J.p.morgan asset management


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J.p.morgan asset management

  1. 1. For professional investors only – not for use by or onward distribution to retail investors
  2. 2. Why the “Lost Decade”?: debt UK Russia Canada Germany France Switz. United States Spain Italy Japan China IndiaOverall Debt% of GDP, latest Brazil Over 400 300 – 399 200 – 299 0 – 199Source: J.P. Morgan Asset Management, McKinsey. For illustrative purposes only 1
  3. 3. Dealing with debt: growthLeading indicators are flat 1.5 1.0 0.5 0.0-0.5-1.0-1.5-2.0-2.5-3.0-3.5 2003 2005 2007 2009 2011 USD GBP EM - GDP weightsSource: J.P. Morgan Asset Management, Bloomberg 2
  4. 4. Dealing with debt: EuropeSource: J.P. Morgan Asset Management. For illustrative purposes only 3
  5. 5. Why always me? UK vs Europe Inflation More Austerity Solvency Missed Low Deficits Growth Devaluation Liquidity High DebtSource: J.P. Morgan Asset Management. 4
  6. 6. We’ve been here before...Government bonds: return free risk%54321 Months0 1 21 41 61 81 101 121 141 161 181 201 Japan 10yr Yields: starting Jan 1995 US, UK, Germany 10yr yields equally weighted: starting June 2008Source: J.P. Morgan Asset Management, Bloomberg. For illustrative purposes only 5
  7. 7. % Adventure Level % Adventure Level What to own10 4 Very High Moderate Very Low High 1 Extreme Peripheral Europe 2 Very High EMFX 3 High High Yield 8 3 4 Moderate EMD 5 Slight IG Corporates 6 Low Mortgages 6 2 7 Very Low UST/Gilt 4 1 Dec Mar Jun Sep High Yield OAS (LHS) UST 10yr Yield (RHS) 6Source: J.P. Morgan Asset Management
  8. 8. Where do you raid?Comparing yields 1 year ago and now 31st May 2011 31st May 2012%10 8 7.79% 6.91% 6 3.73% 4 3.37% 2.96% 2 1.64% 0Dec 2010 Mar 2011 Jun 2011 Sep 2011 Dec 2011 Mar 2012 BofA ML UK Gilts BofA ML Global Corprates BofA ML US High YieldSource: Bank of America Merrill Lynch, Bloomberg. Past performance is not an indication of future performance. 7
  9. 9. Hunting for incomeHigh yield: Risk vs. reward% %25 1220 10 815 610 4 5 2 0 0 2001 2003 2005 2007 2009 2011 US Govt Yield US High Yield Spread Default rate (rhs)Source: J.P. Morgan Asset Management. 8
  10. 10. Don’t ignore investment grade creditSpreads have room to narrowbps375325275225175125 75 25 Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 US OAS GBP OAS JPY OASSource: Barclays Capital. Data as of May 2012. Past performance is not an indication of future performance. 9
  11. 11. Who has the capacity to repay debt? -12 -10 United States 2011 Fiscal Deficit (% of GDP) United Kingdom -8 India Greece -6 Spain France Poland Venezuela -4 South Africa Italy Mexico Indonesia Argentina Brazil -2 China Germany Russia - 2 Korea Hungary 4 - 20 40 60 80 100 120 140 160 180 Public Debt 2011 (% of GDP) Developed Markets Developing MarketsSource: IMF Outlook as at September 2011 10
  12. 12. JPM Strategic Bond Fund (OEIC) yield 3.48% Key features Risk and return targets*  ‘Best ideas’ actively managed global  Return: 3% above cash bond fund  Duration: 0-9 years  Diversified opportunity set across global fixed income and currency markets.  Quality: Maximum 50% below  Dynamic sector management, aiming to Investment Grade only take risk when compelling investment opportunities are identified  Currency: Mainly hedged to base currency (80%)There can be no assurance that the Fund will achieve its investment objective, the Target Return or any other objectives. The target return shown above is neither guaranteed by nor binding onthe Manager. Please refer to the Fund Prospectus. * Risk and return targets shown gross of all expenses and investment management fees, they are the objective of the fund manager. Pleaseread the Prospectus for more information about the investment objective and investment policy of the fund. 11
  13. 13. JPM Strategic Bond Fund (OEIC):investment performance yield 3.48%As at 31 May 2012 Performance JPM Strategic GBP Broad 3 Month Bond Fund Market Index GBP LIBOR 134.0 Since Inception* 28.18% 35.97% 2.63% 129.0 124.0 119.0 114.0 JPM Strategic Bond Fund (JPM A - Net Acc) 109.0 GBP Broad Market Index 104.0 3 Month GBP LIBOR 99.0 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12Past performance is not a guide to the future. Source: Bloomberg. Fund return shown net of all applicable expenses, fees and taxes for ‘JPM A – Net Acc’ class. Please refer to the fund’sprospectus for a description of the other available classes of shares, the performance of which will differ from that shown above. Fund and benchmark rebased to 100 as of fund inception.*Inception date: 6th May 2009. GBP Broad Market Index shown is the Merrill Lynch Sterling Broad Market Index (UK00). 12
  14. 14. Benefiting from a global strategic allocationSource: J.P. Morgan Asset Management; Data as of May 2012 Note: Duration exposure is achieved through exchange traded bond futures. 13
  15. 15. The next instalment: Avoiding the Temple of Doom Debt overhang Interest rates to remain low Japan is the roadmap Fixed Income returns surprise Anaemic recovery Hunting for yield Regulatory pressure Credit analysis critical Global opportunities High Yield, Corporates, EMD Globally Integrated. Research Driven 14
