LSE 00:01
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Peter Higgins 00:17
Hello and welcome to the Investing Matters Podcast. Today I have the huge privilege of speaking with the hugely talented Amanda Sillars, an investment manager and ESG director of Jupiter independent funds team, which manages nearly 7 billion in the Jupiter Merlin range of portfolios.
In June 2021, she was given the additional responsibility of ESG director at Jupiter, Jupiter funds team and Amanda has over 26 years of investment industry experience and alongside her colleagues have several decades of industry experience between them, ensuring a team that is completely focused on generating outperformance for their clients using the multi manager concepts after fees over time and a harder proponent of team management, active stewardship and transparency.
Welcome Amanda.
Amanda Sillars 01:09
Well thank you, Peter, you made me sound terribly old.
Peter Higgins 01:12
No terribly experienced.
Amanda Sillars 01:14
Well thank you.
Peter Higgins 01:15
You know, this is just what I'm focused on and talented.
Amanda Siilars 01:18
Well, yes, that's so that was very kind.
Peter Higgins 01:22
Right. So in this conversation, we're going to discuss Amanda, your journey in the investment industry, thus far, lessons learnt, experiences gained, your investing style, and your passion for all things ESG and for delivering long term success for investors via Jupiter Merlin’s portfolio and much more. Okay, so welcome. I want to say firstly, it was absolutely fabulous to meet and speak with you and your Merlin colleagues at Leicester recently.
Thank you so much for just gaining me with your present and naturally allowing me to speak with you on the day. And I'm so pleased that you're here with us today. Thank you very much for that.
Amanda Sillars 01:59
Not at all. Thank you. And actually, to be honest, I think at that meeting, you had John Chatfeild-Roberts presenting, there were three of us and he was one and he's a real devotee. It's not me. So but thank you.
Peter Higgins 02:10
Anyway, thank you very much. Now, I wanted to start this conversation, if I may, with you, sharing with us your transition from obtaining a BA Honours degree in Art & History to your first job in the investment industry. How did that come about Amanda?
Amanda Sillars 02:23
Yeah, no, it's really unusual. I frankly, I never even considered finance or the City or anything like that.
As a career, I was always very much on the artsy side. And it wasn't till I met someone who said, Amanda, do you have any idea what the City actually does? And I said, yes, it's all focused on money.
And I'm not really interested in frankly, money doesn't really excite me. And I'm not particularly good with figures anyway. And he said, You've got it all wrong. London, works on GMT, Greenwich Mean Time. So you've got Asia on one in the morning, and you've got the states open in the afternoon, London is the hub for global finance.
Secondly, we have a rule of law, so naturally attract all these companies, to London to British law.
Thirdly, we have English, it is the language, the global language of business.
And fourthly never to be forgotten.
Every single company requires cash. And he said to me, you, Amanda, you're working here as a waitress, because you need cash. Cash is your life, that's your oxygen, if you run out of cash, you're useless. And the same is true of a company.
So if you have a company that's growing, that's got something really good, it needs cash to grow. And the City can provide that. And he happened to be a fund manager, and he said, so I've got lots of investors who are investing lots of their hard earned savings with me. And if I can empower the best companies to grow, and to make better goods and services and be better for all stakeholders, he didn't use that word, because that's quite a modern word. But for everyone, then that's a fantastic job that I can do. And I can make a real difference. I thought, oh, my gosh, I want to find out about the City. How cool.
And then, in addition, I would say one other thing. And I've now fast forwarded. But I would also say that another massive thing about the City and about investment management and active asset management in the way that we do it for our duty and to investors is that if you can add in that fiduciary duty, in other words, you're saying to a company, I think you're so good, I want to buy some of your shares. I want to have an ownership stake in your business. Oh, and by the way, that comes with fiduciary responsibility.
So I'm going to engage with you the management of that company, to help you grow and make that company more sustainable over time. I do see it as a partnership. So that last bit he didn't say, but the first bit he did and so I just suddenly thought, hey, I have no idea what I want to do. I've just finished a degree and to get into the art world is really tough. And by the way, it's particularly tough in that regard, it's no tougher in the City.
So why not give it a shot? And I suddenly discovered everything he said was right. And there in embarked on an eight year series of exams. No, no long time having said I would never do another exam after my A-Levels. I then did agree. And I've ended eight years. And yeah, so to the exact question, I was very lucky, in that I happened to see an advertisement.
I don't know if you remember those old days, most of your listeners probably won't. They used to be on the back of the Times, there wasn't an internet, there was no World Wide Web or anything like that.
There was a jobs list at the back of the Times. And I just saw one for a receptionist. And so I went for it.
Peter Higgins 05:38
Brilliant. So you started as a receptionist, that was your very first job. And look at you look at you now, you know, you went on to become an Executive Director of JP Morgan, where you spent 15 years at JPS Asset Management and JP Morgan Private Bank, Flemings respectively, please share some of your other roles there and your greatest learnings and and do you have any early mentors Amanda?
Amanda Sillars 05:59
Yes, to your last question, mentors are so important. And I keep saying to everyone I meet in my mentoring capacity, which seems still to be quite big, please get some wonderful mentors.
And I genuinely think it should be in the brief of every line manager to make sure each individual who reports to them has good mentors, because it's a fabulous relationship.
