View the article online at http://citywire.co.uk/money/article/a892797
Jupiter Global hopes for revival under Steve Davies
It's all change at Jupiter Global Trust which wants to place its future in the hands of the Citywire AA-rated UK manager.
Davies manages the £1.6 billion Jupiter UK Growth fund, a successful fund that invests in mostly large recovery and growth stocks. The board of Jupiter Global believes Davies could bring back a generation of investors who have recently abandoned the trust.
In the past two years total assets of Jupiter Global have declined 20% to just £56 million, leaving it too small for most wealth managers and stock brokers to buy.
That shrinkage does not reflect poor investment performance, however. Over three years to the end of February the trust generated total shareholder returns of 33.7%, ahead of the 20.6% from the FTSE All Share, although behind the 42% from Davies’ fund.
The decline in the 44-year-old trust’s size follows a series of share buy-backs as the board, chaired by Tom Bartlam, has operated a nil-discount policy aimed at eradicating the gap between the share price and its underlying net asset value.
However, with the shares closing last week at 6% below NAV – a one-year high for the discount – the board has concluded that Jupiter Global’s eclectic mix of UK and overseas funds and shares no longer finds favour with investors.
Bartlam said: 'The company’s current mixed mandate has served us well in recent years as both a source of benchmark-beating returns and a differentiating factor within the investment company classifications.
'It has become increasingly clear to us, however, that the market for investment companies is evolving rapidly and we believe these proposed changes will enable us to reach a new market of shareholders while maintaining the potential for capital growth.'
Change has been brewing for a while at the trust. A year after adopting its tough zero discount policy, the trust’s original name Jupiter Primadona Growth was dropped in favour of its current, more straightforward tag.
Bartlam and the other directors are betting that a switch to a UK strategy under Davies will broaden the trust’s appeal, particularly as it will be able to use gearing – or borrowing – to boost returns generated by the manager.
They point out that Davies’ performance can be volatile though, and that shareholders will receive one annual dividend rather than the quarterly pay-outs they have been used to.
Shareholders will vote on the proposed change in mandate and another new name of Jupiter UK Growth (JUGL) on 18 April.
As a sweetener they are being offered a cut in charges: Jupiter’s base management fee will be reduced from 0.8% of total assets to 0.5% of adjusted net assets, in line with the institutional share class of the Jupiter UK Growth fund.
Its performance fee will be made harder to achieve too. In future Davies will have to beat the FTSE All Share by 2% a year before the group can extract 15% of excess returns over that hurdle rate.
Numis Securities will replace Cenkos as the trust's new sponsor and financial adviser.
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In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
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