EUROPEAN EQUITIES MARKET UPDATE Rob Burnett Head of European Equities FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR USE BY PR...
NEPTUNE EUROPEAN OPPORTUNITIES FUND An award-winning fund *Source: Neptune as at 30.09.11; yield on A income share class. ...
EUROPEAN EQUITY MARKETS UPDATE We expect some tactical opportunities during the fourth quarter <ul><li>The world changed t...
EUROPEAN SHOCK: PROPOSAL FOR GREEK DEFAULT A TERRIBLE SIGNAL FOR THE MARKET Italy and Spain now being forced into recessio...
US SHOCK: GOVERNMENT SPENDING CUTS OF 1.5tn OVER NEXT DECADE, 10% OF GDP Two large shocks in Europe and US; both negative ...
CHINA SHOCK: DEFAULTS IN PROPERTY SECTOR STARTING Three shocks to markets: Europe, US and now China Source: Neptune resear...
IN LIGHT OF THIS, WHAT IS THE PORTFOLIO POSITIONING? Source: Neptune as at 30.09.11 <ul><li>Relative overweights </li></ul...
WHY ARE WE UNDERWEIGHT BANKS? LEVERAGE BNP valuation implying a 1.7% hit to BNP total assets Source: Soc Gen/Blomberg Aug ...
WHY ARE WE OVERWEIGHT CONSUMER STAPLES? Consumer Staples can experience resilient sales in 2012 Source: Neptune/Consensus/...
Telecoms dividends may be a large part of total return Source :  Neptune/Consensus/Bloomberg estimates, Aug 2011.   Please...
WHAT WOULD MAKE US TACTICALLY BULLISH? Synchronised policy response would cause a large bounce <ul><li>Hopefully, we can g...
IS THERE A SOLUTION TO THE SOVEREIGN DEBT CRISIS? Eurobonds can take place with enough market pressure United States of Eu...
SUMMARY Buying opportunity post global policy response <ul><li>A shock to growth and confidence has taken place at a vulne...
<ul><li>55.22 62.54 </li></ul><ul><li>.19 36.24 </li></ul>Source: Lipper as at 30.09.11, IMA Europe ex UK Sector; A Accumu...
Moneywise Fund Awards 2009 & 2010  North America Sector Winner  Gold Standards Awards  2009 & 2010 Gold Standard Winner  T...
CONTACT DETAILS <ul><li>Neptune Investment Management Limited   </li></ul><ul><li>3 Shortlands, London, W6 8DA </li></ul><...
IMPORTANT INFORMATION This document is issued by Neptune Investment Management Limited (“Neptune”), 3 Shortlands, London, ...
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Citywire wealth management retreat neptune european equities presentation oct 2011 final

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Citywire wealth management retreat neptune european equities presentation oct 2011 final

  1. 1. EUROPEAN EQUITIES MARKET UPDATE Rob Burnett Head of European Equities FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR USE BY PRIVATE INVESTORS. CITYWIRE WEALTH MANAGEMENT RETREAT OCTOBER 2011
  2. 2. NEPTUNE EUROPEAN OPPORTUNITIES FUND An award-winning fund *Source: Neptune as at 30.09.11; yield on A income share class. This Fund may have a high historic volatility rating and past performance should not be a guide for future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. Copyright - © 2011 Morningstar, Inc. All Rights Reserved TM as of 31.08.11 in the Europe ex-UK Large Cap Equity Morningstar Category TM. The Neptune European Opportunities Fund won the Europe ex UK category at the Trustnet Awards 2009. This Fund may invest more than 35% in government and public securities in a number of jurisdictions. For further details please see the Full Prospectus. <ul><li>Fund Manager: Rob Burnett </li></ul><ul><li>Launch date: 29 November 2002 </li></ul><ul><li>Fund size: £976.6m* </li></ul><ul><li>Sector: IMA Europe ex UK </li></ul><ul><li>c.40-60 stock portfolio </li></ul><ul><li>Net yield of income share class of 1.06%* </li></ul>
  3. 3. EUROPEAN EQUITY MARKETS UPDATE We expect some tactical opportunities during the fourth quarter <ul><li>The world changed this summer </li></ul><ul><ul><li>Three policy shocks hit credit markets, impacting macroeconomics, causing lower growth </li></ul></ul><ul><li>In light of this, what is the current fund positioning? </li></ul><ul><li>When to get more bullish? </li></ul><ul><ul><li>We anticipate constructive policy from Europe, the US and China this quarter </li></ul></ul>
  4. 4. EUROPEAN SHOCK: PROPOSAL FOR GREEK DEFAULT A TERRIBLE SIGNAL FOR THE MARKET Italy and Spain now being forced into recession by their own bond markets Source: Bloomberg as at 06.09.2011 . Past performance is not a guide to future performance. Italian 10 yr yield <ul><li>Private sector losses in Greek bonds proposed and supported by EU leaders </li></ul><ul><ul><li>A worrying precedent for all European Sovereigns </li></ul></ul><ul><li>Italian real yield at Euro era record of 4.5%+ </li></ul><ul><li>Automatic stabilisers are not working </li></ul>
