As reported last week, the £1.9bn Jupiter Income Trust is to passed on to Ben Whitmore, manager of the £743m UK Special Situations Fund, while Philip Matthews will take over as lead manager on the £509m Jupiter High Income Fund.
These are sizeable funds and, given Nutt’s status as one of the star managers within the ever-popular Equity Income sector, many investors now face a tough decision whether to stick with Jupiter or sell out.
Nutt’s long-term performance has been rightly celebrated, though the past three years haven’t been quite as fruitful – the fund has underperformed the IMA UK Equity Income average, though still delivered a respectable 21%.
Toughest year
Nutt himself acknowledges that the past year has been the “toughest in living memory”, though his decision comes down more to do with personal choice more than anything else.
“I shall be 60 next year and one thinks a long time about retirement before retirement arrives,” he said.
“In the past few years I’ve been thinking about where I can best employ my resources in later life, and succession on the UK equity team. This is not something I would have wanted to do, or could of done, back in 2003, but it is something we can do as easily as it will ever be. I really do think it is a good time.”
The timing might feel right, though is Whitmore the right man to take on the larger Income Trust? He certainly talks a good game and he has been at pains to stress he follows a similar approach to Nutt as a value manager with a contrarian bias.
He told me he likes to hunt for new ideas in unpopular areas of the market with good dividends and strong core franchises. There is already some overlap in key names held in both the Income Trust and UK Special Situations fund, including Vodafone, BAT, BP and AstraZeneca.
New ideas
In terms of new ideas that Whitmore could bring into the fund, he his likes media stocks, and also sees some good value in certain financials – particularly money brokers and equity exchanges, which are currently very out of favour despite strong yields.
Whitmore must be given time to mould the portfolio to his liking, though that in itself could bring a period of turbulence for investors.
As Adrian Lowcock, senior investment manager at Hargreaves Lansdown, explained: “What investors will want to know is will Whitmore be making wholesale structural changes to the fund. If there is a huge turnover of stock, that then could change the whole makeup of the fund quite quickly.”
Whitmore himself says he doubts there will be large alterations to the fund, and emphasises the only big change for him, in terms of his thinking, will be taking a greater emphasis on meeting the fund’s yield requirement.
Low-turnover investors
He said: “With the same mindset I don’t think you are going to get that big a portfolio turnover. Both Tony and I are pretty low-turnover investors, so I think the change will be gradual and of course the key requirement of the Income Fund is paying a dividend at 110% of the AllShare and growing it – that will remain the key objective.”
Whitmore will continue running his UK Special Situations fund, though he is to hand over responsibility for around £700m, including his best ideas strategy, Jupiter UK Alpha, and an institutional mandate.
It will be interesting to see what other overlapping ideas will emerge across his two funds, and of course how the Income Trust will compare to other popular funds in the UK Equity Income sector. This is the one peer group that houses many of the most recognisable names in domestic fund management. The departure of Nutt sees it lose one of its real stars, but only time will tell if Whitmore can live up to the top billing.
