The Jupiter Global Fund - Jupiter Asset Management

the jupiter global fund
Jupiter Global Equities
■■Jupiter Global Equities Review of Portfolio as at 30 September 2012
Performance
NAV 30.09.12 30.09.11 % Change
Class L US Dollar Shares USD 12.30 USD 10.26 19.88%
Class L Euro Shares EUR 13.97 EUR 11.16 25.18%
Class L Sterling Shares GBP 11.24 GBP 9.83 14.34%
Market Review
Concerns over global growth and the absence of a satisfactory
resolution to the eurozone crisis have been the main influences on
markets in the period under review. Towards the end of 2011, markets
fell as investor confidence waned, but sentiment was restored by the
introduction of a lending programme for European banks called the
Long Term Refinancing Operation in early 2012. Global equities
rallied, supported also by better economic data from the US. However,
by the second quarter, evidence had begun to emerge that growth in
developing economies such as China and India was slowing and
interest rates in those countries were cut by way of response.
Performance in global markets fell back and, at the same time,
concerns over the solvency of Spain’s financial sector mounted. This
nervousness was compounded after the Dutch government collapsed
over failure to agree austerity measures and socialist leader François
Hollande became President of France. The head of the European
Central Bank (ECB), Mario Draghi, announced in a pivotal speech in
July that he would do ‘whatever it takes’ to ensure the survival of the
eurozone, commitment that shored up global markets through the
summer months. In early September, a bond-buying operation called
‘Outright Monetary Transactions’ was launched by the ECB in an
attempt to bring down worryingly high yields on southern European
sovereign debt. With key economic data remaining gloomy, the US
Federal Reserve nonetheless felt obliged to introduce a third round of
quantitative easing in September, and the ensuing rush of liquidity
boosted markets at the end of the period under review.
Policy Review
For the year to 30 September 2012, the Fund returned 19.9%, compared
to 22.3% for its benchmark, the MSCI World index in US dollar terms.
Our underweight position in financials weighed on performance in the
period under review. The Fund has a heavily overweight bias towards
consumer goods and services – almost double that of the index – and
this has served us well in terms of performance. Sector-wise, basic
materials and technology also made good returns. Consumer staple
companies with international reach such as Wal-Mart and Philip Morris,
both of which are core holdings for the Fund, made strong returns while
Australia’s Newmont Mining detracted, suffering from the drop in global
commodity prices. The Fund’s overweight position in two northern
European economies – Germany and the Netherlands – supported
performance and has been ramped up from just over 6% to just over
11% in the period under review.
Investment Outlook
Signs of stability have emerged in the US property market and the
eurozone countries have made some progress in tackling the debt
crisis, but much work still needs to be done. We have selective
exposure to both these regions, as we believe it is possible to pick up
high quality companies at reasonable valuations, especially within the
large-cap sector. We continue to see the best value in emerging
market equities but the Federal Reserve’s third round of quantitative
easing is likely to precipitate a rush of liquidity into traditionally higheryielding
emerging market assets, and this could push inflation in those
areas to uncomfortably high levels. In the meantime, however,
fluctuations in emerging markets resulting from news flow concerning
western economies are presenting patient long-term investors with
what are, in our view, attractive entry points.
We remain optimistic that although economic growth is tapering, the
Chinese economy will nonetheless avoid a hard landing. We are also
confident that once the transition of political power has taken place by
the end of the year, new measures will be introduced to stimulate
growth and manage the country’s transition from a trade and exportoriented
economy to a consumption-led economy. Following a visit to
the Philippines and Indonesia in the summer, we are also upbeat
regarding the growth prospects for the smaller countries in Asia. We
were impressed by the state of government and corporate finances,
as well as the extent to which these economies’ growth is driven
domestically rather than through export dependency. Overall, we have
slowly been increasing the portfolio’s exposure to emerging market
equities through the course of the period under review.
Ben Surtees
30 October 2012
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