Its Global. Chris Johns. Jupiter Global Value. For professional and institutional investors only. Not for retail investors. ON THE PLANET TO PERFORM

Transcription

1 Its Global Its Global Chris Johns Jupiter Global Value ON THE PLANET TO PERFORM

2 Learning objectives At the end of the presentation Advisers will be able to Discuss the rising level of corporate debt worldwide Understand global cyclically adjusted price earnings contribute to spotting opportunities Explain how a value approach to investing globally is achieved 1

3 What are you a Bull or a Bear? Note: Jupiter has purchased the copyright to this image(s). 2

4 Note: Jupiter has purchased the copyright to this image(s). 3

5 Debt on all counts has continued to rise A $237 trillion record. Global debt climbed by 42 percent in the fourth quarter from a decade earlier Source: Institute of International Finance. 4

6 But why not? It s cheap at the moment! The views expressed are those of the presenter at the time of preparation and may change in the future. Source: Federal Reserve Bank of St. Louis. 5

7 Forward guidance from the Fed is one way Note: Jupiter has purchased the copyright to this image(s). 6

8 The CEO conundrum? TAKEOVER A COMPETITOR Issue Debt? PAY INCREASING DIVIDENDS?? INCREASE EARNING PER SHARE? Convertibles Low Yield/High Yield Preference Note: Jupiter has purchased the copyright to this image(s). 7

9 The US has seen $5.5tn removed from Stock Market Source: Federal Reserve Board. This chart shows the value of share issuance netted against hare buybacks and cash -funded M&A. Note: Jupiter has purchased the copyright to this image(s). 8

10 The US has seen $5.5tn removed from Stock Market Source: Federal Reserve Board. This chart shows the value of share issuance netted against hare buybacks and cash -funded M&A. Note: Jupiter has purchased the copyright to this image(s). 9

11 Longest US 60/40 Bull Market since Roaring 20s and Golden 50s Source: Goldman Sachs. 10

12 Will potentially come down! Note: Jupiter has purchased the copyright to this image(s). Source: Bloomberg. 11

13 Mergers & Acquisitions worldwide Source: ( 12

14 Mergers the winners curse Success measures Company Value? Shareholder Value? Competitive Advantage? 83% 66% 60% Fail Destroy to create add Shareholder Company a sustainable Value Value competitive Deloitte Harvard advantage Wharton Source: McKinsey Quarterly, Wharton, Harvard, Deloitte. 13

15 Cyclically adjusted price earnings Denmark 35.6 x Greece -4.7 x Ireland 45.5 x Russia -4.7 x United States 31.2 x 14

16 Q1 MSCI Value vs Growth: historical performance MSCI World Index Growth MSCI World Index Value MSCI: 26%* Sector: 24%* Value: 22%* Growth: 30%* Past performance is no indication of current or future performance, doesn t take into account commissions and costs incurred on the issue/redemption of shares. Source: Morningstar, gross income reinvested, net of fees, in USD, from to Sector: Morningstar Global Flex Cap Equity. *Source: FE, in GBP, as at

17 Compelling opportunity for value investors Value vs Growth US stock market's rolling 10-year total return difference: Fama-French HML 20% 15% 10% Value outperforms 5% 0% -5% September 1942 Next 5 years Value +329% Growth + 148% Growth outperforms March 2000 Next 5 years Value +89% Growth -27% Next 5 years? -10% Value versus growth as measured using Fama-French s High minus Low (HML) framework, top quintile returns less bottom quintile. Source: Calculated based on data from Kenneth French s website (mba.tuck.dartmouth.edu/pages/facilty/ken.french/index.html), which was derived from the CRSP (Center for Research in Security Prices) COMPUSTAT merged database. Data as at

18 Running Global Money From the UK? ON THE PLANET TO PERFORM

19 When too much choice is too much choice! 60, Note: Jupiter has purchased the copyright to this image(s). 18

20 Company Access? Initial Investment Company A Fund: 105% FTSE All Share: 67% Company A: 69% Relative: +2% Purchase Date: 18 Feb 11 Initial Investment Company B Fund: 42% FTSE All Share: 36% Company B: 161% Relative: +125% Purchase Date:2 Dec Feb-11 Oct-11 May-12 Jan-13 Sep-13 Apr-14 Dec-14 Aug-15 Mar-16 Nov-16 Jul-17 Feb-18 22* Company A Company B Past performance is no guide to the future. Source: Bloomberg chart data to 26 February *combination of 22 company management meetings. Fund and FTSE All Share ret urns to 31 January Source: FE, fund performance data is calculated on a NAV to NAV or bid to NAV basis dependent on the period of reporting, all performance is net of fees with net income reinvested, in GBP. The performance figures are shown to illustrate the fund manager s experience only. The UK Value Strategy invests principally in UK equities, its performance is thus not indica tive of any potential future performance of the Jupiter Global Value fund. 19

