The fund was a top-quartile performer under former manager Alexander Darwall, but returns have sunk below the industry average since Mark Heslop and Mark Nichols took over three years ago.
The popular European fund Jupiter rose to fame in the early 2010s when it flourished under the management of Alexander Darwallbut performance has since weakened.
In fact, over the last decade the fund has gained 194%, while for five years it has been in the top quartile of the AI sector in Europe excluding the UK.
Returns are 4.5 percentage points lower than peers since the change in leadership, at 6.3% over the period. It remains popular with investors, but some have started to leave. In fact, since October 2019, the fund’s assets under management have shrunk from £4.9bn to £3.3bn.
As the fund approaches its third anniversary with Heslop and Nichols as managers, Trustnet asks industry experts whether investors should buy, hold or withdraw from Jupiter European.
Total return of the fund vs. sector since change of manager
Source: FE Analytics
Ben Yearsley, chief investment officer at Shore Financial Planning, said he would sell the fund if he currently invested in it, as the investment styles of its old and new managers differ too much and have weakened the strategy.
“They took the fund from a manager with a different style and it was never going to be a copycat fund,” he said.
“The current team is focused on quality and growth, while the previous manager, Alexander Darwall, is more focused on growth. I guess the key problem is that it’s neither one thing nor the other.
“Jupiter seems like an unhappy place and would not currently have any Jupiter background. They have had bad luck with the style changes in the markets, but in general I prefer other funds”
Andy Merricks, fund manager at 8AM Global, also noted that the switch between managers was a difficult transition, leading to increased exposure to sectors that could underperform this market cycle.
He said: “One of its main problems is that it had grown to a massive size which, with its exposure to mid-caps, made it a very difficult fund through which to change course if necessary.”
Some 44.8% of its largest sector exposures are industrial and consumer discretionary assets, which are “probably the last place to be sitting in an energy-driven cost-of-living inflation crisis,” Merricks said.
He advised investors to hold onto the fund if they already owned it, but an attractive entry point for new buyers won’t open up until at least the second half of next year.
Tom Sparke, chief investment officer at GDIM, was more sympathetic to the difficult conditions under which Heslop and Nichols inherited the portfolio.
Shortly after he took over the fund, the markets were hit by the pandemic and all the monetary headwinds that came with it.
All things considered, the new managers handled this difficult period quite well, according to Sparke, who said: “The fund has actually outperformed peers in similar positions. As the positions are more internationally focused, the fund should suffer less in a European downturn, especially as many of the positions have high pricing power and strong balance sheets.”
He added that investors who are concerned about Jupiter European’s poor performance in recent years should not jump ship as their current positions appear resilient to upcoming market volatility.
“I think the outsized value bias that has driven much of this year’s gains has dissipated, so the fund should do better as it has very good businesses that have positive futures ahead of them,” Sparke said.
Chris Salih, research analyst at FundCalibre, was similarly positive about the direction of Heslop and Nichols during their turbulent three years in office and was confident that portfolio allocations have improved during that time.
He said: “Ultimately, both Mark Nichols and Mark Heslop have excellent long-term track records investing in Europe and, more importantly, have stuck to their process despite these headwinds.
“They now have a portfolio consisting of industry-leading companies that offer protection should we go into a recession, but also the strength to thrive when we see a recovery.”
Investors who already have the fund should keep it in their portfolios, but current market uncertainty and depressed values may make now an opportune time to buy, according to Salih.