Jupiter japan select amsterdam citywire

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Jupiter japan select amsterdam citywire

  1. 1. April 2012 Japan – 12 months on Simon Somerville Citywire Amsterdam Event – 19th April 2012 For professionals only
  2. 2. OFUNATO, March 14, 2011Iwate prefecture January 15, 2012 TOSHIFUMI KITAMURA/ AFP/Getty Images
  3. 3. KESENNUMA, March 16, 2011Miyagi prefecture January 14, 2012 PHILIPPE LOPEZ/ AFP/Getty Images
  4. 4. 3 The Long Road to Recovery  Industrial production index (2005=100)  Industrial production index (yoy, %) 100 Earthquake 40 Earthquake (Mar. 11, 2011) (Mar. 11, 2011) 98 30 96 94 20 92 90 10 88 Thai floods 0 86 84 -10 82 Thai floods -20 80 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 2010 2010 2011 2011Source: Bank of America Merrill Lynch as at 31.12.11
  5. 5. 4 Jupiter Japan Team Funds AUM Fund Manager: Simon Somerville Jupiter Japan Income Fund Unit Trust £498m Jupiter Japan Select SICAV £50m Jupiter Global Managed Unit Trust £268m Total £816m Current Role Joint Head, Far Eastern Equities Team Current Manager, Jupiter Japan Income Fund (Unit Trust) and Responsibilities Jupiter Japan Select SICAV and Jupiter Global Managed Fund Fund Manager: Dan Carter CFA Current Role Fund Manager, Far Eastern Equities Team Current Manager, Japanese portion of the Jupiter Global Managed Responsibilities Fund (Unit Trust), Deputy Manager of Jupiter Japan Income Fund (Unit Trust) and Jupiter Japan Select (SICAV)Focused, UK-based team gives perspective, flexibility and performanceSource Jupiter, S&P, OBSR as at 28.02.12.
  6. 6. 5 Jupiter’s Asian Equities Team Japan Simon Somerville Daniel Carter Since launch India Jupiter Japan Income 22.4% Avinash Vazirani Sector rank 4 / 42 Amelie Thevenet Asia JGF Japan Select 17.7% Sector rank 32 / 100 Philip Ehrmann Ben Surtees Since launch Dealers Jupiter India 31.4% David Flanagan Jupiter India Select -2.6% Since launch Carl Westover Sector rank 8 / 29 Jupiter China 59.2% Jeremy Griggs Sector rank 11 / 15 Jupiter Asia Pacific 121.7% Sector rank 17 / 69 Front Office Admin 3 dedicated support staffStrength and resource in AsiaSource: FE, to 31.03.12. Jupiter India Fund launched 31.03.08 (figures in £), Jupiter Global Fund SICAV India Select launched 02.05.08 (figures in $), Jupiter China(Acc) Fund launched 20.10.06 (figures in £), Jupiter Global Fund SICAV Asia Pacific launched 21.12.04 (figures in $), Jupiter Japan Income Fund launched 15.09.05(figures in £), Jupiter Global Fund SICAV Japan Select launched 01.07.09 (figures in $). Past performance is not an indicator of future performance.
  7. 7. 6 Investment track record  Jupiter Japan Income performance 1 year 3 years 5 years Since inception % % % % Jupiter Japan Income Fund -0.24 28.19 3.19 22.42 Topix 1.64 26.29 -3.06 9.96 Outperformance -1.88 +1.90 +6.25 +12.46  Jupiter Japan Select SICAV performance 1 year Since inception % % JGF Japan Select -1.67 17.70 Topix 1.31 14.92 Outperformance -2.98 +2.78Strong and consistent investment performanceSource: FE, bid to bid, net income reinvested to 31.03.12. Past performance is not an indicator of future performance.Jupiter Japan Income fund launched 15.09.05 (figures in £). Jupiter Japan Select SICAV launched 01.07.09 (figures in $).
  8. 8. 7 Jupiter Japan Select SICAV  Investment philosophy  Cashflow and strong balance sheets are key  Companies improving corporate governance will be rewarded  Identification of themes / sectors and stocks within these is important  Communication with companies is vital  Concentrated portfolio – so know what we own extremely well
  9. 9. 8 Jupiter Japan Select SICAV  Investment process – looking for alpha  Cashflow is key. Screen for growth, valuation and momentum using Holt CFROI  Technical analysis aids timing decisions  Seeking companies with strong fundamentals  Domestics with strength of franchise  Exporters with defendable intellectual property  Make direct contact with 300+ companies per year  Focus on understanding companies and their drivers (macro themes)
  10. 10. 9 Stock selection – 4 stepsA disciplined approach
  11. 11. 10 What’s Wrong with Japan Politics Demographics The Debt The Yen Deflation The economy CompaniesBasically a lot! But there is hope!
