Source: Jupiter, as at 31.12.2023. Updated on an annual basis.
Talking Factsheet
Global equity absolute return strategy
Amadeo Alentorn gives an overview of Jupiter’s global equity absolute return strategy, how the investment process works, and how the team seek to generate alpha.
The objective of our global equity absolutism strategy is to deliver capital growth, while carefully controlling risks. We have been managing this strategy since 2009, and with it, we aim to deliver a return of cash plus five with very low correlation to equity markets and also with low volatility than equities. We strongly believe that adding such market neutral strategy as part of a multi-asset portfolio can bring a number of benefits.
It can help to diversify the risk coming from traditional asset classes such as equities and bonds, while adding an attractive source of return that is not dependent on the direction of equity markets.
How does the team invest in order to achieve the strategy's objectives?
Our investment process consists of analysing over 7000 companies every day, employing fundamental ideas such as stock price valuation, balance sheet quality and growth metrics, and combining these fundamental indicators with sentiment driven signals as well as price driven indicators. Having analysed those thousands of stocks every day, we then go on to build a portfolio that is market neutral. That means selecting attractive stocks to build a long book and balancing that with a short book, which is made out of stocks that are unattractive.
In constructing this market neutral strategy, we employ a robust risk management framework, controlling very carefully a zero exposure to the overall equity market. As a result, the performance of such market neutral strategy will be independent of the direction of the equity market. It will simply be a function of selecting for the long book stocks that outperform the market, and selecting for the short book stocks that underperform the market.
Where does the team gain an investment edge that allows them to generate alpha?
Our dynamic investment approach recognises that different styles of investing are needed at different points in the cycle. Our process automatically adjusts the weights to the different styles of investing, tilting towards those that are more likely to perform well in the current environment. The second point is the length of time that we've been working together as a team. Going back to 2005, over that length of time, we have employed that scientific approach to understanding how equity markets work, how we can generate alpha consistently throughout the cycle that is done within the team, but also with close collaboration with a team of academic advisors across a number of leading universities.
The need for diversification and low volatility
In times of market volatility, diversification across traditional asset classes may fail to deliver the benefits many investors expect. When both equity and bond markets fall in the same period, many investors’ portfolios – which they may have hoped had been diversified – can be exposed to losses. Diversification is hard to find when global equities and bonds fall together. When traditional assets correlate in a downward trend, it can seem to investors that there is nowhere to hide.
Alternative strategies with the potential to deliver positive returns irrespective of the market environment or macroeconomic backdrop, and with low or negative correlations with traditional equity and bond markets, are therefore of interest.
The Jupiter Merian global equity absolute return (GEAR) strategy has historically enjoyed low correlation both to global equities and to global bonds (see “Low correlation” under “7 reasons to consider our systematic approach”).
As well as uncorrelated returns, protection from high volatility is also important in stormy waters. The GEAR strategy targets an annualised volatility limit of just 6% (see “Low volatility” under “7 reasons to consider our systematic approach”).
7 reasons to consider our systematic approach
3 month rolling correlation of the Jupiter Merian Global Equity Absolute Return strategy with the MSCI World Index
Past performance is no indication of current or future performance. Source: Jupiter, as at 31.12.2023. Updated on an annual basis. Three month rolling correlation with MSCI World index.
The correlation of the strategy with global bond markets has also been historically low on average.
3 month rolling correlation of the Jupiter Merian Global Equity Absolute Return strategy with the Bloomberg Global Aggregate Index
Past performance is no indication of current or future performance. Source: Jupiter, as at 31.12.2023. Updated on an annual basis. Three month rolling correlation with Bloomberg Global Aggregate index.
The strategy has had well managed volatility, typically remaining below the 6% targeted limit
Past performance is no indication of current or future performance. Source: Jupiter, as at 31.12.2023. Updated on an annual basis. Rolling volatility of the strategy.
Volatility of MSCI World Index
The strategy seeks positive returns in both up and down equity markets
For illustrative purposes only.
The strategy is market neutral, holding a long equity book and a short equity book in balance. In a down market, the short book may make a positive contribution even if the long book is negative. In an up market, the long book may make a positive contribution even if the short book is negative. When one book is positive and the other negative, the relative difference between them determines the strategy’s return.
Dynamic Valuation
Shares with attractive valuations. This proprietary criterion incorporates quality to reduce the downside risk of value investing.