And it flourishes most when it's informal. Because it sort of comes and goes with swing, sometimes you'll find sometimes you just need that extra outside input, or initiative. And mentors are brilliant to that. And that's one of the reasons I'm so keen to give back and be a mentor, and also connect the mentees together as well. It's not just me to them, it's them to me, and it's them across as well. And I forgotten your first question, I'm sorry, Peter.
Peter Higgins 06:51
No, I was going to say with regards to the various roles and your greatest learnings whilst you were there at JP Morgan.
Amanda Sillars 06:57
So various roles, we had quite a lot of M&A, mergers and acquisitions.
So we were sort of bought and sold several times. So I had lots of managers, different managers all going in different directions, wanting different things.
So that was quite entertaining, and encouraging, coupled with three children as well.
I think my greatest learnings were humility, that everyone has something really valuable to teach, I should have two of those, and one of those that we have in this country, an incredible opportunity. And we just need to have the hard graft, and the humility to chase it and just go for it.
Don't let any holes be barred. So I think it's humility, and it's the opportunity that we have here compared to others.
On that latter point, you know, I compare ourselves to other countries, you're not allowed to be a mother and work in Japan, it's socially unacceptable. And to actually have a meaningful job that's so rare, and so, so special, we have a climate that we can live in and work in.
We have a rule of law, we have a sensational example of service and diligence and integrity from our ruling family. I mean, look how seamless that transition was from the Queen to the king. And you look back in history, and there's blood on the streets for years, we take so much for granted. We take the fact we have water in our taps, okay, it's costing more, but it's still there. We take the fact we've got a blue sky when we come out in the mornings.
Well, I was reading that in Mongolia. Now, the solar panels are useless because they've got so much smog from the coal we're selling to China. It's no good. We haven't lost that yet. So I'm forever grateful and forever on both.
Peter Higgins 08:39
Thank you for that. Now, I wanted to go back a bit if I may, because you touched on your passion for mentors and mentoring. Now, during your time at JP Morgan, you chaired the woman's interactive network with over 2,000 members, please do tell us the importance of that role and why you got so involved in it at the time?
Amanda Sillars 08:57
Sure. We had 27 offices at the time of the merger of Chase Fleming and JP Morgan, okay, it didn't all come together. But essentially, it did. And we had a lot of women and a lot of change. And at times of change is a really good idea to try and get groups to cleave together and try and tackle problems in a combined and effective fashion. And the women's interactive network, when we used to call it had been running for ages. And I was invited to be a you know, a member of the group. And then as people sort of left I suddenly found myself holding the can which was a bit terrifying actually.
And so we used to probably have a meeting once a month. And each of us there was sort of six of us in the group invited a senior person to speak twice a year, essentially.
So sorry, two meetings every year, which was a responsibility. I had to find two speakers every year. And we would typically find the most senior people we could and ask them to come in to all the women and, and to give a what we call the three plus three minus, which is a typical metric that you use in an appraisal in an American bank.
And it was fascinating some of these really, really big swinging individuals, I won't use the normal word for that came in and gave us a really candid appraisal of their careers, and often career advice.
So it was really motivating, actually. And to your next question, the best piece of advice I ever heard was from the chap who was head of JP Morgan Investment Bank, which at the time was a really, really big deal. And he came in and said, you know, my biggest regret is that my daughter is a composer. And I didn't listen to her. I didn't go along to her concerts. And I'll never get that back. And he said, It's all very well to say to people, yes, you can go and collect your kids from school once a month. Or you can go to one of the football matches, if you've got a son, you know, who's playing in a team once a term or whatever.
But actually, if you don't set the example, from the top, they didn't do it. And I just thought, note to self, I'll never be at the top. But I must always remember to try and set the example, in whatever it is. Because actually, that's the most effective way of emulating what you're trying to deliver.
Peter Higgins 11:15
And it's a very good point very well, well made there Amanda and I think you are at the top, and the fact that you've managed to maintain 26 years in the industry and raised three children who are equally doing very, very well at their pursuits, that success in itself. So very, very well done.
Amanda Sillars 11:31
While you're very sweet, my great student actually is having a wonderful husband and keeping him happy. And to your last point, I struggle to get my 18 year old out of bed at times, but there we go. It's not straight success, I can assure you that.
Peter Higgins 11:43
Eighteen year olds often have that difficulty. Do you struggle to get them out of bed as well?
Amanda Stillers 11:50
Seems to be a strange type of glue there that I haven't yet found.
Peter Higgins 11:54
The 18 year old syndrome unfortunately, now, during your time at JPMorgan, we're going to move on in a little while from that, obviously, you've got some investing memories and experiences, you experience the dotcom bubble and the global financial crisis of 2007/8, could you just share some of the experiences of that for the listeners that haven't been through that seeing current year's volatility and drag on the markets and but they haven't really experienced much in comparison to those sort of episodes.
Amanda Sillars 12:23
That's true, actually. And this year for bond investors, they're experiencing drawdowns of that size. And I can see so many bond teams, they've never seen drawdowns of 30-40% before.
And it's really shattered them in equities, well used to draw downs. I mean, I as you rightly identify have been through two of those, thoughts would be firstly cleaved together, you've got good people in your teams, draw them out, work together, get in the office, listen to them, engage them in conversation, because it takes some of the fear out of it they've seen that they've been at for and the fact that they're there means they've survived.
