Ask Money: is Alexander Darwall pushing his luck with Jupiter?

Money Observer associate editor Andrew Pitts answers a readers question about a fund.

November 15, 2019

You reported recently on proposed changes in the management of the Jupiter European fund and its sister investment trust Jupiter European Opportunities (JEO), both currently run by ‘star’ manager Alexander Darwall, who is now planning to set up his own fund management company. For many years Jupiter European was the largest holding in my portfolio, and a smaller holding in JEO was the next largest.

Jupiter European has served me well, but I have become concerned about its erratic performance, which I believe is due in large part to its heavy over-exposure to the German company Wirecard, whose shares have repeatedly suffered in recent months following adverse media comments on its accounting practices. As a result, some months ago I reluctantly sold my holding in JEO, and I have subsequently reduced my holding in Jupiter European. As I write, the value of both funds has dipped sharply again over the past week, following further press commentary on Wirecard.

My concern is not so much that Darwall should choose to invest in any one particular company such as Wirecard – that is his prerogative as fund manager – but that he invests at the levels he does in both Jupiter funds. According to the latest figures I can find, Wirecard is still by far his largest holding, accounting for nearly 9% of the Jupiter European fund and a staggering 15.5% of the sister trust. I have made the personal decision that I don’t want to risk being so heavily exposed to such a volatile share as Wirecard.

I am surprised that there has been virtually no comment in Money Observer (or anywhere else that I can see) to guide me and other investors on this. JEO is currently one of Money Observer’s fund choices for Europe. In the light of its recent volatile performance, I think this recommendation should now come with a caution.

This particular concern apart, I am immensely grateful to Money Observer for the information, advice and guidance it provides that has helped me navigate the choppy investment waters over the years. 
Mike Sharrocks, by email

Andrew Pitts, associate editor at Money Observer, replies: Jupiter European Opportunities has been a Money Observer Rated Fund since 2013. The board of directors has reiterated its confidence in Alex Darwall by appointing his new management group, Devon Equity Management, to continue managing the trust’s assets from November.

The issues surrounding the Financial Times (FT) investigation into Wirecard, which represents more than 15% of the trust’s net asset value, have been well-documented since the first few months of the year. The board has conducted a due diligence exercise and shareholder consultation into the appointment of Devon as the new manager of the trust. Questioning the reasoning behind the trust’s large holding in Wirecard will have been a part of that process. In the trust’s annual report for the year to 31 May, Darwall said: “We retain great confidence in the management of the company to capitalise on the considerable opportunities that present themselves.” We are not aware of any further announcements from Darwall on the matter.

The trust has always pursued an unconstrained, growth-oriented policy, one that has led to significant gains under Darwall. It is interesting to note that Wirecard represented 14.3% of the portfolio on 31 May but that this weighting had risen to 15.2% by the end of August. That is a strong indication that Darwall’s faith in Wirecard remains undiminished, despite the FT’s investigation into its accounting practices. Your decision to reduce the size of your holding in the investment trust is understandable, but it is your personal choice. In the meantime, we will be assessing the trust’s Rated Funds status in the forthcoming annual review.

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