Jupiter Japan Income - new manager, same approach

Richard Troue | Wed 23 November 2016

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• Dan Carter took over from Simon Somerville in June 2016 and Mitesh Patel joined as assistant manager in October 2016
• No significant changes to the investment approach or the portfolio since Dan Carter took over
• We would like to see the managers establish a longer track record of success before considering the fund for the Wealth 150

Dan Carter took over from Simon Somerville as lead manager of Jupiter Japan Income in June 2016. He was previously the fund’s co-manager from November 2011 and has also been lead manager of Jupiter JGF Japan Select, a similar fund, since October 2013. He has 12 years’ experience analysing Japanese companies in total.

There have been no significant changes to the portfolio since he took over. He uses a similar investment approach to Simon Somerville. The aim is still to invest in companies with the ability and willingness to grow dividends at a faster pace than the average for the stock market.

To determine a company’s ability to grow dividends Dan Carter asks questions in five main areas:-

• Financial stability – does the company have a strong balance sheet and healthy cash flow?
• Management quality – will management act in the best interests of shareholders?
• Competitive advantage – can the company defend its market share and margin?
• Growth – is there an identifiable reason why profits should grow?
• Valuation – is the valuation reasonable and is there potential for upside?

Recent investment in companies which meet the above criteria include Don Quijote, a discount retailer; Horiba, a leading maker of auto emissions testers; and Murata, a world-beating maker of communications equipment.

If a company ceases to meet the criteria above and looks to be in long-term decline it will be sold. Recent sales have included Panasonic, on fears its competitive advantage has been eroded; and Casio, which has struggled with higher costs, competition and pressure on profit margins.

Dan Carter maintains a concentrated portfolio. This means each investment can contribute significantly to performance, but it increases risk.

Our view

Events such as fund manager departures can be a good catalyst to review a portfolio. Dan Carter has a sensible approach, in our view, and he could go on to deliver good returns. However, according to our analysis, he has delivered a slightly lower return than the average fund in the sector and Japan’s Topix Index since October 2013. This incorporates his track record as lead manager of Jupiter JGF Japan Select and the short time he has been at the helm of Jupiter Japan Income, although past performance is not a guide to the future.

We prefer to invest with fund managers with long track records. In light of Dan Carter’s relatively short track record as a lead fund manager we felt it prudent to remove the fund from the Wealth 150 when he took over. The Wealth 150 is reserved for the fund managers we believe have the best prospects. We are not currently considering the fund for readmission, but we will inform investors if our views change.

Please note the fund’s charges can be taken from capital which can increase the yield, but reduces the potential for capital growth.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.