HEAD-TO-HEAD: JGF-Jupiter versus Pictet

123456

Investment approach

The $12.5m JGF-Jupiter Global Ecology Growth Fund aims to generate long term capital growth from investing in companies worldwide that are “responding positively to the challenge of environmental sustainability and climate change”, according to its prospectus.

Fund manager Charlie Thomas and his team “look for global companies with strong management teams, sound balance sheets and defensible market positions which, in time, convert a proportion of their profits into cash”, said McDermott.

“The team also believes such businesses have a deep, long-term impact across three key areas: infrastructure, resource efficiency and demographics,” he said.

In terms of geographic exposure, while the fund invests worldwide, “there is specific regional exposure, which is the result of stock selection rather than targeted asset allocation”, he added.

Nevertheless, the current portfolio is quite evenly split geographically, with 44% exposure to Europe (including the UK) and 36% allocation to North America.

In contrast, the regional composition of the $2.88bn Pictet Global Environment Opportunities Fund seems more concentrated, with 57% of the portfolio in US equities.

Pictet has a capital growth strategy, and it invests mainly in securities issued by companies active throughout the environmental value chain, for example in agriculture, forestry, clean energy and water.

Compared with environment-themed fund strategies offered by other firms, “the key differentiator of the Pictet fund is its use of the ‘planetary boundaries’ framework’, first published in Nature magazine in 2009 by Johan Rockstrom”, according to McDermott.

The planetary boundaries framework identifies nine key environmental areas, namely: climate change, freshwater use, land use, ocean acidification, nitrogen and phosphorous cycle, biodiversity, ozone depletion, aerosol loading and chemical pollution.

“The framework specifies the respective threshold which humanity must not cross to prevent irreversible environmental damage,” said McDermott.

“Companies which the managers can invest in must operate within the ‘safe operating space’ where human activities can take place,” he added.

In fact, the managers target companies where a minimum 20% of their activities are “actively solving environmental challenges, although the aggregate focus across the portfolio is closer to 65%”, he said.

There is initial screening of around 3,500 companies — sectors such as oil & gas, mining and most chemicals companies are excluded — and the number is whittled down to approximately 400 stocks which qualify for further screening and scoring for various criteria, according to McDermott.

“A final list of 200 stocks with the best risk-return profile is then drawn from this, and further analysis is undertaken,” he said.

“Portfolio construction is built into the process when assessing every stock, which ensures the final 50-holding portfolio is well diversified,” he added.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 12 May 2020)

 Fund characteristics

Geographical allocation:

Source: Factsheets, 31 March 2020

Sector allocation:

Source: Factsheet, 31 March 2020

Source: Factsheet, 31 March 2020

Top 10 holdings:

Source: Fund factsheets, 31 March 2020

123456