Top manager departs from biggest Europe fund: should investors stick or twist?

We mull what the exit means, and who will step into the space.

Alexander Darwall is to stand down from management of the biggest fund in the IA European ex UK sector, Jupiter European, which he has managed since 2001. The £5.3 billion fund has substantially outperformed the IA Europe ex UK sector over one, three and five years – over five years it has gained 80%, more than twice as much as the sector average (36%).

He is also stepping back from the offshore version of the fund, the £2.4 billion Luxembourg-based Jupiter European Growth.

Darwall’s place will be taken by Mark Nichols, who has co-managed Threadneedle European Select with David Dudding since 2016. Nichols will run the two open-ended funds.

This choice is regarded favourably by Darius McDermott, managing director of FundCalibre. “Mark Nichols is probably among the best [replacement] Jupiter could have found,” he says. “We have been very impressed with him [in his role at Threadneedle]. He has a very similar investment style and philosophy in that he looks for quality growth companies.”

Jupiter chief investment officer Stephen Pearson says: “For some time we have been developing a succession plan for Alexander Darwall, who has managed funds for more than 18 years at Jupiter… In Mark we have identified a bottom-up stockpicking investor with experience across the market capitalisation range in Europe and a conviction-based approach to portfolio construction.”

Given the similarities between the funds’ strategies, it is expected that there will be little practical change to the way Jupiter European is run. However, McDermott points out, Jupiter’s fund is both notably more concentrated and much bigger than the £1.5 billion Threadneedle European Select.

Importantly for followers of Money Observer’s Rated Funds, Darwall remains in charge of the Jupiter European Opportunities investment trust (JEO), which has assets under management worth £817 million and is currently trading on a 4% discount. This might therefore be an option for investors in the open-ended fund who wish to follow Darwall rather than chancing their arm with the new manager.

Darwall is due to step back from the open-ended funds in order to focus on managing JEO “before the end of the year”.

JEO has some similarities with its open-ended sister, but has underperformed the open-ended fund over shorter timescales, with the share price losing 15% over the past six months. Germany and the UK account for almost 60% of the portfolio.

Darwall invests in businesses of all sizes in JEO, aiming to find ‘special’ companies across a range of activities. He regards change and disruption as necessary ingredients for his investment strategy to work, and looks for companies that stand to benefit.

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