With multiple information sources and deep experience, we aspire to identify emerging material risks when we encounter them. The combination of six monthly, one-on-one meetings with all investee managers and ad-hoc onsite visits to their places of work (as detailed earlier) provides us with insightful opportunities to examine numerous material risks. These vary widely: for example, how have managers demonstrated integration of ESG and how attuned are they to the outcome from the differing ESG ratings of investee companies (i.e. by third parties, be they proxy voting agencies, MSCI ESG Rankings, etc)? What is the significance of youth and/or turnover in a fund’s compliance or risk executives? How effective is investment risk monitoring and oversight, be it outsourced to an external Authorised Corporate Director or executed internally? What is the relationship between internal Governance professionals and the managers entrusted with our clients’ savings? We study the nuances and detail and strive to calibrate the impact and outcomes.
The Jupiter Independent Funds Team recognises that ESG integration and reporting are evolving: it differs widely by asset class, region, fund house, fund team and portfolio manager. What is tailored, invaluable best practice for one, may be irrelevant ‘green washing’ for another. Moreover, many definitions have yet to be defined or adopted in a standardised manner by investors or companies, particularly within climate change. We believe that we can add value through encouraging and engaging with underlying managers. We challenge JIFT managers individually to disclose and demonstrate how they adhere to signatory status and how they exercise their duties as owners of investee companies, particularly where companies with poor ESG scores are held: what is their strategy and output of their engagement?
Finally, challenging managers on their stewardship credentials would be a threadbare and ineffective conversation without data. Our ESG database is updated annually and ad-hoc (for those offering more regular disclosure), ranging from RPFs’ to detailed working examples of engagement output or failing this, subsequent sale. Our engagement can be a catalyst of material evolution on behalf of investee managers and our team is frequently requested to talk to investee Governance specialists and their consultants. Whilst it can be challenging to calibrate the precise impact to underlying stakeholders, we strive to continue to exercise our stewardship responsibilities on behalf of our Jupiter Merlin investors.
It is important to further note that the above investment process naturally leads us to active managers who invest with integrity and seek to invest their clients’ capital in sustainable companies. With typically long holding periods and low turnover, the managers behave as long-term owners on behalf of their unitholders. Engagement and voting are integral to their alpha generation - their raison d’etre - and increasingly, they can demonstrate the outcomes of their effective engagement. With the exception of the Real Return strategy, funds with very high turnover, those using significant derivatives or leverage, in passives or AI, factor-driven strategies or in structured products are generally avoided.