W H E R E N E X T F O R F I X E D I N C O M E?

Transcription

1 W H E R E N E X T F O R F I X E D I N C O M E? Fabrizio Palmucci, CFA Fixed Income & Multi-asset Product Specialist September 2017 ON THE PLANET TO PERFORM

2 Jupiter Fixed Income team Ariel Bezalel (20) Head of Strategy, Fixed Income Hilary Blandy (15) Head of Credit Research Consumer / Retail, Food / Beverage Luca Evangelisti (9) Banks, Insurance, Financial Services Katharine Dryer (19) Head of Investments, Fixed Income & Multi-Asset Harry Richards (5) Assistant Fund Manager Chemicals, Oil & Gas Adam Darling (15) Industrials, Metals & Mining, Leisure, Business Services, Property Joe Moxham (3) Paper & Packaging, Gaming, Auto / Parts, Transportation, Utilities Fabrizio Palmucci (14) Product Specialist Vikram Aggarwal (8) Assistant Fund Manager EM sovereigns, Quasi sovereigns Nicole Weiss (12) Maternity leave Andrew Rubins (6) TMT, Healthcare Mike Poole (12) Head of Fixed Income Dealing Rhys Petheram (15) Fixed Income Fund Manager Nachu Chockalingam (17) EM - LatAm Reza Karim (6) EM - CEMEA Steve Naish (30) Specialist Dealer Alejandro Arevalo (18) Fixed Income Fund Manager Head of EMD Andrew Withey (12) Specialist Dealer Note: Years of experience in parentheses as at JUPITERAM.COM 2

3 NEW Some quotes from Central Bankers "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." Ben Bernanke 9 th June 2008 "Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we re much safer and I hope that it will not be in our lifetimes and I don t believe it will Janet Yellen 27 th of June 2017 JUPITERAM.COM 3

4 Time for caution Risk assets priced for perfection Global growth somewhat mixed. US displaying late cycle behaviour Central Banks seem more determined of late to try and normalize rates Long term fundamentals to reassert themselves: The Three D s Fiscal reform appears more and more unlikely in the US The views expressed are those of the presenter at the time of preparation and may change in the future. Image source: istock.com. Note: Jupiter has purchased the copyright to this image. JUPITERAM.COM 4

5 Dez.13 Apr.14 Aug.14 Nov.14 Mär.15 Jul.15 Okt.15 Feb.16 Mai.16 Sep.16 Jän.17 Apr.17 Dez.13 Apr.14 Aug.14 Nov.14 Mär.15 Jul.15 Okt.15 Feb.16 Jun.16 Sep.16 Jän.17 Apr.17 Level Level Economic activity is diverging Purchasing managers indices Manufacturing Services 61 Eurozone US China UK 63 Eurozone US China UK Source: Bloomberg, JUPITERAM.COM 5

6 Jän.17 Jän.17 Jän.17 Jän.17 Jän.17 Feb.17 Feb.17 Feb.17 Feb.17 Mär.17 Mär.17 Mär.17 Mär.17 Apr.17 Apr.17 Apr.17 Apr.17 Mai.17 Mai.17 Mai.17 US Citi Surprise Index Since beginning of April, US data somewhat more mixed Citi Surprise Index (US) Source: Bloomberg as at JUPITERAM.COM 6

7 Euphoria hits the US equity market, no margin for error! Valuations suggest US equities return < 1% per year for the next 12 years US cyclically adjusted P/E Stock market capitalisation to GDP for US Source: Hussman Strategic Advisors, Robert J Shiller ( FRED economic data. JUPITERAM.COM 7

8 Central bank impact on risk assets QE has created bubbles in many risk assets. Will the withdrawal of stimulus go smoothly? BoJ and ECB balance sheet now exceeds the FED G3 CB balance sheet something to do with asset bubbles? The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market. Ludwig Von Mises Source: Big 5 = Alphabet, Amazon, Apple, Facebook, Microsoft JUPITERAM.COM 8

9 NEW The rates market could be signalling policy mistake Especially as the macro data softens The views expressed are those of the presenter at the time of preparation and may change in the future. Source: Morgan Stanley Research, Bloomberg. June JUPITERAM.COM 9

10 Dez.09 Jul.10 Feb.11 Sep.11 Apr.12 Okt.12 Mai.13 Dez.13 Jul.14 Jän.15 Aug.15 Mär.16 Okt.16 Mai.17 Okt.16 Nov.16 Dez.16 Dez.16 Jän.17 Feb.17 Feb.17 Mär.17 Apr.17 Apr.17 Mai.17 Bond market signals US Treasury market pricing out reflation trade US Yield curve US 10 & 5 year break evens ,2 2,1 2,0 1,9 1,8 1,7 1,6 1,5 0 1,4 Source: Bloomberg as at JUPITERAM.COM 10