21 Currency Hedging Is currency hedging an important part of portfolio management? Majority of our universe have global revenue streams and costs Hedging many currencies is prohibitively expensive Little evidence investors can accurately forecast foreign exchange rates Global managers who outperformed picked stocks that outperformed their local markets Percentage global market capitalisation Domestically -Orientated Natural Resources Companies % global capitalisation Natural Resource Multi-Nationals Exporters Domestically- Orientated 5%-15% 35%-45% 25%-35% 15%-25% Hedge? No No No Maybe Exporters Multi- Nationals Reason Companies have exposure to commodities which have global prices Multi currency, not linked to currency stock is denominated in Costs largely in home currency, revenues in multiple. Benefits when home currency depreciates Cash flow directly linked to home currency Company classification for currency management. Source: GMO White Paper The case for not currency hedging foreign equity investments. April

22 Currency Hedging Is currency hedging an important part of portfolio management? Majority of our universe have global revenue streams and costs Hedging many currencies is prohibitively expensive Little evidence investors can accurately forecast foreign exchange rates Global managers who outperformed picked stocks that outperformed their local markets Percentage global market capitalisation Domestically -Orientated Natural Resources Companies % global capitalisation Natural Resource Multi-Nationals Exporters Domestically- Orientated 5%-15% 35%-45% 25%-35% 15%-25% Hedge? No No No Maybe Exporters Multi- Nationals Reason Companies have exposure to commodities which have global prices Multi currency, not linked to currency stock is denominated in Costs largely in home currency, revenues in multiple. Benefits when home currency depreciates Cash flow directly linked to home currency Company classification for currency management. Source: GMO White Paper The case for not currency hedging foreign equity investments. April

23 Currency Hedging Is currency hedging an important part of portfolio management? Majority of our universe have global revenue streams and costs Hedging many currencies is prohibitively expensive Little evidence investors can accurately forecast foreign exchange rates Global managers who outperformed picked stocks that outperformed their local markets Percentage global market capitalisation Domestically -Orientated Natural Resources Companies % global capitalisation Natural Resource Multi-Nationals Exporters Domestically- Orientated 5%-15% 35%-45% 25%-35% 15%-25% Hedge? No No No Maybe Exporters Multi- Nationals Reason Companies have exposure to commodities which have global prices Multi currency, not linked to currency stock is denominated in Costs largely in home currency, revenues in multiple. Benefits when home currency depreciates Cash flow directly linked to home currency Company classification for currency management. Source: GMO White Paper The case for not currency hedging foreign equity investments. April

24 Currency Hedging Is currency hedging an important part of portfolio management? Majority of our universe have global revenue streams and costs Hedging many currencies is prohibitively expensive Little evidence investors can accurately forecast foreign exchange rates Global managers who outperformed picked stocks that outperformed their local markets Percentage global market capitalisation Domestically -Orientated Natural Resources Companies % global capitalisation Natural Resource Multi-Nationals Exporters Domestically- Orientated 5%-15% 35%-45% 25%-35% 15%-25% Hedge? No No No Maybe Exporters Multi- Nationals Reason Companies have exposure to commodities which have global prices Multi currency, not linked to currency stock is denominated in Costs largely in home currency, revenues in multiple. Benefits when home currency depreciates Cash flow directly linked to home currency Company classification for currency management. Source: GMO White Paper The case for not currency hedging foreign equity investments. April

25 Accounting differences Are global accounting standards comparable to the UK? Percentage of profits converted into free cash FTSE 100 Index* Country average for Jupiter Global Value holdings 99% 97% 97% 93% The views expressed are those of the Fund Manager at the time of writing, 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. Source: Jupiter as at 25 September * FTSE 100 excluding financials and companies without a 10 years history. Using comp any year end financials. 24

26 Accounting differences Are global accounting standards comparable to the UK? Percentage of profits converted into free cash FTSE 100 Index* Country average for Jupiter Global Value holdings 99% 97% 97% 93% Overseas holdings provide superior cash conversion levels The views expressed are those of the Fund Manager at the time of writing, 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. Source: Jupiter as at 25 September * FTSE 100 excluding financials and companies without a 10 years history. Using comp any year end financials. 25

27 Accounting differences Are global accounting standards comparable to the UK? Percentage of profits converted into free cash FTSE 100 Index* Country average for Jupiter Global Value holdings 99% 97% 97% 93% The views expressed are those of the Fund Manager at the time of writing, 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. Source: Jupiter as at 25 September * FTSE 100 excluding financials and companies without a 10 years history. Using comp any year end financials. 26

