William Heathcoat Amory
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Updated 17 Dec 2021
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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.

  • During the six months to 30/09/2021 NAV total returns were 4.6%. This contrasts with a fall of 2.7% in the company's share price and a 6.7% rise in the company's benchmark index, the MSCI World Small Cap
  • A general trend during this period was a slump in the share price of some exciting innovative stocks, largely due to profit-taking or a change in market sentiment as underlying business performance remained broadly robust and reflective of their strong long-term potential.
  • As at 30 September 2021 the company's net gearing level was zero. While the loan facility was used to apply gearing to the portfolio during the period, the net gearing at the end of this period reflected a more cautious stance given a deterioration in the nearer-term risks to market sentiment.
  • The company's share price traded at a premium to net assets from April to June and at a discount to net assets in the period from July to September. The Board issued shares amounting to £3m during the period and bought back shares amounting to £0.2m in July in order to limit the extent of the discount.
  • JGC’s manager has expanded the size of the Environmental Solutions team by adding two experienced analysts to support the fund manager, Jon Wallace.

Kepler View

In September 2020, Jupiter Green (JGC) shifted its investment focus towards targeting smaller and more innovative companies able to best capture what the Chairman of JGC refers to in the interims as the “rich hunting ground for investors in environmental solutions”. Jon Wallace took over as lead manager in January 2021, at a point in time that saw a broad market rotation away from growth towards value stocks, which meant the trust struggled on a relative basis in the first half of 2021.

As we discuss in our recent full profile of JGC (click here), Jon held his nerve and added to several of the higher conviction positions that were hit hard, which contributed strongly to performance when sentiment subsequently recovered.

Jon appears convinced of the long-term secular growth opportunity, but perhaps of more relevance is his perception of “a broadening of the opportunity set of 'enabling' solutions capable of tackling not just climate change but other, closely linked, environmental challenges such as biodiversity loss and wider forms of degradation to the natural world”.

We see this opening up of the opportunity set as a key attraction for investors, which should help increase the potential returns from the strategy but also (all things being equal) reduce the volatility of returns than would be the case if the trust was exposed to just the clean energy sector, for example. With a broadening of the sector, the opportunity for Jon to invest in niche businesses with transformative prospects is improved.

Jon invests across themes that reflect his view of the most attractive opportunities, and include the circular economy, clean energy, water and sustainable agriculture, nutrition and health. By investing in companies below the radar of most investors, JGC offers a clearly differentiated proposition.

JGC’s current discount to NAV of 4.3% is in line with the average of the past five years. Enthusiasm for the new mandate and sustainability-themed funds has seen the discount narrow at times and periodically trade at a premium. Share issuance has allowed the trust to grow, which is encouraging, reducing costs and making the shares more liquid. 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.

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