Presentation is loading. Please wait.

Presentation is loading. Please wait.

AROUND THE WORLD IN 80 MINUTES A new world order – implications for bond investors BNY Mellon Asset Management For professional advisers only.

Similar presentations


Presentation on theme: "AROUND THE WORLD IN 80 MINUTES A new world order – implications for bond investors BNY Mellon Asset Management For professional advisers only."— Presentation transcript:

1 AROUND THE WORLD IN 80 MINUTES A new world order – implications for bond investors BNY Mellon Asset Management For professional advisers only

2 For illustrative purposes only Returns Time 2000s– ? trend Returns Time 1980–2000s trend … a more volatile world The great moderation is over … 1 Your starting point is all important… A perspective on investment returns

3 Investment solutions in a lower return/volatile world Active, flexible approaches Emphasis on income Strategies that protect capital and aim for asymmetry of return Return based objectives Then and now… its a different world ¹ September ² Calculated by the Bureau of Economic Analysis in the US in calculating the national accounts ³ Used 10 years of earnings to remove the effect of the economic cycle from the PE calculation Source: Census, Bloomberg, Datastream, Newton United States ¹ Fed funds rate12%0.25% 10-year bond yield14%2% Monetary base$149 billion$2.6 trillion Budget deficit as % of GDP-2.2%-10.1% Household debt to GDP ratio47.1%88.3% Inflation rate, % yoy8.9%3.8% Savings rate11.9%4.5% Unemployment rate8.5%9.1% Profit margins (national accounts)²9.6%17.5% S&P 500 P/E ratio (1 year trailing)8.0x14.0x S&P 500 cycle adjusted PE³7.8x20.3x S&P 500 dividend yield5.7%2.3% Demographics – average age of babyboomerMedian age is 27Median age is 56 2 Your starting point is all important… A perspective on investment returns (contd)

4 The US financial position: Or put it another way…lets pretend its a household budget: Source: Newton, October 2011 ($) US tax revenue2,170,000,000,000 Federal budget spending 3,820,000,000,000 New debt1,650,000,000,000 National debt14,271,000,000,000 Recent budget cuts38,500,000,000 ($) Annual family income21,700 Annual outgoings38,200 New credit card debt16,500 Outstanding balance on credit card 142,710 Budget cuts385 3 A perspective on investment returns

5 Peak debt year Peak debt in USD bn Peak debt proportion of domestic GDP Peak debt proportion of global GDP A perspective on investment returns * Precrisis debt peak except for Eurozone figures, which are as at February 2011 Note: Bubbles are not to scale and for illustrative purposes only ** GDP stands for Gross Domestic Product, and is the monetary value of goods and services produced within a countrys borders in a specific time period. It is usually calculated on an annual basis and gives an indication of a countrys economic health and standard of living. Source: IMF, Bloomberg S. Korea/Thailand , % 6.1% Russia % 1.2% Greece % 0.4% Argentina % 1.5% Eurozone* , % 57.4%

6 Theme(s) Less debt More balanced economic variables Higher energy costs More older people Unprecedented connectedness Five important transitions to a world with: 5 Global thematic framework

7 Key economic factors:Debt, growth, competitiveness Primary trend:Extended period of deleverage Secondary trendLoose Monetary Policy, State intervention Major fault lines:Eurozone economic collapse US growth and budget arithmetic China growth uncertainty Diverse outcomes:Printing of Money, Rate Cutting and Default Market distortions remain 6 The post-bubble landscape

8 *Source: JPMorgan Global Bond, as at 31 Dec 2011 AAA CLUB% REST OF THE WORLD UK6.74 Brazil Australia 0.95 China Canada 1.82 Czech Republic Germany5.96 Indonesia Sweden0.41 Malaysia Denmark Mexico New Zealand MONEY PRINTERS Norway USA33.70 Poland Japan South Africa South Korea CREDIT RISKSingapore France6.09 Switzerland Holland1.63 Belgium1.63 Italy5.36 Spain Index* weightings 7 Managing money against a bond index is fraught with danger

