Embed Size (px)
Citation preview
A new age for global markets?
Philip Saunders: Co-Head Multi Asset Growth
23 June 2020
2
Important information
All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security.
The value of this investment, and any income generated from it, can go down as well as up and will be affected by changes in interest rates, exchange rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. The Fund’s investment objective will not necessarily be achieved and there is no guarantee that these investments will make profits; losses may be made. This Fund may not be appropriate for investors who plan to withdraw their money within the short to medium term. Performance shown is that of the Fund and individual investor’s performance may differ as a result of initial fees, actual investment date, date of any subsequent reinvestment and any dividend withholding tax. All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions stated are honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particular security. It is not an invitation to make an investment nor does it constitute an offer for sale. Before making an investment, please read the Prospectus and Key Investor Information Document, which sets out the fund specific risks and is available from Ninety One SA (Pty) Ltd (“Ninety One SA”) . The portfolio may change significantly over a short period of time. The Fund is traded at the ruling price and can engage in borrowing and scrip lending and may be closed in order to be managed in accordance with the mandate. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. The Fund is a sub-fund of the Ninety One Global Strategy Fund, which is a UCITS organised as a Société d’Investissement à Capital Variable under the law of Luxembourg. For further information on the Fund including application forms and a schedule of fees and commissions, please contact Ninety One SA. Fund prices and English language copies of the Prospectus, Report & Accounts and Articles of Incorporation and local language copies of the Key Investor Information Documents may be obtained from our website and free of charge from the following country specific contacts: Luxembourg – Ninety One Global Strategy Fund, 49 avenue J.F. Kennedy, L-1855 Luxembourg. In South Africa, Ninety One SA is an authorised financial services provider. The sub-funds offered for public sale in South Africa are approved under the South African Collective Investment Schemes Control Act.
Investment Team: There is no assurance that the persons referenced herein will continue to be involved with investing for this Fund, or that other persons not identified herein will become involved with investing assets for the Manager or assets of the Fund at any time without notice.
Investment Process: Any description or information regarding investment process or strategies is provided for illustrative purposes only, may not be fully indicative of any present or future investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for illustrative purposes only and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular strategy. Portfolio data is expected to change and there is no assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available in the future at the levels presented, with the same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability of Manager to construct the illustrative portfolio and implement its investment strategy or investment objective.
In the event that specific funds are mentioned please refer to the relevant minimum disclosure document in order to obtain all the necessary information in regard to that fund.
This presentation is the copyright of Ninety One SA and its contents may not be re-used without Ninety One SA’s prior permission.
3
Outlook
Our central scenario has generally been playing out
Forecasts are inherently limited and are not a reliable indicator of future results.Opinions based on current market conditions; subject to change without notice and without any obligation to update.
‒ Material shock to growth but not a typical recession
‒ Policies of strict isolation seem to be working
‒ The liquidity shock led to valuations moving to discount a materially more negative outcome
‒ Market crash versus typical bear market – precedents in 1987, 1998, 2008 and 2011
‒ Massive Dollar ‘margin call’ but Central bank response timely and aggressive
‒ Fiscal response sufficient to contain damage to demand and productive capacity – ‘the biggest bridging loan in history to the real economy’
‒ Markets are likely to track the rebound in industrial production
‒ Likely that support for the rally will be tested, but the extent of any set-back could disappoint
Central scenario – growth recovers after a period of significant disruption and weakness and markets rally in anticipation
4
The clear trend is down in most regions
COVID-19
Forecasts are inherently limited and are not a reliable indicator of future results.Source: Ninety One as at 18 May 2020. Growth rate based at 50 cases = 0
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 96 97 96 97
Growth rates in confirmed COVID-19 cases across regions
ChinaSingaporeJapanSouth KoreaIranItalyFranceGermanyEU OtherSpainUKUS
Days
5
Getting the measure of COVID-19
Susceptibility may be lower due to prior antibodies. That means herd immunity threshold may be much lower than the 80% generally assumed
Forecasts are inherently limited and are not a reliable indicator of future results.Source: J.P. Morgan Quantitative and Derivatives Strategy. Infection rate measured with a 7-day lay to allow to testing lags.
