Jupiter UK Dynamic Equity fund page

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Jupiter UK Dynamic Equity

IA Sector:

UK All Companies

Asset Manager:

Jupiter

Asset Manager Website:

www.jupiteram.com

Asset Manager Factsheet:

A value-biased UK equity fund. The team seeks opportunities in companies that are restructuring, recovering or have hidden growth with a view to profiting from investor scepticism. The fund currently sits in our ‘Value-Biased’ category.

Opinion, Characteristics & Utility

Opinion

Alex Savvides was appointed lead manager in October 2024. This fund was previously called Jupiter UK Special Situations and was managed by Ben Whitmore and his team before they left the firm.
The team employs a patient and methodical approach to “change” investing. They are well-versed in the challenges of persisting through the tougher times for their investment approach.
They think carefully about calibrating the portfolio to achieve diversification and building a margin of safety through valuation discipline and selectivity.

Characteristics & Utility

The team looks for business transformation opportunities where share prices are suffering under a cloud of investor uncertainty. This contrarian approach results in an idiosyncratic risk/return profile.
Although the team does not target a particular investment style, the fund displays overt value characteristics because of the nature of the approach.
Stock selection is the driver of portfolio returns. The manager will invest across the market-cap spectrum and in aggregate and over time, the strategy has displayed a mid- to larger-cap profile.
Their efforts to ensure good business and sector diversification mitigates some of the inherent risks of this approach. The additional attributes of cheap valuations, cash generative companies and strong dividend credentials also help to reduce long-term portfolio risk.
The strategy typically enjoys periods of strong relative performance when value is in the vanguard and improving fundamentals are recognised. Equally, it is likely to struggle at times of market uncertainty, when “change” is a less appealing prospect.
The fund is suited to value-orientated investors who have a long-term horizon and are attracted to the concept of opportunities from corporate change. For those who are concerned about risk versus the benchmark, it should be deployed as a complementary holding within a blend.

Risk Commentary

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%.

The manager took over responsibility for the fund in October 2024. Over the long term, the manager’s investment approach has resulted in higher volatility than the benchmark and peers in aggregate. This is to be expected, given his willingness to embrace change and out-of-favour situations. Different share classes could have differing SRRI scores.

Description

Investment Team

Lead manager, Alex Savvides, joined the firm in October 2024. He has over 20 years of investment experience, having previously worked at JO Hambro Capital Management (JOHCM), where he managed the firm’s UK Dynamic strategy. He works closely with Stephanie Geary, investment manager, and Siddharth Sukumar, investment analyst. They both joined from JOHCM, where they worked with Mr Savvides on the strategy.

Investment Philosophy

The manager argues that companies are dynamic, not static, and that corporate change is often ignored or underappreciated. Therefore, through a disciplined stock selection process, the team seeks to profit from uncertainty and invest patiently where they believe the risk/reward prospects are in their favour.

Portfolio Construction & Risk Controls

The portfolio is concentrated, with the number of holdings ranging from 25 and 40. The investment universe is the FTSE 350 (above £250m market cap) and positions are taken across the market-cap spectrum. Most investments are dividend payers; non-dividend payers are limited to 5% of the fund. Close attention is paid to absolute risk in the sense of ensuring good diversification across types of businesses and sectors and appropriate balance within the portfolio. There are no formal stock/sector constraints versus the index, but they monitor factor risks and tracking error, which is typically in the range of 4-7%.

Investment Process

In seeking misunderstood, undervalued change opportunities, the team uses a variety of inputs to identify companies that fit into one of three categories: restructuring; recovering; and hidden growth. In all cases, companies should incorporate an element of self-help. Typically, stocks enter the portfolio as either a restructuring or recovery situation and, ideally, they eventually cycle through to the growth cohort.
The stock universe is filtered based on size and prospective dividend yield. Following this, the team focuses upon situations that are under a cloud of investor uncertainty and where there is scope for material undervaluation. More specifically, they want to buy companies that are trading at lowly levels in terms of share prices and valuation multiples, but with high earnings and cash yields relative to their peers and history. Next, they assess how companies might evolve to address problems and arrest share price declines. The quality of a firm’s management team is a critical component of the investment thesis, and they engage actively with companies to gain a deep understanding of the business strategy, including areas such as capital allocation and shareholder value.
In constructing the portfolio, the team emphasises those businesses considered to offer the best transformation opportunities. They aim to build in a margin of safety whereby discounted stock valuations and investor pessimism is twinned with a high degree of confidence in the scope for improved shareholder returns through strategic change, an approach they call “Valueplus”.

Key Fund Facts

Inception Date:

03 June 1996

Manager(s) (Since):

Alex Savvides (Oct 24)

Fund Domicile:

United Kingdom

Base Currency:

£ Sterling

Fund Benchmark:

FTSE All Share

IA Sector:

UK All Companies

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.