28 Accounting differences Are global accounting standards comparable to the UK? Percentage of profits converted into free cash FTSE 100 Index* Country average for Jupiter Global Value holdings 99% 97% 97% 93% The views expressed are those of the Fund Manager at the time of writing, 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. Source: Jupiter as at 25 September * FTSE 100 excluding financials and companies without a 10 years history. Using comp any year end financials. 27

29 Accounting differences Are global accounting standards comparable to the UK? Percentage of profits converted into free cash Quality of UK accounts is poor, relative to global accounts FTSE 100 Index* Country average for Jupiter Global Value holdings 99% 97% 69% 97% 93% Overseas holdings provide superior cash conversion levels The views expressed are those of the Fund Manager at the time of writing, 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. Source: Jupiter as at 25 September * FTSE 100 excluding financials and companies without a 10 years history. Using comp any year end financials. 28

30 Somethings are lost in translation Japanese Company Financial Statements: Teikoku Sen-I Stock examples are for illustrative purposes only and are not a recommendation to buy or sell. Source: Japanese Company Financial Statements: Teikoku Sen-I

31 Other things are just not understandable Issues that come with being a minority investor Samsung group ownership structure Stock examples are for illustrative purposes only and are not a recommendation to buy or sell. Source: International Corporate Governance: Samsung. Credit Suisse research

32 The pitfalls of forecasting Most popular metrics have had little or no correlation with future stock returns Proportion of future real stock returns that is explained by various metrics, Source: Vanguard. Forecasting stock returns what signals matter, and what do they say now? The bars display the R2 of a regre ssion model of 10 year ahead and 1 year ahead real annualised stock returns on each variable, fitted over the January 1926-June 2012 sample, with the expectation of corporate profits, which are fitted for January June 2012 (because of data limitations). 31

33 (US$) The Value Premium, ,000 Value Growth CAGR Value, 12.8% 10,000 1,000 Growth, 10.3% US data series. Source: Calculated based on data from Kenneth French s website (mba.tuck.dartmouth.edu/pages/ facilty/ken.french/index.html), which was derived from the CRSP (Centre for Research in Security Prices) COMPUSTAT merged database. 32

34 Nov-03 Oct-07 Sep-11 Aug-15 Jul-19 Jun-23 May-27 Apr-31 Mar-35 Feb-39 Jan-43 Dec-46 Nov-50 Oct-54 Sep-58 Aug-62 Jul-66 Jun-70 May-74 Apr-78 Mar-82 Feb-86 Jan-90 Dec-93 Nov-97 Oct-01 Sep-05 Aug-09 Jul-13 Jun-17 Price/earnings ratio (CAPE, P/E10) Valuation can be a major determinant to future returns P/E ratio 33.8 Long-term interest rates Long-term interest rates (%) The views expressed are those of the presenter at the time of preparation and may change in the future. Source: Robert Shiller: Graham & Dodd P/E (10 year moving average earnings), February

35 Active performance through time Active managers tends to outperform most markedly in neutral and bearish conditions Percentage of active managed funds that beat their index in various market conditions 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% US Large Cap US Small Cap International Large Cap 0% Bull Bear Neutral Total Source: Raymond James, Active and Passive Investing In Bull, Bear, and Neutral Markets. AMS Institutional Research as of , Callan as of Study period covering 1974 to

36 10-year annualised relative return of MSCI Value vs Growth Europe 8% 6% 4% 2% 0% -2% -4% Dec-84 Aug-91 Mar-98 Oct-04 May-11 Dec-17 US 10% 5% 0% -5% -10% Dec-84 Aug-91 Mar-98 Oct-04 May-11 Dec-17 Japan 12% 10% 8% 6% 4% 2% 0% -2% Dec-84 Aug-91 Mar-98 Oct-04 May-11 Dec-17 World 6% 4% 2% 0% -2% -4% Dec-84 Aug-91 Mar-98 Oct-04 May-11 Dec-17 Source: Bloomberg, as at

37 Learning Outcomes At the end of the presentation Advisers will be able to Discuss the rising level of corporate debt worldwide Understand global cyclically adjusted price earnings contribute to spotting opportunities Explain how a value approach to investing globally is achieved 36

38 Jupiter Value Team Ben Whitmore Fund Management Director 24 years Dermot Murphy Fund Manager 6 Years Claudia Ripley Product Specialist, UK Equities 11 years Ben Whitmore Ratings and awards should not be taken as a recommendation. *Source: Jupiter, as at Copyright 2018 Morningstar UK Limited. All Rights Reserved. 37