So that's a good start. Secondly, try when you're going in to these times, which is always difficult to see, but there are red flags, listen to the people who are really wise, and they will show you those red flags, try to protect capital, if you can preserve capital such that you don't permanently destroy it, then you've got capital invested in the markets at the bottom, you'll never know when the bottom is.
So you have to have skin in the game. If you sell at the bottom, you know you've catalysed the very worst outcomes for your clients, you've literally just managed to crystallise a drop of a third or a half.
And that's somebody else's savings. And who knows, they may not be earning, they may be relying on that money for their pension, for college fees, and you've just denied that person, that outcome. It's an enormous responsibility, but shared amongst many broad shoulders of various age groups is super helpful. And I guess my third point would be just a flashback. It was the 18th of December and my boss and I sat down and went through the fund of funds that we were running at the time in 99.
And we suddenly did a tot-up and we thought, well, if we look through the sector holdings of the 10 funds within this fund of funds, what's our real TMT exposure?
Because on paper, it's 21%. But actually, when we added in all the stocks that were being caught in this bubble, which was called TMT, we actually had 35% exposure to this single theme, which had gone up and was trading at PEs sort of 80, 100, 120 depending on how far you looked.
And that's when we cut big time and it felt pretty sickening at the time.
And often, when you're making the right move, you do feel sick for quite a few weeks.
But the term came very quickly at the beginning of 2000 and we were so grateful that we'd actually dug deeper and had a look and understood we get transparency through all the portfolios that are in the Jupiter Merlin portfolios.
For us, for example, and indeed all the funds that used to be in the product we managed to JPMorgan. And it's that granular depth of knowledge that is invaluable, particularly when there's something you know is not right in the market. And you've just got to dig at it like a sort of ferret, trying to find out what's going on and what the impact might be and make sure you are in the right position.
Peter Higgins 15:20
Love that reply and find something you said that really, really resonates with me as well, is the difficulty of selling. You know, we all do the research, the fund managers do the research. And it almost feels easier to find the best quality and then make a purchase.
But the difficulty of all that research then going now, the market has gone a certain way. And we need to extract ourselves, that's often a very, very difficult path to go down for, for everybody, even the most experienced fund managers.
Amanda Sillars 15:47
Which is one of the reasons on the Merlin team, because it's other people's money. Okay, we've got our money in it, too. But it's most of the others. Obviously, we always wait for an inflection point to happen.
We don't prejudge it, because we can't. I can't see into Jay Powell’s head. The governor of the US Federal Reserve who's going to change interest rates.
I don't know if he's going to change interest rates tomorrow. And even if I could, would I know which way the market would respond? It's not always intuitive. It's really interesting, however clever you think you may be. You're always shown actually, you're really not. And the market is far more powerful than you are. Which is why one of the traits that really upsets me when I listen to fund managers, is any arrogance, if there's any hint of arrogance, I'm afraid. I'm out of that meeting in about 10 minutes. It's a really dangerous characteristic. And I think the same is true, perhaps in any profession.
You know, if you're not listening to what's going on around you in the marketplace, and amongst your customers, particularly, they're your vital feedback loop, it's then you're serving. If you fail to listen to the people you're serving, what service are you performing for them? What value does it add?
Peter Higgins 16:51
Very good point, I'm going to be touching on characteristic traits a little bit later on. I'm going to speak now, if I may, with regards to your 15 years at JP Morgan, and then you joined Jupiter in 2011.
Given our vastly qualified and experienced you were already what attracted you to Jupiter at the time, Amanda?
Amanda Sillars 17:09
So you're so sweet. I didn't consider myself to be far too qualified at the time. But this team have always been the best in fund of funds. They used to be a triumvirate of three, and they very much sat on the pedestal.
So all the sort of conferences I used to go to and the peer group, they were seldom there, because they were so busy. And if they wanted to see anyone, they would literally pick up a telephone, and any manager would be there faster than the taxi could drive, literally. So to try and get into their front door, the queues all the way down the street.
Why? Because they delivered to their clients in a transparent, simple, effective after fee revenue stream that satisfied their financial desires. And secondly, because they made a real effort to meet their clients. So they would have roadshows going up and down the country meeting all their clients, their investors, twice a year. And they would write handwritten letters to every single attendee, after they came to give you an insight.
When I joined in 2011. We were having 1,000 people at every roadshow. And you met us at one of those roadshows. So you know, exactly the type of forum with 30,40,50 people.
And they would write after every single road show in 17 different venues. So it was that connection with the individuals, they understood the privilege and the responsibilities they were carrying, by being entrusted by these people with their precious hard earned savings.
And I think it's that link, I wasn't dealing any more with a piece of paper, which had a pension scheme trigger on it. I wasn't dealing with trustees who are arm's length from the members of a pension scheme.
It was actually the hands on and I can tell you, Peter, you'd enjoy this particular story. I was in Exeter, about two years ago, presenting, actually it was three, it was just before the lockdown. And this wonderful chap, don't ask me his name, because I have a memory like a sieve for names unless they're actually managers.
And he came up to me and he shook me warmly by the hand. He said, Amanda, I'm so excited. I've just had my first grandson. And I said, I'm overjoyed for you, how exciting!
And he said, yes, and he's already an investor inJupiter Merlin Growth. And I just thought to myself, okay, so my timeframe has now gone from your lifetime, which is probably another 20 or 30 years to probably 90.