The most parsimonious explanation for falling infection rates everywhere may be lower susceptibility rates to the virus rather than effective behavioural change everywhere at once
The vast majority of countries had decreased COVID-19 infection rates after national lockdowns were lifted
6
Getting the measure of COVID-19
“If what you are doing ain’t working, change what you are doing”
Forecasts are inherently limited and are not a reliable indicator of future results.Opinions based on current market conditions; subject to change without notice and without any obligation to update.
‒ It is an inflammatory disease not an influenza
‒ C-19 causes a hyperactive immune system response in vulnerable patients (cytokine storm) which causes inflammation and blood clotting
‒ Anti inflammatory, anti coagulants and corticosteroids seem to be effective if administered at an early stage of hospitalisation
‒ WHO and CDC advised against the use of these treatments, but there has now been a paradigm shift among medical practitioners
‒ Susceptibility could be much lower than previously anticipated
A growing case for a more rapid lifting of lockdowns
7
Getting the measure of COVID-19
A remarkable number of treatments and vaccines under way
Source: Bloomberg, Milken Institute, as at 13 May 2020.
Current count of treatments and vaccines
COVID-19 treatments and vaccines (combined)
Treatments in consideration223 Vaccines in
development141
Antibodies
Antivirals
Cell-Based Therapies
RNA Based Treatments
Dormant / Discontinued
Scanning compounds to repurpose
Devices
Others
Vaccines
8
Getting the measure of COVID-19
Chinese industrial production was rebounding well ahead of the easing of lockdowns
Forecasts are inherently limited and are not a reliable indicator of future results. Source: Refinitiv.
Chinese industrial production versus trend
9
The recovery in global industrial production is likely to be dynamic
Growth assets are likely to be heavily influenced by the behaviour of industrial production
Forecasts are inherently limited and are not a reliable indicator of future results.Source: Refinitiv.
Global industrial production versus trend
10
Global equities – a bear market or another ‘panic attack’?
Source: Bloomberg, MSCI World index as at 12 June 2020.
90
100
110
120
130
140
150
Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20
MSCI World Index (as at 12 June 2020)
11
‘It’s the economy, stupid’
James Carville, political consultant and campaign manager for Bill Clinton
12
‘It’s the liquidity, stupid’
Explosive US money supply growth
Source: Bloomberg as at 31 May 2020
0
5
10
15
20
25
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
200
0
200
2
200
4
200
6
200
8
2010
2012
2014
2016
2018
2020
US Federal reserve M2 money supply YoY % change
13
Is the quantum of stimulus announced sufficient?
Summary of key stimulus measures to date (% of GDP)
Source: Bloomberg. UBS, Federal Reserve websites and press releases, ECB website and press releases, BoE website and press releases, BoJ website and press releases, UK Office for Budget Responsibility, Unicredit, JPM as at 4 June 2020
34.2%38.1%
15.2%9.8%
13.0%
31.1%
6.1%
42.1%
4.3% (total)
US Eurozone UK Japan China
Monetary
Fiscal
14
Volatility…
… on a declining trend
Source: CBOE VIX Index, Bloomberg as at 15 June 2020
38.51
0
10
20
30
40
50
60
70
80
90
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
Volatility index (VIX) from January 2006 to June 2020
15
260.77
0
100
200
300
400
500
600
700
800
900
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
151
392
261c. 130 bps spread compression from peak to 15 June 2020
The recovery has broadened across asset classes
EM IG has staged a sharp catch up as equity markets consolidated their recent gains
Source: Bloomberg CEMBI IG spreads, as at 15 June 2020
c. 240bps spread widening over c.4 week period to peak on 23 March
16
367
1094
637
637
0
500
1000
1500
2000
2500
c. 460 bps spread compression from peak to 15 June 2020
… and risk premia have reduced dramatically
Moves in high yield debt spreads
Source: Bloomberg B of A ML spreads, as at 15 June 2020
c. 730bps spread widening over 4 week period to peak on 23 March
17
… equity market leadership finally beginning to broaden
Source: Bloomberg as at 15 June 2020
70
75
80
85
90
95
100
105
110
115
120
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20
US Europe ex UK UK Japan Asia ex Japan
Cyclicals vs Defensives (2 years)
18
Asia / China continues to move up the value chain
Growth at attractive prices
Source: Ninety One, Bloomberg – as at 30 April 2020.
