VIEW ON THE UK - Jupiter Fund Managementinfo.jupiteram.com/rs/652-DHL-807/images/View on the UK -...
12
On the planet to perform For UK professional audience only, not for retail investors. March 2016 Wealth Manager Sentiment - March 2016 ON THE PLANET TO PERFORM VIEW ON THE UK Analysis by
Transcript of VIEW ON THE UK - Jupiter Fund Managementinfo.jupiteram.com/rs/652-DHL-807/images/View on the UK -...
ACTIVE FUND MANAGEMENT
On the planet to perform
JUPITERONLINE.COM
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
For UK professional audience only, not for retail investors.
March 2016
Wealth Manager Sentiment - March 2016
ACTIVE FUND MANAGEMENT
On the planet to perform
JUPITERONLINE.COM
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
VIEW ON THE UK
Analysis by
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
For UK professional audience only, not for retail investors.
2
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
UK STUDY | March 2016
This report is distributed by Jupiter Asset Management Limited which commissioned CoreData Research Ltd. to conduct independent primary research in accordance with the MRS Code of Conduct and the ICC/ESOMAR International Code of Marketing and Social Research Practice.
Any views expressed or findings are those of CoreData Research, not Jupiter.
This report is for information purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ContentsAbout this research paper 3
Introduction 4
The Jupiter Wealth Manager Index 5
Wealth manager UK sector outlook 6
Risk and volatility on the agenda 7
Many wealth managers concerned over dividends 8
Wealth manager views on factors influencing dividend payments 9
Conclusion 10
Commissioned by Jupiter and written by CoreData Research, this study includes primary research of over 150 wealth managers in the UK representing assets under management of more than £2 trillion. The report covers a range of issues facing the financial distribution market in the UK, including sentiment towards a number of sectors comprising the FTSE All-Share Index. It also canvasses opinion about specific issues currently affecting the UK, such as turbulence in both the banking sector and oil and mining sector.
In January-February 2016, CoreData Research surveyed 159 Discretionary Fund Managers (DFM), wealth managers and investment focused Financial Advisers (measured by total client assets managed). These groups represented the following in terms of their firm’s assets under management.
n 41% with less than £999m of assets under management
n 8% with between £1bn and £5bn
n 9% with between £5bn and £10bn
n 21% with between £10bn and £25bn
n 14% with between £25bn and £50bn
n 4% with between £50bn and £75bn
n 3% with over £75bn
Approximately 90% of the interviews were conducted online with 10% conducted over the phone or through face-to-face interviews to provide qualitative feedback.
About this research paper
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
For UK professional audience only, not for retail investors.
4
UK STUDY | March 2016
Introduction
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
1 Source: International Monetary Fund, January 2016 http://www.imf.org/external/pubs/ft/weo/2016/update/01/index.htm2Office for National Statistics, as at March 2016, http://www.ons.gov.uk/economy/grossdomesticproductgdp
The economy will be challenged due to a potential Brexit, which will lead to a lack of foreign direct investment, and because the Government will need to increase austerity now due to the economy faltering.
Wealth manager, managing assets between £100m - £250m
‘
Having ended 2015 as one of the fastest growing developed economies, the outlook for the UK was positive going into 2016 as low inflation, a strong housing market, record unemployment levels, a pick-up in wage growth and a willingness of consumers to spend, hinted at strong momentum and cause for optimism for both investors and consumers in the year ahead.
Figures from the International Monetary Fund in January 2016 placed the UK third in the list of major developed economies for projected 2016 GDP growth at 2.2%, behind Spain (2.7%) and the United States (2.6%).1
The UK economy grew by 0.5% in the three months to the end of December 2015; taking the annual rate of growth for 2015 to 2.2%, according to figures from the Office for National Statistics2. The figures showed an improvement of 0.4% on the third quarter as the economy continued to demonstrate its resilience in comparison to many of its global counterparts.
However internal and external threats remain. These threats are mixed and offer very real challenges for the UK’s economic outlook, all of which indicate exposure to the UK now provides less certainty than it did, particularly as no investment sector appears immune to the array of hazards.
EU referendum; the elephant in the roomThe EU referendum is a prominent risk factor to the UK’s growth outlook in 2016 and has polarised opinion in terms of both the decision and what the impact will be. With a date now set for 23 June, the outcome does hang over the UK economy, particularly in the event of an exit resolution. There are strong concerns among wealth managers that a vote to break away from the EU would result in foreign investors questioning their exposure to the UK economy and UK assets; this in turn could lead to an increase in bank funding costs which could be passed to UK consumers through tightening credit conditions. The potential negative impact on UK exporters and particularly the service industry is now being broadly debated; adding to the strong headwinds for the UK market until the vote passes.
Numerous headwinds continue to hit the UK economyWealth managers are wary of a maelstrom of headwinds set to hit the UK market on top of Britain possibly leaving the EU. These include weak global growth and geopolitical instability coupled with concerns over the oil price remaining low, dividend cuts across numerous sectors and the endless puzzle that is the banking sector.