11 Waning power of debt Change in US public debt vs. gain in US GDP $billion, The views expressed are those of the presenter at the time of preparation and may change in the future. Source: ICIS, JUPITERAM.COM 11

12 Ageing boomers are no longer spending US household consumer spending by age group and category 2016 Part of the challenge the U.S. faces, Mr. Fink said, is demographics. Baby boomers, the largest living generation in the country are aging, reaching retirement age. With our demographics it seems pretty improbable to see sustainable 3% growth. Demographics in mainstream economics has been underemphasized for too long. The views expressed are those of the presenter at the time of preparation and may change in the future. Source: The ph report, US household consumer expenditure survey 2016, Bureau of labour statistics. JUPITERAM.COM 12

13 Declining Power Of Labour: Globalisation and Technology Globalisation & Technology: driving secular labour market trends *Labour share has declined as wages lagged productivity gains Source: European Commission, AMECO database; Eurstat; IMF, World Economic Outlook; OECD, Economic Outlook, National Accounts Statistics and STAN database; Datastream; national data; BIS calculations. March *Ratio of compensation of employees to nominal output; measured by GDP and gross value added for the total economy and manufacturing sector, respectively. JUPITERAM.COM 13

14 Jun.07 Dez.07 Jun.08 Dez.08 Jun.09 Dez.09 Jun.10 Dez.10 Jun.11 Dez.11 Jun.12 Dez.12 Jun.13 Dez.13 Jun.14 Dez.14 Jun.15 Dez.15 Jun.16 Dez.16 Jun.17 Jun.07 Dez.07 Jun.08 Dez.08 Jun.09 Dez.09 Jun.10 Dez.10 Jun.11 Dez.11 Jun.12 Dez.12 Jun.13 Dez.13 Jun.14 Dez.14 Jun.15 Dez.15 Jun.16 Dez.16 Jun.17 Are auto sales at the peak? US Total Auto Sales SAAR, mm US Domestic Vehicle Sales (SAAR, mm) Source: Bloomberg, as at JUPITERAM.COM 14

15 Auto loans causing some pain Off-lease vehicle volume* NADA used car guide vehicle price index** Mini Subprime Crisis? Santander USA holdings verified income on just 8% of borrowers whose loans it recently bundled into $1bn of bonds, according to Moodys *Source: Manheim Consulting, BofA Merrill Lynch Research estimates. ** Source: J.D Power Valuations Services. JUPITERAM.COM 15

16 Retail store closings by units Only second to 2015 store closures YTD; could be the new highest closings for full year Per Capita retail space comparison US 46.6 square feet India 2.0 square feet Mexico 1.5 square feet UK 23.0 square feet Canada 13.0 square feet Australia 6.5 square feet The views expressed are those of the presenter at the time of preparation and may change in the future. Source: Company data, News articles, Credit Suisse estimates. JUPITERAM.COM 16

17 US restaurant sales year on year 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% Jän.93 Apr.95 Jun.97 Aug.99 Nov.01 Jän.04 Mär.06 Mai.08 Aug.10 Okt.12 Dez.14 Feb.17 The views expressed are those of the presenter at the time of preparation and may change in the future. Source: Jupiter, as at JUPITERAM.COM 17

18 Bank lending grinds to a halt Money supply growth turning down US bank loans and leases (YoY) M2 growth (YoY) Source: Federal Reserve, Bloomberg JUPITERAM.COM 18

19 The global credit impulse Source: Haver, UBS Estimates (complete data though March, partial data through April) JUPITERAM.COM 19

20 European credit metrics An improving credit story Leverage and interest coverage ratios: IG European HY leverage and coverage ratios Source: Deutsche Bank, FactSet, JUPITERAM.COM 20

21 US investment grade fundamentals Source: Morgan Stanley Research, Bloomberg Source: Morgan Stanley Research, Bloomberg JUPITERAM.COM 21

22 US IG leverage uptick is not just because of energy! Change in leverage from trough in 3Q10 The views expressed are those of the presenter at the time of preparation and may change in the future. Source: Morgan Stanley Research, Bloomberg JUPITERAM.COM 22

23 US leverage near record levels across credit A deteriorating credit story HY leverage ticks lower, but still near cycle highs HY leverage also near peak levels ex-energy Source: Morgan Stanley Research, Bloomberg, Capital IQ, the Citigroup Index LLC JUPITERAM.COM 23

