When a fund manager announces his retirement or suddenly departs, investors are often left wondering whether they should hold the fund or switch into an alternative.
Tony Nutt, manager of the Jupiter Income fund, has announced he is to retire in 2014.
Between now and his retirement, he will be handing over responsibility for managing the £1.9bn fund to Ben Whitmore.
Tony Nutt is one of a select group of ‘star’ fund managers; fund management personalities who are believed to bring great value to the success of an investment fund.
When a star quits the management of a fund, the choice for investors can be stark; stick with the fund in the hope that the successor develops his own star quality, or find another star manager running a fund with similar objectives.
In the case of Nutt, Whitmore and the Jupiter Income fund, the decision might not be so tough.
The fund itself has languished in the bottom quartile in various timescales over the past one, three and five years.
Had the fund been an above average performer over the past five years, investors might have been tempted to stick around to see how things worked out. With a fund that sits in 71st place out of 80 funds in the IMA UK Equity Income sector over the past five years, things can’t really get that much worse in terms of performance.
Whitmore, the successor to Nutt, has been a fund manager since 1998, graduating with a degree in geography before working for Schroders and then joining Jupiter in 2006.
He is described as ‘a bottom-up stock picker who manges money with a clear, contrarian, value bias’. This is an approach we like when it comes to actively managed funds, although with nearly £2bn to manage it could be tough to apply this philosophy.
Whitmore currently runs a couple of funds; Jupiter UK Alpha and Jupiter UK Special Situations. Over the past five years he has managed to produce a return of 20% compared to the IMA UK All Companies sector average of 2.4%; not too shabby!
Of course, past performance is not a reliable guide to future returns. And running a growth oriented £740m special situations fund is very different to managing a £1.9bn flagship income fund.
We take the view that the influence of the fund manager is often less important than the team behind the fund, their research capabilities and process deployed.
What we would urge investors to consider is whether the Jupiter Income fund was really suitable for their investment objectives before Tony Nutt announced his retirement.
There are plenty of strong alternatives to Jupiter Income in this sector. Hanging around to experience the impact of a manager change over the next couple of years feels less sensible than selecting a fund today with an established manager, team and process in place.
Photo credit: Flickr/IainBuchanan