I'm not going to be here in 90 years time. How am I going to service that little boy? Effectively, so there's, it's a, it's a hugely, hugely special place to be. It's a huge responsibility when you're not working with an incredible team. And that's why I wanted to work with the team because they're just they are the best, great product. Great team, great house and it still is, so that's great.
Peter Higgins 19:58
Yeah, fantastic team. Now, the team manages nearly 7 billion on their assets and management for Jupiter Merlin range of portfolios.
Please, can you give us an overview of the team, the structure and its philosophy? You've touched on a little bit of it there as well. And I'm sure that still continues on.
Amanda Sillars 20:15
Okay, lots of questions that are there Peter. So I'll try and touch on each one briefly.
The range is six portfolios, each with a different risk reward profile to suit everyone from Granny's through to that little boy.
So different ranges of risk and therefore they have a different composition of fixed interest, equities, and other assets. Philosophy is the only person who matters is the clients. And that if we do well, by our current clients, hopefully we will attract future clients. And we do that by delivering an after fee revenue and return profile that allows those individuals to not diminish the real spending power of those assets.
What do I mean by that? What I mean is that if you could invest a certain tranche of money, I think our average investors got about 25 or 30,000 pounds with us, okay, one has got 100 million, we know that.
But the average is about 25, or 30,000. And we know that if we can, over time, increase the value of that money after fees, then hopefully they can achieve their own financial objectives, which gives them surety and that's really valuable. And so we try and do that by adopting a robust and repeatable investment process. Whereby we have a look at the world and say, okay, these are the things that are going on at the moment. So for example, an easy one, we've got rampant inflation.
So in an inflationary environment, which asset classes are likely to outperform and which are likely to underperform. And therefore, we're trying to skew the portfolios to the asset classes that are most likely to deliver a positive return and take assets away, remove money from the asset classes that are going to underperform.
Easier said than done. And then over time, we have, I think, a perfect combination of you've got our team of six people who are focused on this, we live, we breathe, we eat this, this is our passion.
This is our day and job is to serve those clients. But you've also got the underlying managers, and they're good. They've got a proven track record of outperformance.
So from your perspective, you Peter, or an investor or anybody else listening, you've got an insurance policy, actually. And you always pay a little bit money for insurance, but it's worth it when the rain comes.
So the insurance policies that you've got us overlooking this is what we've done for the last 21 years. And we've got a track record going back that long. But even if we get it wrong, which we do, all the other underlying managers of which there are at the moment, typically 13, or 14 funds within the portfolios, they weren't all get it wrong. And I think that's a really, that allows me to sleep at night.
It's one of the two things that allows me to sleep at night. The other one is that we're not in passives. We're not in structure products. We haven't put any of the money into derivatives.
We know what we've put other people's money into. Whereas with so many other products, they're really complicated, and they're really confusing. If I didn't understand them, how are our clients supposed to understand them yet alone?
Often IFAs are explaining them to clients. Well, if it's fiendishly complex and leveraged, and you just never know what's coming next. The markets are quite difficult enough already. And your last question was to team so Algie, John and Pete were the triumvirate they were the three musketeers who nobody could touch. And Pete bless him, he retired actually about six years ago now, but he's still a consultant.
And actually, I think out, John, I've got lunch with him this week, if I'm right. He lives up in Yorkshire.
And so they just travel north because they all got quite a long way out. So they were the three.
And then when I met them, I in my first meeting with them, actually, I said, I would adore to join you, obviously, who wouldn't? I don't mind what I do, I can happily make the tea. I really don't mind. I just would love to come and join you. But I can't solve your problem. And these lovely triumvirate looked at me slightly askance and said, What's that? And I said, Well, I'm not dissimilar in age.
We're all roughly the same age. And hey, ho the next thing I heard they were taking two of us. Yay. So here came David. And David is now my boss. He's fabulous, incredible guy. And he is now co ahead with John, which is brilliant. And then George has come up very fast on the inside track. He was a grad who took four years ago now. And he's just come up so fast, but I'm not going to keep singing his praises because he might be listening to this interview in due course. And then Alistair joined us as a CPM or Client Relationship Manager.
So if any of our clients have got colleagues They want to teach them about Jupiter Merlin portfolios. They literally pick up the telephone and says Alistair, come up to Timbuktu, come and tell us about it. And he said, right, I'll go. So he's on the road all the time. So whilst when he's in the office, he comes to our meetings, whereas we all attend the meetings and we all want to be there, because we all want to know what's going on in these portfolios in those funds. Was that it? Did I miss anything? Peter?
Peter Higgins 25:26
Brilliant. Exactly, absolutely, brilliantly said and quoted. And you've answered it perfectly. I want you to touch on this. This has the nuance of what it means to be successful. Amanda, the Jupiter Independent Funds team have won over 15, multi manager awards in the past 10 years.
So clearly, what you and your team are doing is absolutely phenomenal. If you can just share some of the secrets of your success, but the others that haven't attained that many awards so far, what's the secret?
Amanda Sillars 25:52
Wow, good question. I would say make sure your product works for your clients, it's got to be something that is fantastic for them. Because if it isn't, there is no reason they should buy it. And there's every reason they should sell it. And therefore you have nothing however good you may be. And secondly, you got to work with a good team.
I really want to see the team, I would love to happen for dinner 100% with their other halves and thirdly, I think to be a really strong team member, you've got to be really humble. And an easy example, but not one that really hurt. But an easy example from the outside was when David was promoted over me, I probably sold for about one minute. But that was all because I was just so delighted.
