Jupiter Merian Global Equity Absolute Return
A well-established, quant-driven long/short absolute return fund. Stocks are selected to go long (profit when the share price goes up) and short (profit when the share price goes down) on a fundamental basis by clever systematic models which are constantly being updated and tweaked by the very experienced investment team. The fund is also well diversified by investment style and sector.
Our Opinion
Fund Manager
Fund Manager
Amadeo Alentorn, Fund manager Dr. Amadeo Altentorn joined Merian Global Investors in 2005 (it was acquired by Jupiter in 2020). He is one of the original architects of this strategy and has been working on it for 20 years now. Amadeo holds a BSC in Robotics, an MSC in computer science, and a PHD in computational finance from the University of Essex. Prior to working on this fund, Amadeo worked at the Bank of England, developing simulation models for systemic risk and liquidity. Amadeo is the head of systematic equities. He is also a CFA charterholder.
Amadeo Alentorn, Fund manager Dr. Amadeo Altentorn joined Merian Global Investors in 2005 (it was acquired by Jupiter in 2020). He is one of the original architects of this strategy and has been working on it for 20 years now. Amadeo holds a BSC in Robotics, an MSC in computer science, and a PHD in computational finance from the University of Essex. Prior to working on this fund, Amadeo worked at the Bank of England, developing simulation models for systemic risk and liquidity. Amadeo is the head of systematic equities. He is also a CFA charterholder.
Risk
Company Description
Fund Performance
Risk
Company Description
Investment process
This is a long/short equity absolute return fund. It targets an absolute return over rolling 12-month periods. The fund’s philosophy is that markets are not fully efficient due to a number of investor behavioural and psychological biases. Following a purely quant-based systematic approach can exploit these errors and generate alpha.
They also believe that investment styles are cyclical and seek to profit by forecasting which styles are most likely to perform in a particular market environment. The team has a very large opportunity set of 6,000 global stocks. Although they remove illiquid stocks from their investment universe, the strategy does invest across the market-cap spectrum - although most exposure is to developed market large-caps.
The fund holds around 600 to 1,200 positions, both long and short, with a target net exposure of zero. The fund’s gross exposure target is 190% to 210% (gross exposure is the total value of a fund's investments, calculated by adding the absolute values of all its long and short positions).
Every stock in the universe is analysed across five stock selection criteria.
These are:
- valuations: measuring a stock’s quality versus its valuation
- sustainable growth: distinguishing between companies with sustainable growth versus one-hit wonders
- analyst sentiment: taking advantage of under or over-reaction by markets to an analyst’s forecast
- company management: how have they performed historically?
- price action: this covers several components at stock and sector level.
Once the stocks have been analysed across the five selection criteria, the next step is to understand which criteria are likely to outperform in the current market conditions. It is important to understand the market sentiment and uncertainty in different regions. Once the current position has been established, the model can look at history to give expectations for future risk and return.
The portfolio is then built from the stocks which maximise alpha within the fund’s set risk limits and controls. The fund’s proprietary transaction cost model ensures that costs are considered before trading, meaning the portfolio is not churned unnecessarily.
The team are constantly tweaking and adding new ideas and data to improve their models. One thing which sets this fund apart is its relationship to academia. The team sponsor PHDs and work with academics to explore blue sky ideas.
Risk
The fund is very well diversified and typically holds between 600 and 1,200 positions. The process has been designed to allow for quick rotation and turnover. The strategy is always trading and moving towards an optimal portfolio every day. Transaction cost models are used to optimise the portfolio and to avoid trading just for the sake of it. Turnover cannot exceed 2% a day.
The fund is very well diversified and has a target net exposure to the market of zero. The fund is geared, given its combination of long and short positions, and gross exposure is around 200%. However, historically the fund has been considerably less volatile than the stock market.
ESG
ESG factors are fully integrated into the investment process. This is now an Article 8 fund. The team use MSCI data to analyse the level and improvement in E, S and G. The portfolio’s carbon intensity is targeted to be below the benchmark level. The fund excludes companies which derive over 25% of their revenues from coal extraction and power generation. The fund has no positions in tobacco or controversial weapons.