Traditional global equity strategies may be constrained by fixed investment styles, leaving them exposed to market cycles and behavioural inefficiencies. The Jupiter Merian World Equity strategy takes a systematic and flexible approach to equity investing. It uses a broad opportunity set and applies robust stock selection criteria to build a diversified portfolio across sectors and company sizes.
Below are five specific challenges faced by investors, and the solutions the strategy seeks to offer.
Providing solutions to investors’ real-life problems
Problem 1
Inconsistency across market environments
Many global equity funds suffer from inconsistency of returns. They may perform well in one market environment, but poorly in others. One reason for this is that some funds have a rigid investment style. They may perform well in environments that favour a growth style, for example, but poorly when value comes to the fore.
Typical large-cap value fund
Typical large-cap growth fund
Solution
Style flexibility
The Jupiter Merian World Equity strategy seeks to deliver more consistent returns, thanks to its style flexibility. The strategy flexes its style after carefully taking the temperature of the market environment. It dynamically shifts its weight across five stock selection criteria, such as Dynamic Valuation and Sustainable Growth.
Problem 2
Behavioural biases
Fund managers’ behavioural biases can lead to poor or inconsistent performance. Behavioural biases include herding, loss aversion, confirmation bias, anchoring, the endowment effect, conservatism and overreaction.
Solution
Systematic process
The Jupiter Merian World Equity strategy uses a systematic process that seeks to exploit—rather than fall victim to—behavioural biases. The investment process behind the Jupiter Merian World Equity strategy is data-led, rather than opinion-led. It enables analysis of a large investment universe according to a disciplined and objective methodology. The systematic equities team applies a scientific approach to testing hypotheses and works closely with Jupiter’s data science team. Research programmes with external academic advisers help in maintaining objectivity.
Benchmark Cap Weight
Problem 3
Concentration risk
A risk of passive investing, particularly when tracking a market-cap-weighted index, is that it effectively becomes a "closet" momentum strategy that can lead to concentrated exposure. Over recent years there has been concentration risk in large-cap US tech stocks.
Strategy Cap Weight
Solution
Well-diversified
The Jupiter Merian World Equity strategy incorporates fundamental stock selection criteria, alongside momentum, reversal and sentiment signals, and is well-diversified across sectors and cap ranges. The Jupiter systematic investment process has been built with diversification at its core.
Problem 4
Opportunity set
Many global equity funds are surprisingly limited in terms of the range of equities they actively analyse. This can lead to missed opportunities where attractive stocks fly under the radar.
Solution
Large opportunity set
The Jupiter Merian World Equity Strategy benefits from a large opportunity set. Every day, it analyses around 7,000 stocks, much more than the approx. 1,500 in the MSCI World Index.
Problem 5
Cookie-cutter funds
Many global equity funds are remarkably similar to one another, as evidenced by the high correlation of their excess returns. This may be due to a lack of differentiation in their investment processes. The same “best ideas” turn up again and again. Analyst research and sell-side narratives also encourage consensus thinking and herd behaviour.
Solution
Unique investment process
The Jupiter Merian World Equity strategy employs a unique investment process, which has historically produced excess returns with low correlation to peers. The investment process is a disciplined, rigorous approach, and has been developed over many years of detailed research. The team seeks to fine-tune and iteratively improve the investment process over time.
Our approach in a nutshell
Stock selection
Addressing a large opportunity set of about 7,000 stocks, the investment process applies a rigorous implementation of investment insights. Every day, it analyses those stocks using five tried-and-trusted stock selection criteria.
Dynamic weighting scheme
A dynamic weighting scheme is applied to the five stock selection criteria, based on expected payoffs in the current market environment.
Portfolio construction
Efficient, constrained, and risk-controlled portfolio construction is undertaken. This includes in-built volatility control and downside risk mitigation. Correlation management further controls risk.
Five stock selection criteria
The team has a unique approach to stock selection. The investment process includes five stock selection criteria. These are not generic factors: each of the five criteria is proprietary, based on years of research. The team works hard to ensure that each of the five criteria is independent from the others, as this increases diversification and reduces risk.
Continuous monitoring of the market environment
The five stock selection criteria are dynamically weighted, based on continuous observation of the market environment.
For example, by March 2022 market sentiment had become almost as pessimistic as it was when the COVID-19 pandemic was declared in March 2020.
Dynamic weighting scheme
Based on observations of the market environment, the weightings to each of the stock selection criteria are adjusted. The strategy rotates between different investment styles. This allows the strategy to better navigate environments where one particular investment style is out of favour. Different investment approaches work at different times across market cycles.
Fundamentals-driven price discovery can often be distorted by market sentiment and technical — and all are potential sources of returns. The dynamic strategy weighting adjusts exposure to strategies based on historical performance in similar environments.
Research by the team shows that dynamically weighting the five stock selection criteria may offer advantages over an equal-weighted proxy.
Continuous enhancements
The team’s investment process was first implemented in early 2009 and is continuously refined. Recent enhancements are shown below. These enhancements follow extensive research undertaken by the team. Please contact us for more information about our research program.
Meet the team
Systematic Equities Team
Strategy specific risks
- Investment risk - there is no guarantee that the Strategy will achieve its objective. A capital loss of some or all of the amount invested may occur.
- REITs risk - REITs are investment vehicles that invest in real estate, which are subject to risks associated with direct property ownership.
- Company shares (i.e. equities) risk - the value of company shares (i.e. equities) 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. Other influential factors include political, economic news, company earnings and significant corporate events.
- Currency risk - the Strategy can be exposed to different currencies. The value of your shares may rise and fall as a result of exchange rate movements.
- Derivative risk - the Strategy uses derivatives to reduce costs and/or the overall risk of the Strategy (i.e. Efficient Portfolio Management (EPM)). Derivatives involve a level of risk, however, for EPM they should not increase the overall riskiness of the Strategy. Derivatives also involve counterparty risk where the institutions acting as counterparty to derivatives may not meet their contractual obligations.
- Sustainability Article 8 - Investments are selected or excluded on both financial and non-financial criteria. The Strategy 's performance may differ from the broader market or other Funds that do not utilize ESG criteria when selecting investments.
The Strategy may be subject to various other risk factors, please refer to the latest sales prospectus for further information. The Prospectus is available from Jupiter on request.
Important Information
This webpage is intended for investment professionals* and is not for the use or benefit of other persons, including retail investors.
This webpage 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.
Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.
Issued in the UK by Jupiter Asset Management Limited, registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority.
Issued in the EU by Jupiter Asset Management International S.A. (JAMI, the Management Company), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier.
Issued in Hong Kong by Jupiter Asset Management (Hong Kong) Limited (JAM HK) and has not been reviewed by the Securities and Futures Commission.
No part of this webpage may be reproduced in any manner without the prior permission of JAM, JAMI or JAM HK.
*In Hong Kong, investment professionals refer to Professional Investors as defined under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), and in Singapore, Institutional Investors as defined under Section 304 of the Securities and Futures Act, Chapter 289 of Singapore.