Ross Teverson took over management of the Jupiter China Fund from Philip Ehrmann on 1 January 2015. I recently met the new manager to find out more about his strategy and the changes made to the fund so far.
Ross Teverson believes most value can be added by taking a truly benchmark-agnostic investment approach, meaning he pays little attention to the positioning of the fund's benchmark when constructing the portfolio. In light of this, the manager will also look to run a more concentrated portfolio of around 40 holdings, compared with approximately 50-60 stocks under the previous manager. This means each stock will have a greater impact on returns, although it is a higher-risk approach.
The manager tends to focus on individual company analysis, rather than taking a wider view on the economic environment. This differs from the previous manager's strategy who adopted a more thematic approach; positioning the fund towards industries he believed would drive future growth in China. Ross Teverson does, however, expect the fund will maintain its bias towards higher-risk medium-sized companies. In his view, looking across the entire market for the best opportunities will naturally lead to investments in smaller, as well as larger, firms.
Change is the core focus of Ross Teverson's overriding philosophy. In his view, material changes that drive share prices can occur at a structural level, an industry level and at the company level. He seeks insights into how corporate prospects are changing for the better, which he believes is not taken into account by other investors. Once recognised, a company's share price could rebound.
In an effort to reduce the fund's similarity with its benchmark, exposure to the financials sector, which makes up a considerable portion of the benchmark index, has been reduced. Ross Teverson has focused on selling low-conviction holdings, or companies he does not feel are undergoing significant change. Two brokerage firms, Citic Securities and Haitong, have been sold, while exposure to Chinese banks has also been reduced.
Our view on this fund
On the whole we like Ross Teverson's unconstrained and concentrated investment approach, with a primary focus on stock selection. We also view it positively that he will maintain the fund's bias to medium-sized companies, which could prove a source of value over the long term, while it also differentiates the fund from many of its peers focused on larger businesses.
At this time the fund will not be added to the Wealth 150 list of our favourite funds across the major sectors. Ross Teverson has prior experience managing Chinese equities as part of a broader emerging markets portfolio; however, he does not have experience managing a more specialist, single country fund. As such we would like to see him build a longer track record before taking a view on his abilities in managing this fund.