After a decade of managing the fund Steve Davies has parted ways with Jupiter asset management to be replaced by Newton’s Chris Smith in June.
Davies’ departure followed years of struggle when he was unable to take advantage of the post-financial crisis bull run, which had been a huge tailwind for most growth funds. Over the five years to end of 2019, which was before the coronavirus crash, the fund made just 6.88 per cent – compared with a 43.82 per cent gain for its average IA UK All Companies peer.
Over the five years to 24 March, it has made a loss of 45.16 per cent after a fall of close 40 per cent as markets sold off during 2020. Over the same five years, the IA UK All Companies peer group fell 11.71 per cent and the FTSE All Share lost 4.95 per cent.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
With several fund pickers previously telling Trustnet that they believe better UK growth funds out there, the question is what should investors hold instead?
Below three fund pickers select other IA UK All Companies funds as an alternative to Jupiter UK Growth.
LF Lindsell Train UK Equity
The first is FE fundinfo Alpha Manager Nick Train’s £6bn LF Lindsell Train UK Equity fund, picked by Willis Owen head of personal investing Adrian Lowcock.
Lowcock highlighted Train’s fund in our previous article, when stating that new manager Smith’s “purer growth style” means Jupiter UK Growth could end up looking more like the Lindsell Train fund anyway.
Taking a long-term outlook and preferring quality-growth companies, Train has a “unique investment approach”, according to Lowcock, looking for cash-generative UK businesses with strong management teams to build up a portfolio of just 35 stocks.
“The portfolio is concentrated, which means each holding earns its place. Given the fund’s turnover is low, any investments are made with a view of holding them for the long term,” Lowcock added.
“This approach means that new investments are thoroughly analysed, poked and investigated before they are included in the portfolio. The long-term approach also means that Train is not moved by market volatility unless it is to invest into one his top ideas on weakness.”
Indeed, LF Lindsell Train UK Equity has remained a lot less shaken by the recent volatility in markets reacting to the coronavirus, managing to maintain positive returns in one of the most badly hit sectors during the crisis.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
It has made returns of 33.01 per cent over the past five years, a major outperformance considering both its peer group and benchmark have fallen into negative territory because of the coronavirus triggered market sell-off. The fund has been top quartile across all time frames.
LF Lindsell Train UK Equity has an ongoing charges figure (OCF) of 0.65 per cent.
JOHCM UK Dynamic
The second fund pick comes from Fairview Investing co-founder Ben Yearsley, who selected the £1.7bn JOHCM UK Dynamic fund. He said it has a similar approach to the Jupiter fund, but without the “unknowns” of how a new manager will perform.
“As for alternatives, I would look to a similar approach, or at least one with the value tilt. I’d look to JO Hambro UK Dynamic, managed by Alex Savvides,” Yearsley said.
“He looks for companies that have had a tough time where there is a clear catalyst for an improvement – for example, management change or the selling off of a division.
“One of the key things the manager looks for is the ability of the company to pay dividends in a reasonable period of time, typically one to two years.”
FE fundinfo Alpha Manager Savvides, who has managed JO Hambro UK Dynamic since its launch in 2008, invests in distressed UK businesses that have been misunderstood by investors but have growth qualities, such as strong brands and competitive advantages. These companies must pay a dividend, as that means they are likely to be more disciplined when it comes to cashflow.
Over the past five years the fund has made a loss of 9.55 per cent, compared with a fall of 6.44 per cent from its average IA UK All Companies peer and a 0.29 per cent decline in its FTSE All Share benchmark.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
JO Hambro UK Dynamic has an OCF of 0.79 per cent, although it can levy a performance fee.
Investec UK Alpha
The final alternative fund pick is Investec UK Alpha, which Ryan Hughes, head of active portfolios at AJ Bell, said was ideal “for core UK equity exposure”.
Hughes highlighted that the fund’s style is likened new manager Smith’s previous funds at Newton.
“This fund has broadly similar style exposure to Smith’s previous portfolio and has around 40 per cent stock commonality with a 95 per cent correlation over the last couple of years, indicating the strong similarity between the holdings and approach,” he explained.
Managed by Simon Brazier, the £1.9bn quality-growth fund primarily invests in the UK, but it does have some flexibility to invest internationally too.
Like its Lindsell Train peer the fund has generated a top quartile performance across all time frames and also managed to maintain positive results during this tough time in markets. It made 2.69 per cent over the past five years, which is a decent result considering the performance of the IA UK All Companies peer group and the FTSE All Share index.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Investec UK Alpha has on OCF of 0.82 per cent.