Invesco European Equities Economic Realities & Political - - PowerPoint PPT Presentation
Invesco European Equities Economic Realities & Political Perceptions May 2017 Stephanie Butcher , Fund Manager, European Equities This document is for Professional Clients only and is not for consumer use. 10730/SR/Euro eqs/Apr17 UK1895
10730/SR/Euro eqs/Apr17 UK1895
This document is for Professional Clients only and is not for consumer use.
May 2017 Stephanie Butcher, Fund Manager, European Equities
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Past performance is not a guide to future returns. Source: Invesco Perpetual as at 30 April 2017. Fund performance figures are shown in GBP, inclusive of reinvested income, gross of the Ongoing Charge and net of portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Benchmark figures are total return, in GBP. *Stephanie Butcher took over management of the fund 1 December 2010. Please see net performance slide for the impact of the Ongoing Charge.
30.7 11.3 19.2 9.1 28.8 9.8 14.3 5.3 4 8 12 16 20 24 28 32 36 1 year 3 years 5 years Since Inception Invesco Perpetual European Equity Income Fund FTSE Europe ex UK Index Invesco Perpetual European Equity Income Fund Annualised returns, gross of fees in GBP (%) Investment approach Target investment horizon of around 2 to 3 years with flexibility to take advantage
Number of factors considered including
Active, valuation-led, bottom up investment approach with macro overlay Current Fund size £693m Fund managers Stephanie Butcher Current no. of holdings 54 Benchmark FTSE Europe ex UK. Flexibility to have off benchmark exposure Fund inception* 12 December 2007
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Source: Invesco Perpetual as at 31 March 2017. 1Also fulfil analyst role for the wider team.
Jeff Taylor
Head of European Equities Eurozone & Continental Europe
Stephanie Butcher
Pan European & Continental European Income
John Surplice
Pan European
Matthew Perowne1
Pan European Continental European Small Cap Continental European Opportunities
Adrian Bignell
European Small Cap Continental European Opportunities
Erik Esselink
Continental European Small Cap
Oliver Collin1
Eurozone Continental European Small Cap
Steve Smith
Trainee European Analyst
Fund Managers Analyst Nitesh Mistry
Product Director
Elias Elias
Product Manager
Joel Copp-Barton
Product Director
Product Directors Product Managers
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For illustrative purposes only.
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5 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Nov 10 Feb 12 May 13 Aug 14 Nov 15 Feb 17 Steady income generators Change in income perception Depressed earnings and/or valuation Cash & other
Source: Invesco Perpetual as at 31 March 2017. 1Based on the judgment of Stephanie Butcher and subject to change.
Invesco Perpetual European Equity Income Fund: Bucket analysis – segmenting the portfolio between steady income generators, change in income perception, depressed earnings and/or valuation1
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6 Key portfolio characteristics: Invesco Perpetual European Equity Income Fund Z Acc Metric Actual value Ranking2 Number in peer group2 5 year cumulative return, %1 125.52 1 77 5 year annualised sharpe ratio, x 1.26 18 77 5 year annualised information ratio, x 0.60 4 73 12m dividend yield %4 3.25 4 95 5 year upside capture ratio %3 104.22 5 year downside capture ratio %3 89.90 Past performance is not a guide to future returns.
Source: Lipper as at 30 April 2017. 1Performance figures are shown in sterling, inclusive of reinvested income and net of the Ongoing Charge and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Rankings as provided by Lipper on a equivalent basis with performance based on an equivalent basis. 2Rankings as provided by Lipper. Peer group used is IA Europe Excluding UK NR. Please see net performance slide included in this presentation for full performance data. 3Upside/downside capture ratios calculated from Morningstar as at 31 March 2017. Upside capture ratio: calculated by accumulating the portfolio returns for periods in which the benchmark returns were positive and dividing the total by the benchmark’s accumulated positive
returns for periods in which the benchmark returns were negative and dividing the total by the benchmark’s accumulated negative returns. A lower downside capture ratio may indicate better portfolio performance in down markets. Ranking based on IA OE Europe Excluding UK. 4Dividend yield is 12m trailing yield.
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Source: Invesco Perpetual as at 31 December 2016.
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Source: Citigroup Global Markets, Bloomberg, Invesco as at 30 April 2017. 1The Global Inflation and Economic Surprises Indices are defined as weighted historical standard deviations of data surprises – actual releases versus Bloomberg survey median. A positive reading suggests that the economic/inflation releases have on balance been better than the Bloomberg consensus and vice versa .
