Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by Jupiter Green. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
To generate a total return by investing in companies that are developing and implementing solutions for the world’s environmental challenges.
Jupiter Asset Management Limited
Association of Investment Companies (AIC) Sector
12 Month Yield
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Latest Net Gearing (Cum Fair)
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Jupiter Green (JGC) has shifted its investment focus towards targeting smaller and more innovative companies (see Portfolio), arguably making it a more interesting proposition for all kinds of long-term investors. The new lead manager, Jon Wallace, has been working on the trust since 2014, ensuring a smooth transition when he took the reins in January 2021.
Jon is using JGC’s ability to be nimble (net assets of £63m) by investing at the smaller end of the market cap spectrum to access the most exciting companies developing environmental solutions. Many of these fast-growing and innovative companies are likely too small for most generalist investors or those with larger funds.
Jon has been finding most opportunities this year in the ‘accelerator’ bucket. Accelerators are those companies that have proven and scalable solutions and are gaining market share from established players. As a result, accelerators now represent 60% of the portfolio. Jon commented recently that COP26 illustrates the urgency of scaling up existing technologies so that they can start to have an impact in reducing carbon emissions as soon as possible, which he thinks should be a strong tailwind for the sort of companies he owns.
By investing in companies below the radar of most investors, JGC offers a differentiated proposition. When combined with the manager’s specialist knowledge and experience in this relatively niche area, as well as now having drawn down a modest level of gearing for the first time, we think JGC is well-positioned to benefit from the many changes that the global economy will make over the next decade.
COP26 highlighted the variety of secular growth opportunities resulting from the need to decarbonise the global economy. JGC invests across six themes that reflect the manager’s view of the most attractive opportunities from sustainability. These include the circular economy, clean energy, water and sustainable agriculture, nutrition and health.
The change in the mandate to focus on ‘accelerators’ and ‘innovators’ will mean higher exposure to mid and small-cap companies worldwide. The impact of the change has already been seen in both the portfolio, but also the risk (as measured by volatility) and returns. JGC had a challenging period in the first half of the year, with market sentiment turning against growth stocks. That said, it’s encouraging that Jon kept confidence in his convictions, adding to holdings that had seen share prices fall. This has helped the trust recover strongly over the second half of the year so far.
JGC has traded on an average discount of c. 4% over the past five years. Enthusiasm for the new mandate and sustainability-themed funds has seen the discount narrow, the shares at times trading at a premium. Share issuance has allowed the trust to grow, which is encouraging, although it retains the ability to be nimble. We think JGC should appeal to all sorts of investors in that it provides a differentiated exposure to a high conviction portfolio of innovative and high-growth companies, which together are helping the transformation of the global economy to a more sustainable footing.
|Differentiated investment proposition makes JGC unique amongst funds and trusts offering a sustainable theme
||Smaller and more innovative companies tend to be higher-risk propositions than ‘established leaders’
|Long track record and experience of management team
||Gearing will exacerbate the downside (as well as enhance the upside)
|Discount has narrowed, and further share issuance means liquidity and OCF should continue to improve
||Discount could widen, perhaps significantly