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The Return of Global Financials: Why now could be the time to revisit an unloved sector
Jupiter Financial Opportunities Fund Citywire North Retreat, Rudding Park FOR PROFESSIONAL INVESTORS ONLY, NOT FOR RETAIL INVESTORS
Presented by: Guy de Blonay – Global Financials Team, Fund Management Director Andrew Hanson – UK Wealth Management, Business Development Manager David Brown – UK Advisory, Regional Sales Manager
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Investing in global financials in 2013 & beyond
A diverse sector Attractive valuations relative to other sectors
Developments in the global economy benefit some financials Our approach
Jupiter: your performance partner
Jupiter can demonstrate longevity and a proven record in the global financials sector
30% 70%
Global Assets
Fund of Funds
Jupiter Asset Management 2
Your performance partner
Source: Jupiter as at 30.06.13.
One of Europe’s most successful and respected fund management houses
£29bn AuM diversified across geographies and asset classes
Global investment strategies represent a significant portion of Group AuM
Committed to active management & alpha generation
Fund managers are personally accountability for performance
Leads to high conviction ideas
Avoids biases of committees
Robust investment risks monitoring Total = £29bn
AuM by front office franchise Our business
Guy de Blonay; calendar year track record
Calendar year performance
-5.3
35.2
25.5
49.0
24.3
9.4
-40.8
45.0
-7.7
39.6
19.6
34.0
15.7
1.8 7.3
23.3
-2.2
-24.5
18.1 20.4
-30.3
15.2
2.7
22.8
5.1
-6.9
-38.1
12.2 9.8
-18.4
23.8 20.3
-50
-40
-30
-20
-10
0
10
20
30
40
50
2002 2003 2004 2005 2006 2007 2008 2009** 2010 2011 2012 YTD
% G
row
th
Henderson New Star Global Fins Fund (GBP) Jupiter Financial Opps Fund (GBP) MSCI AC World Financials (GBP)*
3
Source: FE, bid to bid, net income reinvested 31.12.01 to 31.07.13. *FTSE Global Financials Index performance shown up to 31.12.09, as it was the benchmark for Henderson New Star Global Financials. The FTSE Global Financials Index was discontinued and we have used MSCI AC World Financials for figures from 2010 onwards. **2009 performance to 20.10.09. Past performance should not be seen as a guide to future performance. Guy de Blonay managed Henderson Global Financials fund from 28.12.01 to 20.10.09. He became lead manager of Jupiter Financial Opportunities on 01.01.11.
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Jupiter Financial Opportunities Fund
-200%
0%
200%
400%
600%
800%
1,000%
Jun-97 Sep-99 Jan-02 May-04 Aug-06 Dec-08 Apr-11 Jul-13
Jupiter - Financial Opportunities Inc TR in GB 865.51 MSCI ACWI/FINANCIALS Gross TR in GB 111.72
Track record since launch to 31.07.13
Source: FE, bid to bid, net income reinvested 02.06.97 to 31.07.31. Past performance should not be seen as a guide to future performance. From 01.06.10 Guy de Blonay became co-manager of the fund (and the lead manager from 01.01.11). *From 01.06.10 to 31.12.10.
2010* 2011 2012 YTD
Jupiter Financial Opportunities 2.30 -24.53 18.09 20.43
MSCI ACWI/Financials 9.86 -18.36 23.76 20.34
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Investing in global financials in 2013 & beyond
A diverse sector Attractive valuations relative to other sectors
Developments in the global economy benefit some financials Our approach
Jupiter: your performance partner
Jupiter can demonstrate longevity and a proven record in the global financials sector
Regional banks
Investment banks
Thrifts and mortgage banks
Broker dealers
Asset managers
Life insurance
Non-life insurance (including reinsurance)
Speciality finance (credit cards, leasing, financial guarantors, banking software)
Exchanges
Property
Transaction management systems
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Important and diverse sector
Source: DataStream, 16.07.13.
Low correlation between sub-sectors 7
Source: Bloomberg, USD, 31.12.06 to 31.12.07.