20
2
Extremelypositive sentiment
-20Extremely
negative sentiment
The Jupiter Wealth Manager Index (JWMI) is a sentiment tracker of the UK wealth manager community based on the results of the research conducted by CoreData in January-February 2016.
The JWMI captures the outlook, attitudes and perspectives of the market and aggregates opinion by rolling-up the collective views managers have towards 10 key FTSE sectors, manifesting into a single and easy to digest rating.
The sentiment index is illustrated via a simple score card to show the general sentiment of UK wealth managers.
This score can span extreme negative sentiment (-20) to extreme positive sentiment (+20). For this to happen however would require all wealth managers to be in complete (and extreme) agreement across all sectors.
In reality, “managers” tend to be bullish in a handful of individual sectors and bearish on others, thus the score on the JWMI is most likely to oscillate somewhere between the low second quartile and high third quartile over time.
Today, wealth managers in the UK are mutedly positive on their outlook for the UK market for the first half of 2016.
According to the inaugural JWMI, these investment professionals exhibit ‘weak positive sentiment’ with a score of 2; on a scale that ranges from -20 to +20.
The JWMI is a single numerical score calculated from the arithmetic average of all UK sector sentiment scores. For the first half of 2016, the score is 2, an outlook rating score slightly above neutral, and suggesting weak positive sentiment among UK wealth managers. On average, across all sectors, wealth managers are expecting muted positive returns over the first half of 2016.
The Jupiter Wealth Manager Index
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
UK STUDY | March 2016
The Score Card16 to 20 Extremely positive sentiment12 to 16 Very strong positive sentiment
8 to 12 Strong positive sentiment
4 to 8 Medium positive sentiment
0 to 4 Weak positive sentiment
-4 to 0 Weak negative sentiment
-4 to -8 Medium negative sentiment
-8 to -12 Strong negative sentiment
-12 to -16 Very strong negative sentiment
-16 to -20 Extremely negative sentiment
The public sector is broken for the next 10 years or more. Economic growth will be slow for a while yet. However, the private sector is in a good position overall backed by low oil, rates and increasing consumer/retail spends. Brexit fears may peg investment spend which is likely to curb growth in the short term.
DFM, managing assets between £50m and £100m
‘
In terms of individual sectors, UK wealth managers have mixed views on the outlook across the market.
In some sectors, there is consensus, while in others the outlook is very broad indeed, spanning deep pessimism to strong optimism.
A breakout of sentiment by key individual sectors in the following chart reveals the expectations of wealth managers toward various sectors in the UK. This is measured on a scale where +5 indicates significant positive return expectation and -5 indicates significant negative returns outlook.
The vertical dark blue line reflects the average sentiment score for that sector, while the teal bar outlines the first to third quartile distribution, i.e. how close to the average 50% of wealth managers reside.
For both the oil and gas and financials sectors wealth managers are far from in agreement in terms of the prospects for these sectors with wealth managers broadly dispersed in their outlook.
Meanwhile, with consumer spending widely expected to deliver GDP growth in 2016, wealth managers cite this as the sector they feel will drive performance in the first half of the year. UK consumer spending has grown 2.5% faster than inflation for the past three years, according to PriceWaterhouseCoopers1 - buoyed by rising employment levels, low inflation and mortgage rates. The healthcare sector also continues to show its muscle with wealth managers recognising its classic defensive qualities as a safe investment option.
Consumer Services
Consumer Goods
Healthcare
Telecoms
Technology
Utilities
Financials
Industrials
Basic Materials
Oil and Gas
1.2
1.2
1.2
1.0
1.0
0.5
0.0
-0.3
-1.1
-0.8
Mean
Mean Negative Postive
RangeMin to Max 1st Q 3rd Q
1.2
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
For UK professional audience only, not for retail investors.
6
UK STUDY | March 2016
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
Wealth manager UK sector outlook
The horizontal orange line indicates to the full range of opinion among UK wealth managers (minimum to maximum). For example, for the consumer services sector the clustering (consensus) is very tight, and while some outliers pull the spectrum to the left and right (the orange horizontal line) the teal bar shows the range of answers for the 50% of wealth managers who sit closest to the median within each sector.
1 Source: PriceWaterHouseCoopers, UK Economic Outlook, November 2015
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
UK STUDY | March 2016
Risk and volatility on the agendaWith a number of headwinds to UK economic growth in 2016, many wealth managers are focusing on risk and volatility as the cornerstones of their portfolio construction over the next 12 months. This reflects the defensive footing and uncertainty they have about the current climate and how to asset allocate accordingly.
Wealth manager investment prioritiesQ. Please rank the following considerations in order of importance
when investing in 2016*
Wealth managers predict FTSE 100 instabilityQ. Approximately, how do you expect the FTSE 100 will perform from
now until the end of June 2016?After five years of extraordinary monetary policy between 2009 and 2014 driving equity markets north, the past couple of years have been less convincing with a number of sectors, such as oil and commodities, under pressure. This has created unease among wealth managers in their market outlook. Many wealth managers believe further market instability is to be expected, reinforcing the merit of adopting a stock picking approach. This reinforces the need for active management at a time when asset allocation is proving exceedingly difficult.
* Multi-ranking question. Ranks 1-3 shown only.
