Eastern Promise: Can Asian growth be sustained? Speakers Tristan Hanson Jonathan Schiessl Craig Farley Investment Presentation Jersey - October 2009

Eastern Promise: Can Asian growth be sustained?

SpeakersTristan HansonJonathan SchiesslCraig Farley

Investment Presentation Jersey - October 2009

Climate changeTristan HansonInvestment OutlookOctober 2009

Eastern Promise | Ashburton Investment presentation | October2009

Performance since last Investment Briefings

+10.9%

+8.5%

+6.9%

+3.7%

90

95

100

105

110

115

Jun-09 Jul-09 Aug-09 Sep-09 Oct-09

Ashburton M-A Aggressive £Ashburton Replica AM £MSCI World (local ccy)Global Bonds (local ccy)



Regional Equity Performance

90

95

100

105

110

115

120

Jun-09 Jul-09 Aug-09 Sep-09

Asia ex Japan

Europe

US

Japan



Performance vs US$ (2009 YTD)

0

0.9

3.3

4.3

9.3

11.3

12.9

19.9

23.1

0 5 10 15 20 25

US $

Jap Yen

Swiss Fr.

Euro

GBP

Swedish Kr

CAD $

Norwegian Kr

AUS $

Performance vs US$ (Jun 9th - Oct 2nd)

-2.2

0

2.3

3.6

4.2

8

8.4

9.2

9.2

-4 -2 0 2 4 6 8 10

GBP

US $

CAD $

Euro

Swiss Fr.

AUS $

Jap Yen

Norwegian Kr

Swedish Kr


Equities – further upside potential

Government bonds (US/Europe) - oversold and no longer overvalued

Sterling preferred currency major

Macro views

Global economy poised for recovery

Long-term structural growth concerns remain

Inflation fears overdone

Key points – June 2009


Valuations of risk assets are no longer at distressed levels

However, current policy mix is very positive for asset prices

Potential for economic rebound to be stronger than consensus expectation

Longer-term structural concerns remain

Market Views

Positive backdrop for risk assets: equities, commodities, emerging markets

Government bonds supported by low interest rates, but look overbought

Asian, EM & Commodity currencies to outperform majors

Sterling oversold on a short-term basis

Current Views – October 2009


Leading Indicators point to growth rebound

OECD Leading Indicator (6m chg, annl %)

-20%

-10%

0%

10%

20%J

ul-

61

Ju

l-6

4

Ju

l-6

7

Ju

l-7

0

Ju

l-7

3

Ju

l-7

6

Ju

l-7

9

Ju

l-8

2

Ju

l-8

5

Ju

l-8

8

Ju

l-9

1

Ju

l-9

4

Ju

l-9

7

Ju

l-0

0

Ju

l-0

3

Ju

l-0

6

Ju

l-0

9


Leading Indicators point to growth rebound

Source: FactSet, Nomura

China: OECD Leading Indicator (6m % chg, annl)

China: industrial production (% YoY, 6m avg)


IMF Growth Projections

Source: IMF

Projections Difference from Jul 09

WEO projections

2008 2009 2010 2009 2010

World output 3.0 -1.1 3.3 0.3 0.6

Advanced economies 0.6 -3.4 1.3 0.4 0.7

United States 0.4 -2.7 1.5 -0.1 0.7

Euro area 0.7 -4.2 0.3 0.6 0.6

Japan -0.7 -5.4 1.7 0.6 0.0

United Kingdom 0.7 -4.4 0.9 -0.2 0.7

Newly industrialised Asian economies 1.5 -2.4 3.6 2.8 2.2

Emerging and developing economies 6.0 1.7 5.1 0.2 0.4

China 9.0 8.5 9.0 1.0 0.5

India 7.3 5.4 6.4 0.0 -0.1

Brazil 5.1 -0.7 3.5 0.6 1.0

Mexico 1.3 -7.3 3.3 0.0 0.3


Consensus expectation is a modest recovery

Source: Macroeconomic Advisers

1948-49

1 2 3 4 5 6 7 8 9

1960-61

1969-70

1957-58

2001

1973-75

1980

1953-54

1981-82

1990-91

2007-2009(MA forecast)

0

1

2

34

5

6

7

8

9

10

Strength of recovery versus severity of preceding recession

Negative growth in recession (versus trend)

Sha

rper

rec

over

y

Deeper recession

"% g

row

th in

re

cove

ry p

ha

se


Why global recovery can be sustained in 2010:

China is growing rapidly

Massive global inventory cycle underway

Significant global fiscal stimulus in the pipeline

Monetary policy takes 12-18 months to be fully effective

US/UK housing is stabilising

Banking system risks have abated

Corporate profitability is recovering (productivity gains)

The global defibrillator is working: ‘animal spirits’ alive once again


G7’s share of world GDP growth is shrinking

Source: Ashburton, IMF

Share of World Growth (volume) %

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1981-1990 1991-2000 2001-2008 2009-2014

EU US China


“Sweet spot” – no pressure yet on interest rates

0

2

4

6

8

10

12

Jan-86 Jan-91 Jan-96 Jan-01 Jan-06

Fed Funds rate

US Unemployment Rate

Source: Ashburton, Bloomberg


“Sweet spot” – no pressure yet on interest rates


US GDP: deviation from trend

-10%

-5%

0%

5%

10%

Ma

r-8

5

Ma

r-8

7

Ma

r-8

9

Ma

r-9

1

Ma

r-9

3

Ma

r-9

5

Ma

r-9

7

Ma

r-9

9

Ma

r-0

1

Ma

r-0

3

Ma

r-0

5

Ma

r-0

7

Ma

r-0

9

US GDP & trend

8.7

9.2

9.7


Why are bond yields so low?


