Funds

An announcement that Jupiter was closing the Luxembourg arm of its Asian Income fund, a fund that has had great relative performance since it was launched specifically for Jason Pidcock (who came to Jupiter with a solid personal reputation as a sector specialist at Newton) is at first mystifying, given that the UK share class of the same fund appears to be well supported.

The PR explanation given is that the European market had not taken to the fund and the sub fund had raised less than £20 million. I would have thought that the offshore share class carried very little extra expenses other than those relating to the Luxembourg listing and compliance, but maybe there is more to it than that. The press release commentary published in my trade newsfeed could have been more appreciative of Jason’s excellent work for investors and his great judgement in minimising China exposure in the fund, which was why I have owned it for a while recently, and had previously made good money with it from launch before banking a profit.

There is no news that the UK fund will close and Trustnet lists it as holding over £1 billion in assets, so that seems unlikely on purely commercial grounds. On the other hand, my intuition is stirring up worries about what may be happening at Jupiter. A whole block of ESG focused managers left not long ago, even though Jupiter had a long history of running ecologically focused funds.

I think the relevant context is that the company has had a recent change of MD, has had its shares shorted by several hedge funds and is apparantly (according to The Times) at this moment the subject of ‘activist investor pressure’.

We can easily forget that many small and medium sized fund management groups are ordinary UK listed firms with the founding shareholders now owning only small percentages of shares and in many cases most of the free float of shares being in the hands of other competitor fund managers, or as in the case of Lindsell Train, for example, a big block of shares being owned by an associated Investment Trust which at least keeps control more or less with the founders and their allies.

This means that fund management firms can become takeover targets, be subject to short seller pressure and have boardroom bustups just like any other business.

The relative underperformance of the UK stock market over most of the last few years until 2022 and a weaker Sterling plus the glut of gloomy predictions for the UK economy (not really a connected factor, in truth) means that there are already plenty of vultures circling, mainly US based, to acquire and strip out cheap UK assets. This may be to our advanatge if we own UK smaller companies or special situations funds, because the managers of those funds know how the game is played and will be holding blocks of shares in takeover targets.

However, I am less happy about the situation at Jupiter in terms of staff morale and motivation. All of the above is hardly going to feel positive if you are long standing employee who was used to working for a friendly British firm that respected its staff and now the cold wind of US capitalism is whistling around your desk! I would take a modest bet that some of the better managers will jump before they are pushed.

In terms of fund research, I would suggest that Jupiter must now warrant at least an Amber light.