He's an amazing guy. And actually, he's younger, and we need to grow him. So that's really, really cool. But actually, things do hit you a broadside particularly actually funny enough, when you come back from maternity leave, things don't go to plan often. And you've just got to sit there and think hold on, I'm incredibly lucky to be where I am. I've got a lot going on at home, I haven't got time to shift jobs, let's not even try it. Give this my best shot. And if in a year's time, X is still happening, or Y is still not great.
Maybe then consider it. But you know your battery by that time is quite thin. So don't stress it by being Oh, well, you know, I could do this better. And how's this all happen when I was away, you know, it doesn't work. So that would be probably my messages to other women.
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Peter Higgins 27:47
Now, I wanted to touch on this because it's quite clear that you and your team continue to find talented individuals across the portfolios that have a long-term ability to add value and beat the market and you touched on characteristics earlier of which ones you would avoid.
Please would you share with us the winning characteristics and recurring characteristics and traits that you found in fund managers over the years? And also, Merlin? Of course.
Amanda Sillars 28:12
Yes, with pleasure, Peter, although it's an exhaustive list, there's an awful lot, which is why having really strong cognitive diversity on a team really helps. But I would say at the very top of that list is a really robust investment process.
Secondly, I would say portfolio construction is critical. And it's very frequently overlooked. And what do I mean by portfolio construction, I mean having the right percent of a portfolio in a certain market or fund.
So thirdly, if you find a manager who's got a really consistent investment process, really strong portfolio construction characteristics, an amazing team, because one person is never a good thing, you always want a combination of great minds, then, from our perspective, what we can do is we can hold a fund for a long period of time and then just sort of increase it when the time is right for it and decrease it when it's not.
So for example, Fundsmith, which many of your viewers will know is a top performing large cap growth, concentrated portfolio run by a very charismatic and successful individual called Terry Smith.
It was off the charts, it delivered fabulous returns for our clients for many, many years. We invested with the strategy when it was I think 200 million in size, and it's now 24 billion, Sterling. And we held an awful lot in that as a percent of our portfolios when the market was rising, and it was being led by that type of style.
But then, when we had the vaccine news, which from memory, it was November 2021.
When we suddenly had that news that we got that vaccine which was fantastic. We recognise we were in a new growth cycle and we switched into value so we reduced down dramatically that exposure.
Now we still have small exposure to that portfolio. We still believe his investment process, you know, everything, they are doing what they're saying on the tin, but it's the wrong time to own that style.
So consistency of style really helps. But there's so many other things as well, you've got to find ultimately, a team that wants to win a team that's really hungry, but not greedy.
If they're greedy, they'll take too many assets. If they're hungry, they'll work at it all the time. They'll think and breathe it, you're walking down the street and you see a sign and think, oh, that links back to that.
Yes, that works. So maybe that will have an impact on that investment sort of thing. So there are lots and lots of different characteristics. And each member of our team is looking for something slightly different. But that's great, because when we all reach the same decision, we can put more money behind it. It's a more robust decision.
Peter Higgins 30:51
I think that goes back to this nuance that I keep seeing repeated over again, the importance of diversity of thoughts, you know, that sort of balanced across the team was looking at things slightly differently but you come out and find the gems that way.
So Amanda, talking about shrewd moves during 2021, yourself and your team made a very bold and it turned out to be a very shrewd move by exiting Chinese equities. Do you recall what red flags sorry, I couldn't resist you and your team was seeing at the time that led to that change of investing strategy?
Amanda Sillars 31:24
Yes, to be honest, we'd been bridling with it for quite a long time, we are increasingly and intrinsically more and more concerned about the E and the S. And I'm not going to use inflammatory language because it's not helpful.
But let's put it in really mundane language, their track record, from an environmental and social governance lead a lot. I don't know how to put it bluntly, was not great.
And the final straw was the common prosperity initiative that President Xi announced, and within three days, which included a weekend, I can't remember the figure, but it was billions and billions of RMB. Chinese Renminbi have been divested from companies, by their founders and their owners and the agents, you know, the management of those companies, and invested in social projects, schools, hospitals, a whole series of different things, which from a philanthropic perspective, is very laudable. But from a governance perspective, just highlighted to us yet again, that Chinese companies are required by law to prioritise the will of the CCP.
And the state owned enterprises have to have one, if not two members of the CCP, on their board, and certain internal processes, we know a huge percent of the index, and indeed, they're very big heavyweights within that index, the social contract in China, is that you need to do as you are told, you don't ask questions, you jump and say how high and it's the person next to me jumping higher? Because if so I got to jump higher.
Whoever thinks that shareholders are primary is mistaken. It's a law. It's written, totally clear and transparent. And secondly, as a foreign minority shareholder, are you really going to be listened to?
Can you genuinely say you have any influence and you can work in partnership with the underlying company? Can you genuinely attest to the policies or the environmental the social policies or indeed the governance?
So honestly, it wasn't a difficult decision to make. We think it's dangerous to invest money in a command economy such as that. And if anything, actually, it's been very interesting to watch the ramifications of the war in Ukraine, whereby suddenly Russian investments became uninvestable and you couldn't withdraw your money from them.
A lot of people are saying like that happened, if well, when really China annexes Taiwan. Question really is, how are they going to do it?
And what would the ramifications and the impact be on the Western world yesterday and Western investors?
