Jupiter Global Value Equity: January 2025 Fund Update

• Brian McCormick has taken over management of this fund from Ben Whitmore and Dermot Murphy

• The fund’s value style and philosophy remains the same though the process will evolve under McCormick

• He has a relatively short track record having started investing in global companies in November 2022

• The fund does not currently feature on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

Jupiter Global Value Equity aims for long-term growth by investing in undervalued companies with recovery potential. That makes it different from many other global funds that focus on companies with high-growth expectations, and we think the two styles could complement each other in a broader investment portfolio. North American companies make up less of this fund than many other global funds, which means it could provide international diversification to an adventurous portfolio.

Manager

Brian McCormick took over management of this fund on 1 November 2024. This follows the departure of previous fund managers Ben Whitmore and Dermot Murphy, who have left Jupiter to set up their own investment boutique Brickwood Asset Management.

McCormick started his investment career in 2015 as an analyst for Stewart Investors and later became a deputy fund manager. Over this time, he was involved in analysing global and emerging and frontier market companies.

McCormick joined Jupiter in 2020 to work with Whitmore and Murphy on the Global Value Equity fund as an analyst. He started managing global funds in November 2022 and an offshore version of the Global Value Equity fund in March 2024. While this means he has some experience managing global funds using a similar value-focused investment approach, his track record remains short.

Alex Savvides is now also a co-manager of this fund after recently joining Jupiter from JO Hambro Capital Management. Savvides has over 20 years’ experience in the industry and previously managed the JO Hambro UK Dynamic fund since launch in 2008. Since joining Jupiter he has taken over the Jupiter UK Dynamic fund (previously named the Jupiter UK Special Situations fund). While Savvides has a longer track record, he has historically focused on UK companies and hasn’t managed a global fund before. Investing in global markets can be very different from investing in one region or country.

On the Jupiter Global Value Equity fund, Savvides is providing support to McCormick who is still early in his fund management career. He provides challenge to and shares ideas with McCormick.

Process

McCormick shares a similar investment philosophy with the fund’s previous managers. He believes that the highest returns come from buying shares with the lowest valuations. That’s why he hunts for companies whose share price, in his opinion, doesn’t reflect their true worth and so can be bought at an attractive price. The reason why they’re undervalued varies from company to company, but it can often be the result of poor management decisions, financial or wider industry pressures. It’s important to remember that this approach can take time to come to fruition though, so it requires patience.

Many of these shares are cheap for a reason and face a gloomy future, often referred to as ‘value traps’. McCormick aims to avoid these companies by buying quality companies. He has a preference to buy family run business and businesses with lower amounts of debt. He believes these companies have the most potential to recover rather than continuing to lose value.

McCormick has made some enhancements to the process since taking over. He places more emphasis on certain company characteristics such as the price to book ratio. This compares how much a company is worth on the stock market (its share price) with the value of its assets.

Similar to Whitmore and Murphy, McCormick then looks closely at the strength of the business and their financial health as well as potential catalysts for recovery. Companies that meet his quality criteria but are still not yet cheap enough go onto a watchlist. This helps him monitor these companies as he waits to see if they become cheap enough for him to buy in the future.

This research results in a fund of around 60-80 investments. Previously, Whitmore and Murphy invested in 35-55 investments, which meant it was more concentrated and increased risk.

McCormick plans to increase investments in North American and Latin American companies, whereas exposure to Europe and the UK will decrease. Overall, most of the fund will remain invested in developed markets but there will be some exposure to higher-risk emerging markets such as Brazil. The fund will continue to invest in small and medium sized businesses which can increase risk.

Prior to McCormick taking over, Whitmore and Murphy made some changes over the past year.

New investments include US healthcare company Envista which specialises in developing and manufacturing dental products. The managers also bought UK consumer company Reckitt Benckiser and Japanese consumer company Koito Manufacturing. They also sold a number of investments including Brazilian bank Banco do Brasil, US consumer company Ralph Lauren and UK oil and gas company Shell.