Citi Eurozone Inflation and Economic Surprises Index1
20 40 60 80
50 100 150 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Citi Economic Surprise Index Citi Inflation Surprise Index
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Source: Datastream, Morgan Stanley, Invesco as at 28 February 2017. The MSCI World and Europe Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 23 Developed Markets Countries. Variables include: long term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long term historical EPS and sales growth
across 23 Developed Market countries. Variables include: book value to price, 12-month forward earnings to price and dividend yield.
20 40 60 80 Dec 86 Nov 87 Oct 88 Sep 89 Aug 90 Jul 91 Jun 92 May 93 Apr 94 Mar 95 Feb 96 Jan 97 Dec 97 Nov 98 Oct 99 Sep 00 Aug 01 Jul 02 Jun 03 May 04 Apr 05 Mar 06 Feb 07 Jan 08 Dec 08 Nov 09 Oct 10 Sep 11 Aug 12 Jul 13 Jun 14 May 15 Apr 16 Mar 17 MSCI Europe: Value vs Growth MSCI World: Value vs Growth MSCI World and Europe: Rolling 10 year relative performance of value vs growth (%)
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10 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 Jan 90 Feb 91 Mar 92 Apr 93 May 94 Jun 95 Jul 96 Aug 97 Sep 98 Oct 99 Nov 00 Dec 01 Jan 03 Feb 04 Mar 05 Apr 06 May 07 Jun 08 Jul 09 Aug 10 Sep 11 Oct 12 Nov 13 Dec 14 Jan 16 Feb 17
Source: Bernstein, Invesco as at 30 April 2017. The composite value factor is constructed with equal weights for Price to Book, 12m FWD PE and Dividend Yield. It is long top quintile of stocks that are cheap on this basis and short bottom quintile of stocks that are expensive across the market. The universe is Top 300 stocks from MSCI Europe by market cap. Factors are rebalanced quarterly – last re-balancing 31 December 2016.
Composite value factor (Cheap/expensive): Price to Book (X)
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Source: Invesco Perpetual as at 31 March 2017.
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Source: Credit Suisse as at 4 April 2017, using all latest available data. 1As at 15 November 2016. 2As at 28 February 2017.
10 20 2011 2012 2013 2014 2016 Non-financial corporates Households
Euro Area Loans to the private sector (€ bn, flows, 3mma)2
93 94 95 96 97 98 99 100 101 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16
Euro Area Domestic demand1 (Feb 2008 = 100)
0% 1% 2% 1996 1999 2002 2005 2008 2011 2014 Euro Area Employment growth1 1% 2% 3% 4% 5% 6% 7% 8% 9% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Euro area US
Net investment, % GDP
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Source: Bloomberg, JPM Global Manufacturing PMI data as at 28 February 2017.
48.0 49.0 50.0 51.0 52.0 53.0 54.0 55.0 56.0 Dec 10 Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12 Apr 13 Aug 13 Dec 13 Apr 14 Aug 14 Dec 14 Apr 15 Aug 15 Dec 15 Apr 16 Aug 16 Dec 16 World business confidence in manufacturing Average Post Crisis PMI-Manufacturing: Global index
3mma
25 50 75 100 11 12 13 14 15 16 17 % of countries with monthly increase in the PMI index 3mma % countries posting an increase in PMI-manufacturing
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Source: Credit Suisse as at 16 March 2017. Data to 28 February 2017, thereafter Credit Suisse forecast. Oil price assumed is flat at US$54pb.
0.0 0.5 1.0 1.5 2.0 2.5 3.0 2012 2013 2014 2015 2016 2017 2018 Food Alcohol + Tobacco Energy Services Core goods Total Eurozone headline inflation components (%)
Credit Suisse forecasts
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Source: Barclays, Datastream, Invesco as at 31 March 2017.
0% 10% 20% 30% 40% 50% 30 35 40 45 50 55 60 65 Nov 97 Nov 98 Nov 99 Nov 00 Nov 01 Nov 02 Nov 03 Nov 04 Nov 05 Nov 06 Nov 07 Nov 08 Nov 09 Nov 10 Nov 11 Nov 12 Nov 13 Nov 14 Nov 15 Nov 16 Euro Area PMI manufacturing index advanced 6 months (LHS) MSCI Europe ex UK 12 mths trailing EPS growth YoY (RHS) Euro Area PMI manufacturing (advanced 6 months) versus MSCI Europe ex UK YoY EPS growth
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Source: MSCI, Morgan Stanley Research, Invesco as at 14 March 2017. Data based on a combination of reported results to end of Q3 2016 and forecast results for Q4 2016.