24 Median Corporate Leverage among big firms Has grown steadily and is close to a Historical Peak Net leverage of S&P 500 Companies Source: Bloomberg l.p.; National Bureau of Economic Research; S&P Capital IQ; Thomson Reuters Datastream; and IMF staff estim ates. JUPITERAM.COM 24

25 Earnings starting to suffer Quarterly EBITDA growth: US leveraged loan issuers Source: LCD, an offering of S&P Global Market Intelligence. JUPITERAM.COM 25

26 Risk Reward In Many Credit Markets Fading Valuations Versus History. Where we are now versus where we were Source: Morgan Stanley, Citigroup Index LLX, S&P LCD, iboxx, Bloomberg. July JUPITERAM.COM 26

27 Who needs fundamentals when the fit is this good Our favourite market indicator Securities purchased by global central banks, rolling 12m, $bn Can you see why? CB securities purchases ($bn) vs US IG credit spread 12m chg (bp) Source: National central banks, Citi Research, Yield Book. EMFX reserve changes are FX-adjusted. JUPITERAM.COM 27

28 NEW Where do we see opportunities? Government US Treasuries Australia New Zealand High Yield US/European sub bank debt CoCo s Short dated/cash proxy paper Senior secured Emerging Markets India Argentina Russia Broader Credit Themes FX Japanese convertibles Gold mining convertibles Long rupee The views expressed are those of the presenter at the time of preparation and may change in the future. Any holdings examples are used for illustrative purposes only and should not be viewed as investment advice. Source: Jupiter, May JUPITERAM.COM 28

29 UPDATED 30/08/2017 Where do we see opportunities? All-weather Building blocs Jupiter Dynamic bond Jupiter EM Corporate Jupiter Global convertibles Characteristics Go anywhere fixed income Total return objective Managed downside risk Outperform the benchmark (net of fees) over the medium to long-term Tracking-error ~ 2% Seek attractive risk-adjusted equity returns Balanced delta Long-term value driven Fund Inception 8 May March October 2010 Size EUR 10,315m USD 103m EUR 740m Sectors Global Flexible Bond EUR hedged Global Emerging Markets Corporate Bond Benchmark n/a JPMorgan CEMBI Broad Diversified Total Return Index Global EUR Hedged Thomson Reuters Convertible Global Focus Hedged EUR Effective duration 4.2 years 5.2 years 2.8 years Yield to maturity 3.4% 5.2% 0.8% (current yield) Average rating BBB BB BBB Source: Jupiter, as of JUPITERAM.COM 29

30 All-weather fixed income: Dynamic Bond Performance and risk metrics Performance since launch* Risk metrics since launch*** 40% 35% 34.6 Jupiter Dynamic Bond L EUR Q Inc Peer group average 5.0% 4.5% Jupiter Dynamic Bond L EUR Q Inc Peer group average 30% 4.0% % 20% 15% % 3.0% 2.5% 2.0% % 5% % 1.0% % % -5% Since launch** YTD 0.0% Volatility Sharpe ratio Past performance is no indication of current or future performance. Performance data does not take into account commissions a nd costs incurred on the issue and redemption of shares. Source: Morningstar, gross income reinvested, net of fees, in EUR, to *Based on monthly returns. **Based on daily returns since fund launch on ***The volatility and Sharpe ratios are based on annualised figures for monthly returns from The peer group consists of Jupiter Dynamic Bond and the largest 15 other funds from the Global Fixed Income, Euro Fixed Income and Cautious allocation sectors (only one fund from each category is chosen). Risk free rate of Euribor 3 Month. JUPITERAM.COM 30

31 Years All-weather fixed income: Dynamic Bond Duration history Current effective duration 6 Jupiter Dynamic Bond SICAV duration 4.22 years May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 Jul-17 Source: Factset, Fund launched on JUPITERAM.COM 31

32 UPDATED 30/08/2017 Building block: EM corporates Key Characteristics Performance Effective Duration 5.2 years Yield to Maturity 5.2% Spread Duration 5.2% Average Rating BB 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% 1 month Since launch* Past performance is no indication of current or future performance. Performance data does not take into account commissions and co sts incurred on the issue and redemption of shares. Source: Morningstar, gross income reinvested, net of fees, in USD, to Fund: Jupiter Global Emerging Markets Corporate Bond SICAV. *Fund launch on JUPITERAM.COM 32

