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1 global investment management Investor implications for global deleveraging Glyn Owen 20 th September 2012.

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Presentation on theme: "1 global investment management Investor implications for global deleveraging Glyn Owen 20 th September 2012."— Presentation transcript:

1 1 global investment management Investor implications for global deleveraging Glyn Owen 20 th September 2012

2 2 global investment management Central government debt burden 1900 to 2011 - advanced and emerging economies Source: Reinhart (2010), Reinhart and Rogoff (2009 and 2011), sources cited therein and the authors %

3 3 global investment management Total debt to GDP for developed economies 1990 - 2012 Source: Deutsche Bank, Haver. September 2012.

4 4 global investment management Debt composition varies widely Source: Bloomberg, September 2012.

5 5 global investment management US fiscal deficit as % of GDP 1791 -2011 Source : Deutsche bank, GFD. September 2012.

6 6 global investment management Budget deficits larger in the US than in peripheral Europe Source: Deutsche bank. September 2012. Greece, Ireland, Italy, Portugal and Spain: GDP- weighted fiscal balance US Budget deficit as a % of GDP %

7 7 global investment management Deleveraging: where are we in the cycle? Note: Debt refers to external marketable debt and excludes internal debts, e.g. interbank debts Source: FRB, Haver Analytics, DB Global Markets Research

8 8 global investment management US real GDP post-war experience: not a normal cycle... Source: Nedgroup Capital. September 2012.

9 9 global investment management The UK recovery is weaker than in the great depression Source: Deutsche Bank. September 2012. %

10 10 global investment management Short term interest rates over past 10 years Source: MGIM, Bloomberg. September 2012 US, UK, Japan and Europe %

11 11 global investment management The world is not normal: UK base rate 1694 to today Source: Deutsche Bank, GFD. September 2012.

12 12 global investment management The world is not normal: Swiss government bond yields Source: Bloomberg, MGIM. September 2012.

13 13 global investment management The world is not normal: 10 year government bond yields Source: Bloomberg, MGIM. September 2012.

14 14 global investment management The world is not normal: US 10 year yield since 1790 Source: Deutsche Bank, GFD, Bloomberg Finance LLp. September 2012.

15 15 global investment management Quantitative easing: Bank of England balance sheet as a % of GDP Source: Deutsche bank. September 2012.,

16 16 global investment management Tail risk of extreme events are not insignificant US fiscal cliff Chinese recession Eurozone disintegration Journey into the unknown – monetary easing

17 17 global investment management Fiscal cliff: will need to be tackled after November Source: Bloomberg, September 2012 US budget deficits

18 18 global investment management US economic momentum is reasonable – but unemployment remains high US labour market Source: Bloomberg, September 2012

19 19 global investment management US construction: the only way is up? Source: Bloomberg, September 2012

20 20 global investment management China is landing Source: Bloomberg, September 2012 GDP and industrial production

21 21 global investment management Major macro indicators continue to disappoint Source: Bloomberg, September 2012. Chinese money supply (% yoy) Chinese PMI: new orders Level

22 22 global investment management Chinas slowing growth: structural or cyclical? Source: Factset. September 2012. China Real GDP y/y % change %

23 23 global investment management The European crisis is not simply debt Source: IMF, 2012 estimates. Budget deficit to GDP Current account balance -2.2% -2.4% 5.2% -0.8% -1.9% -4.6% -1.7% -8.0% 1.0% -8.5% -4.2% -4.5% -2.1% -6.0% -7.4% -7.2%

24 24 global investment management Unit labour costs since the launch of the euro Source: Bloomberg, September 2012

25 25 global investment management Currencies vs. the Deutschemark Source: Bloomberg, September 2012

26 26 global investment management German Labour reform accelerated growth- can Italy? Source: Bloomberg, September 2012

27 27 global investment management The European stress / intervention cycle Dont underestimate the political will to preserve the Eurozone Inflate, stagnate or default Austerity / growth European bail out of banks Issue of Eurobonds ECB – LTRO / OMT / rate cut Fiscal union

28 28 global investment management Source: JPMorgan, September 2012 Clear slowdown in global growth

29 29 global investment management Equity market valuations Source: Bloomberg, Statistics to 06/09/2012. September 2012 *current year estimate

30 30 global investment management MSCI World P/E ratio since 1995 Source: Bloomberg, September 2012

31 31 global investment management Investment conclusion New normal is now the consensus Deleveraging and rebalancing set to continue for years US – growth risk in 2013 China – structural slowdown underway Europe – stress / intervention cycle to continue Policy risks are high Further monetary loosening is certain Crisis presents an extraordinary valuation opportunity

