HEAD-TO-HEAD: Jupiter versus MFS

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Investment approach

Both the Jupiter and MFS funds invest in European equities, including the UK, according to Caquineau.

The funds are similar in terms of their investment styles. They both have a bias toward high-quality growth companies, Caquineau said. Both products also invest in small- to mid-cap companies.

Source: Morningstar. As of 31 January 2020.

However, a quick look at the fund’s top 10 holdings, as well as their sector allocations, show that the portfolios are largely different.

Top 10 holdings (%)

Source: Morningstar. As of 31 January 2020.

Sector allocation (%)

Source: Morningstar. As of 31 January 2020.

Caquineau explained that there are significant differences in the way the funds are managed. The Jupiter fund is managed by a single portfolio manager, Cédric De Fonclare, while the MFS fund is managed collectively by a team of 10 analysts.

Jupiter’s De Fonclare “calls all the shots” when managing the fund, according to Caquineau. While he prefers high quality growth names, which usually have good management teams and stable balance sheets, he has a leeway to invest up to 30% of his portfolio in turnaround companies.

“He can be pragmatic at times and will invest in stocks that are going through short-term difficulties,” Caquineau said.

“It depends on the level of valuations he is seeing in growth names. When growth stock valuations are rich, he will lighten exposure and invest in turnaround stories. This is a distinctive feature of the fund when compared to the MFS option.”

Caquineau added that while stock selection is largely bottom-up, De Fonclare adds a top-down layer in his investment approach for risk management.

“He is trying to manage risk by making sure he is not too much invested in companies that may be vulnerable to market cycles.

“He has at least 20 years of experience and deep knowledge of the European stock market. Being the fund’s manager for 17 years, he has seen some cycles,” he noted.

Turning to the MFS fund, Caquineau said that the fund’s decision-making process involves all analysts involved in the fund, which is in contrast to the Jupiter product.

“The portfolio construction at MFS is consensus-driven. They need a majority of votes for a stock to enter the portfolio,” he said.

Each of the MFS fund’s analysts is designated two or three sectors to cover, and it is his or her responsibility to find the best ideas within the sector to present to the whole team.

In addition, it is not one individual who is left to decide on the weighting of each stock in the portfolio.

“There is no huge debate about the sizing because the initiating position is usually about 1% of the fund’s assets. What happens after is that the analyst can increase or decrease the position by up to 25 basis points without requiring a vote within the rest of the team,” Caquineau said. Position changing can only be done every six months, he added.

Given that the MFS fund is managed by 10 people, all analysts are required to adhere to the high-quality bias of the strategy. This makes the strategy less flexible compared to the Jupiter fund, according to Caquineau.

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