TIDMJUS
Jupiter US Smaller Companies PLC
09 December 2020
Jupiter US Smaller Companies (JUS)
09/12/2020
Analysis of manager change from Kepler Trust Intelligence
The board of Jupiter US Smaller Companies (JUS) has awarded the
management contract to the US small cap growth team at Brown
Advisory. JUS's portfolio will be managed by Chris Berrier, who
will take over in April 2021. This follows the announcement in
October of the retirement of Robert Siddles of Jupiter, who has run
JUS for 20 years.
Robert has had a long and distinguished career, but management
is passing to a team which also has considerable experience and a
solid track record. Brown Advisory has run its small cap growth
strategy since the early 1990s, but its current form dates back to
2006 when Chris took over the portfolio management role. Chris
brought more of a focus on downside protection and awareness of
valuations to what is still fundamentally a quality growth
strategy, and that has resulted in impressive absolute and
risk-adjusted performance under his tenure. The Brown Advisory US
Smaller Companies UCITs fund, which follows the same small cap
growth strategy, has performed particularly strongly on the
downside over the past five years, and has displayed a superior
downside capture ratio, upside/downside capture ratio and Sharpe
ratio to JUS and the other small cap US smaller companies
investment trust over this period.
In a period of strong returns for growth stocks, it has also
significantly outperformed its Russell 2000 Growth benchmark. Over
the past ten years, the Brown Advisory US Smaller Companies UCITS
fund has generated returns of 13.4% a year compared to 12.1% for
the growth benchmark and just 9.4% for the Russell 2000 Index. Over
the past five years the outperformance has been even higher, with
annualised returns of 14.7% for the fund compared to 11.2% for the
benchmark and 7.6% for the market.
Chris and the team will be running a much more explicitly
growth-focussed strategy than the manager they take over from. When
we met with Chris recently, he stressed that he and the team look
for long-term compounders. This means companies which are market
leaders or show the ability to rapidly gain market share, which
have a differentiated business model that facilitates this, and
which are in a large or growing market. High importance is placed
on good quality, trustworthy management, with alignment of
interests and incentives with shareholders. They expect these
companies to show higher returns on invested capital than their
peers, with incremental revenue gains from efficient use of capital
or rising margins. However, Chris believes that valuation can be
extremely important on a five to ten year view, and he is wary of
not overpaying for the next big thing and creating excessive
downside risks.
Kepler View
We believe the board of JUS have made a very interesting
appointment which makes the trust an altogether different
proposition. For those with a shorter-term perspective, or those
seeking an entry point into US small caps, we think the
double-digit discount could be an opportunity. While many stocks
and funds with exposure to the US domestic economy or US small caps
have rallied in recent weeks, JUS has not. In our view the
appointment of a new manager could be a catalyst for a
re-rating.
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