1 2 3 4 5
Industrials Healthcare Telcos. Materials Real Estate Utilities
IT Energy Financials MSCI Eurp. ex UK MSCI Europe ex UK 2016E EPS Waterfall: Contribution to YoY EPS change in 2016E versus 2015 (%)
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Source: Datastream, Invesco as at 31 March 2017. 112m fwd earnings shows net number of upgrades (downgrades) over total estimates on rolling three month basis.
0.02 0.04 0.06 0.08 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Energy relative to MSCI Europe ex UK: Earnings revision ratio1
0.02 0.04 0.06 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Banks relative to MSCI Europe ex UK: Earnings revision ratio1
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Source: Left Hand Chart: MSCI, Factset Estimates, Morgan Stanley Research, Invesco as at 10 April 2017. *Data only includes stocks which report quarterly and where EPS data is available for all 16 quarters between 1Q13 and 4Q16. Total number of companies = 167. Right Hand Chart: MSCI, Morgan Stanley Research as at 10 April 2017.
MSCI Europe ex UK Quarterly earnings (based on companies reporting quarterly*): YoY change %
5 10 15 20 25 30 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 2 4 6 8 10 12 Financials
Energy
Industrials Materials Healthcare IT Real Estate Utilities Telcos. MSCI Europe ex UK MSCI Europe ex UK 2017E EPS Waterfall: Contribution to YoY EPS change in 2017E versus 2016E (%)
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0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Jan 98 Sep 98 May 99 Jan 00 Sep 00 May 01 Jan 02 Sep 02 May 03 Jan 04 Sep 04 May 05 Jan 06 Sep 06 May 07 Jan 08 Sep 08 May 09 Jan 10 Sep 10 May 11 Jan 12 Sep 12 May 13 Jan 14 Sep 14 May 15 Jan 16 Sep 16 US Equity Risk Premium (%) Europe ex UK Equity Risk Premium (%)
Source: Bernstein as at 30 April 2017. Equity Risk Premium is defined as the 10 year average nominal earnings yield from MSCI Europe ex UK/MSCI US minus market cap weighted 10 year real bond yield for Europe ex UK countries.
European Equity Risk Premium is still close to crisis highs
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Source: Invesco Perpetual as at 9 May 2017.
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Source: UBS, Thomson Datastream as at 16 March 2017. *Thomson Datastream indices used for trailing DY data until 2004 and IBES MSCI Indices from 2004 for forward DY. German 3m rates are 18 year data and US 3m rates, AA and A corporate bond yields are 15 year data.
3.7 2.1 1.1 0.8 0.4 2.5
0.72
0.0 1.0 2.0 3.0 4.0 5.0 6.0 European div yield US div yield A € corp bond yield AA € corp bond yield German 10y Bund US 10yr bond yield German 3m FIBOR US 3m rates Current (%) 30 yr average* (%)
Equities Government Bonds Corp Bonds Money Markets
European Equities dividend yield compares favourably with other regions and asset classes
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Past performance is not a guide to future returns. Source: UBS European Equity Strategy, Datastream using MSCI data as at 28 February 2017.
European payout ratio 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Europe Payout ratio Ex-Energy
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Source: Goldman Sachs as at 31 December 2016. Based on Goldman Sachs own US and Europe ex UK universe.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Indexed interest expense Indexed Total Debt (2007 = 100) Aggregate for European coverage (ex-UK and ex- financials) 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 80 100 120 140 160 180 200 220 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Debt, Interest Expense (index=100 in 2007)
Indexed Total Debt Indexed Interest Expense Aggregate for North America coverage (ex-financials)
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Source LHC: UBS as at 13 March 2017. RHC: Datastream, Invesco as at 28 February 2017.
