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Fantasy Fund Manager JPM Global Equity Capabilities

Fantasy Fund Manager JPM Global Equity Capabilities. January 2012. Agenda. Introduction Global Equity Funds Global Financials Global Natural Resources Global Consumer Trends. JPM Global Equities capabilities.

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Fantasy Fund Manager JPM Global Equity Capabilities

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  1. Fantasy Fund ManagerJPM Global Equity Capabilities January 2012

  2. Agenda • Introduction • Global Equity Funds • Global Financials • Global Natural Resources • Global Consumer Trends

  3. JPM Global Equities capabilities • Manage approximately $52bn in global and international equity portfolios for our clients • Organised into distinct investment processes • A single operational and client service platform • Focused on delivering performance …multi-product provider with a wide range of investment solutions

  4. Manager-Driven Research Behavioural Finance Fundamental (DDM) Research Offering Global Equity Investment Solutions Theme Funds Global Focus Global 130/30 Alpha Target Global Dynamic Global Equity Global Dividend Global Opportunities Benchmark Aware Benchmark Free Benchmark Sensitive

  5. The Manager-Driven Research process The Fundamental (DDM)Research process • Consistent process applied globally • Draws on proprietary analysis • Seeks to profit from peer-group valuation anomalies • Focus on forecast earnings & cashflow ( DDR ) • Developed and customised to individual markets • Draws on proprietary and third-party analysis • Seeks to profit from local and global pricing inefficiencies • Focus on stock-specific characteristics Three complementary equity processes The Behavioural Finance process • Consistent process applied in selected markets • Draws on consensus analyst views • Seeks to profit from growth and value anomalies created by human behavioural biases • Focus on style characteristics (value, growth, momentum) Correlation of excess returns is low…

  6. Agenda • Introduction • Global Equity Funds • Global Financials • Global Natural Resources • Global Consumer Trends

  7. JPM Global Financials Fund MSCI World Financials Index Launched December 2000 40 to 70 holdings Passive currency management Exposure to Financial stocks globally Performance* Ahead of benchmark over 3 year and 5 years Experienced team PMs – Peter Kirkman and Simon Poncet Analyst team - In depth industry insight with average of 13 years’ experience Portfolio construction bottom-up, global best ideas JPM Global Financials fund Source: JPMAM Global Financials SICAV, NAV , in USD, as at 31st December 2011. Inception date is 11 December 2000

  8. We have a strong track record Excess Return** +10.1 -1.5 +1.7 +1.8 +3.3 +0.9 +4.5 -2.7 +8.2 +0.2 -4.0 Source: JPMAM NAV, gross of fees, USD, as at 31st December 2011. Inception date is 11 December 2000. Adjustments to our approach occurred in September 2008 *Numbers over 1 year are cumulative. **Geometric.

  9. Co-managed by Peter Kirkman and Simon Poncet • Daily discussion driven by interaction between PMs and analysts • Ensure risk profile of fund is appropriate to achieve desired performance Peter Kirkman Simon Poncet • Global Macro and Risk Management perspective • Based in NY and ensures full dialogue with US-based analysts • Bottom-up perspective • Based in London and challenges analyst conviction and assumptions … partnership between PM’s and analysts creates best ideas portfolio

  10. Our Analysts Focus Conduct detailed cash flow analysis Same valuation methodology Common global assumptions Foundation of process is our equity analysts Superior long-term forecasts from specialist research experience New York Urmas Wompa (27) Kay Herr (16) Jason Ko (8) Steven Wharton (14) David Small (10) Emerging Markets and Asia Mark Ferguson (11) Chris Birney (12) Europe Simon Poncet (14) Robert Haim (22) Lucy Parken (9) Francesco Sedati (10) Hugo Alexander (18) Jeremy Kelton (22) Japan Hiroyuki Hanaoka (18) Yuko Taniwaki (18) Irene Shimada (7) … to generate superior industry and company insights

  11. Our best ideas require valuation, catalysts, and a visible timeline Comprehensive global sector coverage from four regional investment centres (300 stocks) Analysts PortfolioManagers Focus on top 2 quintiles within global sectors as ranked by their internal rates of return. Upside potential with a catalyst and a timeline to its achievement PM/ Analyst Interaction Avoid value traps - PMs + analysts partner to validate and stress-test assumptions PortfolioManagers Portfolio of 50–80 high conviction stocks

  12. Where we are today • Key concerns remain for western banks capping sustainable ROEs below historical levels • Sovereign risk still exclusively a Eurozone concern • Emerging Market financials continue to deliver strong operating performance and are much less affected by regulatory and sovereign issues than global peers • The Insurance industry faces less challenges than banks and is more attractive on a valuation basis