  12. 12. 11 Is there hope for Japanese politics after all?Naomi Koshi – Mayor of Otsu Hideaki Omura – Governor of Aichi  Japan’s youngest ever  Former LDP Diet member – female mayor now independent  Harvard Law School Grad  Founded party to promote decentralisation  Represents the changing face of Japanese politics  Seeks alliance with HashimotoToru Hashimoto – Mayor of Osaka Yoshihiko Noda – Prime Minister  Extremely popular at  Proposes consumption tax hike the grassroots  The best PM since Koizumi?  Urges private sector growth  Popularity of PM and major and public sector efficiency parties is low  Displays a “healthy contempt” for central government Shintaro Ishihara – Governor of Tokyo  Extremely popular – now in fourth term  Known for controversial views  Has cut metropolitan spending, promoted growth
  13. 13. 12 Is the bond market telling us something about inflation? Japan BEI inflation expectation (LHS) Japan BEI inflation expectation (LHS) TOPIX (RHS) TOPIX 12M forward PER (RHS) % % 2 2000 0.1 14.5 1800 14.0 1 0.0 1600 13.5 1400 -0.1 0 13.0 1200 -0.2 12.5 -1 1000 -0.3 12.0 800 -2 11.5 600 -0.4 11.0 400 -3 -0.5 200 10.5 -4 0 -0.6 10.0 Jan 05 Jan 07 Jan 09 Jan 11 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12BEI = break-even inflation rate as derived from Index Linked JGBsSource: Mizuho 07.02.12.
  14. 14. 13 Japans tax nightmareSource: Nicholas Smith.
  15. 15. 14 Robert Feldman’s Unscientific Survey  What do the people want? A B C D E Consumption tax rate 5% 10% 15% 20% 25% Total spending -20% -15% -10% -5% 0% Fiscal savings ¥40tr ¥40tr ¥40tr ¥40tr ¥40tr Preference of the young, Older, regional and public urban, private sector sector preferenceSource: Morgan Stanley February 2012
  16. 16. 15 Is this what matters? Won - Yen exchange rate (LHS) Nikkei 225 stock average (RHS) 25 40,000 35,000 Yen weakens, 20 market rallies 30,000 25,000 15 20,000 10 15,000 10,000 5 5,000 0 0 Jan 90 Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12Source: Bloomberg as at 28.02.12.
  17. 17. 16 Japan Baby Boomers!  Japan total fertility rates 2.2 Actual NIPSSR 2006 Projection (High) NIPSSR 2006 Projection (Medium) 2.0 NIPSSR 2006 Projection (Low) NIPSSR 2012 Projection (High) NIPSSR 2012 Projection (Medium) 1.8 NIPSSR 2012 Projection (Low) 1.6 1.4 1.2 1.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060Source: MHW, National Institute of Population and Social Security Research.
  18. 18. 17 Demi-Ashton ratio TOPIX Demi-Ashton S&P 500 Demi-Ashton 3,000 170% 1,400 120% 1,200 110% 2,500 150% 1,000 100% 2,000 130% 800 90% 1,500 110% 600 80% 1,000 90% 400 70% 500 70% 200 60% 0 50% 0 50% 1950 1970 1990 2010 2030 2050 1950 1970 1990 2010 2030 2050Source: Deutsche Bank. Demi-Ashton ratio = population in the range 40 to 49 years/population in the range 20 to 29 years.
  19. 19. 18 Sony – Japanese restructuring! Operating Profit Restructuring Charges Net Profit No. of Employees 6 185000 5 180000 4 175000 3 170000 No. of employees 2 165000 ($bn) 1 160000 0 155000 -1 150000 -2 145000 -3 140000 -4 135000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011Source ML, Sony as at 31.12.11.
