Manager Research

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Alexander Darwall to launch his own business

8 Jul 2019

It was announced last week that Alexander Darwall will be departing Jupiter on 1st October 2019 to set up his own fund management business, Devon Equity Management, pending approval from the FCA. Jupiter's share price subsequently fell by 7.4%, such is the influence of the AUM for Darwall's European strategies. Jupiter already confirmed in April that Darwall would be stepping down as manager of the European and European Growth funds in October, but he would stay on as Head of Strategy, European Growth and continue to run the £985m European Opportunities investment trust. However, with the latest announcement, it appears highly likely that he will be taking the trust to his new business. Analyst Luca Emo and Head of Investment Trusts at Jupiter, Richard Pavry, have confirmed that they will been joining Darwall at his new venture.


We previously awarded the Jupiter European Fund a Tier 1 rating. Darwall has managed the strategy since 2001 (and been analysing European equities since 1987), which gives us a substantial amount of time over which to assess his actions. He has repeatedly shown that he unwaveringly sticks to his investment process and clients have been rewarded by his high-conviction, non-conformist approach. His experience is vital. We noted that key person risk was high since we first initiated coverage of the strategy. Therefore, in light of last week’s announcement, we shall be rescinding our rating on the fund when Darwall hands over the reins to Mark Nichols at the end of September.


In terms of the succession itself, Jupiter had five key areas of focus:


- Cultural fit;


- Stylistic fit (in terms of growth and concentration);


- Track record;


- Managing money on a similar scale to what would be required at Jupiter;


- A similar client base that would be familiar with the new fund manager to assist transition.


We have not yet spent considerable time with Mark to evaluate him as an investor or on more qualitative matters such as his cultural fit with the firm. However, we would highlight some quantitative differences between Nichols and Darwall. The obvious point to make is that the track record of Nichols is far shorter and not nearly as strong as Darwall's. We have sympathy here as few, if any, have a comparable record to Darwall in the European space. Nevertheless, from a purely quantitative stand point, we could not yet gain high conviction from Nichols’ track record that he is likely to deliver strong excess returns over long periods of time going forward. There are also nuanced differences between Darwall and Nichols as investors. Nichols has previously held less concentrated portfolios than Darwall with greater allocations to FMCG companies (which Darwall avoids). This has caused the return profile to diverge in the past and would suggest that Darwall and Nichols do have some philosophical differences.  


For clients currently invested in one of Darwall’s strategies, we would encourage them to evaluate whether they are comfortable with the changes and whether the fund will continue to meet their objectives. 

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