Jupiter Fund Management has announced that FE Alpha Manager Alexander Darwall (pictured) is to leave the firm to launch his own boutique business. 
As previously announced, Mark Nichols – former co-manager of the Threadneedle European Select fund – is to take over Darwall’s open-ended strategies and will be joined by colleague and small- and mid-cap specialist Mark Heslop in September.
The pair will assume management of the strategies in the fourth quarter.
With the succession plans now in place, the asset manager revealed that Darwall is set to launch his own investment management business.
A spokesperson said: “Alexander has told the company that he would like to fulfil a long-held ambition to launch a small investment management business.
“With Jupiter’s agreement, he has taken preparatory steps to do this including making an application to seek regulatory approval from the Financial Conduct Authority for a newly incorporated company.”
As such, a new company called Devon Equity Management has been registered with Companies House and Darwall named as a director.
The firm noted that “as part of a constructive and collaborative engagement” it had agreed with the manager that the new venture will not compete in the Ucits market for a period of two years.
“Jupiter would like to emphasise that clients’ best interests remain the key consideration in this process,” the spokesperson added. “In the meantime, Alexander is fully committed to delivering consistent performance and ensuring a smooth transition of the mutual funds.”
Performance of manager since November 2000
Source: FE Analytics
As the above chart shows, Drawall has generated a total return of 604.27 per cent compared to the peer group composite’s gain of 205.55 per cent.
The FE Alpha Manager is currently head of European growth strategy and is well known for his management of the four FE Crown-rated Jupiter European fund, which has made a total return of 517.14 per cent during his tenure on the fund since January 2001 against a 154.24 per cent return for the average IA Europe Excluding UK peer.
Performance of fund vs sector & benchmark under Darwall
Source: FE Analytics
He is also well-known as the manager of the Jupiter European Opportunities Trust, which has made a total return of 845.38 per cent compared with a gain of 293.53 per cent for the average IT Europe peer and 196.37 per cent for the FTSE World Europe ex UK index.
The trust’s board announced that it has already decided to investigate the possibility of appointing new venture Devon to advise on the investment portfolio, as such it has asked its professional advisers to assist in a due diligence exercise and consult with shareholders.
“The board is in negotiations with Jupiter regarding the ongoing management arrangements and investment management contract,” the trust added.
The move has been met with some interest by fund pickers who noted that the timing of the announcement came as somewhat of a shock.
“News that Alexander Darwall is leaving Jupiter to set up his own firm is a surprise given it was only in April that he was stepping back from his open-ended funds to concentrate on his investment trust,” said Ryan Hughes, head of active portfolios at AJ Bell.
“This was not interpreted at the time as a step to an immediate departure but it seems plans were already afoot for this next step for Darwall to set up his own investment management company.”
Hughes added: “With Jupiter announcing that Darwall has agreed to not launch a competing open-ended fund for two years, it seems that investors only opportunity to continue to access Darwall’s quality growth investment approach will be through the investment trust which may well create strong demand for it in the coming months.”
However, the timing of Darwall’s new firm comes at a time when another ‘star’ manager who set up by himself – Neil Woodford – has placed the culture of big-name managers under increasing levels of scrutiny.
“Alexander Darwall is another manager with a stellar track record and very solid investment principles which have rewarded loyal investors,” said Tom Sparke, investment manager at GDIM Discretionary Fund Managers.
“If the style and remit remain the same there is a very good chance that this success could be replicated, but it remains to be seen whether the new venture, in which the restrictions may be fewer, will fit this mould.”
Sparke added: “The weight of assets he leaves behind is not as great as some in the past and while he is a ‘big name’ in the industry a typical retail investor may not be so aware of him, so the problems stemming from dealing with the flow of tens of billions should not be an issue in this case.”
Darius McDermott (pictured), managing director of FundCalibre, said the appointment of Nichols as manager showed that Jupiter had appointed somebody very similar to Darwall, although there would be some challenges.
“Mark has a very similar investment style and philosophy in that he looks for quality growth companies,” he said. “However, while both funds have a similar number of holdings, the Jupiter franchise is a lot larger and the onshore fund is a lot more concentrated: the top-10 holdings account for some 61 per cent of assets while the top-10 of the Threadneedle fund account for 45 per cent.
“We will want to see how Mark settles in and if the fund retains its concentrated mandate going forward. We will also be monitoring redemption levels closely – as we have been reminded recently, managing a fund successfully whilst having to meet large levels of redemptions is extremely difficult and can impact significantly on performance.”