0.5 0.6 0.7 0.8 0.9 1.0 1.1 Dec 74 Dec 77 Dec 80 Dec 83 Dec 86 Dec 89 Dec 92 Dec 95 Dec 98 Dec 01 Dec 04 Dec 07 Dec 10 Dec 13 Dec 16 Europe/US Price to Book relative (x) Average European valuation relative to US
100,000 150,000 200,000 250,000 Dec 15 Mar 16 Jun 16 Aug 16 Nov 16 Feb 17 US Equities EMEA Equities (rhs) US v Europe Equity Cumulative Flows (US and European ETF net flows $m)
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5 10 15 20 25 10 20 30 40 50
10-year subsequent total return CAGR (%) MSCI Europe Cyclically Adjusted PE (x)
Current MSCI Europe Cyclically Adjusted PE of 17.5x R2 = 0.74 MSCI Europe: Historic starting CAPE and subsequent 10 year following compound returns
Past performance is not a guide to future returns. Source: Left hand chart: Citi, Thomson Datastream as at 31 March 2017. Each square/data point on the chart (monthly frequency) maps the starting cyclically adjusted PE ratio from 31 December 1979 to 31 March 2007 (based on ten years average historic earnings with the underlying data starting from 31 December 1969) to the subsequent ten year total nominal return up until 31 March 2017 (expressed as an average annual nominal growth rate and based on historic data). Through regression analysis a line of best fit is calculated, based on the two data sets that make up each square (all historic data). Right hand chart: ASR, World Bank, OECD as at 1 May 2014. Annual data used: country data based on MSCI indices with both GDP and equity returns deflated by OECD CPI. Germany France Netherlands Belgium Austria Italy Spain Norway Sweden Switzerland Denmark UK US Japan Canada Finland Portugal Ireland Greece
y = -0.0448x + 4.4497 R² = 0.0002
2 4 6 8 10 12
1 2 3 4 5 6
Real equity return (%) Real GDP growth (%)
Selected countries historic real GDP growth and real equity returns 1974-2012
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0.0 0.5 1.0 1.5 2.0 Value Growth Median Current Portfolio Tilt Relative to FTSE Europe ex UK (Style SkylineT M )
Past performance is not a guide to future returns. Source: Style Research, Invesco as at 30 April 2017. The chart shows how the fund is positioned or “tilted” relative to FTSE Europe ex UK – maximum, minimum and median values are provided. Based on the standard default setting as provided by Style Research. For “value” six factors are included and equally weighted: Book to Price, Dividend yield, Earnings yield, Cashflow yield, Sales to Price and EBITDA to price (all historic). For “growth” six factors are included and equally weighted: Return on Equity, Earnings Growth,Income/Sales, Sales Growth, IBES 12mths Forward Earnings Growth and IBES Full Year 1 Earnings Revisions. Typically, Style Research provide the following guidelines: Any tilt between -0.5 and +0.5 are probably not significant, any tilt less than -0.5 or more than +0.5 indicate a tilt exists but many not be significant, and tilt less than -1 or more than +1 are significant and less than -2 or more than +2 are very significant.
Invesco Perpetual European Equity Income Fund ‘Value’ & ‘Growth tilts: Minimum/maximum range, median and current values 5 years to 30 April 2017
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Source: Morgan Stanley as at 16 January 2017. Based on data to 30 Nov 2016 from Morgan Stanley quants team which tracks monthly long-short returns of European stocks based on the equal-weighted dollar returns of the top / bottom quintiles of stocks based on different
100 200 300 400 500 600 700 Nov 96 Nov 00 Nov 04 Nov 08 Nov 12 Nov 16 Long-Short Factor Return - cumulative FCF Yield Div Yield N12M PE PBV The superiority of FCF yield factor returns started from 2007 onwards – before this it did not
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Source: Invesco Perpetual as at 30 April 2017.
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0.0 0.1 0.2 0.3 0.4 Health Care Food & Bev Utilities Real Estate Pers & H/H Gds Telecom Retail Financial Svs Travel & Leis Media Oil & Gas Chemicals Auto & Parts Technology Basic Resource Inds Gds & Svs Con & Mat Insurance Banks Correlation to changes in German 10Yr bond yield when Yields < 5%
Source: UBS European Equity Strategy as at 29 February 2016. *Sensitivity using weekly returns based on a Datastream Index, Europe excluding emerging markets, relative performance of the sector against the market over all periods when bond yields are below 5% and the correlation of that time series to the bond yield, since 1 January 1980.
Cyclical/Value sectors typically performed best*
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Source: Morgan Stanley, MSCI and Invesco as at 30 April 2017. Based on Morgan Stanley / MSCI stock level data to 31 December 2016 combining current PBV – current and trailing - and 40yr percentile columns. Ranked and grouped according to 40yr percentile (eg. Banks have only been cheaper 25% of the time over the past 40 years). PBV = Price to Book Value. This is not financial advice and not a recommendation to buy/hold/sell these securities. There is no guarantee that Invesco will keep these securities in its funds in the future.