Example (31.12.06 – 31.12.07)
Trend Long Avoid
2002 De-leveraging Re-pricing of risk Volatility
Money brokers Lloyds of London European property
US market sensitive stocks Asset managers Investment banks
2003 Market consolidation Low interest rates High liquidity
Investment banks Asset managers Irish and UK property
Insurance Online brokers Insurance brokers
2004 Stronger equity markets Surge property valuation outside G7 Low interest rates
Investment banks Private banking Eastern European property
US insurance US asset managers UK domestic banks
2005 Market sentiment positive M&A activity increasing Low inflation
Asset managers Emerging markets Japanese brokers
UK domestic banks Insurance brokers Large cap US regional banks
2006 Market sentiment positive M&A activity Liquidity
Investment banks Asset managers Emerging markets
Canadian regional banks US regional banks Insurance brokerage
2007 Global growth Re-pricing of risk Low inflation
Diversified financials Asset managers Emerging markets
US regional banks Spanish domestic UK banks
2008 De-leveraging Re-pricing of risk Volatility
Reinsurance Lloyds of London Swiss regional banks
Investment banks Spanish domestic UK banks
2009 De-leveraging Dilution risk Asset quality
Reinsurance Lloyds of London Swiss regional banks
US regional banks Spanish domestic Japanese banks
2010 Low interest rates Liquidity Re-leveraging
Asia Global banks Norway
Portugal Spanish domestic Greece
2011 Low interest rates Re-leveraging M&A Activity
Credit cards Private equity Asset managers
India banks Greek banks Spanish domestic
2012 Low interest rates LTRO/OMT/QE Credit growth
Credit cards Asset managers Emerging markets
Spanish domestic Irish banks Brazil
2013 LTRO/OMT/QE US housing Restructuring
Asset Managers Global Payments Global banks
Chinese banks Brazil Spanish domestic
Asset Allocation –Playing sub-sector themes 8
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Investing in global financials in 2013 & beyond
A diverse sector Attractive valuations relative to other sectors
Developments in the global economy benefit some financials Our approach
Jupiter: your performance partner
Jupiter can demonstrate longevity and a proven record in the global financials sector
Book basis still looking low
Price / Book ratio
Source: Bloomberg, in GBP, 31.12.96 to 31.07.13.
MSCI World Financials
10
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
From One Extreme to Another 11
Source: Datastream, Societe Generale Cross Asset Research 27 November 2012. Nasdaq composite index relative to US banks Datastream index. 100 = 01/01/1980.
A very high “hate” level against the banking sector
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Investing in global financials in 2013 & beyond
A diverse sector Attractive valuations relative to other sectors
Developments in the global economy benefit some financials Our approach
Jupiter: your performance partner
Jupiter can demonstrate longevity and a proven record in the global financials sector
Flows Into High Yield Bonds 13
Source: ICI, Haver Analytics. “Govt” excludes MBS, 2012.
…for all the plants we want to grow. Net US manual fund inflows, annual $bn
More money moving into equity products would be supportive of stock prices
Insurance dividend yields increasingly attractive
Insurance dividend forecast to grow faster
Insurance Dividends Forecast to Grow 14
Source: Bloomberg, Barclays Research estimates, 2013. The views expressed are those of the Fund manager at the time of writing and may change in the future.
7.4%
6.2% 5.2%
4.4%
7.4% 6.5%
5.0% 4.7%
7.4% 6.3%
5.2% 5.5%
4%5%6%7%8%
Telecoms Utilities Oil & Gas Insurance
2012 2013 2014
5.8% 4.7% 0.2%
-4.9%
16.6%
-3.9% -0.2%
5.2%
-10%
0%
10%
20%
Insurance Utilities Telecoms Oil & Gas
2013 2014
Telecos and Utilities div outlooks fairly unappealing
Insurance yields moving towards traditional yield sectors
Earnings growth is a key driver
A specific opportunity within this important sub sector
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Investing in global financials in 2013 & beyond
A diverse sector Attractive valuations relative to other sectors
Developments in the global economy benefit some financials Our approach
Jupiter: your performance partner
Jupiter can demonstrate longevity and a proven record in the global financials sector
Our approach in brief
Strategy
Fundamentally-based long term capital growth principally through investment in the financials sector on an international basis; guided by a combination of top-down / bottom-up stock analysis
Fund manager’s investment approach
Identify sub-sector fundamental themes and exploit them through investments in companies with prices that do not reflect longer-term trends
Be opportunistic and effective with capital by dynamically allocating it across multiple sub-sectors, capitalisations, growth / value categories and geographies
Goal
Generate meaningful returns in any market conditions
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All of our ideas start with a view that a significant country, industry or company change, not yet being fully recognised by the market, is imminent or in progress
Our current position
Regional allocation
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Instrument % of fund
AXA 2.81
JPMorgan Chase 2.79
LSE Group 2.77
Prudential 2.72
Morgan Stanley 2.54
Citigroup 2.46
Invesco 2.31
Discover Financial Services 2.31
Schroders 2.07
KKR & Co 2.02
Total 24.80
Top 10 holdings
Source: Jupiter as at 31.07.13.