So we have the luxury of global mandates amongst the portfolio's we can invest people's money in safer areas.
So why wouldn't we? So That's a really long answer. But it's something that really troubles us and really worries us. But it is a very unusual view. And it was even more unusual when we made it, I can assure you, nobody.
Peter Higgins 34:21
No but I mean, you took up the essence of the role around May/June of 2021, as the ESG director, and that's part of your mandate isn't that you've got to be seeking out where there might be troubles or where there might be issues. And you absolutely and your team smashed it regarding that particular episode and continue to do so.
I wanted to ask you, if I may, it’s absolutely vital it’s very important. And you guys do it really well. Engaging with companies on the ESG fronts and looking at what's important.
How do you get that because obviously, there's some funds and some companies that are reluctant to go down the ESG route at the moment. So how do you go about that? Engaging them more?
Amanda Sillars 34:57
So it's a really good question. And it seems as though we're very arm's length, because we have a portfolio. And in it is a whole series of underlying investment funds. And in theory, they're all actively managed.
So if you Peter were managing an active fund, you could say, well, what's to stop me holding one portfolio when I come in and see you? And then hey ho I changed it, and it's something completely different the next day, you have no knowledge of that at all.
It's money in my fund. And I can do as I, you know, you're empowering me to do that, because you're not investing directly.
In practice, however, if you're trying to deliver an earnings stream, you're trying to invest in companies that will grow their earnings in a more sustainable and more effective way over time.
And those earnings are more likely to grow if they're doing the right thing and adopting the right practices from an environmental, and social, and governance, and a climate change on every perspective.
So engaging with the companies with whom you've hand selected those companies for your fund. And engaging with them to help them along this route means you've got better insight.
It's a tool that's been used for time immemorial, by the best quality active managers, okay, it wasn't called ESG that acronym had yet to be sourced, it was just called engagement. And people didn't note it.
But they often did it and actually, I can give you a brilliant example. Yesterday, I hopped on my bicycle from work. And I went on my way home via one of our superb managers.
This happens to be an unusual one. It's a very boutique, it only invests in one asset class. They're celebrating their 30th anniversary. I said to them, where's the cake? You should be celebrating, we should know about this. And they said, yeah, well, we're keeping it quiet. And then what we'll do is to be in one asset class, seven managers all in one asset class.
And still running is a real achievement. They're headed their index by about 8% year-to-date, which is fabulous. And I was talking to them and saying,look, your ESG report is great.
You've come on strides, you've done fabulously, but I'm not seeing an awful lot on E and S. climate, carbon, biodiversity.
Can I just ask you about this,hey ho, would you believe it, they started talking about a company they invested in, I'd been really careful not to give you the names to identify the manager. And they said, well, we're investing in this company, because they're using an if I can get this right, a new method of blast furnaces for their steel. And this has a much much lower carbon footprint than their competitor. And we think because carbon pricing will come in that this will allow the company to perform better, and it can invest more over time that I bought a set of them.
This is exactly what I would have expected you to be doing. They engage with their companies, masses. But unless you nudge them, say to them, please articulate what you're doing. They didn't seem to understand the language that needs to be deployed to do that effectively.
So in a way, I hope that we as a team can help just gently help those outstanding boutiques to demonstrate that actually, on paper, they may look poor, but they're actually great.
Moreover, they don't use the voting agency intelligence, they use the plumbing, but not the intelligence, they make all their own decisions, which saves them a revenue stream, and stops groupthink. And then thirdly, the quality of their analysis is superior.
So again, if you would, when you run them through Sustainalytics, or we have a fantastic thing called Jupiter ESG hub that runs all the third party data on all the underlying positions with each fund. And when you run them through that it doesn't look great.
But actually, the work that they're doing is helping these companies to improve what they're doing. And that's where you get the elevation in the ESG score, which in turn attracts those who use ESG scores, we do less, the only reason that we knew they were doing this work is because we've known them for a long time.
But secondly, and more importantly, because we have something internally which George developed when he first arrived, and it's called the Jupiter Merlin Scoring Matrix. And we asked each manager before they come in for their routine six monthly meeting sounds like a dentist, isn't it? And we go through each tooth and have a look and see how the fillings are positioned? And is this one a little bit wobbly? Or is that company a little bit wobbly?
We also ask them well, when did you last have that filling inspected? When did you last engaged with that company? And what were you asking them about? And how much of that company do you earn? And what was the outcome of that engagement?
So we hold them to account to demonstrate positive outcomes from their engagements with companies. And that I think, is what ESG should be about. It's not about exclusion. It's not about following distant third party analysis be at the voting agencies, the IT Sustainalytics, MSCI All the other agencies. It's about hands on active stewardship that really makes a positive difference over time, on occasion, it's tough to do well, but when it works, it's really cool.
Peter Higgins 39:58
Brilliant. I've got two questions that are attached to what you just said. I'm going to just cut these very, very quickly now Amanda, and please do share with our listeners the difference between highly rated ESG stocks and improving ESG stocks and why there tends to be an outperformance of the latter group?
And you touched on it a little bit there regarding the scores regarding certain companies.
Amanda Sillars 40:19
I'll give you an analogy, Peter, in a classroom, you're the teacher, if you engage with the kids who are sitting in the front row, who are listening already, and whose work is exquisite, how are you going to lift up the whole class, you're not massively, which is they've got those few.