39 Growth Performance UK Value Strategy 450% 400% 350% 300% Schroder Recovery/Jupiter UK Special Situations FTSE All-Share 01 August 2001 to 10 July 2006 UK-domiciled UT 86.1% FTSE All-Share 31.3% Sector rank 9/ % 31 October 2006 to 31 July 2018* 200% Jupiter UK Special Situations I Acc 173.9% 150% FTSE All-Share 106.2% 100% Sector rank* 25/179 50% 0% -50% Aug-01 Sep-03 Oct-05 Dec-07 Jan-10 Mar-12 May-14 Jun-16 Jul-18 Past performance is no guide to the future. The performance figures of Schroder Recovery Fund are shown as a representation of the fund manager s experience and are not necessarily indicative of any potential future performance. Fund performance data is calculated on a NAV to NAV or bid to NAV basis dependent on the period of reporting, all performance is net of fees with net income reinvested. The performance figures are shown to illustrate the fund manager s experience only. The Jupiter UK Special Situations invests principally in UK equities, its performance is thus not indicative of any potential future performance of the Jupiter Global Value fund. Source: FE/Morningstar,, in GBP, from to *Source: FE, in GBP, from to S ector: The Investment Association UK All Companies. 38

40 Performance Global Value Global Value as a SICAV Since October 2016 Global Value as a UT Since March 2018 Past performance is no guide to the future. Source: FE in GBP, gross income reinvested, net of fees, from to

41 12-month rolling performance Jupiter Global Value SICAV and the Jupiter UK Value Strategy (%) 01 Aug '13 to 31 Jul '14 01 Aug '14 to 31 Jul '15 01 Aug '15 to 31 Jul '16 01 Aug '16 to 31 Jul '17 01 Aug '17 to 31 Jul '18 Jupiter Global Value SICAV MSCI AC World Jupiter UK Value Strategy* FTSE All-Share Ben Whitmore and Dermot Murphy assumed management of the Jupiter Global Value SICAV on , performance prior to this period was under a different fund manager and structure Ben Whitmore has managed the Jupiter UK Value Strategy since Past performance is no guide to the future. Source: Morningstar, gross income reinvested, net of fees, in USD, to Share class for the Jupiter Global Value SICAV is the Jupiter Global Value L USD Acc. *Fund performance data is calculated on a NAV to NAV or bid to NAV basis dependent on the period of reporting, all performance is net of fees with net income reinvested. The perf ormance figures are shown to illustrate the fund manager s experience only. The UK Value Strategy invests principally in UK equities, its performance is thus not indicative of any potential future performance of the Jupiter Global Value fund. Source: FE/Morningstar, in GBP, to

42 Jupiter Global Value The Key Investor Information Document, Supplementary Information Document and Scheme Particulars 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. 41

43 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. The sub fund may be subject to various other risk factors, please refer to the Prospectus for further information. Prospective purchasers of shares of the sub fund(s) of the Company should inform themselves as to the legal requirements, exchange control regulations and applicable taxes in the countries of their respective citizenship, residence or domicile. Subscriptions can only be made on the basis of the current prospectus and the KIID, accompanied by the most recent audited annual report and semiannual report. These documents are available for download from The KIID and, where required, the Prospectus, along with other advertising materials which have been approved for public distribution in accordance with the local regulations are available in English, Dutch, French, Finnish, German, Italian, Portuguese, Spanish and Swedish. Before subscribing, please read the Prospectus. Hard copies may be obtained free of charge upon request from any of: The Company Custodian and Administrator: JP Morgan Bank Luxembourg S.A, 6 Route de Trèves, Senningerberg, L-2633, Luxembourg; and from certain of the Company s distributors; Austria: Jupiter Asset Management Limited, Austria branch, Goldenes Quartier, Tuchlauben 7a, 1010 Vienna, Austria; Belgium: BNP Paribas Securities Services, Boulevard Louis Schmidt 2, 1040 Brussels; France: CACEIS Bank France, 1/3 Place Valhubert, Paris, France; Germany: Jupiter Asset Management Limited, Frankfurt branch, whose registered office is at: Roßmarkt 10, Frankfurt, Germany; Italy: BNP Paribas Securities Services, Milan branch, Piazza Lina Bo Bardi, Milano, Italy. Allfunds Bank S.A.U. Milan Branch, Via Bocchetto 6, Milano, Italy. 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; Netherlands: Jupiter Asset Management Limited, Netherlands branch, Fellenoord 130, 5611ZB Eindhoven, Netherlands. Chamber of Commerce number: ; 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. 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. 42

44 Indices disclosure Industry Classification Benchmark ( ICB ) is a product of FTSE International Limited ( FTSE ) and all intellectual property r ights 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 i s 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. This document contains information based on the FTSE All-Share Index. FTSE is a trade mark owned by the London Stock Exchange Plc and is used by FTSE International Limited ( FTSE ) under licence. The FTSE All-Share Index is calculated by FTSE. FTSE does not sponsor, endorse or promote the product referred to in this document and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. All copyrig ht and database rights in the index values and constituent list vest in FTSE. This document contains information based on the MSCI World Value, MSCI World Growth, MSCI UK Value, MSCI UK Growth and MSCI A C World indices. Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warrant ies 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 original ity, 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. 43