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Jupiter's European focus
By Rob Griffin
Alex Darwall likes to stay true to his principles - as was illustrated by the way he stuck to buying high-quality companies for his Jupiter European fund during the recent bull run, despite the market favouring lower-quality assets.
"I invest in sensible companies with strong balance sheets and that counted against me during the credit bubble because people wanted heavily indebted stocks with bad balance sheets," he says. "My approach became unfashionable."
The portfolio may have underperformed as a result, but Darwall insists that his stance has since been vindicated by both the returns achieved and the fact that his portfolio is much better placed to withstand the current stockmarket turbulence. "The fund is now very well set-up and the results from companies that it holds have been very good," he says. "We've managed to avoid the lower-quality companies which tend to really get found out during a credit crisis."
The aim of the £1.2 billion fund, launched in 1987 and run by Darwall for seven years, is to achieve long-term capital growth by investing in companies quoted on a European stock exchange.
"I look for stocks which have something special or unique," he explains. "I like those with some sort of intellectual property or technology that gives them an edge over rivals and can be used across different markets."Travelling well He adds: "One of the great things about European companies is they have been very good at travelling overseas into different markets."
Darwell cites Novo Nordisk as a prime example. Although its headquarters is in Denmark, the company employs 26,000 people in 79 countries. Furthermore, its products are actually sold in 180 countries.
"It's the number one producer of insulin in the world, which puts it in a strong position," he explains. "Diabetes is obviously a worldwide problem, so the company sells everywhere and that means it's a truly global business."
Many of the ideas for the fund come from the 200 meetings that Darwall has with management teams every year. "I spend a lot of time with corporates to understand how they make their money and why their business is worth investing in," he explains. "There's no reward without risk, so if you're going to take a risk, then make sure it's a high-quality one."
The fund usually contains between 40 and 50 stocks, with just over 60% of its assets invested in the 10 largest positions. This reflects Darwall's conviction in them, although he doesn't believe he is taking a concentrated approach.
"The important fact is that it's a series of uncorrelated, single-company risks, as I have a very broad range of exposures," he says. "This means that if one goes wrong then it won't have a knock-on effect on the others in the portfolio."
Looking to the future, Darwall has no doubt that Europe is capable of providing a rich source of ideas. "Europe gets some very bad press but it's important not to confuse the political process with the world-class companies that happen to be listed on the Continent," he says. "There are some world-beaters and I'm just lucky to be able to invest in them."
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