There appears to be two markets, the stock market and the street market. The stock market is irrational but on the street individuals are benefiting from lower food and oil prices, low inflation and wage increases. We are no longer in a market where everything moves one way and we will have to work in that environment.
DFM, managing assets between £25m and £50m
‘
Increase by more than 20%
Increase by 20%
Increase by 15%
Increase by 10%
Increase by 5%
No Change
Decrease by 5%
Decrease by 10%
Decrease by 15%
1%4%4%
26%10%
21%2%
4%
28%
Risk 84%Volatility 70%
Protection 47%Growth 44%Income 42%
Fees 14%
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
For UK professional audience only, not for retail investors.
8
UK STUDY | March 2016
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
Q. How concerned are you about the outlook for dividend returns from UK companies in 2016?
The falling oil price is one of the core causes of dividend concern among wealth managers and more broadly worries about the outlook for income in 2016. Along with miners and retailers, oil companies are one of the primary reasons why UK company dividends may fall for the first time in seven years.
The Capita UK Dividend Monitor1 says underlying dividends, excluding special dividends, are set to fall by 0.9% to £83.8bn in 2016 with some of the biggest companies having already slashed payments and yet more bad news expected. In late February, for example, BHP announced a 75% reduction in its dividend after posting its first loss in more than 15 years. Wealth managers are pressed to look harder than ever for UK dividends in 2016, whether that is moving away from stalwart companies – held by many of the larger UK income funds – and towards mid-cap dividend paying firms or towards other income generating asset classes.
1 Source: Capita, Capita UK Dividend Monitor, Issue 24 - January 2016, http://www.capitaassetservices.com/articles/q4-2015-dividend-monitor
Many wealth managers concerned over dividends
Some of the mega-caps are simply going to find it extremely hard in this environment not to cut dividends.
Wealth manager, managing assets between £50m and £100m‘
Not Concerned
Neutral
Very Concerned
9%
46%
45%
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
UK STUDY | March 2016
Those who are less concerned over dividend payments feel there is sufficient diversification, such as small and mid-size firms, which offer dividends, while also highlighting many potential dividend cuts are already factored into market prices.
A proportion of wealth managers believe they will need to be more creative in searching for income beyond the traditional stocks in the large cap sector.
Wealth manager views on factors influencing dividend payments
There is such a variety of companies that the outlook is likely to differ widely. UK PLC is in good health; big constituents in mining and oil for income are under pressure and are not likely to maintain those dividends. From our own investment perspective there are alternatives in smaller income funds.
DFM, managing assets between £100m and £250m
‘
UK STUDY | March 2016
Conclusion So far, 2016 is characterised by a broad range of factors bearing influence on the outlook for the UK economy. Wealth managers are generally confident that the country will muddle through but are positioning to operate from a flexible, defensive position should this not be the case.
This research paper tells us many wealth managers are looking to be as flexible as possible given the level of uncertainty that abounds in a bid to tackle a market that has been increasingly difficult for them to make confident asset allocation calls. External concerns such as weak global growth and geopolitical instability have added to internal fears over dividends, the banking sector, house prices and low productivity to create this uncertainty among wealth managers over the UK economy.
There is still confidence in the consumer-centric and healthcare sectors; however, there is a strong difference in opinion over commodity based sectors and financials, both of which contain some of the big dividend payers in the UK.
Wealth management professionals believe adaptability is likely to be the key to investing this year in a cycle favouring stock-pickers.
Despite low growth expectations, many wealth managers believe markets will trade around their current range, perhaps with some slight improvement, but bumps in the road are deemed inevitable. In a volatile global environment, wealth managers believe the UK still offers a lot of upside, including a strong services sector, wage growth and low unemployment.
According to the JWMI, wealth managers do not believe the outlook for the UK economy is gloomy, simply uncertain. The lack of certainty, and inability to find any area of the UK equity market that acts as a safe haven, continues to be a source of concern to wealth managers. Many are increasingly focusing on fund managers with a genuine ability to stock pick and add alpha, providing a key driver for potential outperformance in the future.
In this environment, wealth managers may benefit from the support of active, experienced fund managers with clear conviction who can invest in these uncertain times and help navigate through more uncertain UK sectors such as banking. For wealth managers, identifying UK funds that can deliver alpha despite the volatile backdrop will be key.
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
For UK professional audience only, not for retail investors.
10
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
This independent research, which is copyright Jupiter Asset Management Limited has been commissioned through Coredata Research Ltd. in accordance with the MRS code of conduct.
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
ACTIVE FUND MANAGEMENT
On the planet to perform
ON THE PLANET TO PERFORM
On the planet to perform
ACTIVE MANAGEMENT
On the planet to perform
11552
-04.
16
Important information:This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.
Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.
Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ are authorised and regulated by the Financial Conduct Authority.
No part of this document may be reproduced in any manner without the prior permission of JUTM and/or JAM.
Contact us
Please do not hesitate to contact us if you require more information or would like more information about our range of unit trusts please visit jupiteram.com
Or contact the Sales Team on 020 3817 1063
Email: [email protected]
For your security we may record or randomly monitor all telephone calls.