Sector Rank Current PBV Trailing PBV 40yr Median 40yr percentile Food & Staples Retailing 1.7 2.4 7 Technology Hardware & Equipment 1.6 2.3 16 Insurance 1.1 2.0 17 Diversified Financials 1.1 1.5 24 Banks 0.9 1.2 25 Energy 1.2 1.5 31 Media 2.6 2.9 41 Real Estate 1.1 1.0 54 Automobiles & Components 1.3 1.2 55 Telecommunication Services 1.6 1.6 56 Software & Services 4.2 4.0 56 Pharmaceuticals, Biotech & Life Sciences 3.9 3.1 60 Utilities 1.7 1.4 67 Health Care Equipment & Services 3.4 2.9 74 Food, Beverage & Tobacco 4.0 2.9 79 Semiconductors & Equipment 4.1 2.6 82 Household & Personal Products 5.4 3.6 82 Retailing 3.8 2.7 82 Materials 2.0 1.7 84 Consumer Services 3.9 1.9 87 Transportation 2.4 1.8 87 Commercial & Professional Services 6.3 3.4 92 Consumer Durables & Apparel 3.6 2.2 97 Capital Goods 3.2 2.0 98
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Source: LHC – 1Exane BNP Paribas, Thomson Datastream, Invesco as at 31 March 2017. Data based on Thomson Reuters Datastream complied index, Europe ex- Emerging Markets, with peak market earnings as at 31 October 2007. Current earnings as at 31 March 2017. All based on 12 month trailing earnings and on Euro basis Source: Right-hand table – 2Thomson Datastream, Invesco as at 31 March 2017. Data based on Thomson Datastream Indices. All underlying nominal earnings data starts from 31 January 1973, with the long term cyclically adjusted P/E starting from 31 January 1983. Cyclically adjusted P/E is based on 10 year average nominal earnings. Current cyclically adjusted P/E is as at 31 March 2017.
European market and sectors: current and long term average cycle adjusted P/E (x)2
Current cycle
Long term average cycle adjusted P/E (x) (Discount) /Premium
Consumer Goods 25.6 16.7 54% Industrials 24.1 21.1 15% Healthcare 28.2 26.0 8% Technology 33.9 32.3 5% Basic Materials 17.3 17.8
Consumer Services 21.8 24.3
Telecoms 15.4 23.0
Oil & Gas 11.4 17.9
Financials 12.5 20.3
Utilities 12.1 20.1
0% 30% 60% 90% Oil & Gas Financials Utilities Basic Materials Telecoms Market Technology Consumer Services Industrials Healthcare Consumer Goods Europe (excluding emerging markets): Current earnings versus peak market earnings at 31 October 2007 (%)1
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Source: Invesco Perpetual as at 30 April 2017. 1Relative to FTSE Europe ex UK.
Sectors Fund Index Oil & Gas 11.45 4.35 Telecommunications 8.64 3.68 Financials 26.37 22.67 Industrials 18.94 15.34 Consumer Services 6.87 5.02 Technology 5.28 4.65 Utilities 1.90 3.54 Basic Materials 5.58 8.42 Health Care 9.79 13.12 Consumer Goods 4.26 19.22 32
0.6 1.9 3.6 3.7 5.0 7.1
10 Cons Goods Health Care Basic Materials Utilities Technology Cons Services Industrials Financials Telecoms Oil & Gas Active sector weight
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Source: DNB, Invesco as at 22 December 2016. (1) Includes crude, condensate and NGLs. (2) Based on average 4% annual decline 2014/2015. (3) 347 projects – Source: Rystad Energy (4) Source: Energy Aspects (5) As calculated by DNB (6) As assumed by DNB. Current shale production approximately 4m bd. For illustrative purposes only.
99.5 9.7 5.6 3.9 3.5 96.2 80 82 84 86 88 90 92 94 96 98 100 Global Supply 2015 (1) Net decline rate of 4% per annum to 2020 (2) Sanctioned Non-OPEC projects (3) OPEC projects (4) Required new shale oil to balance (5) World demand by 2020 (1 mbd per annum to 2020) (6) kbd
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Source: Datastream, Bernstein as at 10 March 2017. All estimates as provided by Bernstein. For illustrative purposes only.
