HEAD-TO-HEAD: Jupiter versus Schroders

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INVESTMENT APPROACH

Both the Jupiter and Schroders funds invest in global convertible bonds and employ a fundamental bottom-up approach to investing. However, there are differences in terms of their risk/return profiles and underlying sector and country allocations, according to Gkeka.

The Jupiter fund has a preference toward less equity-sensitive convertibles compared with its peers and follows a more conservative approach having a bias in value names, Gkeka said. Because of that, it avoids exposure to sectors with high valuations and price momentum.

“As a result, information technology represents the biggest sector underweight, while the biggest overweight is in industrials, as the manager is finding plenty of opportunities that trade at reasonable valuations, have strong balance sheets and generate free cash flows,” she said.

In terms of geographic exposure, the US represents the biggest country underweight due to its large underweight in technology, while the portfolio is overweight in Asia, as the fund’s team is finding companies with strong fundamentals and cheap valuations, according to Gkeka.

Turning to the Schroders fund, Gkeka said that the portfolio is tilted toward more equity-sensitive convertibles.

“Its neutral delta position, a measure of the sensitivity of a convertible bond price to changes in the price of the underlying equity, is typically 3% above the benchmark level,” she explained.

Unlike the Jupiter fund, which has a bias in value names, the Schroders offering has a preference for growth names with solid balance sheets.

“Highest conviction positions are often in stocks with potential near-term appreciation or convertibles with good convexity,” she added.

As a result, the fund’s largest sector overweights include information technology and healthcare. On the flipside, its largest sector underweights are in sectors where balance sheet quality has been impacted by the Covid-19 pandemic, such as consumer discretionary and real estate.

In terms of country allocations, the US represents the largest part of the portfolio as it offers many opportunities in high beta and mid-cap tech names, according to Gkeka. The portfolio is overweight Japan as the fund’s managers find attractively valued securities and like its high beta equity market. Meanwhile, the fund is underweight Europe as it offers less exposure to growth names.

Country allocation

Source: Fund factsheets

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