32 32 global investment management Implications for portfolio construction Subdued growthlow return expectations Continued deleveraging and tight credit financial strength is critical High tail riskshigh volatility Cyclical move down in commodities has further to run Deflation protection in safe haven bonds Income generating assets important safe dividend equities corporate bonds emerging market bonds Focus on: Diversification by asset class Quality defensive equities Inflation not todays problem – but might be the end game Exploit tactical opportunities Focus on: Diversification by asset class Quality defensive equities Inflation not todays problem – but might be the end game Exploit tactical opportunities

33 33 global investment management Introduction to Harmony portfolios Risk profiled core solutions: Balanced and Growth Multi-asset, multi-manager, multi-currency Diversified between local and global investments, asset class, currency, manager and style Dynamic tactical asset allocation Available in five currency / regional bases: USD, GBP, EUR, AUD and Asian The Harmony range uses no derivatives, structured products or CDOs Managed by Momentum Global Investment Management in London

34 34 global investment management Harmony Balanced Fund strategic allocation Source: MGIM, September 2012

35 35 global investment management Harmony Growth Fund strategic allocation Source: MGIM, September 2012

36 36 global investment management Harmony US Dollar Balanced September 2012. Past performance is not indicative of future returns.. *30/06/2005 to 30/12/2005

37 37 global investment management Harmony US Dollar Growth September 2012. Past performance is not indicative of future returns.. *30/06/2005 to 30/12/2005

38 38 global investment management Harmony performance vs. cash, bonds and equities Source: MGIM, Lipper, September 2012. Past performance is not indicative of future returns..

39 39 global investment management Disclaimer Momentum Global Investment Management is the trading name for Momentum Global Investment Management Limited. This document does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this document, and should be satisfied in doing so that there is no breach of local legislation or regulation. The information is intended solely for use by our clients or prospective clients, and should not be reproduced or distributed except via original recipients acting as professional intermediaries. This document is not for distribution in the United States. Prospective investors should inform themselves and if need be take appropriate advice regarding applicable legal, taxation and exchange control regulations in countries of their citizenship, residence or domicile which may be relevant to the acquisition, holding, transfer, redemption or disposal of any investments herein solicited. Any opinions expressed herein are those at the date this material is issued. Data, models and other statistics are sourced from our own records, unless otherwise stated herein. We believe that the information contained is from reliable sources, but we do not guarantee the relevance, accuracy or completeness thereof. Unless otherwise provided under UK law, Momentum Global Investment Management does not accept liability for irrelevant, inaccurate or incomplete information contained, or for the correctness of opinions expressed. We caution that the value of investments in discretionary accounts, and the income derived, may fluctuate and it is possible that an investor may incur losses, including a loss of the principal invested. Past performance is not generally indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Our investment mandates in alternative strategies and hedge funds permit us to invest in unregulated funds that may be highly volatile. Although alternative strategies funds will seek to follow a wide diversification policy, these funds may be subject to sudden and/or large falls in value. The illiquid nature of the underlying funds is such that alternative strategies funds deal infrequently and require longer notice periods for redemptions. These Investments are therefore not readily realisable. If an alternative strategies fund fails to perform, it may not be possible to realise the investment without further loss in value. These unregulated funds may engage in the short selling of securities or may use a greater degree of gearing than is permitted for regulated funds (including the ability to borrow for a leverage strategy). A relatively small price movement may result in a disproportionately large movement in the investment value. The purpose of gearing is to achieve higher returns associated with larger investment exposures, but has concomitant exposure to loss if positive performance is not achieved. Reliable information about the value of an investment in an alternative strategies fund may not be available (other than at the funds infrequent valuation points). Under our multi-management arrangements, we selectively appoint underlying sub-investment managers and funds to actively manage underlying asset holdings in the pursuit of achieving mandated performance objectives. Annual investment management fees are payable both to the multimanager and the manager of the underlying assets at rates contained in the offering documents of the relevant portfolios (and may involve performance fees where expressly indicated therein). Momentum Global Investment Management Limited (Company Registration No. 3733094) registered office at 20 Gracechurch Street, London EC3V 0BG. Momentum Global Investment Management Limited is authorised and regulated by the Financial Services Authority in the United Kingdom, and is an authorised Financial Services Provider pursuant to the Financial Advisory and Intermediary Services Act 37 of 2002 in South Africa. © Momentum Global Investment Management Limited 2012

40 40 global investment management Contact: Lucy Richardson Marketing Manager Momentum Global Investment Management Lucy.richardson@momentumGIM.com T: +44 207 939 1725 www.momentumgim.com


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