20 40 60 80 100 120 140 160 Jan 90 Jan 91 Jan 92 Jan 93 Jan 94 Jan 95 Jan 96 Jan 97 Jan 98 Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 US$/bbl Brent Marginal Cost of Supply Estimated Price of Demand Destruction Estimated Marginal Cash Cost Brent oil price per barrel versus marginal cost of supply, estimated marginal cash cost and estimated price of demand destruction (USD$)
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Source: Datastream, Morgan Stanley, Invesco Perpetual as at 28 February 2017. *Based on the constituents of MSCI Europe ex UK Integrated Oil & Gas companies – ENI, GALP, OMV, Repsol, Statoil and Total (GICS Sub Industries classification) and aggregating individual company bottom up forecasts as provided by Datastream. Free Cash Flow formula = (12mths Forward CPS * no of shares (IBES)) minus 12mths Forward Capex = Free Cash Flow. Dividends formula = 12mths Forward DPS * no of shares (IBES).
30 50 70 90 110 130 150
4 9 14 Mar 07 Jul 07 Nov 07 Mar 08 Jul 08 Nov 08 Mar 09 Jul 09 Nov 09 Mar 10 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12 Nov 12 Mar 13 Jul 13 Nov 13 Mar 14 Jul 14 Nov 14 Mar 15 Jul 15 Nov 15 Mar 16 Jul 16 Nov 16 Mar 17 Free CashFlow minus Cash Dividends ($bn, LHS) Crude Oil Brent USD$ per barrel 12mths forward consensus Free Cash Flow minus dividends for Integrated Oil and Gas companies* (as compiled by Invesco, USD$ bn)
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Source: Factset, Datstream banks index 1990-2003, 2004 onwards based on company data as compiled by Autonomous Research, including share buy-backs to 31 December 2015, thereafter Autonomous Research estimates.
0% 1% 2% 3% 4% 5% 6% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E Long Term Average dividend yield = 3.5% Current dividend yields on banks above long term average
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Source: MSCI, Factset, IBES, Bernstein analysis as at 28 February 2017. Data is based on Bernstein’s own compiled Pan European banking index. ROE and Price to Book data are 12m trailing. Current is as at 28 February 2017.
European banks: Price to Book versus Return on Equity 2 4 6 8 10 12 14 16 18 20 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Dec 87 Dec 90 Dec 93 Dec 96 Dec 99 Dec 02 Dec 05 Dec 08 Dec 11 Dec 14 % Ratio (x) Europe Banks Price to Book (LHS) Europe Banks ROE (RHS) y = 0.1465x - 0.085 R² = 0.6155 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 5.0 10.0 15.0 20.0 Price to book (x) ROE (%) Current Regression analysis and R2 of European Banks Price to Book and Return on Equity
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Source: Left hand table: RBC, based on latest individual bank results as at 16 March 2017. *Q4 ‘16 pro forma for capital raise. 1Q4 '07 data from Bloomberg, 2Tier 1 capital ratio, core ratio not available, 3Q4 ‘07 for “la Caixa Group”, Q4 ‘16 pro forma for purchase of BPI. For illustrative purposes only. Right hand chart: 4ECB, Deutsche Bank as at 31 January 2017 (latest available).
Liquidity Coverage Ratio1 Core equity tier 1 capital ratios under Basel II in 2007 – v- the latest available under stricter Basel III Bank Q2 2007 Basel II Q4 2016 Basel III Bankinter1 5.3 11.2 Barclays 5.3 12.4 BBVA 6.2 10.9 BNP Paribas 6.1 11.5 CaixaBank3 10.1 11.2 Credit Suisse 11.6 11.6 Danske Bank 5.4 15.9 Deutsche Bank* 7 14.1 ING 7.5 14.2 Intesa Sanpaolo 7.2 12.9 Lloyds 7.2 13.8 Nordea2 7.1 18.4 RBS 6.4 13.4 Santander 6.3 10.6 Societe Generale 6.4 11.5 UBS 10.8 13.8 Unicredit* 6.1 11.2 105% 110% 115% 120% 125% 130% 135% 140% 145% Jan 08 Oct 09 Jul 11 Apr 13 Jan 15 Oct 16 Euro area banks loan to deposit ratio (HH + NFC) Euro Area Banks Loan to Deposit ratio4
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Source: Left hand chart: Bank of America Merrill Lynch, Invesco as at 31 March 2017. Includes latest available quarter. Right hand chart: Bloomberg, Bank of America Merrill Lynch, Invesco as at 31 March 2017. For illustrative purposes only.
