Jupiter Fund Management is under pressure after a star fund manager, responsible for £10billion of client assets, defected to start his own company.
Jupiter shares plunged up to 20 percent after the company announced Ben Whitmore’s departure. The firm also warned that last year’s outflows were worse than expected.
Whitmore is the manager of Jupiter’s UK Special Situations Fund, which has a market capitalization of £2.1 billion. He also runs Jupiter Income Trust as well as Jupiter Global Value Unit Trust. He manages an Alliance Trust mandate, which is a separate investment trust.
Jupiter tried to ease the blow of the news by announcing that it had hired Alex Savvides from JO Hambro Capital Management, a well-respected stockpicker. Jupiter announced that Savvides will join the company by autumn to take over UK Special Situations.
Jupiter stated that Whitmore would leave “to pursue his ambition to establish an independent value equity boutique”, but not before the end July. This allowed for “a collaborative and orderly transition process”.
Whitmore has been given the option to share the fee for the Jupiter Global Value Unit Trust worth £1 billion. In order to secure the deal, Whitmore agreed to a non-compete clause that will prevent him from launching new funds for two years.
Clients tend to follow star managers, so their departures can have a hugely negative impact. Jupiter suffered a major blow in 2019 when Alexander Darwell left the company to start his own firm, Devon Equity Management.
Paul Angell is the head of investment research for the broker AJ Bell. He said that the news was “clearly unwelcome” for any fund management company. However, he added, there was no reason to react in a hasty manner due to the long period of time between the transfer and the new owner.
Whitmore, a former Schroders employee, joined Jupiter in 2006. The funds analysis group Trustnet describes Whitmore as “highly respected” and says he has beaten his peers over the past one, three, and ten year period.
Alex Savvides has been appointed to run Jupiter’s UK Special Situations Fund, which is worth £2.1 billion.
Jupiter announced, adding to the doom, that the company had experienced net outflows totaling £2.2 billion in the year ending December 2023. This was “a marginally more negative outcome than we anticipated”.
It blamed the delays in winning some mandates from institutions investors, as well as a weaker than anticipated sentiment among its retail customers in October and November.
The company expects to be forced to write off the value of Knightsbridge Asset Management (purchased in 2007 for £341m) and Merian Global Investors (acquired in 2020 at a £229m deal). This is a non-cash expense.
Jupiter’s share price has dropped by three-quarters over the last three years. This is due to the trend of individual investors moving away from UK funds in favour of cheaper index tracking funds.
Matthew Beesley, Jupiter’s chief executive who joined the company in January 2022 has tried to reorientate Jupiter towards institutional mandates with some success. Inflows of £1.8 billion from institutions in 2017 were offset by £4 Billion in retail client outflows.
He said Savvides’s track record was comparable to Whitmore’s over the long term, while it was better over shorter periods of time.
“Jupiter is a great place to find outstanding talent. We have worked very hard in order to have a steady stream of new hires that can help us expand our truly differentiated strategy and also ensure a smooth succession.” “I am delighted that Alex will be joining us.”
Jupiter Income Trust is set to be run by Chris Morrison and Adrian Gosden, who were hired from GAM in November.
Jupiter shares closed the day at 751/2p, down 14.6%.
Jupiter’s chief executive Matt Beesley did his best to minimize the impact of star fund managers leaving Jupiter.
He has firstly managed to quickly hire a new replacement to manage at least a part of Ben Whitmore’s enormous £10 billion patch. Alex Savvides is a well-respected employee of JO Hambro Capital Management who will be running Jupiter UK Special Situations.
Savvides who runs JOHCM’s UK Dynamic Fund, has actually had a slight edge over Whitmore in the last year. However, he is slightly behind over the past ten years. Whitmore’s return of 83.5 percent compares to Savvides’s 79.8 percent.
He has also tried to minimize the impact on clients who follow Whitmore out of the door by implementing non-compete agreements or fee-sharing arrangements through delegation.
Alliance Trust, a FTSE 250 investment trust with a portfolio worth £3 billion that has been using Whitmore for six years to manage ten percent of it’s assets will make an interesting decision. It must now decide whether it will continue with Whitmore or Jupiter, or divide the mandate among its other fund managers.
Willis Towers Watson is the fund manager of choice for Alliance. WTW is a “gatekeeper” of mandate decisions in the industry. Their decision will be closely monitored.
Beesley is also aware of the importance of this. He has made winning institutional business an important part of his new Jupiter strategy, as Jupiter has been losing retail clients for many years.
Jupiter’s net losses in yesterday’s figures were due to delays in gaining institutional business. The firm must take action to stop them in their entirety.
Jupiter is a victim of both the shift in investors’ investments from UK-focused funds to global diversified funds and from actively managed funds into cheaper tracker funds.
The company is in a sorry state, but no one has bid to save it. Whitmore’s departure partly explains this: The business’s most valuable assets can leave at any moment.
Jupiter should not be surprised. This is a repeat of Alexander Darwall’s departure, which led to a similar tremor in 2019.
Whitmore is responsible for 19% of Jupiter’s total assets. The Jupiter board should ask itself how they ended up giving this much power and authority to one employee.