Winterflood Securities has warned that Jupiter’s rebranded £44m UK Growth Trust could fail to reach its fundraising targets given its similarity to Steve Davies’ open-ended version.
The trust’s board announced it would rename the company in April, with Jupiter’s Steve Davies taking over and converting it from a global to a UK equity strategy.
Mr Davies also runs the £1.6bn open-ended Jupiter UK Growth fund, a strategy which the trust intends to mimick.
Given this similarity, Winterflood head of research Simon Elliott has questioned whether the trust will be able to meet its “ambitious growth target” of at least £200m in assets within the next three years.
The investment trust does differ slightly from the open-ended version in its ability to use gearing, capped at 25 per cent of net assets, and an ability to short stocks. Gearing is currently at 23 per cent.
But Mr Elliott also highlighted previous examples of trust conversions failing to make their mark.
He compared the Jupiter product to the Threadneedle UK Select trust, which in 2012 appointed a high-profile manager in Simon Brazier and introduced a zero-discount policy.
The trust is now £36m in size, having failed to substantially grow assets prior to Mr Brazier’s departure for Investec in 2014. The zero discount policy was subsequently abandoned.
Mr Elliott said: “Steve Davies is an impressive presenter and has an equally impressive performance record with his open-ended fund from his involvement in January 2013, albeit with periods of volatility.
“However, this may not necessarily be enough to ensure that the board’s ambitious growth target is met and the example of Threadneedle UK Select may be pertinent.
“We believe this reflects the difficulties of attracting new buying interest for sub-scale investment trusts, even with strong fund managers and minimal discount risk.”
Mr Elliott added: “While we welcome the board’s proactivity, it remains to be seen whether the fund will see renewed buying interest and whether the presence of gearing and an ability to short will be sufficient to differentiate the investment trust from the £1.6bn open-ended fund.”
The company was previously known as Primadona Growth and then the Jupiter Global trust. The board said the previous strategy was failing to attract new investors.