Orange– YoY organic revenue & EBITDA growth
0.0% 2.0% 4.0% 6.0% 8.0% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Group revenues France revenues Spain revenues Group EBITDA 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Jan 07 Aug 07 Mar 08 Oct 08 May 09 Dec 09 Jul 10 Feb 11 Sep 11 Apr 12 Nov 12 Jun 13 Jan 14 Aug 14 Mar 15 Oct 15 May 16 Dec 16 Orange EV/EBITDA 1 yr forward (x) Stoxx Europe 600 Telcos sector EV/EBITDA 1 yr forward (x) Orange and Stoxx Europe 600 Telcos Sector EV/EBITDA 1 year forward (x)
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Source: Invesco Perpetual as at 30 April 2017. Fund performance figures are shown in GBP, inclusive of reinvested income, gross of the Ongoing Charge and net
12 December 2007. Stephanie Butcher took over management of the fund 1 December 2010. Please see net performance slide for the impact of the Ongoing Charge.
Annualised returns YTD 6 months 1 year 3 years 5 years Since inception* IP European Equity Income Fund 6.85 10.59 30.70 11.26 19.20 9.15 FTSE Europe Ex UK 8.51 9.57 28.80 9.82 14.26 5.29 Out/underperformance
+1.02 +1.90 +1.44 +4.94 +3.86 Past performance is not a guide to future returns. Calendar year 2016 2015 2014 2013 2012 2011 2010 2009 2008 IP European Equity Income Fund 22.44 7.57 2.28 43.20 20.45
4.38 12.31
FTSE Europe Ex UK 19.70 5.35 0.16 25.19 17.82
5.75 20.09
Out/underperformance +2.74 +2.22 +2.12 +18.01 +2.63 +4.02
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Source: Lipper as at 30 April 2017. Launch date 12 December 2007. Stephanie Butcher took over management of the fund 1 December 2010. Fund performance figures are based on the Z (accumulation) share class. As this was launched on 12 November 2012, for the periods prior to this launch date, performance figures are based on the accumulation share class, without any adjustment for fees. Performance figures for all share classes can be found in the relevant Key Investor Information Document. Fund performance are shown in sterling, inclusive of reinvested income and net of the Ongoing Charge and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Sector average performance is calculated on an equivalent basis. Benchmark and other index information source: Thomson Datastream, total return, in sterling. 1Periods of less than one year are cumulative.
Annualised returns1 YTD 6 months 1 year 3 years 5 years Since inception* IP European Equity Income Fund 6.52 10.07 29.49 9.98 17.65 7.34 IA Europe ex UK NR 8.27 8.75 26.45 10.20 14.14 10.07 FTSE World Europe ex UK 8.51 9..57 28.80 9.82 14.26 5.59 Quartile 4 2 1 3 1 2 Past performance is not a guide to future returns. Calendar year 2016 2015 2014 2013 2012 2011 2010 2009 2008 IP European Equity Income Fund 21.30 6.22 1.01 41.39 18.01
2.25 9.96
IA Europe ex UK NR 16.84 9.29
26.00 19.16
8.51 19.53
FTSE World Europe Ex UK 19.70 5.35 0.16 25.19 17.82
5.75 20.09
Quartile 1 4 2 1 3 1 4 4 1
10730/SR/Euro eqs/Apr17 UK1895
44 Attribution by sector Portfolio Weight (%) BM Weight (%) Total Attrib (%) Top sectors Oil & Gas 11.05 4.24 2.07 Industrials 17.71 14.77 0.76 Basic Materials 4.30 8.02 0.42 Bottom Sectors Technology 4.23 4.52
Financials 27.92 21.29
Health Care 11.09 13.67 0.00
Source: Invesco Perpetual to 31 December 2016. The average weights and attribution figures are estimates and should be used for indicative purposes only. Data cleansing and retrospective information availability may cause changes. Holdings may change without notice. BM = FTSE World Europe Ex UK.
Attribution by stock Portfolio Weight (%) BM Weight (%) Total Attrib (%) Top stocks Royal Dutch Shell 3.02 0.00 0.92 Statoil 2.44 0.28 0.74 AP Moller-Maersk 2.49 0.27 0.67 Bottom stocks Credit Suisse 0.89 0.51
Nokia 2.43 0.57
Ageas 1.01 0.14
10730/SR/Euro eqs/Apr17 UK1895
45 Attribution by sector Portfolio Weight (%) BM Weight (%) Total Attrib (%) Top sectors Financials 26.27 22.48 0.51 Technology 5.52 4.57 0.05 Utilities 1.73 3.56 0.04 Bottom Sectors Oil & Gas 11.44 4.51
Industrials 17.93 14.98
Health Care 8.72 13.13
Source: Invesco Perpetual to 30 April 2017. The average weights and attribution figures are estimates and should be used for indicative purposes only. Data cleansing and retrospective information availability may cause changes. Holdings may change without notice. BM = FTSE World Europe Ex UK.
