Income: Clarity, Relevance and Solutions

Stuart Podmore

Head of Strategic Alliances and Academy Sales

January 2013

For Professional Clients only – not for use by or distribution to retail investors

Investment challenges: Clarity, Relevance, Solutions

Starved for income: Low yields on traditional fixed income and cash necessitate a more diverse approach to generating income.

A new era for bond investing: With interest rates in many countries at historic lows, fixed income investors must adopt a more sophisticated, flexible approach to buying bonds.

Invest in companies, not economies: Investor attitudes have caused many to miss the opportunities presented by healthy companies.

Diversification works: A well-balanced investor might have earned 100% over the most recent ten years despite a tumultuous market.

Why do ‘rejectors’ reject?

Free information deters advice Q: Why have you never used a professional financial adviser? (open response)

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Source: J.P. Morgan Asset Management/Ledbury Research. Base: All who have never used a professional financial adviser (498).

39%

26%

10%

8%

8%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Can get all the information I need myself for free

Never thought about it/never had the need to

Don't have sufficient savings to require advice

Deterred by cost of advice

Don’t trust the quality of advice available

% of non-users of financial advice

Uncertainty has been a tax on the global economy… but for investors, uncertainty equals opportunity.

If it were just about information, it would be simple…

EURO

DEBT

OIL TAXES

CHINA

IRAN ?

When you wait for certainty, you miss opportunity

S&P 500 Index

Dec 08 Dec 09 Dec 10 Dec 11

800

1,000

1,200

1,400

1,600

25-Nov, 2008: TALF

11-Mar, 2011: Japan tsunami

5-Aug, 2011: US downgraded by

S&P

27-Apr, 2009: S&P downgrades Greek

debt

15-Sep, 2008: Lehman

3-Oct, 2008: TARP

20-Apr, 2010: Gulf oil spill

Feb-27: Chile

earthquake

21-Nov, 2010: EFSF package for

Ireland

Jul-21: Dodd-Frank law

signed

9-Mar, 2009: Market low

6-May, 2010: “Flash crash”

25-Jan, 2011: Egyptian revolution

begins

2-May, 2011: Bin Laden killed

23-Aug, 2011: Gaddafi overthrown

31-Oct, 2011: Kim Kardashian files for

divorce

15-Feb, 2012: unemployment hits

17-yr high in UK

6-May, 2012: Anti-austerity party in

Greece wins

9-Jun, 2012: $125 bn for Spanish banks

30-Sep, 2012: US loses Ryder Cup to

Europe

26-Oct, 2012: Super-storm Sandy

20-Aug, 2011: Kim Kardashian marries Chris Humphreys

26-Jul, 2012: Draghi bumble-bee speech

QE, MEP, Twist, etc.

Source: Standard & Poor’s, www.historyorb.com, J.P. Morgan Asset Management

How investors see the economy shapes the way they invest

My home value is down

The unemployment rate is high

Petrol prices are high

There is too much debt

I don’t want to invest!

What’s on clients’ minds?

Dominant financial planning concerns and aspirations Percentage ‘concerned’ or ‘very concerned’ about the following financial planning issues

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Source: J.P. Morgan Asset Management/Ledbury Research. Base: All respondents (2,028).

39%

31%

26%

18%

10%

11%

10%

7%

39%

44%

45%

37%

29%

20%

14%

14%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Enjoying a comfortable retirement

Getting a decent return on savings

Making the most of my investments

Tax paid on savings & investments

Getting the right insurance/protection

Paying off the mortgage

Affording a good education for my children

Managing debt

Very concerned Concerned

8

9

Handsome yields and low volatility

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Emerging Markets Income…

Source: ZHEJIANG, China (REUTERS) - A road was built around a solitary house in China after an elderly couple refused to sign an agreement to allow their house to be demolished. They say that compensation offered is not enough to cover rebuilding costs, according to local media. Their house is the only building left standing on the road, which was paved through their village.

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Helping you meet these Investment challenges for your clients

Starved for income: Low yields on traditional fixed income and cash necessitate a more diverse approach to generating income.

A new era for bond investing: With interest rates in many countries at historic lows, fixed income investors must adopt a more sophisticated, flexible approach to buying bonds.

Invest in companies, not economies: Investor attitudes have caused many to miss the opportunities presented by healthy companies.

Diversification works: A well-balanced investor might have earned 100% over the most recent ten years despite a tumultuous market.

Client understanding, expertise and knowledge, with a strong focus on income, retirement planning, investments and taxation.

J.P. Morgan Asset Management

For Professional Clients only – not for Retail use or distribution.

This document has been produced for information purposes only and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P.Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. Both past performance and yield may not be a reliable guide to future performance and you should be aware that the value of securities and any income arising from them may fluctuate in accordance with market conditions. There is no guarantee that any forecast made will come to pass.

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Stuart Podmore, Head of Strategic Alliances and UK Academy Sales +44 (0) 20 7742 9413 stuart.g.podmore@jpmorgan.com