UKApr 10 2017

Jupiter revamps Special Sits policies after external review

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Jupiter revamps Special Sits policies after external review

Jupiter value specialists Ben Whitmore and Dermot Murphy have adjusted their investment process following an external review of the £1.7bn UK Special Situations fund.

Mr Whitmore and Mr Murphy commissioned external agency Cabot Research to assess their investment process. While the company identified “core strengths” including the team’s buying process, its findings also pointed to several limitations.

These included signs of “regret aversion” when establishing positions and a focus on building up cash at times of excessive valuations.

The managers also had a tendency to sell loss-making positions too early or hold winners for too long. As a result, the team has refined its process, with four main actions being taken as a result.

The duo will now seek an initial exposure of 2 per cent within the first three months of initiating a position in a company. They will also reduce overall cash exposure, targeting a maximum of 4 per cent in most market conditions.

For existing holdings, "significant losers" which fall to a minimum weighting of 1.5 per cent will prompt a decision on whether to sell or add to the position, while long-term winners will be reviewed after being held for three years.

The managers said: “We sent Cabot eight years’ worth of daily fund holding and transaction data for the Jupiter UK Special Situations Fund. The results of the analysis were fascinating. Not only has it allowed us to better understand our behavioural biases as investors, it has enabled us to refine our processes.”

The fund has prospered over the past five years regardless of the findings. Over the past half-decade the portfolio has returned 93.7 per cent compared with an average of 66.5 per cent for the UK All Companies sector, according to FE.