Talking Factsheet
Jupiter Origin Global Smaller Companies Active UCITS ETF
Tarlock Randhawa discusses the Jupiter Origin Global Smaller Companies Active ETF.
What kind of global smaller companies do you look to invest in?
Well, we're looking to identify some of the most successful and profitable businesses in the global small cap space and invest in those businesses for our clients’ portfolios.
And what I mean by that, putting it into some context, is that the average business in our global smaller companies portfolio tends to be twice as profitable than the average stock in the index. And that's true whether you're looking at return on invested capital or return on assets. So these really are some of the most successful businesses historically in the small cap space.
But we're not just looking at historic success. We want these businesses to be successful going forward. And so we look at expectations of future profitability. And generally the businesses in which we invest will not only be historically very successful, but they will look like they're going to be successful going forward.
Now, clearly, we don't want to pay up for that success. And so at the point of purchase, the market is sceptical that there are high returns that these businesses have enjoyed historically will be enjoyed in the future. If the market wasn't sceptical, we wouldn't have an opportunity to generate alpha for our clients.
The final piece of the puzzle for us is relative share price trend. We want the businesses in which we invest to already be outperforming the benchmark. So long as that outperformance is justified, justified by a history of wealth creation, justified by expectations of future profitability, that suggest these businesses are going to be successful in the future, and the valuation gap that we believe that we can exploit on behalf of our clients.
How do you find these companies? Tell us about your investment process.
So we're a stable team that executes a stable process that delivers stable outcomes. The stable team we've worked together for 25 years. We created the investment process, which we continue to execute today. And we've used it in the small cap space for the last 15 years.
The stable process. We've talked about the characteristics which we're trying to exploit. We have a universe of 5000 stocks at the beginning of our process. Some benchmark, some not benchmark, some emerging markets, some developed markets. We want as wide an opportunity set as possible to make sure that we never have to settle for mediocrity in our portfolios.
We run those stocks through a mechanical screen at the beginning of the process, and that screen isolates at the top of the list those stocks which, on the face of it, look like they should be in our clients portfolios. We as fund managers will then carry out due diligence on each of those names to identify what really are the most compelling ideas. And we will put those into our clients portfolios.
Describe why particular features of the investment process provide an edge and contribute to alpha generation.
So in my opinion, the small cap space is very underserved by active managers. It's very difficult to run global small cap portfolios and achieve scale with large numbers of people in a team. And so people don't do it. Many fund management firms don't do it because it's just not profitable or viable.
With our approach, which is scalable, team based and very evidence based, it is possible for us to identify a large number of very attractive names and put them into our portfolios and exploit the alpha that we believe other people are missing out on.
Why global smaller companies?
Global opportunity set
Exposure to developed market and emerging market small caps can offer diversification benefits and broader potential return opportunities
Long-term growth potential
Smaller companies tend to be younger and faster growing but can be more volatile than larger companies
Attractive valuations
On conventional valuation measures, global small cap stocks are trading at a discount to large cap peers
Supportive backdrop
Relatively supportive economic conditions for high-quality small cap growth stocks
The Jupiter Origin team has run a global smaller companies strategy since 2010, using a differentiated approach:
- Clarity of focus: Small, experienced, committed team and tested investment process
- Evidence not opinion: No forecasting - apply collective judgment to hard evidence
- Systematic implementation: Evidence led – avoiding emotion
- Consistency, transparency: Portfolio consistency, with strong tilts to growth, quality and momentum
Seeking stocks with four measurable characteristics:
About Active ETFs
An ETF, or Exchange-Traded Fund, is a type of investment fund that trades on an exchange, just like a share. Traditionally, they have been used to enable investors to track a specific index, such as the S&P 500, in a cost-efficient manner. Unlike passive tracker funds, active ETFs are actively managed by fund managers, who make investment decisions with an aim to generate higher returns and outperform their benchmark.
Jupiter Origin Global Smaller Companies Active UCITS ETF (JOGS)
Jupiter Origin Global Smaller Companies Active UCITS ETF (or JOGS, to call it by its market ticker) is an actively managed ETF of smaller company stocks from developed markets and emerging markets.
What is the objective?
Meet the team
A team with a heritage of over 20 years
Strategy specific risks
- Investment risk - there is no guarantee that the strategies will achieve their objectives. A capital loss of some or all of the amount invested may occur.
- Company shares (i.e. equities) risk - the value of Company shares and similar investments may go down as well as up in response to the performance of individual companies and can be affected by daily stock market movements and general market conditions.
- Currency (FX) risk – The strategies can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.
- Pricing Risk - Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
- Smaller companies risk - smaller companies are subject to greater risk and reward potential. Investments may be volatile or difficult to buy or sell.
- Emerging markets risk - Emerging markets are potentially associated with higher levels of political risk and lower levels of legal protection relative to developed markets. These attributes may negatively impact asset prices.
- Derivative risk - the strategies may use derivatives to reduce costs and/or the overall risk of the Fund (this is also known as Efficient Portfolio Management or “EPM”). Derivatives involve a level of risk, however, for EPM they should not increase the overall riskiness of the strategies.
- Liquidity Risk (general) - During difficult market conditions there may not be enough investors to buy and sell certain investments. This may have an impact on the value of the Fund.
- Liquidity Risk (less liquid securities) - some investments may be hard to value or sell at a desired time and price. In extreme circumstances this may affect the Fund’s ability to meet redemption requests upon demand.
- ESG - Investments are selected or excluded on both financial and non-financial criteria. The strategies’ performance may differ from the broader market or other strategies that do not utilise ESG criteria when selecting investments.
Important Information
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This material 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.
Information in this material has been obtained or derived from sources believed to be reliable and current. However, accuracy or completeness of the sources cannot be guaranteed.
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Past performance does not predict future returns.
Issued in the UK by Jupiter Asset Management Limited (registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ) which is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg) which is authorised and regulated by the Commission de Surveillance du Secteur Financier.
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