  16. 16. JPM Strategic Bond FundObjectiveTo maximise returns by investing primarily in a global portfolio of fixed and floating rate debt securities. The Fund may invest in developed and emerging market countries and holdinvestment grade, non-investment grade and unrated bonds. The Fund may have a concentrated portfolio and may have a significant exposure to any one country, sector orissuer, which may include emerging markets and non-investment grade or unrated bonds, at any time. Allocations between countries, sectors and ratings of bonds may varysignificantly at any time. The Fund may use derivatives for investment purposes or Efficient Portfolio Management including hedging, where appropriate. The Fund is alsopermitted to invest up to 100% in government and public securities.Risk Profile Bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds, the certainty of receiving a regular fixed amount of incomefor a defined period of time with the prospect of a future known return of capital is lost. Bond prices can fluctuate significantly depending not only on the global economic and interest rate conditions but also on the general credit market environment and thecreditworthiness of the issuer.The credit quality of high yield bonds is below investment grade and they usually offer higher yields to compensate for the reduced creditworthiness and the increased risk ofdefault relative to investment grade bonds.Bonds with a lower credit rating may have a higher risk of defaulting which may in turn have an adverse effect on the performance of Funds which invest in them.The investment policy of the Fund permits the use of derivatives and/or forward transactions for investment purposes. As a result the Fund may sometimes be leveraged,potentially increasing the volatility and therefore risk of the Fund.The Fund may have a significant exposure to asset and mortgage backed securities (ABS and MBS). Owing to the nature of some ABS and MBS, the exact timing and size ofcashflows paid by the securities may not be fully assured.Bond funds will normally distribute a combination of coupon and the expected discount/premium on the securities. Therefore, a Fund’s distribution will comprise income receivedand an element of projected capital gains or losses. This could result in an element of capital gain being taxed as income in the hands of an investor. 15
  17. 17. Important informationFor Professional Investor use only – not for retail use or distribution.This material is not an offer or solicitation for the purchase or sale of any financial instrument in any jurisdiction, nor is it a commitment by J. P. Morgan Asset Management or anyof its subsidiaries to enter into any transaction referenced herein. All information provided by J. P. Morgan Asset Management herein is indicative, is based on certain assumptionsand current market conditions and is subject to change without notice. Accordingly, no reliance should be placed on the information herein. In deciding whether to enter into anytransaction or strategy referenced herein, the recipient should rely solely on the final documentation which will contain the definitive terms and conditions relating to any referencedtransaction or strategy.These materials have been provided for illustrative purposes only and should not be relied upon by you in evaluating the merits of investing in any securities or strategiesmentioned herein. Past performance is not a guide to the future.Any forecasts, opinions and statements of financial market trends expressed are J. P. Morgan Asset Management’s own at the date of this document and may be subject tochange without notice. Any research in this document has been obtained and may have been acted upon by J. P. Morgan Asset Management for its own purpose. The results ofsuch research are being made available as additional information only and do not constitute investment advice. They do not reflect the views of JPMorgan Chase Group. The valueof investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested.Both past performance and yield may not be a reliable guide to future performance. Changes in exchange rates may have an adverse effect on the value, price or income of theproduct or underlying overseas investments.J. P. Morgan Asset Management makes no representation or warranty regarding the accuracy or completeness of the information herein. J.P. Morgan Asset Management is not anadvisor to any person who receives information on any referenced transaction.Investment is subject to documentation (Prospectus, Simplified Prospectus and Terms and Conditions), copies of which can be obtained free of charge from JPMorgan AssetManagement Marketing Limited.Issued in the UK by JPMorgan Asset Management Marketing Limited which is authorised and regulated by the Financial Services Authority. Registered in England No. 288553.Registered address: 125 London Wall, London EC2Y 5AJ. 16