Jupiter Financial Opportunities Fund
North America 48.96
Europe 20.35
United Kingdom 19.51
Japan 6.32
Far East Ex Japan 2.70
Eastern Europe 1.34
Sector breakdown
Financial Services 42.93
Banks 28.65
Life Insurance 14.61
Non-Life Insurance 8.20
Equity Investment Instruments 3.11
Real Estate Investments & Services 1.21
Real Estate Investment Trusts 0.48
Cash 0.81
Stock examples
Source: Bloomberg, July 2013. The views expressed are those of the Fund manager at the time of writing and may change in the future.
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GAM Holding
Strong investment performance
Cost discipline
Capital rich
Geared to rising stock market
Citigroup
Not just a recovery story
Change in management
Return to the dividend register
Valuation a compelling feature
Stock examples
Source: Bloomberg, July 2013. The views expressed are those of the Fund manager at the time of writing and may change in the future.
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Visa
Cash to cashless economy
Growing middle class
High barrier to entry
EPS growth >20%
Banque Cantonale Vaudoise
Excellent Management
Cash rich
Distribution policy continued
Investing in global equities in 2013 & beyond 20
Jupiter: proven expertise in global equity investing
Financials: a relevant & diverse sector within global equities
Valuation opportunities exist within the global financials
Economic recovery is supportive of strong financial names
Your Performance Partner
Disclosure
Jupiter Unit Trust Managers Limited (‘JUTM’) and Jupiter Asset Management Limited (‘JAM’) are both registered in England and Wales (nos. 2009040 and 2036243). The registered office of both is 1 Grosvenor Place, London SW1X 7JJ. JUTM and JAM are authorised and regulated by the Financial Conduct Authority in the UK whose address is 25 The North Colonnade, Canary Wharf, London E14 5HS. This presentation is intended for investment professionals and not for the benefit of private retail investors. Anyone attending the presentation or who has the opportunity to view the accompanying slides should bear in mind that the value of an investment in a unit trust and the income from it can go down as well as up. It may be affected by exchange rate variations and you may not get back the amount invested. Initial charges are likely to have a greater proportionate effect on returns if investments are liquidated in the shorter term. Quoted yields are not guaranteed. Past performance should not be seen as a guide to future performance. Jupiter Financial Opportunities: This Fund can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The Key Investor Information Document (KIID), Supplementary Information Document (SID) and Scheme Particulars are available from Jupiter on request. This document contains information based on the MSCI World Financials and MSCI All Countries World Financials Indices. Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties 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 originality, 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. For your security we may record or randomly monitor all telephone calls. If you are unsure of the suitability of an investment please contact your financial advisor. Any data or views given should not be construed as investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.
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2498_UT_FIN OPPS_GDB
Appendix
Lead Fund Manager: Guy de Blonay Fund Management Director Jupiter, Financial Equities team
Portfolio Manager with 18 years’ investment experience* Currently: Lead Manager of Jupiter Financial Opportunities Fund(1)
Lead Manager of CC&L Financial Opportunities Fund(2)
Deputy Manager of Jupiter International Financials Fund Deputy Manager of Jupiter Global Financials SICAV
Former Manager of: Henderson New Star Global Financials Fund OEIC(3) CC&L Global Financials Fund(4) Henderson Financial Opportunities Investment Trust(5)
New Star Financials Hedge Fund(6)
Formerly at: Henderson Global Investors Ltd (Apr 2009 – Oct 2009) New Star Asset Management Ltd (Sept 2001 – Apr 2009) Jupiter Asset Management Ltd (Sept 1995 – Apr 2001)
1. Since January 2011. 2. Since October 2011. 3. Since launch 31.12.01 – 20.10.09.
Robert Mumby Fund Management Director Jupiter, Financial Equities team
Filtering and portfolio construction – The Team 23
4. Since launch 020.5.06 – 20.10.09. 5. From 07.04.09 – 20.10.09. 6. Since launch 02.04.02 – 31.12.08.
“Those ideas are generated by a team but decisions are best left to the individual”
*Years of experience as at 31.07.13.
