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A Japanese equity fund that offers a yield premium compared to the market. The managers focus upon companies that have both the ability, and the willingness, to increase dividend distributions. Within its sector, the fund features in our 'Income and Growth' category.
The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 6. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 6 means the fund’s historic volatility is between 15% and 25%.
This score is in keeping with other funds in the peer group. Its five-year volatility is higher than the sector and is broadly in-line with the benchmark. Its high active share and market-cap profile means that it has the potential for risk/return divergence compared to the index. Different share classes could have differing SRRI scores.
The fund is co-managed by Dan Carter and Mitesh Patel. Mr Carter joined Jupiter in 2008 having previously worked at Odey Asset Management and Baillie Gifford. Mr Patel joined Jupiter in 2016 and was assistant fund manager before becoming co-manager in February 2020. The Japan team is part of the larger Developed Markets Equities team, headed by Deputy CIO, Katharine Dryer.
The cornerstone of the manager’s investment approach is the principle that equity has value because of the potential for future distributions provided to shareholders. Therefore, the team’s efforts are focused upon the search for companies with both the ability, and the willingness, to increase pay-outs.
The fund is relatively concentrated, with 40-45 holdings selected from across the market cap range. The portfolio features a mix of stocks with differing yield and growth characteristics (including stocks with low/no current dividend) with a view to achieving a balanced profile. There are few formal constraints, albeit there is an awareness of the index and the managers aim for a broad risk profile. They are supported in a formal way by the Investment Risk and Portfolio Analytics teams.
The process is designed to highlight companies that are growing their intrinsic values and are therefore in a good position to increase their dividend distributions. The aim is to invest in such companies when their potential is underappreciated by the market. To filter the investable universe, the team runs a series of screens and analytical tests to mark out those that have both the ability, and the willingness, to grow pay-outs. The analysis of financial stability, competitive advantages and growth (in profits and cashflow) informs their understanding of a company’s ability in this regard, while a management quality test helps them to assess the willingness of a business to increase distributions to equity holders over time. This part of the process revolves around contact with company management, whereby they consider capital allocation decisions and shareholder alignment. This work also helps them to identify improving corporate governance opportunities.
Only businesses that satisfy all four selection criteria are put forward to the final stage of the process, valuation assessment. Here, the team uses a variety of metrics to determine the market’s expectations. Investments are considered in those companies where the team’s expectations outstrip the implied market expectations. For consistency, the managers review all candidates using a checklist of questions to help them build a broader view of the company. These are mostly bottom-up in nature, but macro-economic trends, such as changing demographics, can also highlight areas of potential growth.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
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