After a decade as manager of the Jupiter UK Growth fund, Steve Davies parted ways with the asset management group as the fund trailed its peers.
Having been involved in the strategy since 2007, Jupiter UK Growth under Davies has struggled in recent years.
The fund, which was launched in 1988 and stood at £996.4m in size at the end of last year although is now just £444.3m, followed the growth investment style, which should have benefited from the post-financial crisis bull run in markets.
However, Davies had been unable to convert that into a strong performance and was only marginally ahead of the FTSE All Share index.
Moreover, the fund had struggle in recent years, making a loss of 6.90 per cent in the three years to 27 February, compared with an 11.22 per cent total return for the peer group and an 8.31 per cent rise in the FTSE All Share index, a commonly used benchmark in the sector.
Performance of fund vs sector & index over 3yrs
Source: FE Analytics
As such it was announced that Davies – who was head of strategy and UK growth at Jupiter – would be leaving Jupiter to pursue other opportunities with equities analyst James Moir filling in until new manager Chris Smith joined the company in June.
Smith was described as “a bottom-up stock picker with a highly active, fundamentals-driven approach” and “a true growth investor” by Jupiter chief investment officer Stephen Pearson.
He joins from Newton Investment Management where he spent 10 years and was latterly manager of the Newton UK Opportunities fund, which he was appointed to in January 2018.
Smith was also an alternate manager on the Newton UK Equity and Newton UK Income funds.
However, is the appointment of an up-and-coming manager enough to turn the fund’s fortunes around?
Ryan Hughes, head of active portfolios at AJ Bell, said former manager Davies’ performance had “clearly been very poor over a long period after initially getting off to a good start”
Performance of fund versus sector over 5yrs
Source: FE Analytics
“For the past five years, the fund has clearly struggled and it came as little surprise that Davies was to stop managing the fund,” he explained, noting that Davies ran the fund with a significant tilt towards cyclical companies.
This tilt had proved “very painful, particularly during 2019 with exposure to Sirius Minerals a particular headache given the collapse of the business”, which had at one point been a top-10 holding.
In 2019, the fund made just 15.94 per cent in a strong year for markets where the average IA UK All Companies peer made a return of 22.24 per cent.
Performance of fund vs sector & index in 2019
Source: FE Analytics
Hughes said there was very little overlap between Davies and new appointment Smith, although both managers favour the growth style there was just a six-stock overlap between the two.
With that in mind Hughes believes that when Smith takes over he will likely significantly overhaul the fund within the first few months, “investors will end up with a portfolio tilted quite differently to how it has been in recent years”.
In fact, it could even end up looking like a portfolio managed by FE fundinfo Alpha Manager Nick Train, according to Willis Owen’s head of personal investing, Adrian Lowcock (pictured).
“In a period when the growth style of investing has dominated the markets, the Jupiter UK Growth fund has had a torrid time, so investors will understandably question their commitment with the change of managers,” Lowcock said.
“However, Chris comes onboard with arguably a purer growth style of investing than his predecessor and a focus on long-term growth compounders. 
“The fund could end up looking more similar to more well-known peers such as LF Lindsell Train UK Equity.”
Something else that investors may want to consider is the £370m acquisition of Merian Global Investors. The deal was also announced last month and would make Jupiter Fund Management the second-largest retail asset manager in the UK with combined total assets of £65bn.
However, the deal would see the firm’s UK equities offering significantly bolstered with the addition of top-performing small- and mid-cap teams and veteran investor Richard Buxton.
All of the changes and uncertainty make it hard to judge the future of the Jupiter fund under Smith or justify holding it according to AJ Bell’s Hughes.
Fairview Investing co-founder Ben Yearsley agreed, saying that there are a huge amount of ‘unknowns’ surrounding the fund that are a bigger risk than backing the new manager.
“I’d fold,” Yearsley said. “There are a number of reasons why I wouldn’t stick with the fund and none of them are a reflection on the incoming manager and his ability.
“However, to me personally he is an unknown quantity and there are many other good long-standing UK equity managers I can switch to with minimal fuss.”
Yearsley added: “The other reason I would switch is that is there is a large-scale takeover/merger happening with Jupiter in the near future, so why take the risk?
“There will be unintended fallouts from the merger with Merian; managers will leave who you didn’t think would and others you think should [that] won’t leave. There will also be fund mergers to take into consideration as they are both UK-focused businesses.”