  20. 20. Japanese Equities Where have the Banks Gone? Industrial Bank of Japan (¥15.9tr) Sumitomo Bank (¥11.6tr) Mitsubishi Tokyo Financial (¥6.1tr) Fuji Bank (¥10.7tr) Daiichi Kangyo Bank (¥10tr) Mitsui Sumitomo (¥5.8tr)1 Mitsubishi Bank (¥9.6tr) 29 Sanwa Bank (¥8.2tr) Mizuho Financial (¥4.8tr) 0 Long Term Credit Bank (¥6.6tr)9 0 Tokai Bank (¥5.3tr) UFJ (¥3.2tr)0 Mitsui Bank (¥4.6tr) 1 Bank of Tokyo (¥4.0tr) Taiyo Kobe Bank (¥3.7tr) Nippon Credit Bank (¥3.2tr) Daiwa Bank (¥2.6tr) Hokkaido Takushoku (¥1.5tr) ¥97.5tr - 80% = ¥19.9trSource Cazenove 31.12.01. 1
  21. 21. Japanese EquitiesSource Cazenove/Jupiter as at 31.12.11. 2
  22. 22. 21 How banks perform in a crisis Banks rel to TOPIX Banks (KBW Index) rel to S&P Banks Rel to DJ Eurostoxx 110 100 90 80 70 60 50 40 30 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12Source: Bloomberg, 03.02.12.
  23. 23. 22 Outlook for 2012  Earthquake – Stronger Yen –Thai floods – Olympus. 2011 not a vintage year  Dividends – encouraging that companies have maintained and even increased  Politics – New PM Noda is saying the right things. Action speaks…  The BoJ finally walking to the rescue?  The yen is hurting corporate Japan  Inflation is key measure to watch. Steady inflation good for Japanese equities  2012 – muted growth globally but rebuild in Japan should support domestic economy
  24. 24. 23 Bank of Japan slow to act – lot to do  Central banks total assets  Asset purchases now 90% of JGB monthly issuance – Japan US Euro area UK greater that Fed’s peak 80% 10  Political pressure for change. % of domestic non-financial sector liabilities 9 Governor replaced next year. 8 Five board members replaced 7 within 13 months 6  Inflation goal is now a target set 5 at a sensible 1% 4 3 2 1 0 01 02 03 04 05 06 07 08 09 10 11 12Source: Haver Analytics, DB Global Markets Research 31.01.12.
  25. 25. 24 Japanese market valuations 2.5 y = 14.796x + 0.1616 R² = 0.6472 2.0 TOPIX PBR 1.5 1.0 We are here 0.5 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% TOPIX 12 month forward ROE (I/B/E/S consensus)TOPIX ROE and PBR from January 03 to December 11.Source: Mizuho Securities Equity Research.
  26. 26. 25 Jupiter Japan Income Fund  Volatility / return over 5 years 60 50 40 30 % change 20 10 0 TOPIX -10 IMA Japan sector average -20 -30 15 17 19 21 23 25 27 29 % annualised volatilitySource: FE, bid to bid, net income reinvested to 31.03.12. Past performance is not an indicator of future performance.
  27. 27. 26 Portfolio overviewJupiter Japan Select SICAV  Top 5 holdings  Top 5 sector weightings Holding % Fund Sector % Weight Canon 4.6 Financials 24.3 Sumitomo Mitsui Trust Holdings 4.4 Industrials 24.1 Honda Motor 4.4 Consumer Goods 19.6 Sumitomo Mitsui Financial 4.3 Consumer Services 10.9 Mitsubishi 4.1 Technology 6.5  Fund statistics  Market cap split Number of holdings 43 Fund size $79 million Top 10 37.3%Source: Jupiter as at 28.02.12.
  28. 28. 27 Summary Japan A focus on quality  Inflation, the yen companies, and Japanese management,  Underowned, politics franchise and undervalued and cashflow maybe changing Key to Jupiter watch
  29. 29.  Appendix
  30. 30. 29 Introduction to Jupiter  Established in 1985  Assets under management  437 employees including 68 Investment Professionals  One of Europe’s most successful and respected fund management houses, managing assets of £22.8bn  Market cap £1bn*Source: Jupiter 31.12.11. *Source: Bloomberg as at 31.12.11.