33 Cumulative total return* NEW Building block: Global convertibles Long-term track-record 180% 160% Convertible funds managed 161.8% Respective convertible indices 67.2% JF/JP Morgan RWC Jupiter 140% 120% 100% 80% 60% 40% 20% 0% -20% Jän.99 Sep.00 Mai.02 Jän.04 Sep.05 Mai.07 Jän.09 Sep.10 Mai.12 Jän.14 Sep.15 Mai.17 Past performance is no indication of current or future performance. Performance data does not take into account commissions a nd costs incurred on the issue and redemption of shares. The funds shown are a representation of the fund manager s experience and are not necessarily indicative of the potential perform ance of the Jupiter Global Convertibles SICAV. Source: Jupiter/FE/Bloomberg, I EUR Acc share class, gross income reinvested, net of fees, from to Indices shown are UBS Global (JPY) 1999 April 2001,UBS Global (EUR) May 2001 August 2004, Thomson Reuters Global Focus Hedged (EUR) September 2004 August 2014, Thomson Reuters Global Convertible Focus Hedged EUR from September 2014 onwards. *For comparison it is assumed that the index is not invested while no fund is being managed. JUPITERAM.COM 33

34 Disclosure This presentation is intended for investment professionals and not for the benefit of retail investors. 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. Initial charges are likely to have a greater proportionate effect on returns if investments are liquidated in the shorter term. Any data or views given should not be construed as investment advice. Past performance is no indication of current or future performance. Performance data does not take into account commissions and costs incurred on the issue and redemption of shares. Company examples are for illustrative purposes only and are not a recommendation to buy or sell. Quoted yields are not guaranteed and may change in the future. Awards and ratings should not be taken as a recommendation. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. It is not an invitation to subscribe for shares in the Jupiter Global Fund (the Company) or any other fund managed by Jupiter Asset Management Limited. The Company is a UCITS fund incorporated as a Société Anonyme in Luxembourg and organised as a Société d investissement à Capital Variable (SICAV). This information is only directed at persons residing in jurisdictions where the Company and its shares are authorised for distribution or where no such authorisation is required. Jupiter Dynamic Bond SICAV: The fund can invest a significant portion of the portfolio in high yield and non-rated bonds. These bonds may offer a higher income but carry a greater risk of default, particularly in volatile markets. Quarterly income payments will fluctuate. In difficult market conditions, it may be harder for the manager to sell assets at the quoted price, which could have a negative impact on performance. In extreme market conditions, the Fund s ability to meet redemption requests on demand may be affected. The KIID and Prospectus are available from Jupiter on request. This fund can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The sub fund(s) may be subject to various other risk factors, please refer to the Prospectus for further information. Jupiter Global Convertibles SICAV: Convertible bonds can benefit or make losses from fluctuations in equity prices, they may be subject to greater volatility, interest rate and default risks. The fund can invest a large portion in high yield and non-rated bonds. These bonds may offer a higher income but carry a greater risk of default, particularly in volatile markets. 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The Fund has been registered with the Commissione Nazionale per le Società e la Borsa (CONSOB) for the offer in Italy to retail investors; Luxembourg: the Company's registered office; 6 Route de Trèves, Senningerberg, L-2633, Luxembourg; Spain: Allfunds Bank, C/ La Estafeta 6, Edificio 3, Alcobendas, Madrid, Spain. For the purposes of distribution in Spain, the Company is registered with the Spanish Securities Markets Commission Comisión Nacional del Mercado de Valores ( CNMV ) under registration number 1253, where complete information, including a copy of the marketing memorandum, is available from the Company authorised distributors. Subscriptions should be made through a locally authorised distributor. The net asset value is available on Sweden: Jupiter Asset Management Limited, Nordic branch, 4th Floor, Strandvagen 7A, Stockholm, Sweden; Switzerland: Copies of the Memorandum and Articles of Association, the Prospectus, KIIDs and the annual and semi-annual reports of the Company may be obtained free of charge from the Company s representative and paying agent in Switzerland, BNP Paribas Securities Services, Paris, Succursale de Zurich, whose registered office is at Selnaustrasse 16, 8002 Zurich, Switzerland; United Kingdom: Jupiter Asset Management Limited (the Investment Manager), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ, United Kingdom. Industry Classification Benchmark ( ICB ) is a product of FTSE International Limited ( FTSE ) and all intellectual property rights in and to ICB vest in FTSE. Jupiter Asset Management Limited has been licensed by FTSE to use ICB. FTSE is a trade mark owned by the London Stock Exchange Plc and is used by FTSE under licence. FTSE and its licensors do not accept liability to any person for any loss or damage arising out of any error or omission in ICB. Issued by The Jupiter Global Fund and, in some instances, Jupiter Asset Management Limited which is authorised and regulated by the Financial Conduct Authority. No part of this presentation may be reproduced in any manner without the prior permission of the Company or Jupiter Asset Management Limited. JUPITERAM.COM 34