International Core Fund Country allocation as of December 31, 2014 Japan France United Kingdom Germany Spain Italy Netherlands JHF III International Core Fund MSCI EAFE Index Sweden Switzerland Canada Other(13) Source: GMO. Note: MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder. The MSCI EAFE Index is a free float-adjusted market-capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada. The index consists of 21 developed-market country indexes. The total return for this index is calculated gross of foreign withholding tax on dividends. It is not possible to invest directly in an index. Listed holdings are a portion of the fund s total and many change at any time. They are not recommendations to buy or sell any security. Data is expressed as a percentage of net assets and excludes cash and cash equivalents. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 17

18 John Hancock International Core Fund Portfolio characteristics as of December 31, 2014 Sector Allocation Valuation Measures Consumer Discretionary Consumer Staples JHF III International Core Fund MSCI EAFE Index Price/Earnings Hist 1 Yr Wtd Median 13.7 x 17.9 x Earnings/Share Forecast LT Median Growth Rate 6.8 x 8.5 x Energy Price/Book Hist 1 Yr Wtd Avg 1.3 x 1.6 x Return on Equity Hist 1 Yr Med 8.7% 10.8% Financials Health Care Industrials Information Technology Materials Telecommunication Services Market Cap Weighted Median $Bil $29.4 $29.7 Dividend Yield Hist 1 Yr Wtd Avg 3.6% 3.0% Cap Size Allocation Utilities Large Large-Medium Medium Medium-Small Small ($67.5B & Above) ($23.7B-$67.5B) ($10.0B-$23.7B) ($3.5B-$10.0B) ($3.5B & Below) JHF III International Core Fund MSCI EAFE Index Source: GMO. Note: MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder. The MSCI EAFE Index is a free float-adjusted market-capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada. The index consists of 21 developed-market country indexes. The total return for this index is calculated gross of foreign withholding tax on dividends. It is not possible to invest directly in an index. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 18

19 Fund Performance Standardized performance, as of December 31, 2014 International Core Fund (A) 1-Year 3-Year 5-Year Since Inception (9/16/2005) Without sales charge -6.94% 9.73% 5.22% 3.13% With maximum sales charge of 5% % 7.87% 4.15% 2.56% Without sales charge (Class I) -6.67% 10.12% 5.65% 3.59% MSCI EAFE Index -4.48% 11.56% 5.81% 4.42% On 6/9/06, John Hancock International Core Fund acquired the assets of the GMO International Disciplined Equity Fund (predecessor fund). Returns of the predecessor fund s Class III shares, first offered on 9/16/05, have been recalculated to apply the gross fees and expenses of Class A, first offered on 6/12/06. The Fund s total annual operating expense ratio as of the current prospectus is 1.46%. Expenses for other share classes will vary, which will affect returns. Performance figures assume that all distributions are reinvested. Performance quoted without sales charges would be reduced if the sales charges were applied. For performance data current to the most recent month end, contact your financial professional or call John Hancock Investments at The performance data contained within this material represents past performance, which does not guarantee future results. The return and principal value of an investment will fluctuate, so that shares, when redeemed, may be worth more or less than the original cost. The Fund s current performance may be higher or lower and is subject to substantial changes. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 19

20 Portfolio Manager Biographies Thomas Hancock is co-head of GMO s Global Equity team. Prior to joining GMO in 1995, he was a research scientist at Siemens and a software engineer at IBM. Dr. Hancock holds a Ph.D. in Computer Science from Harvard University and B.S. and M.S. degrees from Rensselaer Polytechnic Institute. Ben Inker is co-head of GMO s Asset Allocation team and a member of the GMO Board of Directors. He joined GMO in 1992 following the completion of his B.A. in Economics from Yale University. In his years at GMO, Mr. Inker has served as an analyst for the Quantitative Equity and Asset Allocation teams, as a portfolio manager of several equity and asset allocation portfolios, as co-head of International Quantitative Equities, and as CIO of Quantitative Developed Equities. He is a CFA charterholder. David Cowan is co-head of GMO s Global Equity team. Prior to joining GMO in 2006, he worked as a financial analyst and software developer for Nantahala Capital Management. Dr. Cowan earned his B.A. in Mathematics and Religion from Williams College, and his M.A. in Humanities from the University of Chicago. Additionally, he received his Ph.D. in Mathematics from Tufts University. Sam Wilderman is co-head of GMO s Asset Allocation team. Previously, he was co-head of the GMO Global Equity team and lead manager for U.S. quantitative portfolios. Prior to 2005, he was involved in research and portfolio management for the Emerging Markets Equity team. He joined GMO in 1996 following the completion of his B.A. in Economics from Yale University. Mr. Wilderman is a CFA charterholder. FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL. 20

21 A Word About Risk John Hancock International Core Fund Class A: GIDEX Class B: GOCBX Class C: GOCCX Class I: JHUIX Class R6: JICEX Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Hedging and other strategic transactions may increase volatility of a fund and, if the transaction is not successful, could result in a significant loss. For additional information on these and other risk considerations, please see the Fund s prospectus. Clients should carefully consider a fund s objective, risks, charges and expenses before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, call John Hancock Investments at or visit our website Clients should read the prospectus carefully before investing or sending money. John Hancock Funds, LLC MEMBER FINRA SIPC 601 Congress Street, Boston, MA NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. NOT INSURED BY ANY GOVERNMENT AGENCY. MF FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC AS ORAL OR WRITTEN SALES MATERIAL