  31. 31. 30 Overall investment philosophy Talented team Investment approach  Entrepreneurial approach with institutional resources  Exclusively active management  Individual fund manager accountability and risk control  Fund Manager autonomy  Low fund manager turnover  No committee driven approach to investing  Equity participation aligns interests  Focus on companies  Concentrating on ‘best ideas’ Fundamental investment approach  Direct company contact is key (up to 150 company meetings p.a. per fund manager)  Quantitative analysis to assess correct valuation  Robust stock selection and disciplined portfolio design  Risk management integral to investment process
  32. 32. 31 Asia is Japan’s driver now  Percentage share of export value by region  Operating profit by region Export to US Export to EU Export to Asia (2003–2011) 70% 60% 50% 40% 30% 20% 10% 0% 1q83 1q85 1q87 1q89 1q91 1q93 1q95 1q97 1q99 1q01 1q03 1q05 1q07 1q09 1q11Source: MOF / Nomura.
  33. 33. 32 The Yen has reduced Japan’s cyclicality OECD Leading Indicators (lhs) Japan rel to MSCI Global (rhs) 10% 40% 8% 30% 6% 20% 4% 10% 2% 0% 0% -2% -10% -4% -20% -6% -30% -8% -10% -40% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: OECD, Bloomberg, MSCI, 31.01.12.
  34. 34. 33 Weakening yen leads to inflation US-style core CPI (YoY, LHS) Effective exchange rate of JPY (YoY,lagged 15 months, RHS, reversed) 0.5 -20 0.0 -10 -0.5 0 YoY % YoY % -1.0 10 -1.5 20 -2.0 30 Weaker yen -2.5 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: Bank of America Merrill Lynch 31.01.12.
  35. 35. 34 How worried should we be about Japan’s debt?  Net savings by sector as % of GDP  Corporate finances have improved over time… Corporate sector Household sector General government 20% 15% …but the government’s 10% balance sheet has worsened 5% 0% -5% -10% 1980 1984 1988 1992 1996 2000 2004 2008  Japan’s total sovereign  G7 public sector debt in 2010 as % of GDP debt is scarily high… …but low yields make it cheap to fundSource: Cabinet Office / Daiwa / Mizuho.
  36. 36. 35 Components of GDP  Real Gross Domestic Product (seasonally adjusted series) Public works as % of GDP Private sector capex as % of GDP Private Housing as % of GDP 20% Great Hanshin Earthquake January 1995 18% 16% 14% 12% 10% % 8% 6% 4% 2% 0% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010Source: ESRI 31.08.11.
  37. 37. 36 Exports as % of GDP in 2010 100 90 80 70 60 50 40 30 20 10 0 US Japan Spain UK France Italy Canada Switzerland Germany Korea Netherlands BelgiumSource: OECD.
  38. 38. 37 Your Jupiter contact in the Netherlands Current Role Sales Director Sophie Robé, CFA Director , 2006 – present Jupiter Asset Management Jupiter Asset Management Director, Hedge Funds Advisory Group, Sales director, Nethrelands 2002 – 2006 Jupiter Asset Management International Sales Executive, Senior Manager 1997 – 2001 Commerzbank Asset Management, Germany Vice President, Senior Project Manager, Product development (2000 – 2001); Head of Quantitative Equity Analysis, Research (1999 – 2000); European Sector strategist (1997 – 1999) 1993 – 1997 University of Kassel, Germany Researcher in Portfolio Theory and Econometrics Qualifications PhD in Finance Economics (University of Kassel) Chartered Financial Analyst
  39. 39. 38 38 DisclosureJupiter Asset Management Limited (‘JAM’) is registered in England and Wales (no. 2036243).The registered office is 1 Grosvenor Place, London SW1X 7JJ. JAM is authorised and regulated by theFinancial Services Authority 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 investors.However any one attending the presentation or who has the opportunity to view the accompanying slidesshould bear in mind that the value of an investment in a unit trust and the income from it can go down aswell 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 theshorter term. Quoted yields are not guaranteed. Current tax levels and reliefs will depend on the nature ofthe holding and details are contained in the key features documents. Past performance should not be seenas a guide to future performance.This document contains information based on the MSCI, MSCI Global Indices. Neither MSCI nor any otherparty involved in or related to compiling, computing or creating the MSCI data makes any express or impliedwarranties 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 ofthe foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related tocompiling, 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 suchdamages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s expresswritten consent.For your security we may record or randomly monitor all telephone calls. If you are unsure of the suitabilityof an investment please contact your financial advisor. Any data or views given should not be construed asinvestment advice. Every effort is made to ensure the accuracy of the information but no assurance orwarranties are given.

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