The Jupiter Global Fund - Jupiter Asset Management

the jupiter global fund
Chairman’s Review
■■Chairman’s Review
Dear Shareholder
The eurozone crisis and prospects for global growth have preoccupied
investors’ minds in the last 12 months.
To combat the former we have seen European leaders attending
numerous summits, but making only slow progress, much of which
has been driven by the European Central Bank (ECB). Amid market
panic as 2011 closed, ECB president Mario Draghi introduced a
lending programme for European banks – the Long Term Refinancing
Operation (‘LTRO’) – which effectively allowed the European banks to
borrow at favourable rates for three years. Shares across the world
responded by rallying strongly. Better economic news from the US
also lifted investor sentiment.
Soon afterwards, however, tensions in the Middle East pushed up the
oil price (any rise acts as a drag on consumption) and evidence
emerged that growth in developing economies such as China and
India had started to slow. In response, the authorities in these areas
swiftly cut interest rates. Japan took the unusual step of setting an
inflation target for the first time, offering investors hope that it would
one day emerge from its decade-long deflation trap.
Intense political uncertainty and heightened speculation that Greece
would leave the euro in the second quarter prompted Draghi to say in
July that the ECB would do whatever it took to keep the single currency
together. Spain was given an initial €100bn bailout package in return
for implementing austerity measures on a population, half of whose
youth are unemployed. Meanwhile, the anticipated recovery in
emerging giants such as China and India in the second half of 2012
failed to materialise. Indeed these economies continued to show signs
of slowing and implemented further stimulus measures. Against the
backdrop of a change in leadership later in the year, the Chinese
government introduced a US$94bn package to invest in infrastructure
development. This came in addition to other packages from provincial
authorities. However, concerns remained that the world’s second
largest economy would experience a harder than expected landing
and this would have a knock-on effect on its Asian neighbours and
later other economies.
The Bank of England, meanwhile, expanded its ‘Quantitative Easing’
(QE) programme to assist the flagging UK economy, effectively
printing money to buy government bonds from banks; its total
purchases of government bonds reached roughly a third of the entire
market. In September 2012, the US too launched yet more QE until
further notice. All this QE helped push up the gold price as more
central banks sought to diversify their reserves away from paper
currencies such as the US dollar, in danger of being devalued by
continuous money printing.
As the period came to a close, Draghi unveiled another building block
for dealing with the eurozone crisis – a bond buying programme for the
debt of troubled nations. Spanish and Italian bond yields fell from crisis
levels in response but concerns remained that Spain would need to
seek a second bailout. Looking ahead, we expect eurozone concerns
to continue. Despite recent action from the ECB, the problems in the
peripheral European countries have not gone away. Growth is simply
far too low in countries such as Spain, Greece, Portugal and Italy to
stabilise national debt levels, let alone create employment and attract
investment. However, the US economy appears to be stabilising and
lower inflation rates in emerging giants such as China should offer
greater scope to cut interest rates and stimulate economies.
The Jupiter Global Fund range offers investors a broad range of
strategies and geographies, all of which seek to employ Jupiter’s
emphasis on achieving robust outperformance. During the year, we
launched another Fund, Jupiter Dynamic Bond, to take advantage of
opportunities in the corporate bond market. The Fund is run by fixed
income specialist Ariel Bezalel with the help of the investment
managers of Jupiter’s fixed income and multi asset team.
In this uncertain world, we believe that investors are likely to favour
quality companies that can grow their earnings, maintain dividends
and strengthen their balance sheets. Being able to manage portfolios
actively and capitalise on opportunities when they arise is likely to be
crucial for patient investors who, like us, believe that the world is going
through a prolonged period of structural change.
Adrian Creedy
Chairman
30 October 2012
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