Capex vs. sales R&D spend vs. sales
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
CY
2010
CY
2011
CY
2012
CY
2013
CY
2014
CY
2015
CY
2016
CY
2017
CY
2018
CY
2019
MSCI Asia ex JapanMSCI USMSCI Europe
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
CY
200
3
CY
200
4
CY
200
5
CY
200
6
CY
200
7
CY
200
8
CY
200
9
CY
2010
CY
2011
CY
2012
CY
2013
CY
2014
CY
2015
CY
2016
CY
2017
CY
2018
CY
2019
MSCI Asia ex JapanMSCI USMSCI Europe
19
All bets on a Eurozone breakup are off (for now)
The EU has united around the need to reflate
20
The return of great power competition
The United States once viewed China as a competitor, it now sees it as an adversary
21
Bi-polar US politics
Until recently the Republicans were regarded as heavy favourites to retain control of the senate
Source: Bloomberg as at May 2020
Dead heat in the senate
Beginning of the Great Rotation?
23
Capital market assumptions vs historic outcomes
Global Fixed income
Source: Ninety One as at 31 March 2020. Historic rolling 10 year outcomes based on returns from 31 December 1987 for US govt, UK govt and global govt, US IG and US HY, 31 December 1993 for EMD Hard, Ninety One proprietary capital market assumptions as at 30 September 2019 and 31 March 2020. Estimates are in local currency, nominal, gross of fees and ignore alpha. Modelling involves risks, assumptions and uncertainties. These estimates reflect the view of Ninety One’s multi-asset team, while the views of other teams across Ninety One may differ. Performance does not guarantee future results. Actual returns could be materially higher or lower than projected.
Capital market assumptions as at 31 March 2020Capital market assumptions as at 30 September 2019Historic outcome interquartile ranges – rolling 10 year annualised returns
0.0% -0.1%-0.2%
3.7%
7.8% 7.6%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
US Govt UK Govt Global Govt IG HY EMD Hard
24
Capital market assumptions vs historic outcomes
Global Equities
Source: Ninety One as at 31 March 2020. Historic rolling 10 year outcomes based on returns from 31 December 1987 for global equities, and US equities, 31 December 1998 for Europe and Emerging market equities, 31 December 2000 for Asia ex Japan equities. Ninety One proprietary capital market assumptions as at 30 September 2019 and 31 March 2020. Estimates are in local currency, nominal, gross of fees and ignore alpha. Modelling involves risks, assumptions and uncertainties. These estimates reflect the view of Ninety One’s multi-asset team, while the views of other teams across Ninety One may differ. Performance does not guarantee future results. Actual returns could be materially higher or lower than projected.
Capital market assumptions as at 31 March 2020Capital market assumptions as at 30 September 2019Historic outcome interquartile ranges – rolling 10 year annualised returns
7.3% 7.7%
12.4%
7.7%
10.9%12.4%
8.4%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
US Europe ex UK UK Japan Asia Pac ex Japan Emerging Markets Global
25
Capital market assumptions
The bond windfall is behind us
Source: Ninety One proprietary capital market assumptions as at 31 March 2020. Estimates are nominal, gross of fees and ignore alpha. Modelling involves risks, assumptions and uncertainties. These estimates reflect the view of Ninety One’s multi-asset team, while the views of other teams across Ninety One may differ. Performance does not guarantee future results. Actual returns could be materially higher or lower than projected. For information on our Capital Markets Assumptions methodology, please see Important Information.
