The Jupiter Global Fund - Jupiter Asset Management

the jupiter global fund
Jupiter Global Financials
■■Jupiter Global Financials Review of Portfolio as at 30 September 2012
Performance
NAV 30.09.12 30.09.11 % Change
Class L US Dollar Shares USD 6.95 USD 5.92 17.40%
Class L Euro Shares EUR 8.26 EUR 6.74 22.55%
Class L Sterling Shares GBP 9.07 GBP 8.45 7.34%
Market Review
Share prices made strong gains in the year to September 2012,
recovering from a significant decline in the summer of 2011 when
concerns over the Eurozone breaking up reached a heightened level.
Positive momentum was increased when the European Central Bank
launched the ‘Long Term Refinancing Operation’ at the end of
December, a programme which provided liquidity to allow southern
European banks to buy sovereign debt. The positive effects of this were
short-lived, however, when bank deposits fled during the Greek election
process in May 2012. This forced domestic banks to sell bonds and
resulted in a sharp decline in equities. Despite clear indications that
global economic growth was slowing, upward momentum in share
prices was restored late in the period under review with the ECB
committing to direct purchases of sovereign debt and the US Fed
announced a third programme of quantitative easing.
Policy Review
For the year to 30 September 2012, the Fund returned 22.6%, compared
to 29.9% for its benchmark, the FTSE AW Financials index TR in euro
terms. The Fund maintained significant exposure to banks in North
America which benefited from the steady recovery in the US economy
and bottoming out of the housing market. We also held positions in
specialist financial companies and real estate companies globally, while
being more cautious on European financials. Despite losing out
somewhat on recovery rallies in European stocks, the Fund made
strong returns from its equity portfolio and good returns from bond
positions. Although the Fund’s risk adjusted return was satisfactory, its
allocation across stocks and bonds meant it lagged the benchmark
return, which is 100% equity weighted.
Investment Outlook
The outlook for global economic growth is hampered by efforts to
reduce debt in the West and slowing growth in China. This has given
rise to additional central bank action as this is seen as the only way to
support economies. The extended low interest rate and investment
return environment in the West combined with weak economies,
particularly in Europe, is unhelpful for financial company earnings
although supportive for valuations. Nevertheless the improving housing
market in the US and interest rate cuts in emerging markets should help
restore growth to more normal levels. The risk of a crisis in Europe looks
to have been contained by the strong policy measures announced by
the ECB but the region remains vulnerable to any political setbacks.
We see opportunities for good returns from shares of niche businesses
in the less economically-sensitive parts of the financial sector and from
companies investing in growth regions of the world. We also see
opportunities in companies which can reduce or eliminate valuation
discounts through cost reduction initiatives, mergers and acquisitions or
through reallocating capital away from uneconomic balance sheets (i.e.
with unproductive or unprofitable assets). Real estate assets and
corporate bonds should in our view continue to benefit from the
additional liquidity provided by quantitative easing. Retail property in
emerging markets remains an attractive way to gain exposure to rising
consumer spending and increasing affluence. Selected financial
company bonds still offer attractive yields with reducing risk as balance
sheets are strengthened.
Guy de Blonay
30 October 2012
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