0

1

2

3

4

5

6

7

Jan

-99

Jan

-01

Jan

-03

Jan

-05

Jan

-07

Jan

-09

%

UK 10yr yield UK 2yr yield


Valuations: no longer distressed

Source: Cazenove, iBoxx


Valuations: no longer distressed

Source: FactSet

World Equity Market PE (12mf EPS)

5

10

15

20

25

30

Oct

-91

Oct

-93

Oct

-95

Oct

-97

Oct

-99

Oct

-01

Oct

-03

Oct

-05

Oct

-07


Valuations: equities attractive compared to bonds, cash


-4

-2

0

2

4

6

8

10

Se

p-8

9

Se

p-9

2

Se

p-9

5

Se

p-9

8

Se

p-0

1

Se

p-0

4

Se

p-0

7

%

US Earnings Yield

US Real Bond Yield

US Real Fed Funds Rate


Strong rebound in profits likely

Barclays Capital US operating earnings model

Source: Barclays Capital, Haver Analytics


Strong rebound in profits likely Unit labour costs falling faster than prices

Source: Ashburton, FactSet, Barclays Capital

Shading indicates rising US profits as share of GDP


Risks to rosy 12-month view

Hedges Likelihood – Ashburton view

1. Significant China slowdown Govt bonds, US$ Low

2. Public finance crisis in G7 countryCash, Gold, Asian/Cmdty. govt bonds & FX

Low

3. Banking crisis relapse Cash, Gold, Govt bonds Low

4. US dollar crisis Commodities, Cmdty FX Low/Moderate

5. Weak G7 recovery Govt Bonds; Asian FX Moderate

3. Rapid growth → interest rate hikes Commodities, Equities, Cash Moderate/High

7. Geopolitical risk increases Govt bonds, Cash, Gold ?


Long-term consequences of the crisis

Source: IMF



Source: IMF



Source: IMF


Investment Strategy


Investment Strategy - Ashburton Asset Management Fund

Asset allocation Oct-09 Jun-09

Bonds (max = 70%) 43% 54%

Govt/Govt Guaranteed 26% 24%

Supranational - 13%

Inflation-linked bonds 11% 13%

Corporate 6% 4%

Equities (max = 50%) 33% 39%

US 13% 13%

Pan Europe 10% 11%

Asia 7% 15%

Alternatives 1% -

Cash/Tbills 23% 7%

100% 100%

Source: Ashburton as at 5 October 2009


Investment StrategyReplica Asset Management Fund– currency overlay

Currency Weightings (%) - Oct

£ € $

GBP 87 8 -

EUR - 67 -

USD - 3 82

JPY - - -

AUD - 6 2

NOK - 3 -

TWD 5 5 5

INR 5 5 5

Other Asia 3 3 6

Currency Weightings (%) - Jun

£ € $

GBP 89 5 5

EUR - 75 -

USD - 4 82

JPY - - -

AUD - 3 -

NOK 3 5 -

TWD 5 5 5

INR - - -

Other Asia 3 3 8


Ashburton Multi Asset Funds

Exposure to a diverse set of risks: equity, interest rate, FX, credit, regional

Exploit inefficiencies at the asset class level

Fundamental research Valuation Sentiment Technical analysis Inter-market analysis

Active asset allocation

Unconstrained

Absolute return mindset

Aim: Cash-plus returns over the cycle with low volatility

“Tortoise vs Hare”

} Are probabilistic outcomes mis-priced?

DISCLAIMER - UK

Ashburton (Jersey) Limited and Ashburton Fund Managers Limited are referred to in this context as ‘Ashburton’. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton is not permitted to communicate with potential investors, or to anyone who would otherwise be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this document, and should be satisfied in doing so that there is no breach of local legislation or regulation. The information is intended solely for use by Ashburton clients or prospective clients, and should not be reproduced or distributed except via original recipients acting as professional intermediaries. This document is not for distribution in the United States.

Prospective investors should inform themselves and if need be take appropriate advice regarding applicable legal, taxation and exchange control regulations in countries of their citizenship, residence or domicile which may be relevant to the acquisition, holding, transfer, redemption or disposal of any investments herein solicited.

Any opinions expressed herein are those at the date this material is issued. Data, models and other statistics are sourced from our own records, unless otherwise stated herein. Ashburton believes that the information contained is from reliable sources, but we do not guarantee the relevance, accuracy or completeness thereof.

We caution that the value of investments and the income derived, may fluctuate and it is possible that an investor may incur losses, including a loss of the principal invested. Past performance is not generally indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments.

Ashburton (Jersey) Limited (Company Registration No. 26087) and Ashburton Fund Managers Limited (Company Registration No. 48200) are regulated by the Jersey Financial Services Commission and have their registered offices at 17 Hilary Street, St Helier, Jersey JE4 8SJ.

RMB Asset Management International Limited (Company Registration No. 3733094) is the appointed UK service provider of Ashburton Global Funds; a Protected Cell Company recognised under Section 270 of The Financial Services and Markets Act 2000 and a subsidiary of Ashburton Fund Managers Limited. RMB Asset Management International Limited is authorised and regulated by the UK Financial Services Authority, a member of the FirstRand Group and has its registered office at Two London Bridge, London SE1 9RA. The United Kingdom Financial Services Compensation Scheme does not apply to investors in the fund. However, in certain circumstances, the Collective Investment Funds (Recognised Funds) (Compensation for Investors) (Jersey) Regulations 1988, as amended, may provide compensation for investors.

Documents

Eastern Promise: Can Asian growth be sustained? Speakers Tristan Hanson Jonathan Schiessl Craig Farley Investment Presentation Jersey - October 2009