100% global equity
100% diversified fixed income
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2% 4% 6% 8% 10% 12% 14% 16% 18%
Retu
rn p
.a.
Risk p.a.Current forecast 25y realised 10y realised
‒ The bond bull market over the last three decades has seen elevated risk-adjusted returns for fixed income portfolios, resulting in an almost flat portfolio risk/return line for all diversified portfolios
‒ More recently performance has been more usual, with bond risk reduction actually coming at the expense of returns
‒ Next few years are likely to see a return to a more normalized environment in terms of risk / reward pay-offs for diversified portfolios
50% global equity, 50% diversified fixed income
26
Global Strategic Managed
Current allocations
Source: Ninety One, 31 May 2020. This portfolio may change significantly over a short period of time.
Total currencies Breakdown
Thematic Equity 38.3%US Relative Economic Strength 1.1%
China's Transition 12.5%
High Return on Invested Capital 20.7%
Japan Reflation 4.0%
70.7%
Growth Defensive Uncorrelated
22.6% 6.7%
Portfolio duration
years1.1
North America 44.3%UK 6.6%Europe 17.4%Japan 13.6%Far East 14.3%
Equities 65.5%Bonds 18.6%Cash & Forwards 9.2%Alternatives 6.7%
High conviction thematic positions including active currencies and hedging
Core Global Equity27.2%
Fixed Income5.2%
Cash & Forwards
9.2%
Fixed Income13.3%
Alternatives6.7%
27
A new age for global markets?
Forecasts are inherently limited and are not a reliable indicator of future results. Opinions based on current market conditions; subject to change without notice and without any obligation to update.
Our central scenario has generally been playing out:‒ Market ‘crash’ moved asset valuations to discount an excessively negative outcome of the impact
of C-19
‒ Fed successfully addressed the problem of a local US and international liquidity shock greatly reducing the chances of a more serious credit shock
‒ Combined fiscal /monetary steps sufficient to mitigate long term impact of the growth shock
‒ Better disease outcomes = faster normalisation
Investment implications:‒ Global industrial production has already inflected leading to a ‘V’ shaped recovery – the broader
recovery in GDP growth could surprise a cautious consensus
‒ Bond windfall is behind us
‒ Narrowness of the recovery in equity markets has given way to a broader, more sustainable uptrend
‒ EM /Asia vs DM – EM divergence accelerated (Asia weight in EM indices 80%). Lower for longer rates will support debt sustainability
Main risks to scenario:‒ Extended lock downs / starts do more permanent damage to both supply and demand
internationally leading to tighter credit conditions and deeper earnings recession
www.ninetyone.com
Thank you
Questions
30
Important information
Institutional Only
Inst
itutio
nal
Except as otherwise authorised, this information may not be shown, copied, transmitted, or otherwise given to any third party without Ninety One’s prior written consent. © 2020 Ninety One. All rights reserved. Issued by Ninety One, May 2020.
Additional information on our investment strategies can be provided on request.
IndicesIndices are shown for illustrative purposes only, are unmanaged and do not take into account market conditions or the costs associated with investing. Further, the manager’s strategy may deploy investment techniques and instruments not used to generate Index performance. For this reason, the performance of the manager and the Indices are not directly comparable.
MSCI data is sourced from MSCI Inc. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.