Culture

Jupiter is a well-known asset manager and part of the FTSE 250. Fund managers are given autonomy to invest the way they see fit, but with an appropriate level of challenge from others in the business. The business setup allows Whitmore and Murphy to focus purely on fund management and take a long-term view, which is important as their value style of investing often requires patience.

Fund managers at Jupiter are incentivised in line with the performance of their funds over various timeframes. We think this aligns their interests with those of investors and helps the managers to focus on delivering strong performance for clients.

We continue to monitor the culture at Jupiter after a number of senior management changes in recent years.

ESG integration

Jupiter’s approach to ESG (Environmental, Social and Governance) is fund manager led, so the fund managers themselves are responsible for implementing ESG in their investment decisions. They typically approach these issues with a materiality-based approach, meaning they focus on ESG risks most material to each company.

The firm also subscribes to several third-party data providers (including Sustainalytics, RepRisk, ISS and MSCI) which offer information that fund managers can use in their research. Where red flags are raised, the managers investigate. Fund managers work closely with central experts on ESG integration, engagement, and proxy voting and the fund managers’ commitment to these topics is a consideration in their annual appraisals.

We like that engagement is not delegated to a separate department. Instead, the fund manager who made the decision to invest in the company leads engagement activity directly, allowing more meaningful and relevant engagement. More information about the firm’s ESG policies and engagement case studies can be found in its annual Stewardship report.

The firm offers a small number of exclusions and sustainability-focused funds, including the longstanding Jupiter Ecology fund, and there is a controversial weapons exclusion applied to all Jupiter funds.

Investors should note that, of the 100 funds under research coverage, this is one of the most carbon intense. The companies within the fund may face increased scrutiny from investors and regulators, as well as higher costs associated with carbon emissions management and potential carbon pricing mechanisms, potentially impacting the fund’s performance.

While ESG considerations are integrated into the idea generation process, this fund is not an ESG focused fund. This means it might invest in stocks that could be considered ESG sinners.

Cost

The fund usually has an annual ongoing charge of 1.68%, but we’ve negotiated a 1.15% saving so it’s available to HL clients for 0.53%. The HL account charge of up to 0.45% per year also applies, except in the HL Junior ISA, where no account charge applies.

Performance

The fund has provided mixed returns since launch in March 2018. Over this period, the fund returned 52.60%* vs 116.53% for the MSCI AC World Index. The fund also didn’t perform as well as the average fund in the IA Global sector, which returned 84.44%. Remember, past performance isn’t a guide to future returns.

The fund’s performance partly depends on when the value style of investing is in or out of favour. Since the fund’s launch it has been out of favour for long periods of time. However, the fund has performed well when value investing has done well, such as in 2022.

Growth investing has also done better over the past year, which has been a headwind for the fund, which we expect. During this period, the fund returned -1.63% compared to 20.13% for the MSCI AC World Index and 12.49% for the IA Global sectors.

The fund’s investment in the German pharmaceutical company Bayer AG was one of the biggest detractors from returns. The pharmaceutical giant recently reported lacklustre results and expressed challenges that may impact future performance. US technology company Intel also hurt performance, as some investors believe it’s being left behind by competitors in semiconductor chip manufacturing. The company also cut its dividend. UK luxury brand Burberry and UK oil company BP also detracted from performance.

Some other investments performed well. Barclays, the UK bank, was the largest contributor to returns, benefiting from the higher interest rate environment in the UK. US technology company DocuSign and UK tobacco company Imperial Brands also added value.

Given that McCormick hasn’t managed the fund for most of this period, we don’t attribute this performance directly to him. Any future performance will be based on his own management. Broadly speaking, we expect the fund to do better when value investing is in favour, though the reverse is also true.

Given the manager has a short track record the fund doesn’t feature on the Wealth Shortlist.