Jupiter UK Growth - going through a rough patch

Dominic Rowles | Tue 19 March 2019

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• Steve Davies looks for companies ignored by others
• He thinks companies reliant on the UK economy are particularly good value
• We currently have more conviction in other UK fund managers

Our view

Steve Davies, manager of the Jupiter UK Growth Fund, invests in companies that have been overlooked and undervalued by others, but with the potential to recover. He also looks at what's going on more broadly in the economy and invests in companies he thinks will benefit from his views.

He's an experienced manager with a well-resourced team behind him but the fund's faced a tougher time in recent years. Our analysis shows his stock-picking held back returns. This means the fund hasn’t held up as well as the broader sectors, and size of company, the manager typically invests in.

The fund's ongoing charge is 1.02% (in addition to the HL platform charge, maximum 0.45% per year). That makes it more expensive than other funds in the UK All Companies sector that we feel have better long-term prospects. Our favourite funds are on the Wealth 50.

Performance review

The fund hasn’t performed well over the past few years.

In 2016 the manager thought the UK would vote to remain in the European Union. He invested some of the fund in companies that could do well in that scenario. But the UK voted to leave so the fund performed poorly.

It's had a tough time over the past year too. Investments in higher-risk small and medium-sized companies, which didn’t do as well as larger ones, and a focus on companies that rely on the UK economy doing well dragged on returns. There were also some company-specific issues.

Sirius Minerals, one of the fund's largest investments, fell heavily after it announced costs at its Yorkshire mine would be higher than first thought. The manager's not selling his shares though. He thinks the company is well run. And a focus on fertiliser products differentiates it from other UK mining operations that tend to focus on copper and iron. Davies sees this as a long-term investment and is prepared to endure short-term volatility.

Past performance is not a guide to the future. Source: Lipper IM to 28/02/2019

How's the fund invested?

A large part of the fund is focused on companies sensitive to the health of the UK economy. They've performed poorly in recent years because of investors' concerns over political uncertainty and Brexit. Steve Davies thinks this means a number of good companies have been overlooked by investors. Retailer WHSmith and broadcaster ITV are examples.

He also invests in some banks including Lloyds Bank, Royal Bank of Scotland and Barclays. They each face challenges, such as competition from smaller challengers and the uncertain impact of Brexit, but Davies thinks their low share prices mean investing in them is worth the risk.

He also uses his flexibility to invest up to 20% of the fund overseas. Luxury car maker Ferrari and Chinese restaurant operator Yum China are held in the fund. They could help provide some shelter if the UK economy falters.

The manager tends to invest in relatively few companies. This means each one can have a meaningful impact on returns so it's a higher-risk approach.

Find out more about the fund including charges

Key investor information