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Why Jupiter's Nutt refused to throw in the towel

Why Jupiter's Nutt refused to throw in the towel

From a purely material perspective, Jupiter’s Anthony Nutt (pictured) could easily have decided to close the door on his fund management career.

When Jupiter Asset Management floated in 2010, Nutt’s stake in the firm was worth millions. The subsequent rise in the share price pushed the value of this stake to £66.5 million in 2011, resulting in Nutt entering the Sunday Times Rich List in 926th place.

The rise in his wealth came at a time when Nutt was going through one of his most difficult performance periods. In the six years to September 2008, his £2.1 billion Jupiter Income fund had returned 74.9% versus a 58.55% gain in the FTSE All Share, making it a top performer.

Then Lehmans collapsed and things got tough, with the fund losing nearly 31% from September 2008 to March 2009, around 5% more than the average loss in the peer group. The rebound in markets has helped Nutt post a positive return of 56.7% over the last three years, although this is some way below the 77.8% rise in the benchmark over the same period.   

The underperformance saw investors turn on him, with Bestinvest among the most vocal of critics, putting the fund in its ‘Doghouse’.

However, Nutt’s character, which was shaped during a stint in the Ministry of Defence early in his career, would not allow him to walk from the job.

‘Many of my colleagues and friends have asked me why I’m still doing this job – it’s because I enjoy it. I don’t think I’ve lost my ability,’ Nutt says.

‘I do a job that has a good deal of responsibility and if you fall below people’s expectations, you can only expect them to criticise you. I’m not the sort of person who runs away from a problem, I have never done that in my life.’  

It is well documented that a position in BP during the Macondo oil well crisis in 2010 provided a blow to performance. However, it is his exposure to the media sector, particularly Yell and Johnston Press, which real irks him.

‘The media stocks are something I have beaten myself up about. I bought Yell when it came to the market and it did fabulously well for me, rising fourfold. Then Lehmans collapsed and the market fell out of love with its private equity model,’ says Nutt, who has since sold down both stocks to a nominal size. 

The equity opportunity

One reason Nutt is still in the job is because he still sees plenty of opportunities.

‘I understand my (more bullish) colleagues’ argument that equities are undervalued, although it’s not an argument I would make. You have to explore intrinsic value and there are opportunities out there,’ he says.

Such is the opportunity that Nutt has reduced his own personal exposure to gilts and recycled the proceeds into his fund. ‘Gilts are very unattractive and I don’t feel bearish on the equity market. At this point in time, dividend growth is strong.’ 

Nutt never strayed from his process when things got tricky and the only notable recent change on the fund has been the appointment of Philip Matthews as a co-manager, although the latter had been working as Nutt’s assistant for some years.

Nutt has also recently been relieved of his duties on the £252 million Jupiter Distribution fund, which he had worked on for 10 years alongside John Hamilton, allowing him more time to focus on his equity income mandates. While he remains a deputy on the fund, day-to-day management has been transferred to Rhys Petheram and Alastair Gunn, who have been co-managers on the fund since February 2010.

For those who remained loyal, there are signs Nutt is starting to climb back to the top. In 2011, his Income fund returned 2.92% versus a 0.77% decline by the benchmark. 

The transformation has been supported by exposure to big oil, pharmaceuticals and telecoms stocks, which he describes as the major points driving markets. ‘In the pursuit of intrinsic value in a geopolitical climate that is similar to the 1930s, I’m led to believe these sectors are the places to be,’ he says.  

A contrarian stance in drinks groups Diageo and SabMiller has also paid off handsomely. ‘We have been aggressively positioned in the beverage sector. We saw a lowly valued sector with a global product, which is benefiting from emerging market growth and a recovery in developed markets. These companies have also recognised they need to return money to shareholders.’ 

Turnover in Nutt’s fund is among the lowest in the peer group.

He bought just two new holdings last year, one of which has been particularly pleasing: engineering consultancy Amec. ‘Samir Brikho [Amec CEO] has delivered the margin expansion he promised when he came in five years ago. He has delivered on the dividend and has £1 billion to spend on acquisitions. He is a man I trust.’ 

Other stocks that have helped Nutt’s recovery include industrial duo IMI and Melrose, which he first bought in 2000 and 2004 respectively.  

While Nutt may have some grounds to feel vindicated as performance appears to turn the corner, he realises there is still some way to go before his critics are stifled. ‘The strongest conviction I have right now is turning around the performance of this fund,' he says.   

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