  13. Valuations in Europe are back at 2008 levels Source: Nomura, European banks, as at August 2011

  14. Strong PPP allows Chinese banks to absorb high credit losses Chinese banks have pre-provision profit margins in the 55 - 65% range providing significant buffers China Banks' pre-provision operating profit margin Annual NPL formation that would cut bank earnings in half (as a % of total loans) Source: Bernstein, as at September 2011 Source: Bernstein, as at September 2011

  15. Our current strategy • Our focus is on the long term valuation of each company • We increased our exposure to China and India • In the developed world we prefer financial institutions that are most geared to increasing savings of households • We are still overweight insurance companies and have recently added to European insurers • Despite our concerns on Western banks we see a number of turnaround situations and very deep value, especially in Europe (KBC, Lloyds, ING, UBS and Soc Gen). … to take advantage of the upside potential in the sector

  16. Agenda • Introduction • Global Equity Funds • Global Financials • Global Natural Resources • Global Consumer Trends

  17. Key strategy features • Small/Mid-Cap Bias • Over 1,000 company contacts per annum by management team • In-depth knowledge across the market cap spectrum allows us to identify tomorrow’s leading projects • Long term approach • Diversified • 3 broad sectors (Gold & Precious Metals, Energy & Base Metals) and over 20 commodity types including specialist metals, base metals, bulk commodities, energy, etc • We take advantage of cyclical performance of different sub-sectors and commodities – i.e. asset allocation • Unconstrained • Minimal sector and regional constraints ensure ‘best idea’ investments …identifying tomorrow’s leading projects through rigorous company analysis

  18. Very strong long-term track record % Source: JPM Factset January 2011

  19. Selected commodity price performance Source: Bloomberg January 2012

  20. Commodity prices vs. Commodity equities Gold Spot Price vs. FTSE Gold Miners Index Copper Spot Price vs. Freeport McMoran Brent Crude vs. HSBC Global Energy Index China Import Iron Ore vs. Fortescue Metals Group Source: Bloomberg 31 Dec 2011

  21. Valuations Source: Factset/ IBES , As at 30/09/2011

  22. Supply not demand is the key price driver for commodities

  23. Agenda • Introduction • Global Equity Funds • Global Financials • Global Natural Resources • Global Consumer Trends

  24. The big picture: Emerging Markets (EM) will dominate future consumption 2008 Global Consumption 2015E Global Consumption This is a dramatic inflection point!... Source: Credit Suisse, Economics department research, 2010

  25. Aspiration The JPMorgan Funds - Global Consumer Trends Fund Demographics & Urbanisation Health & Wellness Identifying new consumer trends is at the core of our strategy

  26. Being global means we have an even wider opportunity set 25x P/E 15x P/E 13x P/E 10x P/E 2008 2011 25

  27. JPM Global Consumer Trends Fund – Regional breakdown Regional breakdown (as at 31 October 2011) Regional breakdown (as at 30 June 2010) … A big shift back towards EM stocks

  28. A review of markets: YTD absolute performance in US$ % Source: MSCI, Bloomberg 30 December 2011

  29. JPM Global Consumer Trends Fund performance 2011201020092008 (SI) since inception JPM Global Consumer Trends Fund -12.9% 22.6%38.4%-8.3% 44.8% MSCI World Index -4.8%15.3%15.7%-13.5% 8.4% MSCI Con Staples and Cons Disc +2.4% 22.2% 15.4% -2.7% 36.3% Source: J.P. Morgan Asset Management, Micropal. Data as at 31 December 2011. Performance shown is Gross of fees, in GBP. Inception date of the fund is 7 April 2008. Competitor data sourced from Micropal.

  30. Summary • We have a wide variety of global equity products to suit different market conditions • The funds we have shown you are at the higher end of the risk/return spectrum • Performance in 2011 was challenging, but the long-term track record is impressive • Typically these funds recover strongly after periods of extreme volatility…………….

  31. J.P. Morgan Asset Management Global Equity Client Portfolio Managers Contact Details: E-Mail address: global_cpm_team@jpmorgan.com Direct Lines John Stainsby: +44 (0)20 7742 3916 Nicole Vettise: +44 (0)20 7742 5586 Louise Kooy-Henckel: +44 (0)20 7742 5309 Alexander Robins: +44 (0)20 7742 2256 Frances Gerhold: +44 (0)20 7742 3435 James Sutton +44 (0)20 7742 2123 Any forecasts or opinions expressed are J.P. Morgan’s own at the date of this document and may be subject to change. The value of investments and the income from them may fluctuate and your investment is not guaranteed and investors may not get back the full amount invested. Past performance is not a guide to future performance. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in smaller companies may involve a higher degree of risk as they are usually more sensitive to market movements. Investments in emerging markets may be more volatile than other markets and the risk to your capital is therefore greater. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made. Telephone lines are recorded and may be monitored for security and training purposes

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