Currently: Manager of Jupiter International Financials Fund Manager Jupiter Global Financials (SICAV) Deputy Manager of Jupiter Financial Opportunities Fund
Formerly at: Cannacord Capital (2005) HSBC (2001 – 2005) ABN (1999 – 2001) BZW/CSFB (1994 - 1999) Industrial Bank of Japan (1989 – 1994) KPMG Peat Marwick (1979 – 1989)
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Filtering and portfolio construction (1)
“All of our ideas start with a view that a significant industry or company change, not yet being fully recognised by the market, is imminent or in progress.”
Filtering and portfolio construction (2)
Macro trends identification and theme generation / stock idea Broad industry “idea sources”
Company research – in-house and external
Company meetings and discussions
Industry networking
Bottom-up approach to stock selection Quality management
Returns on equity
Competitive positions
Valuations
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Macro trends and themes considered for sub sector selection combined with bottom up stock selection approach:
Filtering and portfolio construction (3)
Positions are managed based upon the risk / reward profile derived from valuation and conviction around catalysts
Holding periods can be two months to two years depending on circumstances Positions are constantly re-evaluated based upon events and additional information
Discrete levels are defined and consistently updated by the team each week Target: based upon base case and high case valuations
Optimal entry price: used in initial building of position and defined as threshold where risk / reward analysis holds
Conviction level: based upon potential downside scenario; conviction increased on confirmation of integrity of valuation thesis and risk / reward
Ultimate stop-loss; for risk management; based upon loss level of around 15%*
Active management used for maximum efficiency Based upon top-down / bottom-up approach
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Typical stock holding 3-7% of NAV (max 10%)
*Stop losses are not guaranteed: further losses may be incurred.
Guy de Blonay; Awards and ratings
Lipper Fund Awards 2009 – Netherlands Global Financials – Best Fund over 5 years – Equity Sector Banks and other Financials Global Financials – Best Fund over 3 years – Equity Sector Banks and other Financials
Lipper Fund Awards 2008 – UK Global Financials Fund – Best Fund over 5 years – Equity Sector Banks and Other Financials Global Financials Fund – Best Fund over 3 years – Equity Sector Banks and Other Financials
City Top 100 – 2007 Guy de Blonay: Winner – Specialist – Fund Manager of the Year
Portfolio Adviser Fund Awards 2007 Specialist Equities category: Global Financials Fund – Winner
Lipper Fund Awards 2007 Fund Global Financials Fund – Best Fund over 3 years – Equity Sector Banks and Other Financials Global Financials Fund – Best Fund over 5 years – Equity Sector Banks and Other Financials
Lipper Fund Awards 2006 – UK Global Financials Fund – Best Fund over 3 years – Equity Sector Banks and Other Financials
Standard & Poor’s UK Fund Awards 2006 Global Financials has been awarded 1st Place in the UK Marketed Class sector Finance sector over
1 year out of 20 funds
Standard & Poor’s Fund Awards UK 2005 in Association with Investors Chronicle Global Financials: 1st place over 1 year in UK Marketed Class Sector – Finance Global out of 16 funds
Past performance is not necessarily a guide to future performance. Awarded when at New Star Asset Management.
27
Jupiter Financials Opportunities Fund
Guy de Blonay
UK Wealth Management- Contact details 28
Andrew Hanson Business Development Manager Wealth Management, UK Wholesale
0207 314 4827
07973131781
Louise Fish Senior Manager, Broker Sales Wealth Management, UK Wholesale
0207 314 4827
N/A
UK Advisory Sales- Contact details 29
David Brown Regional Sales Manager Advisory Sales, UK Wholesale
0207 314 4892
07917 095 905
Ben Sackitey Broker Sales Executive Advisory Sales, UK Wholesale
0207 314 4892
N/A