If you manage to engage with the guys who want to be at the back of the class who are highly disruptive, who cause chaos, at the first opportunity, the whole class will do better. But the uplift you get from those individuals is far greater.
Peter Higgins 40:49
Fantastic response. Thank you. Now the other aspect you touched on there as well, briefly Amanda, if I could ask you to discuss the rationality of exclusion?
I think it is how you and your team phrased it with regards to sustainable investing, often focusing on what is good today, and not necessarily long term?
Amanda Sillars 41:06
Yes, there are so many facets of this, I'm trying to think has covered in a couple of minutes. Firstly, go back to the analogy. If you completely ignore those kids, they will fall out of the bottom, they will end up being school leavers and 40% of prison inmates are kids who are excluded from school. And the same is true as investments if you exclude companies, bad companies, which are held in the indices, by the way.
So if you're an index investor, you're investing your capital, quite happy in this rubbish, dreadful companies. But I digress. If you exclude these companies, or indeed, force companies to sell off the weakest parts of them.
So for example, coal is a great example. Where do those bits go?
Well, typically, they go into private hands, state owned enterprises, private equity companies, where there is no transparency, or there's much less transparency. They don't have to have shareholders who have to meet them, because there's an annual AGM, they have to have voting.
They don't have people saying, Oh, by the way, how about a netzero.
This great idea of a netzero programme, and you know, how are you showing that you're progressing towards that? How are you… Are you paying your employees when they get Covid?
Don't forget if you’re in the US, there's no sick pay, or there certainly wasn't pre-Covid, but there's no maternity pay, or in other countries, they just lay them off and don't even think about it twice.
So private companies are quite an issue because we hold listed companies to account but there is no way to do the same, and apply the same rigour to private companies.
So if you exclude you not only don't have the ability to engage, and to bring on that management team, but you also de-power those companies so for example, oil and gas sector is still trading at very cheap multiples, because so many people have excluded them, they can't invest in the way that they would wish to, in renewable energy.
They have got the technical expertise, they've got the wells, they've got the people, and they've got quite often quite deep purses as well. And a great example is EOG in the US, it's a mid cap.
And the fund that we own has empowered that management to create carbon capture that literally recapturing carbon that they've admitted and putting it back, pumping it back into the spent wells where you can't do that, if you're a new startup. And not only does that obviously reduce the carbon footprint of EOG, but it actually has a real positive impact on the real world.
But by excluding that company, you're divesting of it, you're excluding it from cash and from capital, quite apart from the fact you might want to plug your phone in one day charged. And by the way, you might want weapons to protect yourself.
You might want copper, because you might fancy an E.V. Well, EV’s we know use seven times the amount of copper versus a traditional combustion engine.
You might want a new laptop, well, that's lithium. But if you divest of these dirty assets, and just allow them to do whatever they want, is that really the way you're going to achieve real world outcomes?
What incentive have they got to invest billions to make their production cleaner, and better? They have none.
So from a portfolio perspective, from a performance perspective when those asset classes are rallying which they aren't at the moment, but very obvious and clear reasons.
It's not a good idea, from an ethical perspective, in terms of trying to actually impact the real world.
We've got some serious challenges ahead of us as a generation. And by just investing in you know, the little companies that are trying to provide the solutions. That's fabulous, but you've actually got to move a mountain not just Muhammad.
Peter Higgins 44:54
No, I completely agree with that. And we've seen it over the last two years. The whole environment regarding ESG investment has accelerated and even more so since the geopolitical problems we've had regarding Ukraine and Russia.
So it's a good thing. And also with that the acceleration of accreditation and regulation of ESG has also moved on somewhat. So that's the important point, I think, very important and well worth doing.
Now, Amanda, we're talking about ESG at the moment, and you have three teenagers, which also keeps it very, very busy.
Teenagers in general, very well-known to be extremely proactive, and globally savvy regarding ethical brands, climate change, environmental issues, and all things ESG.
Do you have some interesting conversations with your teenage children around the topics and issues?
And if so, what are the areas that you all all heartedly agree on? And what do you disagree on?
Amanda Sillars 45:45
That's a really interesting question. I think one of the ones that really woke me up was about five years ago, my 13 year old daughter piped up and she said, Mummy, do you know how much water has been used for those jeans that you're wearing today?
I must have to confess, I actually hadn't a clue. And it's mind boggling amount of water is needed to produce jeans, mind boggling amount of water actually needed to produce fabrics. And in the places where typically we outsource our production to so emerging markets, the regulation, and indeed, the money to invest in doing so in a sustainable way, particularly from a biodiversity perspective, is not that.
So you see rivers that are red, literally. And she woke me up to that actually, I think we agree on an awful lot.
I suppose they do sometimes call me an eco warrior, which was mostly not. So well, maybe one thing that we're perhaps not so quite aligned on is every time you press a like, you know, that heart thing that uses energy, there is no such thing as a cloud, it's all servers. And I do try and say to them guys. Do you realise that the emissions from servers are actually greater than the entire aviation industry? So please, could you come off your phone? Doesn't always work? I try.
Yeah, maybe just slightly different tack to others can try lots of different routes. Plastics, yeah, they're quite good. Sometimes they throw away plastics without washing them, putting them recycles, which annoys me. We're getting there slow work, but on other things that are pretty good. But as you rightly say, it's a symbiotic relationship.
