Jupiter Ecology - seeking companies that solve environmental problems

Dominic Rowles | Thu 13 July 2017

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• The number of investment opportunities could rise as environmental awareness across the globe increases
• Fund performed in line with benchmark over the past year despite a lack of exposure to strongly-performing financials and miners
• We prefer funds with a broader investment universe and our favourites feature on the Wealth 150

Our view

Charlie Thomas, manager of the Jupiter Ecology Fund, aims to invest in companies that offer solutions to environmental and social problems such as pollution, resource scarcity and water shortages. This is a niche area of the market, which means the fund’s performance can differ significantly from broader global stock markets and increases risk. In our view, the manager has not demonstrated strong enough stock-picking ability to deliver returns significantly ahead of the wider global market for the level of risk taken.

It can be extremely difficult for a manager to add value by investing in such a specialist area of the market. That said, we view Charlie Thomas as a highly experienced manager and view the fund as a reasonable choice for socially responsible investing on a global scale. The number of companies offering environmental solutions could increase over the years as governments, companies and individuals become more aware of their impact on society and the environment, and this could provide greater opportunity to add value through stock picking over the long term.

On balance we currently believe funds adopting an unconstrained approach have greater opportunity to outperform the global stock market over the long term and the fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors. Our favourite global funds can be found on the Wealth 150.

Portfolio construction

The fund’s investments can be divided into a number of ‘themes’, ranging from clean energy and transport services to water management and pollution control. The fund’s largest theme is ‘energy efficiency’ and 22.3% of the fund is invested here. Companies included within the ‘energy efficiency’ theme include Japanese firm Toray which creates weight-saving aeroplane parts out of a carbon fibre composite.

A further 19.7% of the fund is invested in companies in the ‘waste treatment and recycling’ theme, such as Norway-based Tomra. The business operates ‘reverse vending machines’ which allow users to deposit used bottles and cans. The system captures 35 billion beverage containers annually and helps to increase resource efficiency.

While a company may fit one of the fund’s themes, this alone does not necessarily make it a good investment. The manager therefore conducts further analysis and invests only in those companies with strong management teams, sound balance sheets, and competitive market positions, which can be purchased at a reasonable valuation.

Electric car-maker Tesla, for example, does not meet the manager’s criteria. The company helps to address the problem of resource scarcity by making motoring more efficient, however, he believes its share price is overvalued.

The fund has little exposure to miners, financials, pharmaceuticals and the oil & gas sector as few companies in these industries fit any of its themes.

Performance

The fund produced a strong return of 22.1%* over the past year, although it marginally underperformed its primary benchmark, the FTSE World Index. Please remember past performance is not a guide to future returns. Turbine manufacturer Vestas Wind Systems contributed heavily to performance, as did water treatment equipment manufacturer AO Smith. In contrast, the fund’s lack of exposure to the strongly performing financials and mining sectors detracted from overall performance.

Past performance is not a guide to future returns. Source: Lipper IM to *30/06/2017.

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.