- Jupiter Global Value Equity invests in companies its managers think trade at prices that do not reflect their value
- Co-manager Ben Whitmore has a record of doing this successfully
- The fund is positioned in areas that could benefit as lockdowns and restrictions are eased
The past decade has not been good for value-style investing – buying shares that appear to be trading at a price less than they are worth, in the hope that their price will eventually rise to reflect this. This trend has been exacerbated during the pandemic with growth stocks, such as tech companies, surging ahead while sectors affected by lockdowns and closures have struggled.
But if the pandemic can be brought under control as vaccines are deployed, sectors that have done badly could starte to recover. So it could make sense to have some exposure to a fund that taps into such areas and is positioned to take advantage of any recovery.
A good option could be Jupiter Global Value Equity (GB00BF5DRJ63) whose managers, Ben Whitmore and Dermot Murphy, invest in companies they think trade at prices that do not reflect their value. The fund only launched in 2018 so doesn’t have much of a track record. However, Mr Whitmore, who is head of strategy for value equities at Jupiter, has a much longer and successful record with funds such as Jupiter UK Special Situations (GB00B4KL9F89). This fund’s medium-term relative returns don’t look great when compared with the FTSE All-Share index, but its long-term returns are strong (see performance table).
Mr Whitmore is a highly experienced value investor who has been at Jupiter (JUP) since 2006 and before that Schroders (SDR), and has performed well even when value investing more generally has not. He has worked in investment since 1994.
But Jupiter Global Value Equity could be a better option than Jupiter UK Special Situations because it has a wider pool of opportunities. And the UK faces Brexit headwinds that might delay or negate a domestic economic recovery. With a global mandate, this fund’s managers are not compelled to hold stocks or areas with less potential, and can focus on ones that look as though they could generate strong, long-term returns.
At the end of February, the fund had 30 per cent of its assets in Europe ex UK, an area some analysts and professional investors believe could benefit from a strong growth rebound later this year. The fund has nearly as much in UK equities, which many analysts argue offer value. UK companies do not necessarily follow the fortunes of the UK economy and may be oversold.
Jupiter Global Value Equity’s 10 largest holdings include companies in sectors that have been negatively affected by lockdowns but could do better as lockdowns are eased. These include oil company BP (BP.) and aircraft manufacturer Airbus (FRA:AIR), which could benefit when travel resumes. The fund also holds luxury goods and clothing retailer Ralph Lauren (US:RL), which could see an increase in sales when people go out more.
When selecting stocks, Whitmore and Murphy weigh up the price they pay for a company’s shares against their view of the quality of its business, and assess the strength of its market position in comparison with its competitors, any recent or potential changes in its industry, and the company’s ability to turn profits into cash. They aim to invest in companies with potential to recover and do well in future.
Jupiter Global Value Equity could be a useful complement to a portfolio that already holds a global fund that invests via a growth investment style.
Its X share class can be bought for a relatively low ongoing charge of 0.53 per cent.
There is no guarantee that value stocks will do better in the near future or Jupiter Global Value Equity will do as well over the long term as Jupiter UK Special Situations. If you invest in a fund with a value investment style you should be prepared to wait for a long time – five years or more – for its holdings to recover or return to favour. It can take time for value equities’ prices to reflect their worth and may not happen at all, so you should only invest in this fund if you have a high risk appetite.
Jupiter Global Value Equity is likely to deliver a very different return profile to global equity indices and growth-focused active equity funds. For example, at the end of February only 12.5 per cent of its assets were invested in North America and 2.9 per cent in technology stocks. By contrast, the US accounted for two-thirds of MSCI World index at the end of February, and tech stocks 22 per cent. So at times, like in recent years, this fund could underperform MSCI World and other global equities funds.
Jupiter Global Value Equity is also relatively concentrated with only 38 holdings at the end of February. This increases risk because if a holding does not do well it will have a greater effect on the fund’s overall return than it would on that of a fund with a greater number of holdings.
However, Jupiter Global Value Equity could do relatively better when global equity indices and funds with different allocations are not doing well, perhaps mitigating their effect on a portfolio’s overall returns if held alongside them. It also looks well positioned to take advantage of stocks that could do well in the near future, as well as not being heavily exposed to ones that seem expensive and possibly vulnerable to a fall. Mr Whitmore also has a good record of getting things more right than wrong and, by having a concentrated number of holdings, the fund will benefit more from one doing well than a fund with a larger number of holdings would.
And while value-style investing is risky, Jupiter Global Value Equity’s focus on companies that are in good financial health, profitable and have a strong brand or franchise mitigates some of this risk.
So, if you are prepared to wait and have a high enough risk appetite to tolerate volatility, Jupiter Global Value Equity looks like a good way to take advantage of a recovery and make good long-term returns. Buy.
|Jupiter Global Value Equity (GB00BF5DRJ63)|
|IA sector||Global||Manager start date||27-Mar-18|
|Fund type||Unit trust||Ongoing charge||0.53%|
|No of holdings||38*||More details||jupiteram.com|
|Source: Morningstar as at 22 March 2021, *Jupiter.|
|Fund/benchmark||1-year total return (%)||3-year cumulative total return (%)||5-year cumulative total return (%)||10-year cumulative total return (%)|
|Jupiter Global Value Equity||55.01|
|MSCI World index||40.86||41.47||95.06||208.88|
|IA Global sector average||46.06||37.59||90.25||163.57|
|Jupiter UK Special Situations||50.42||8.36||36.34||126.43|
|FTSE All Share index||40.98||9.65||35.26||84.37|
|IA UK All Companies sector average||55.23||12.61||37.68||97.77|
|Source: FE Analytics, 19 March 2021.|
|Top 10 holdings (%)|
|Source: Jupiter, 28.02.2021|
|Geographic breakdown (%)|
|Europe ex UK||30.1|
|Asia Pacific ex Japan||3.9|
|Caribbean & Latin America||0.6|
|Source: Jupiter, 28.02.2021|
|Sector breakdown (%)|
|Oil & gas||4.2|
|Source: Jupiter, 28.02.2021|