I expect you probably have children, and many of our listeners will as well. And it's a fantastic additional stream of noise, essentially. And it's really useful to know what they're thinking. And they're often ahead of us.
So it's really useful. I'm very grateful for them, actually. And I often ask, when I come across teams of managers, and they're all very similar age, or very similar in the way they seem to think about things, I often think to myself, you need a teenager on your group because you're missing out. I remember one group discussing LK brands. I don't know if you remember LK brands. Tell me what they used to do.
Peter Higgins 47:57
Because they're all manner of different things. Materials, clothing, perfumes.
Amanda Sillars 48:00
Yep. Victoria's Secret bras. I wasn't going to use that word. Yes. And I remember this group, this group of men saying, Well, I don't understand how Victoria's Secret is doing so well. And I thought, you know, my 12 year old boy could tell you that he's had to watch the catwalks. He can tell you why Victoria's Secret is doing so well. It's on everybody's Christmas list. And it's not just my children. It’s not his by way, his sisters but yeah, I just made me think yeah, anyway.
Peter Higgins 48:29
Brilliant, now I'm going to change it up to the children. Amanda, do you have ISAs for them?
If so, what's your investing style with them? Or how do you go about selecting the investments for them as well?
Amanda Sillars 48:41
I'll be honest, I'm maybe not a very diligent mother, in that I'm quite time poor. And so I'm afraid I've taken the easy route and everything and everyone, me and them sorry, they,and me are all in Jupiter Merlin Growth, my mother's in Jupiter Merlin Income, why would I not? My husband does his own thing. Bless him.
Peter Higgins 48:59
So that's your investment style and strategy. Now, with regards to children? Is that something that you do on a lump basis? Or do you do a monthly sort of pound cost averaging strategy into those funds for them and yourself?
Amanda Sillars 49:11
It's to be honest, it hasn't been the same for each child, it should be I know it is in the name, but when they hit certain birthdays, we say to them, okay, we have this small sum, and we want to introduce you to investing.
So we're going to put this sum, we're choosing where it's going. But we want you to become more aware of what it is what it means of performance of the impact of inflation, because you're going to have to suffer that on your student loans as well.
But it also has an impact on investments and obviously they're not homeowners or anything like that, but we've used that as a way to try and introduce them to the world of finance and to looking after their own personal balance sheets you know spending two pounds on the bus well okay, that goes your spend this week and I wanted to buy a coffee, well, can you afford it sort of thing.
So teaching each child to do their own balance sheet essentially, which again, has mixed reception. But at least they understand the theory when they need to. Hopefully they can apply the practice.
Peter Higgins 50:10
Brilliant. Amanda, it's been absolutely wonderful to have you on the Investing matters podcast with me.
I've got one final question with you if you'll indulge me, and this is a fun one. So I hope you'll enjoy it. So Amanda, you're an investment manager and ESG, Director of Jupiter Independent Funds team, I'm going to give you the opportunity here to grant you one wish, right? The ultimate power to change one thing for the betterment on alll that grows the planet that we call Earth, what would it be? And why?
Amanda Sillars 50:42
Sorry Peter you'll need to repeat the question one wish to change what?
Peter Higgins 50:46
Anything to do with ESG for the betterment, the grace of all that are on the planet Earth? What would that be?
Amanda Sillars 50:55
It would be an awareness that every single person has a personal impact. Every single person makes choices. And each choice has an impact. And I think if every single person were to sit down, wake up in the morning or sit down, whatever, and think about the impact of everything they do.
The world will be a very different place. And I'll give you an example.
When you wake up in the morning, when you Peter wake up in the morning tomorrow morning, perhaps please could you perhaps lie in bed and think okay, I'm going to brush my teeth.
How long are they running the water for? What am I using to brush my teeth? Isn't a tube plastic? Or is it not? I'm washing? What chemicals? Am I putting down the sink? We all know that water isn't recycled in the way it should be.
What am I putting into the oceans? And what am I using upstream to create those? Okay, I'm getting dressed. Am I wearing nylons? Am I wearing fleeces that Leach? They're made from oil and gas.
They're synthetics? Are they leaching bio plastics into the water? I go downstairs, what's the footprint of my food that I'm eating, the carbon footprint of it? How has it been sourced? Where's it come from? Am I eating sensibly in terms of eating stuff it's about to go off, I'm not throwing things away. What examples am I giving by what I'm eating and how I'm behaving?
I plug in my phone, did it remember to turn it off last night. So it's not being used. It's not on sleep mode, because it still uses energy when it's on sleep mode. Why not just turn it off. Sometimes I forget.
And the same with your laptops and tablets and anything that's on the wall, it should be switched off on the wall. Because you're saving energy, we could really, really change so much for the better if we just thought a little bit about how we live our lives and how we consume.
We don't have to make big swinging changes all the time. Just every little thing will make a difference.
So I'd love to empower people to just be so much more careful and thoughtful about what they do and the impact of what their behaviours have.
Peter Higgins 53:06
Brilliant. Love that response. Thank you ever so much for sharing that with me. Amanda Sillars Investment manager and ESG Director at Jupiter Independent funds team.
Thank you ever so much for kndly sharing your insights and wisdom with me on this Investing Matters podcast. It's been an absolute delight, Amanda, thank you. Take care. And God bless you.
Amanda Sillars 53:25
And thank you again, all the best. Bye.
Peter Higgins 53:28
Thank you, Amanda.
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