The Jupiter Global Fund - Jupiter Asset Management

the jupiter global fund
Jupiter New Europe
■■Jupiter New Europe Review of Portfolio as at 30 September 2012
Performance
NAV 30.09.12 30.09.11 % Change
Class L US Dollar Shares USD 6.75 USD 5.96 13.26%
Class L Euro Shares EUR 7.30 EUR 6.17 18.31%
Class L Sterling Shares GBP 8.36 GBP 7.67 9.00%
Market Review
Regional markets were heavily influenced by external factors in the
period under review, in particular by the eurozone crisis. While share
prices have been pressured by weak sentiment, the largest economies
in our region and the operational results of the companies in our portfolio
have shown considerable resilience. The Russian economy has largely
recovered from the recession of 2008-09 and recent statistics suggest
that Russian consumers are in a good position. Unemployment is at its
lowest level since 1999, while real wage growth is allowing for increasing
levels of spending, helping to drive real annual retail sales growth.
However, Russian equities have not performed as strongly as might
have been expected during the year to 30th September 2012.In Turkey,
the government has enjoyed some success in rebalancing the economy
and preventing it from overheating following an 8.5% surge in GDP in
2011. Growth moderated to3.2% year on year in the first quarter of
2012, while the current account deficit narrowed to 8.6% of GDP in May,
down from10% at the end of 2011.
Policy Review
For the year to 30 September 2012, the Fund has returned 18.3%
compared to 23.8% for its benchmark the MSCI Emerging Markets
Europe 10/40 index. The underweight position in central Europe has
weighed on performance, particularly in the last nine months or so, as
central bank measures to increase liquidity coupled with tentative signs
of progress in resolving the eurozone crisis caused these markets to
rally in spite of weakening fundamentals. The main stock-specific factor
working against performance has been the Fund’s position (3.6% as at
30 September 2011) in Russia vodka producer Synergy (-21% in GBP
in the 12 months to 30 September 2012), which suffered from
unfavourable regulatory developments, including a sharp increase in
excise duty, causing results to disappoint. The Fund has an overweight
stance in Russia and Turkey. In Russia, key positions include consumerfocused
stocks such as food retailer Okey, and infrastructure plays such
as Russia’s largest transport construction company Mostotrest. In
Turkey, we hold significant positions in banks, which provide exposure
to the underleveraged consumer and underpenetrated mortgage
market. The Fund has almost no positions in central Europe (other than
a small holding in Polish insurer PZU) as these economies have
suffered a sharp slowdown in recent months due to their greater
exposure to the crisis in the Eurozone.
Investment Outlook
The success of Turkish policymakers in reducing macroeconomic
volatility has allowed investors to increase their focus on the country’s
long-term growth drivers: favourable demographics, rising productivity
and improved governance. Following a recent research trip, we have
increased the Fund’s Turkish exposure by around 10% on the view that
corporate earnings are set to surprise positively, creating scope for the
market to continue performing strongly. We believe that Turkey currently
offers better opportunities than central European markets to which we
currently have no exposure on the view that those countries will be
badly affected by the slowdown in the eurozone.
After 18 years of negotiations, Russia finally joined the World Trade
Organisation this summer. While the gains from membership are mostly
of a long-term nature, it is an important signal of the government’s
commitment to liberalise the economy. Russian equities look
increasingly attractive from a dividend perspective following
encouragement from the government to increase payout ratios. As a
result, the dividend yield for the Russian market – which historically was
lower than in other markets – has now caught up with emerging market
peers and stands at around 3.2%. Long term structural growth drivers,
macroeconomic strength and low valuations combine to create
compelling investment opportunities in Russia and Turkey.
Elena Shaftan, Ingrid Kukuljan and Colin Croft
30 October 2012
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