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Fed-up Jupiter UK Growth trust threatens to sack Jupiter

7 October 2019

Jupiter Fund Management faces dismissal from second investment trust in a week after board of small, poorly performing Jupiter UK Growth announces it is looking for ‘alternative arrangements’.

Jupiter Fund Management (JUP) faces the loss of its second investment trust in a week after the board of the small and poorly performing Jupiter UK Growth (JUKG) announced it was looking for ‘alternative arrangements’.

‘Having expressed our growing concerns to the investment adviser Jupiter Asset Management in a number of meetings over the past year, in the absence of any improvement we have come to the conclusion that our strategy is not working and needs to be changed,’ said trust chairman Tom Bartlam.

‘In the review of our strategy, we have been actively engaging with Jupiter Asset Management and our brokers Numis Securities to identify alternative arrangements that could better serve the interests of shareholders,’ he added.

These could include sticking with Jupiter but changing manager and approach or sacking Jupiter and appointing a new fund management group to take the trust forward, Bartlam said.

Pending the outcome of these discussions fund manager Steve Davies will remain in place, he added. Davies also runs the £935 million Jupiter UK Growth fund, for which he last held a Citywire performance rating in 2016 before the referendum.

Since Davies took over the former Jupiter Primadona investment trust three years ago under a new remit of seeking growth and recovery stocks, there has been little evidence of either for the £43 million trust.

Badly positioned for the Brexit vote, the trust suffered badly after the 2016 EU referendum and the underperformance of mid-cap, domestic stocks means that even with dividends included its net asset value (NAV) has dipped 0.3% since April 2016. This compares to the 34.3% total return in the FTSE All-Share index.

The last 12 months to 30 June have been the final straw with the trust hit by the collapse of Thomas Cook (TCG) and the funding problems at Sirius Minerals (SXX) helping to knock 14% off NAV after the payment of dividends, or by 11-.9% with payouts included. By contrast the All-Share offered a total return of 0.6%.

The review of Jupiter UK Growth comes days after the board of the Jupiter European Opportunities (JEO) trust announced it would follow star fund manager Alexander Darwall to his new firm.

Although expected, the loss of the £943 million mandate and the threat to its European fund franchise from Dzarwall’s departure are significant financial blows for Jupiter, whose shares have slipped 14p to 324p since the trust’s announcement last Wednesday.

Losing the much smaller Jupiter UK Growth trust would be much less significant but draws critical attention to the firm’s performance at a time when it is settling under new chief executive Andrew Formica, who took charge in January after leaving Janus Henderson Investors.

Jupiter UK Growth shares shed 3.6p or 1.3% to 264.4p. Despite the poor returns, the shares trade on a relatively narrow 4% discount below NAV due to the high level of buybacks by the trust. In the 12 months to June the board repurchased nearly 2.3 million shares, taking the total spent on its own stock over three years to £20.3 million.

Investment company news brought to you by Citywire Financial Publishers Limited.

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