As a team we have seen many inflection points in markets over the years – points at which the mood of investors shifts, sometimes by 180 degrees, a new market trend starts and one needs to adapt or be left behind. We are by nature patient investors who prefer to hold a steady course through the ups and downs of market movements, but when it becomes clear to us that we have reached an inflection point that is when we take swift and decisive action.
A good example was the announcement on 9th November 2020 by Pfizer/BioNTech that their Covid-19 vaccine had shown strong efficacy in ‘phase three’ clinical trials. Until that point, the Jupiter Merlin Portfolios were positioned defensively focusing on preserving investor’s capital from the economic fall-out fromthe pandemic, with an increased weighting to gold and a preference for funds investing in the high quality ‘growth’ companies more in control of their own destinies.
That had been a successful strategy, but we knew that once a proven vaccine was available and with the likelihood of more to follow, the market mood would shift . We therefore reduced the gold exposure down to a far lower level and increased the Portfolios’ investments in ‘value’ funds, which seek to invest in companies with lowly-valued shares – typically economically sensitive businesses that had struggled through the pandemic but could bounce back strongly once economies reopen.
Coincidentally Dominic Cummings’ leaving his role in government provided the catalyst for us to increase exposure to the UK in the Jupiter Merlin Portfolios,. We felt his departure signalled a trade deal would be struck with the European Union, avoiding a ‘hard’ Brexit.
Having charted a new course, we will stay patient for the foreseeable future. however, the future isn’t all that ‘foreseeable’, so we always reserve the right to change our minds should the facts change.
One not only needs the willingness to be decisive, however, but also the ability. We constantly think about the liquidity of the funds in which we invest, meaning the ease with which their managers can buy or sell their investments in the market, as well as the ease with which we can trade in and out of the fund. The high-profile case of Neil Woodford has brought this issue to the fore recently, but liquidity is always uppermost in our minds.
We have always believed that companies with good products and services which also look after their employees, customers, suppliers, the environment, and engage constructively with regulators have a fighting chance of being a sustainable business over the long term. If any of those components are missing, then the risks increase that the business will underperform or even fail. In short, we believe that well governed, responsibly managed companies generally make good investments. Today the fashionable term for these considerations is “ESG” (standing for Environmental, Social and Governance), but regardless of its label it has always been at the core of how we think about investment.
There isn’t just one way in which to invest with ESG in mind, however, and we are careful to scrutinise the available data (where there is very little correlation between scores given by different providers) and conduct our own primary research to determine how the fund managers in which we invest approach issues around the environment, society and governance in their portfolios. We actively encourage them to exercise their voting rights as shareholders, not to lend shares out, to engage with company management and challenge them where appropriate, as well as to sign up to initiatives such as the UN Principles of Responsible Investing.
Active and detailed research around ESG is essential as, despite attempts by regulators to create a common framework , definitions can be quite broad and there remains potential for fund managers to talk grandly about ESG without backing it up with action. The ability of fund-of-funds managers such as ourselves to do that active research, to get under the bonnet of funds and monitor them on a constant basis, is we believe highly valuable to investors who want to invest responsibly but don’t have the time or expertise, or the access, to do that research themselves.
Past performance is no guide to the future. 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. The views expressed are those of the individuals mentioned at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances.
Fund specific risks
The NURS Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. The Jupiter Merlin Conservative Portfolio can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The Jupiter Merlin Income, Jupiter Merlin Balanced and Jupiter Merlin Conservative Portfolios’ expenses are charged to capital, which can reduce the potential for capital growth.