9 8 Govt debt held abroad as % GDP vs. 5yr CDS spreads Source: Datastream as of 31 October 2011 As economic growth slips the reliance on foreign support becomes more important. Government debt held abroad

10 9 Wage growth and the problem with Europe Source: Bloomberg, OECD January 2012

11 10 Source: Newton, February 2012 Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. Emphasis on traditional fixed income asset classes A return seeking core with particular security characteristics Risk offsetting positions for dampened volatility and downside protection Global Dynamic Bond strategy Conceptual representation

12 11 Source: Newton, Merrill Lynch Indices Hedged into Sterling, 31 December 2011 Past performance is not a guide to future performance. 1 st 2 nd 3 rd 4 th 2011 EM 6.80 Govt 6.32 IG 5.14 HY HY EM IG 7.46 Govt HY EM IG Govt Govt IG EM HY Govt 6.38 EM 5.89 IG 3.76 HY HY EM 9.68 IG 3.32 Govt EM Govt 6.50 IG 5.20 HY EM HY IG 8.66 Govt HY EM IG 8.73 Govt EM Govt IG HY IG 9.95 Govt 7.31 HY 4.76 EM EM Govt IG 8.49 HY EM HY 3.06 IG 1.74 Govt Govt IG HY 5.01 EM EMEmerging-market govt bondsGovtGovt bondsIGInvestment-grade corporate bondsHYHigh-yield corporate bonds The fixed income asset classes rankings change depending on the economic cycle

13 *The higher the target return the greater the potential for the returns to be significantly higher or lower than expected* **Based on long term volatility statistics Risk control (portfolio guidelines) Risk monitoring Newton Global Dynamic Bond Fund Risk parameters Target volatility6% – 8%** Portfolio diversificationMax 5% in any corporate issuer at purchase Portfolio concentrationMax 50% in any sector. Quantitative risk assessment How much risk? – (bond weights, correlation, volatility) What kind of risk? – (currency, credit, interest rate) Is risk consistent? – (strategic views, economic cycle) NIM_GDB10 The performance aim of the Fund is to deliver cash (1 month GBP Libor) + 2% p.a. over 3 to 5 years before fees are deducted. There is no guarantee that this return will be achieved or that your capital will be maintained. 12 Global Dynamic Bond Fund

14 Source: Newton, 29 February 2012 Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. EM Sovereign % Government Bonds 23.95%High Yield 19.58% Investment Grade % 13 Newton Global Dynamic Bond Fund Positioning as at 29 February 2012

15 14 Newton Global Dynamic Bond Fund performance versus IMA Sectors Source: Lipper as at 14 Feb Please note that sector returns are likely to vary, depending on the timing of data extraction from Lipper Fund performance calculated as total return including income net of UK tax, net annual charges, no initial charge, in GBP. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request. Past performance is not a guide to future performance. The performance aim of the Fund is to deliver cash (1 month GBP LIBOR) + 2% p.a. over 3 to 5 years before fees are deducted. There is no guarantee that this return will be achieved or that capital will be maintained.

16 A higher yielding addition to global government bonds Government bond yields at new lows Investors looking to work their bonds harder – looking to invest in a wider bond universe Defaults on a declining path. Corporate credit still attractive. Plenty of individual credit stories – they dont all move together Emerging market debt a serious alternative – credit story improving Government bond yields at new lows Investors looking to work their bonds harder – looking to invest in a wider bond universe Defaults on a declining path. Corporate credit still attractive. Plenty of individual credit stories – they dont all move together Emerging market debt a serious alternative – credit story improving NEWTON GLOBAL DYNAMIC BOND FUND invests wherever there are fixed income opportunities Investing in a diversified universe of generally high yielding securities: – Government bonds – Emerging market sovereigns – Corporates – high yield and investment grade Currency overlay Derivatives – principally to manage duration NEWTON GLOBAL DYNAMIC BOND FUND invests wherever there are fixed income opportunities Investing in a diversified universe of generally high yielding securities: – Government bonds – Emerging market sovereigns – Corporates – high yield and investment grade Currency overlay Derivatives – principally to manage duration The presentThe future Going forward a dynamic fixed income asset allocation is required Last updated: Last updated: 15 Why Newton Global Dynamic Bond Fund?