Attribution by stock Portfolio Weight (%) BM Weight (%) Total Attrib (%) Top stocks Caixabank 2.97 0.22 0.58 Philips Lighting 0.68 0.00 0.14 Airbus 1.76 0.67 0.12 Bottom stocks Statoil 2.21 0.29
Royal Dutch Shell 2.45 0.00
Orange 3.04 0.50
10730/SR/Euro eqs/Apr17 UK1895
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5 10 Oil & Gas Telecoms Financials Health Care
12 months ago 3 months ago Current IP European Equity Income Fund active sector weighting relative to FTSE Europe ex UK Index %
Source: Invesco Perpetual as at 30 April 2017.
10730/SR/Euro eqs/Apr17 UK1895
47 Stock Sector % in fund 12 months forward dividend yield%1 Novartis Health Care 4.20 3.8 Roche Health Care 4.04 3.3 CaixaBank Financials 3.02 3.5 ING Financials 3.01 4.7 BNP Paribas Financials 3.01 4.5 Orange Telecoms 2.91 4.7 Ahold Delhaize Consumer Goods 2.81 3.4 Total Oil & Gas 2.49 4.8 Intesa Sanpaolo Financials 2.49 7.4 Siemens Industrials 2.45 3.0
Source: Invesco Perpetual as at 30 April 2017. 1Bloomberg on a 12-month forward basis as at 30 April 2017. The dividend yield for each company is based on the consensus dividend per share estimates on a forward 12-month basis divided by the previous day closing price multiplied by 100.
10730/SR/Euro eqs/Apr17 UK1895
Source: Invesco Perpetual as at 30 April 2017. 1Relative to FTSE Europe ex UK.
Sectors Fund Index Oil & Gas 11.45 4.35 Telecommunications 8.64 3.68 Financials 26.37 22.67 Industrials 18.94 15.34 Consumer Services 6.87 5.02 Technology 5.28 4.65 Utilities 1.90 3.54 Basic Materials 5.58 8.42 Health Care 9.79 13.12 Consumer Goods 4.26 19.22 48
0.6 1.9 3.6 3.7 5.0 7.1
10 Cons Goods Health Care Basic Materials Utilities Technology Cons Services Industrials Financials Telecoms Oil & Gas Active sector weight
10730/SR/Euro eqs/Apr17 UK1895
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Past performance is not a guide to future returns. Source: Style Research, Invesco as at 30 April 2017. The maximum, minimum and median values are provided. Ex Ante Tracking error is an estimate of the expected relative volatility of the portfolio versus the FTSE Europe ex UK and is expressed as an annualised percentage. *Rolling 5 year Ex Post tracking error as provided by Lipper. Based on Invesco Perpetual European Equity Income Z Accumulation share class relative to FTSE World Europe ex UK TR GBP index. Active share is calculated using the formula (1- coverage.) Coverage is defined as the lower of the % weight in the portfolio and the % weight in the benchmark.
1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Ex Ante Tracking Error Ex Post Tracking Error (rolling 5 year basis)* Median Current Range of values (%) Ex Ante Tracking Error & Ex Post Tracking Error: Minimum/Maximum range, median and current values 1 May 2012 to 30 April 2017 period 65.0 70.0 75.0 80.0 85.0 Active share Median Current Range of values (%) Active Share: Minimum/Maximum range, median & current values 1 May 2012 to 30 April 2017 period
10730/SR/Euro eqs/Apr17 UK1895
This document is for Professional Clients only and is not for consumer use. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Past performance is not a guide to future returns. Where Stephanie Butcher has expressed opinions, they are based
Perpetual investment professionals. Where securities are mentioned in this document they do not necessarily represent a specific portfolio holding and do not constitute a recommendation to purchase, hold or sell. The fund may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing and/or generate additional capital or income, although this may not be achieved. The use of such complex instruments may result in greater fluctuations of the value of the fund. The Manager, however, will ensure that the use of derivatives within the fund does not materially alter the overall risk profile of the fund. For the most up to date information on our funds, please refer to the relevant fund and share class-specific Key Investor Information Documents, the Supplementary Information Document, the Annual or Interim Short Reports and the Prospectus, which are available using the contact details shown. 50
Invesco Perpetual is a business name of Invesco Fund Managers Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxon, RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.