Jupiter European: December 2021 fund update

How it fits in a portfolio

Europe is home to lots of successful companies that are well known across the globe. As a result, the managers of the Jupiter European Fund have plenty of options to choose from but favour larger, more stable businesses. They invest in companies with long-term growth potential, coupled with a strong competitive advantage that others struggle to replicate. We think the fund could be a good choice for exposure to Europe as part of a global investment portfolio or sit alongside other European funds focused on smaller companies or those using different investment styles.

Manager

Mark Heslop and Mark Nichols joined Jupiter from Threadneedle in 2019 and have a combined total of over 40 years’ experience investing in Europe. They took over management of the Jupiter European fund in October 2019.

Prior to this Heslop was a part of Threadneedle’s European equities team for 11 years and was appointed lead manager of their European Smaller Companies Fund in 2013. Nichols joined Threadneedle in 2015 and became co-manager of the European Select Fund, which currently features on our Wealth Shortlist.

Since joining Jupiter, the managers have built up a strong team of five investors. This includes Phil Macartney, a fund manager with 13 years’ experience across UK and European companies, Sohil Chotai, an assistant fund manager with 8 years’ experience of analysing European companies, and Nikisha Mistry, who has 3 years’ experience as a European equities analyst.

Macartney has recently been named co-manager on the Jupiter European Smaller Companies Fund and Chotai has been appointed co-manager of the European Special Situations Fund. Despite the added responsibility, each of the European funds share a similar investment process, so we feel the managers can comfortably manage their commitment to each.

Heslop and Nichols also view it as team-based approach, so encourage discussions, debate, and the sharing of ideas across each European fund.

Process

The managers aim to identify world class companies across the European continent. These companies need to have unique products or services which others struggle to replicate but also be able to grow sustainably over the long term. Identifying companies that have a global reach in regions like the US or Asia is also important, as they are less likely to be as reliant on the state of Europe’s economy. As a result, they’ll tend to invest in a concentrated list of companies they have a high level of conviction in. This means each one can have a meaningful impact on performance, and this increases risk.

The managers focus on holding these companies for the long run in order to benefit from sustainable growth, rather than trying to time the market or make short-term decisions. The managers generally prefer to keep portfolio turnover low, keeping buying and selling to a minimum. That said, there have been several changes to the fund this year.

One of the recent changes was the investment in Lonza Group. The Swiss biopharmaceuticals manufacturer has a rich pipeline of biological drugs and a strong position in the industry. The managers feel it’s a good option for biotech exposure within the portfolio.

They also invested in the Initial Public Offering (IPO) of Allfunds Group and topped up their investment in Temenos. Allfunds Group is a platform that sits between fund houses, fund distributors and wealth managers, which the managers believe has strong growth potential. Temenos primarily provides software to smaller banks and they feel it’s the leader in its industry.

On the other hand, French gaming company Ubisoft was sold from the portfolio. The decision was driven by a combination of poor performance and weakening conviction in the company’s long-term prospects. The fund’s investment in financial service provider Deutsche Böerse was also reduced.

Culture

We think the culture at Jupiter is attractive. Fund managers are given autonomy to invest the way they see fit and believe will benefit investors over the long run, but with an appropriate level of challenge from others in the business. The business setup allows Heslop and Nichols to focus on fund management, their team, and maintain flexibility.

All fund managers at Jupiter receive support from the Sustainable Investing and Governance Research teams. Heslop and Nichols also form their own views on ESG (Environmental, Social and Governance) issues and incorporate them into their research, believing them to be important to the long-term quality of a business.

We think the managers are incentivised in a way that could maximise long-term performance, meaning their interests should be aligned with those of their investors. Part of their remuneration is based on short and longer-term performance, and they also hold Jupiter shares and invest in the funds they manage.

Cost

The ongoing charge for this fund is 0.99%. This makes it one of the more expensive funds in the European sector. The HL platform fee of up to 0.45% per year also applies.

Performance

The fund has delivered good returns under the tenure of Heslop and Nichols. Since taking over in October 2019, it’s outperformed the FTSE World Europe ex UK Index, by 9.45%*, though this is a short time frame to judge performance. Over this period the fund has benefited from the tailwinds of investing in high quality companies with above average earnings growth, also known as growth investing. Past performance is not a guide to future returns.

It hasn’t all gone the managers’ way though. The fund lagged the broader European benchmark for the first half of 2021 as the growth style of investing fell out of favour with investors. This coincided with the loosening of coronavirus restrictions allowing more businesses to operate. The fund lacked exposure to some of these attractively valued, more cyclical areas of the market which performed strongly in the first part of the year.

Grifols, a pharmaceutical company focused on plasma therapies, was one of the poorer performing companies. The company took on more debt during the pandemic and the usual plasma donations were hit hard due to travel restrictions and government stimulus. Video game developer Ubisoft and payment solutions provider Edenred also performed poorly.

The fund did perform better in the latter part of 2021 though, and year-to-date it’s ahead of the FTSE World Europe ex UK index. Chemical distributor IMCD was one of the best performing companies over this time. The company posted a strong set of results and acquired a growing distributor in India. Software solutions provider, Dassault Systemes and semiconductor developer ASML also helped drive performance.

Annual percentage growth

Past performance is not a guide to the future. Source: *Lipper IM to 30/11/2021.

More about Jupiter European, including charges

Jupiter European Key Investor Information