Morningstar downgrades Jupiter fund, due to “extreme underperformance”

Added 20th March 2017

Morningstar analysts demoted Jupiter’s UK Growth fund, headed by Steve Davies, citing issues with underperformance and portfolio construction over 2016.

Morningstar downgrades Jupiter fund, due to “extreme underperformance”

Davies’ £1.4bn fund was ranked in Morningstar’s bronze category alongside products from other peers in the IA UK All Companies sector, including the Liontrust UK Growth and the Kames UK Equity funds, before being booted to a neutral ranking on Monday.

Davies took over as lead manager of the fund in May 2015, after having co-managed the portfolio with Ian McVeigh since 2007.

So last year was very much Davies’ time to step out of the shadow of his predecessor and prove himself, which is why the fund’s underperformance was such a disappointment to Morningstar analysts.

While the Jupiter UK Growth fund was returning 13.1% in early January 2016, against the 1.2% average sector return, it dipped into negative territory by February.

In the weeks after the EU Referendum, Davies’ fund was producing considerably lower returns (-11.3% at its lowest point) than other funds in the sector.

The Jupiter UK Growth fund finished the year returning 8%, less than half of the level of returns generated by the sector on average (16.7%).

“No one is immune from mistakes,” said Morningstar fund analyst Simon Dorricott, “but the scale of underperformance, this time being -20%, has called into question Davies’ construction skills which haven’t been tested so much in the past.”

Back in the early days of the fund, McVeigh took the lead on making final decisions on portfolio weightings, Dorricott explained. Whereas Davies’ background was in stock analysis and coming up with top-down type views.

He added: “Davies hasn’t really been at the helm for a significant period of time, so the underperformance brought into question his portfolio construction.”


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