17 16 Important information This is a financial promotion and is not intended as investment advice. The information provided within is for use by professional clients and should not be relied upon by retail clients. All information relating to Newton Investment Management Limited (Newton) and Newton Global Dynamic Bond Fund has been prepared by Newton for presentation by BNY Mellon Asset Management International Limited (BNYMAMI). Any views and opinions contained in this document are those of Newton at the time of going to print and are not intended to be construed as investment advice. BNYMAMI and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. This document may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. The Prospectus and/or Simplified Prospectus should be read before an investment is made. This document can be obtained from or by calling To help us continually improve our service and in the interest of security, we may monitor and/or record your telephone calls with us. Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. Tax treatment will depend on the individual circumstances of clients and may be subject to change in the future. Newton Investment Management Limited are authorised and regulated by the Financial Services Authority. Newton Investment Management Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No Newton Global Dynamic Bond Fund (NGDBF) is a sub-fund of BNY Mellon Investment Funds, an investment company with variable capital (ICVC) incorporated in England and Wales under registered number IC27 and authorised by the Financial Services Authority. BNY Mellon Fund Managers Limited (BNY MFM) is the Authorised Corporate Director. BNY Mellon Fund Managers Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No Authorised and regulated by the Financial Services Authority. The investment adviser of the Newton sub-funds is Newton Investment Management Limited. ICVC investments should not be regarded as short-term and should normally be held for at least five years. There is no guarantee that either the target or positive returns will be achieved and no form of capital protection will apply. The higher the target return the greater the potential for the returns to be significantly higher or lower than expected. Changes in the rates of exchange may affect the value of investments. The Fund can invest in overseas securities which may also generate profits overseas and pay dividends in foreign currencies, which means the fund is exposed to changes in currency rates. The Fund may invest in emerging markets. It should be noted that these markets have additional risks associated with local custody and registration practices that may be less developed than more mature markets. The Fund takes its charges from the capital of the fund. Investors should be aware that there is potential for future capital erosion if insufficient capital growth is achieved by the Fund to cover the charges. Capital erosion may result in the amount of income that can be drawn declining over time. The Fund may hold sub-investment grade bonds that typically have a low credit rating and carry a high degree of default risk, which can affect the capital value of your investment. The Fund may hold fixed interest securities, which are particularly affected by trends in interest rates and inflation. This may affect the capital value of your investment. The Fund may invest in illiquid securities, which means that there is a possibility that they cannot be readily converted into cash when required. The value of these securities is subject to greater fluctuation if they are not regularly traded. The Fund may use derivatives for efficient portfolio management (EPM) purposes. EPM restricts the use of derivatives for the reduction of risk, the reduction of cost and the generation of additional capital or income with no or an acceptable low level of risk. EPM transactions must be economically appropriate and the exposure fully covered. In addition to EPM, the Fund uses derivatives in pursuit of its investment objectives. All of these factors may affect the performance of the Fund. This document is issued in the UK by BNY Mellon Asset Management International Limited. BNY Mellon Asset Management International Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No Authorised and regulated by the Financial Services Authority. BNY Mellon Asset Management International Limited, BNY MFM and Newton and any other BNY Mellon entity mentioned are all ultimately owned by The Bank of New York Mellon Corporation. BNY MFM and Newton are members of the IMA. CP (3m)


Download ppt "AROUND THE WORLD IN 80 MINUTES A new world order – implications for bond investors BNY Mellon Asset Management For professional advisers only."

Similar presentations


Ads by Google