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Jupiter hits a rough spot

Last week&#39s departure of Jupiter chief executive John Duffield marked the

end of an era for the asset management firm.

Having held the top job since he founded the company 14 years ago,

Duffield modelled Jupiter around his ideas and unique business style.

Following the loss of star fund manager William Littlewood in April,

combined with a recent period of weaker all-round fund performance,

Duffield&#39s departure along with seven of the other eight board members has

been enough to generate serious concerns among IFAs.

But while some IFAs advocate selling Jupiter holdings, others are

suggesting that clients adopt a wait-and-see approach while most of

Jupiter&#39s fund managers remain in place.

Premier Unit Trust Brokers partner Peter Edwards began to sell holdings in

Jupiter&#39s income fund after Littlewood&#39s departure and the events of the

last week have deepened his scepticism.

He says: “It&#39s a ship without a captain, without a navigator and without

an engineer. I don&#39t doubt that Commerzbank will draft in new people and I

hope that they are good. But now is definitely not the time to get into

Jupiter and, as far as the income fund goes, our advice is to get out. We

never invested in Jupiter income, we invested in Littlewood income, and

that no longer exists.

“When you lose eight of the nine London-based directors, you are left with

a headless chicken. Obviously, the fund managers were all devoted to

Duffield or they would not have been there, so God knows what they are

feeling like now. The ongoing management of the funds must have a question

mark over it until this is resolved.”

Several IFAs are advising clients to get out of Jupiter altogether. Best

Investment deputy managing director Jason Hollands is convinced that recent

events provide reason enough to disinvest.

He says: “The exit of Duffield cannot be underestimated. He stamped a

unique culture on Jupiter which has been very successful. It is fairly

reasonable to expect that Commerzbank will now want to take more of a role

in the running of the business, which is likely to create disputes or at

least change the management style.

“Furthermore, the new directors are going to see themselves very

stretched. We had a lot of faith in chief investment officer Edward

Bonham-Carter and head of specialist funds Alan Miller but they will now

have less time to spend with the funds in their new jobs.”

Hollands says Jupiter had effectively created an umbrella structure to

house talented individuals, a formula that had worked until now. But he

believes recent events may also have revealed its weakness, that the whole

firm suffers when the big names leave.

Yet other IFAs believe it is premature to be talking of disinvesting. They

argue that selling holdings is a costly process for the investor and that

IFAs need to be certain the ship is sinking before they call for such

drastic action.

They point out that when Perpetual hit hard times at the beginning of this

year after several of its fund managers refused to join the rush into

technology stocks, many investors panicked. But, approaching the end of the

second quarter, Perpetual has once again picked up pace, with its income

fund back in the top five over three months.

Hargreaves Lansdown head of research Mark Dampier is frustrated by what he

describes as scaremongering by brokers at the first opportunity.

He says: “We think the Jupiter situation is a churner&#39s charter. Brokers

have got a good chance to get investors to panic and make a bit of

commission but I think it is wrong.

“We are advising clients to sit tight for the moment. As long as the fund

managers are all staying in place, I do not believe there is any need to

switch yet. I do not think you can react to something you don&#39t know

anything about and it is yet to be seen how the new management will affect

the company.

“At the beginning of the year, we were one of the only brokers to

recommend Perpetual&#39s income fund while everyone else was panicking. Look

at it now, it is one of the leading funds in its sector.”

Chase de Vere is another firm which is advising investors to sit tight for

the moment. Investment adviser Janine Starks says: “Unsurprisingly, people

are worried when you have got most of the board members falling off the

fence. We have got Jupiter&#39s funds under review by our funds panel but we

are not scaremongering. We have got plenty of clients with Jupiter funds

and the last thing you want to do is advise people to sell when things may

still turn out all right. However, until it is all sorted, we will not be

recommending clients to buy.”

Standard & Poor&#39s says the changes will not affect its ratings of

Jupiter.A statement last week said S&P will continue to monitor the firm

but, while the fund managers remain in place, Jupiter will maintain its

five A and AA ratings.

The summer months are likely to be a tough period for Jupiter while it

tries to rebuild investor confidence. However, if Commerzbank&#39s management

restructure succeeds with no further casualties, there is no reason to

believe that Jupiter will not emerge stronger and more robust from the

events of the past month.


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