FTSE data is sourced from FTSE International Limited (‘FTSE’) © FTSE 2020. Please note a disclaimer applies to FTSE data and can be found at www.ftse.com/products/downloads/FTSE_Wholly_Owned_Non-Partner.pdf
Assumptions
The presentation includes results which are not historical or actual in nature but are hypothetical illustrations involving modelling components and assumptions that are required for purposes of such hypothetical illustrations. No representations are made as to the accuracy of such hypothetical illustrations or that all assumptions relating to such hypothetical illustrations have been considered or stated or that such hypothetical illustrations will be realized. In particular, no assurances can be provided regarding the composition or actual performance of the portfolio that the composition or performance of such portfolio, at any time, will resemble or correspond (in any way) to the composition of any hypothetical portfolios or hypothetical performance scenarios herein or in other written materials provided to you, or discussed with you. Actual events are difficult to predict and are beyond the Firm’s control. Actual events may be different, perhaps materially, from those assumed. The information contained herein does not purport to contain all of the information that may be required to evaluate the investment strategy or portfolio and you should conduct your own independent analysis of the data referred to herein. For example, declines in portfolio valuations have not been assumed. A decline in the value of the portfolio will have a direct impact on the actual returns and hypothetical If any offer of securities is made, it shall be pursuant to a definitive Offering Circular prepared by or on behalf of the issuer which would include material information, including risk factors, not contained herein and shall supersede this information in its entirety. Any decision to invest in securities or strategies described herein should be made after reviewing such definitive Offering Circular or comparable disclosure document, conducting such investigation as an investor deems necessary and consulting its own legal, accounting and tax advisors in order to make an independent determination of suitability and consequences of such an investment. No investor or client of the Firm has actually experienced the hypothetical results presented. Additional and supporting information is available upon request.
This communication is for institutional investors and financial advisors only. It is not to be distributed to the public or within a country where such distribution would be contrary to applicable law or regulations. If you are a retail investor and receive it as part of a general circulation, please contact us at www.ninetyone.com/contactus.The information may discuss general market activity or industry trends and is not intended to be relied upon as a forecast, research or investment advice. The economic and market views presented herein reflect Ninety One’s judgment as at the date shown and are subject to change without notice. There is no guarantee that views and opinions expressed will be correct and may not reflect those of Ninety One as a whole, different views may be expressed based on different investment objectives. Although we believe any information obtained from external sources to be reliable, we have not independently verified it, and we cannot guarantee its accuracy or completeness. Ninety One’s internal data may not be audited. Ninety One does not provide legal or tax advice. Prospective investors should consult their tax advisors before making tax-related investment decisions. Nothing herein should be construed as an offer to enter into any contract, investment advice, a recommendation of any kind, a solicitation of clients, or an offer to invest in any particular fund, product, investment vehicle or derivative. Investment involves risks. Past performance is not indicative of future performance. Any decision to invest in strategies described herein should be made after reviewing the offering document and conducting such investigation as an investor deems necessary and consulting its own legal, accounting and tax advisors in order to make an independent determination of suitability and consequences of such an investment. This material does not purport to be a complete summary of all the risks associated with this Strategy. A description of risks associated with this Strategy can be found in the offering or other disclosure documents. Copies of such documents are available free of charge upon request. In the US, this communication should only be read by institutional investors, professional financial advisers and their eligible clients, but must not be distributed to US persons apart from the aforementioned recipients. THIS INVESTMENT IS NOT FOR SALE TO US PERSONS EXCEPT QUALIFIED PURCHASERS. Note that returns will be reduced by management fees and that investment advisory fees can be found in Form ADV Part 2A.In Australia, this document is provided for general information only to wholesale clients (as defined in the Corporations Act 2001). In Hong Kong, this document is intended solely for the use of the person to whom it has been delivered and is not to be reproduced or distributed to any other persons; this document shall be delivered to professional financial advisors and institutional and professional investors only. It is issued by Ninety One Hong Kong Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong (SFC). The Company’s website has not been reviewed by the SFC and may contain information with respect to non-SFC authorised funds which are not available to the public of Hong Kong. In Singapore, this document is for professional financial advisors and institutional investors only, issued by Ninety One Singapore Pte Limited (company registration number: 201220398M) and has not been reviewed by the Monetary Authority of Singapore. In Indonesia, Thailand, The Philippines, Brunei, Malaysia and Vietnam this document is provided in a private and confidential manner to institutional investors only. Ninety One Botswana (Pty) Ltd, Unit 5, Plot 64511, Fairgrounds, Gaborone, Botswana, is regulated by the Non-Bank Financial Institutions Regulatory Authority. In Namibia, Ninety One Namibia (Pty) Ltd is regulated by the Namibia Financial Institutions Supervisory Authority. In South Africa, Ninety One is an authorised financial services provider.