  5. 5. US SHOCK: GOVERNMENT SPENDING CUTS OF 1.5tn OVER NEXT DECADE, 10% OF GDP Two large shocks in Europe and US; both negative for growth Source: Neptune research, Strategas, Aug 2011. Please remember that forecasts are not a reliable indicator of future performance. The forecasts are Neptune’s personal views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. Net Federal fiscal stimulus ($bn) <ul><li>Current fiscal deficit is c.$1.3tn </li></ul><ul><li>If Obama passes his stimulus bill, no drag in 2012 but $500bn in 2013 </li></ul><ul><li>Long-term spending cuts of $1.2-1.5tn drags GDP down by 10% and creates uncertainty for capital investment </li></ul>
  6. 6. CHINA SHOCK: DEFAULTS IN PROPERTY SECTOR STARTING Three shocks to markets: Europe, US and now China Source: Neptune research, Strategas, Aug 2011. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities China’s tightening now being felt <ul><li>Given tightening credit conditions, weakest players in property now failing </li></ul><ul><li>Political leadership happy to deflate property bubble </li></ul><ul><li>Causing multiple compression and some earnings falls for China plays in Europe, e.g. BMW and Louis Vuitton </li></ul>
  7. 7. IN LIGHT OF THIS, WHAT IS THE PORTFOLIO POSITIONING? Source: Neptune as at 30.09.11 <ul><li>Relative overweights </li></ul><ul><ul><li>Consumer Staples: +14% </li></ul></ul><ul><ul><li>Telecoms: +11% </li></ul></ul><ul><ul><li>Healthcare: +2% </li></ul></ul><ul><li>Relative underweights </li></ul><ul><ul><li>Financials: -19% </li></ul></ul><ul><ul><li>Industrials: -11% </li></ul></ul><ul><ul><li>Consumer Discretionary: -7% </li></ul></ul>Market cap split (%) > €5bn 78.9% € 1bn – €5bn 1.6% <€1bn 0.7% Cash 18.8%
  8. 8. WHY ARE WE UNDERWEIGHT BANKS? LEVERAGE BNP valuation implying a 1.7% hit to BNP total assets Source: Soc Gen/Blomberg Aug 2011. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities <ul><li>BNP balance sheet €2tn, 33x gearing to equity </li></ul><ul><li>Market understands Sovereign exposure and funding problems </li></ul><ul><li>All banks face concerns on CDS hedging, given counterparty risk </li></ul>BNP Paribas
  9. 9. WHY ARE WE OVERWEIGHT CONSUMER STAPLES? Consumer Staples can experience resilient sales in 2012 Source: Neptune/Consensus/Bloomberg estimates, Aug 2011. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities. Consumer Staples holdings’ sales evolution (2007-10) <ul><li>Staples were resilient in 2009 due to defensive nature and brand strength </li></ul><ul><li>Same again due in 2012 </li></ul>Average 2010 sales split of Danone, Nestle, Reckitt, Pernod & Unilever
  10. 10. Telecoms dividends may be a large part of total return Source : Neptune/Consensus/Bloomberg estimates, Aug 2011. Please remember that forecasts are not a reliable indicator of future performance. The forecasts are Neptune’s personal views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. Past performance is not a guide to future performance. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities WHY ARE WE OVERWEIGHT TELECOMS? <ul><li>Telecoms sales growth in 2012: -2% to +2%, earnings growth: -10% to +10% </li></ul><ul><li>Dividend yield critical for investment case; yield range 5% to 8.5% </li></ul><ul><li>Data story can lift earnings: 3G to 4G means data download speed will be 4-7x faster </li></ul>Telecom sales 2007-2011e Telecom dividends 2007-2011e
  11. 11. WHAT WOULD MAKE US TACTICALLY BULLISH? Synchronised policy response would cause a large bounce <ul><li>Hopefully, we can get policy support from three fronts </li></ul><ul><ul><li>Europe: Eurobonds and bank recapitalisations </li></ul></ul><ul><ul><li>US: QE3 </li></ul></ul><ul><ul><li>China: loosening monetary policy will make credit conditions easier </li></ul></ul>Source: Google Images, Aug 2011
  12. 12. IS THERE A SOLUTION TO THE SOVEREIGN DEBT CRISIS? Eurobonds can take place with enough market pressure United States of Europe? <ul><li>Some form of fiscal union can work because European debt is c.85% of GDP and current account deficit is c.4% </li></ul><ul><li>German parliament now more pro-Europe post elections </li></ul><ul><li>Germany can support Eurobonds with the right concessions from Italy and Spain and enough market pressure </li></ul>Source: Neptune Research and Google Images, Aug 2011.
