Morningstar Downgrades Jupiter Special Situations Fund After Star Departure

As Jupiter prepares for the departure of Ben Whitmore, Morningstar analysts downgrade its flagship UK Special Situations fund and Income Trust 

Christopher Johnson 11 March, 2024 | 12:07PM
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Morningstar has downgraded Jupiter Asset Management's flagship £2.07 billion UK Special Situations fund and £1.5 billion Income Trust following news of the departure of lead portfolio manager Ben Whitmore.

The strategies had previously been placed "under review" by Morningstar's analysts.   

Highly-regarded Whitmore, who took the helm of the funds in 2006, is set to leave Jupiter this July to launch his own value equity fund house, subject to regulatory approvals and a Jupiter-imposed two-year non-compete clause. 

The UK Special Situations fund will be taken over by Alex Savvides, who joins from JO Hambro Capital Management, and the Income Trust will be led by Adrian Gosden and Chris Morrison who join from the embattled Swiss asset manager GAM.  

Morningstar analyst Daniel Nilson has since downgraded the strategies' the People and Process Pillars to average from High for the UK Special Situations fund, because of uncertainty around which elements of Whitmore's process will now be conserved.  

"Our understanding is Savvides will bring across his existing process and portfolio construction nuances while retaining the fund’s value heritage," Nilson says.  

"However, there are still some differences that will need to be flushed out, as Whitmore's process centres on value metrics, while Savvides places more focus on identifying companies undergoing changes not yet fully recognised by the market."

Nilson also points to Savvides allocating slightly further down the market cap spectrum, not investing heavily in offshore holdings, as well as running his process with less holdings and more concentration amongst his highest-conviction ideas.  

Under Whitmore the fund has been lucrative for investors, returning 263.36% in the period between June 2008 to February 2024, versus the Morningstar UK All Cap TME index, which achieved 159.10% return rate.  

Whitmore's departure also forced Nilson to downgrade the Income Trust from Above Average to Average on both the People and Process pillars.  

Gosden and Morrison, who currently manage the GAM UK equity Income Fund, have some key portfolio construction differences with Whitmore.  

"The process followed on the GAM UK Equity Income strategy allocates further down the market-cap spectrum, has a minimal allocation to offshore holdings, and has slightly more holdings," Nilson says.

He is also uncertain about how the portfolio construction differences will be incorporated into the trust. However, he cites that one commonality is the value-focused process, although the GAM managers will not be as deep-value as Whitmore was.  

"It is our understanding that Adrian Gosden and Chris Morrison will retain the process they have honed on the GAM UK Equity Income fund," Nilson says.  

"This process is founded on how much spare cash each business generates and its ability to pay dividends with this cash. Idea generation starts with a basic filter of the UK stock market to find companies with good free cash flow metrics."

From June 2008 to the present day the Jupiter Income Trust returned 120.64%, although it underperformed the Morningstar UK All Cap TME Index, which saw a return rate of 159.10%.  

Today, shares in parent company Jupiter Fund Management (JUP) are down around 35% over one year as the investment firm struggles to recover from staff departures and outflows.  

In January, Jupiter chief executive Matthew Beesley said he wished Whitmore well. 

"Having worked at Jupiter since 2006, Ben informed me of his ambition to set up a new independent value equities boutique, which has been a long-term personal aspiration for him," he said.

"I would like to thank him sincerely for his contribution to the company and, after he leaves Jupiter, wish him well for the future." 

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Christopher Johnson  is data journalist at Morningstar

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