Sustainable Growth
Strong but stable growth characteristics. Avoidance of 'one hit wonders'.
Company Management
Evidence of strong company managment teams making good capital investment decisions.
Sentiment
Changes in analyst forecasts and textual analysis of company earnings transcripts contain useful information.
Market Dynamics
Price driven information to identify trends. Accounts for unintended biases in trends.
The power of our investment process is enhanced when different stock selection criteria agree on the same stock. We work hard to ensure that each of the five criteria is independent from the others, as this increases diversification and reduces risk.
Risk environment and Market sentiment are proprietary measures developed by the team. Source: Jupiter, as at 31.03.22. AP=Asia Pacific, EM=Emerging Markets, EU=Europe, JP=Japan, NA=North America.
Data-Led
Our investment process is data-led, rather than opinion-led. We apply a scientific methodology to testing hypotheses. We also have available to us the resources of Jupiter's data science team.
Unbiased
Systematic investing is dispassionate, rather than biased. Indeed, our process seek to exploit other investors' psychological and behavioural biases.
Disciplined
We use diciplined, rigorous approach. We seek to fine tune and improve the investment process iteratively in a diciplined way over time.
Systematic equities range
Our systematic equities investment process is applied to both long-only and long-short strategies. All are based on the same core process.
Meet the team
Systematic Equities Team
Fund specific risks
- Investment risk - whilst the Fund aims to deliver above zero performance irrespective of market conditions, there can be no guarantee this aim will be achieved. Furthermore the Fund may exceed its volatility limit. 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.
- Stock Connect risk - the Fund may invest in China A-Shares through the ChinaHong Kong Stock Connect (“Stock Connect”). Stock Connect is governed by regulations which are untested and subject to change. Trading limitations and restrictions on foreign ownership may constrain the Fund's ability to pursue its investment strategy.
- Currency risk - the Fund is denominated in USD and may use hedging techniques to try to reduce the effects of changes in the exchange rate between the currency of the underlying investments and the base currency of the Fund. These techniques may not eliminate all currency risk. The value of your shares may rise and fall as a result of exchange rate movements.
- Derivative risk - the Fund uses derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment. 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 Fund's performance may differ from the broader market or other Funds that do not utilize ESG criteria when selecting investments.
The fund may be subject to other risk factors, please see the Scheme Particulars for further information.
Important Information
This is a marketing communication. Please refer to the latest sales prospectus of the sub-fund and to the Key Information Document (KID) (for investors in the EU)/ Key Investor Information Document (KIID) (for investors in the UK), particularly to the sub-fund’s investment objective and characteristics including those related to ESG (if applicable), before making any final investment decisions.
An investment constitutes the acquisition of shares in the sub-fund, not in the sub-fund’s underlying assets. We recommend you discuss any investment decisions with a financial adviser, particularly if you are unsure whether an investment is suitable. Jupiter is unable to provide investment advice. This communication 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. Initial charges are likely to have a greater proportionate effect on returns if investments are liquidated in the shorter term. Past performance is not a guide to future performance. Company/Holding/Stock examples are for illustrative purposes only and are not a recommendation to buy or sell. Quoted yields are not a guide or guarantee for the expected level of distributions to be received. The yield may fluctuate significantly during times of extreme market and economic volatility. Awards and Ratings should not be taken as a recommendation. Every effort is made to ensure the accuracy of the information provided but no assurance or warranties are given. This is not an invitation to subscribe for shares in the Jupiter Asset Management Series plc (the Company). The Company is an investment company with variable capital established as an umbrella fund with segregated liability between sub-funds which is authorised and regulated by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as amended. Registered in Ireland under registration number 271517. Registered office: 33 Sir John Rogerson’s Quay, Dublin 2, Ireland. The sub fund may be subject to various other risk factors, please refer to the latest Prospectus for further information. Prospective purchasers of shares of the sub fund of the Company should inform themselves as to the legal requirements, exchange control regulations and applicable taxes in the countries of their respective citizenship, residence or domicile. Subscriptions can only be made on the basis of the latest Prospectus and the Key Information Document (KID)/ Key Investor Information Document (KIID), accompanied by the most recent audited annual report and semi-annual report. These documents are available for download from www.jupiteram.com. The Manager may terminate marketing arrangements. Information on sustainability-related aspects is available from www.jupiteram.com.