  13. 13. SUMMARY Buying opportunity post global policy response <ul><li>A shock to growth and confidence has taken place at a vulnerable time </li></ul><ul><li>Neptune European Opportunities Fund cautiously positioned since July in Consumer Staples and Telecoms </li></ul><ul><li>However, policy can become more favourable in the fourth quarter to trigger a rally </li></ul>
  14. 14. <ul><li>55.22 62.54 </li></ul><ul><li>.19 36.24 </li></ul>Source: Lipper as at 30.09.11, IMA Europe ex UK Sector; A Accumulation share class cumulative performance, in sterling with net income reinvested and no initial charges. The performance of other share classes may differ. This Fund may have a high historic volatility rating and past performance should not be a guide for future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only. Strong long-term performance CUMULATIVE FUND PERFORMANCE Period Neptune European Opportunities Fund IMA Sector Average MSCI Europe ex UK To 30.09.11 % return ranking % return % return YTD -11.95 5 / 104 -18.07 -16.95 1 year -8.29 21 / 104 -11.41 -13.23 3 years 10.84 23 / 92 5.27 2.41 5 years 17.58 7 / 78 -1.61 -1.57 Since launch (29.11.02) 213.00 1 / 64 82.22 86.35 Under Rob Burnett (06.05.05) 93.05 3 / 74 35.66 36.26
  15. 15. Moneywise Fund Awards 2009 & 2010 North America Sector Winner Gold Standards Awards 2009 & 2010 Gold Standard Winner Trustnet Awards 2010 Neptune US Opportunities Fund wins North America award Neptune European Opportunities Fund wins Europe ex UK award NEPTUNE’S INDUSTRY RECOGNITION Best European Equity Fund Best US Equities Fund Active North American Equity Manager Award High Alpha Equity Manager Award UK Equity Small Winner - 3 Years Equity North America Winner - 5 Years
  16. 16. CONTACT DETAILS <ul><li>Neptune Investment Management Limited </li></ul><ul><li>3 Shortlands, London, W6 8DA </li></ul><ul><li>Tel: 020 3249 0100 </li></ul><ul><li>Fax: 020 3249 0123 </li></ul><ul><li>[email_address] </li></ul><ul><li>www.neptunefunds.com </li></ul><ul><li>Patrick Berton, Sales Director 020 3249 0104 </li></ul><ul><li>Adam Hughes, Head of Intermediary Sales 020 3249 0158 </li></ul><ul><li>Tom de Lisle, Intermediary Sales Manager 020 3249 0176 </li></ul><ul><li>Emma Knight, Sales Support Manager 020 3249 0177 </li></ul><ul><li>Jake Perkins, Sales Support, Retail 020 3249 0160 </li></ul><ul><li>Calls may be recorded for monitoring and training purposes and for your protection </li></ul>
  17. 17. IMPORTANT INFORMATION This document is issued by Neptune Investment Management Limited (“Neptune”), 3 Shortlands, London, W6 8DA which is authorised and regulated by the Financial Services Authority, FSA number 416015. Details of Neptune's regulatory status and authorisation by regulators in other countries are available from us on request. The Neptune web address is www.neptunefunds.com Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are the analyst’s personal views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of Neptune's views. This is not a solicitation or an offer to buy or sell. Neptune Investment Management Limited has produced this report for private circulation to Investment Professionals only. The material is not intended for the use of Private Investors. All information is given in good faith but without any warranty. Neptune Funds are available to any persons that may be marketed to under the Financial Services and Markets Act (Promotion of Collective Investment Schemes) (Exemptions) Order 2001. Private Investors should consult their Independent Financial Adviser or other authorised intermediary. This communication is only intended for persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations. The provision of investment services may be restricted in certain jurisdictions. You are required to acquaint yourself with any local laws and restrictions on the availability of any services described. Please check whether such products are available in the country in which your clients are resident. None of the Neptune products are available to residents in the United States. Some Neptune funds may have a high historic volatility rating and past performance should not be a guide for future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. These funds may invest more than 35% in government and public securities in a number of jurisdictions. Forecasts and past performance are not an indicator of future performance. The current Prospectus, Simplified Prospectus and most recent annual and semi-annual reports can be obtained by calling 0800 587 5051 or downloaded from www.neptunefunds.com. Any past performance data that has not been shown is due to the information not being available. Neptune is not authorised to give investment advice and only provides information on Neptune products.
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