Jupiter Financial Opportunities Income Units

Our view on this Fund

The Jupiter Financial Opportunities Fund launched in 1997, since when it has delivered extremely impressive returns. Indeed at one stage it was the top-performing fund of all those available to private investors.

We believe the secret behind the fund's success, and the key reason we favoured the fund, was the skill of Philip Gibbs. He has proved adept at reading the economic picture, and was not afraid to shift the portfolio aggressively between regions and assets. A good example of this was in 2007, when he foresaw the credit crunch, and moved the majority of the portfolio into cash and gilts. This sheltered investors from the subsequent market falls, and the fund was one of very few to actually make money during what was a torrid period for stock markets, and financial stocks in particular.

However, since this period of extraordinary outperformance the fund has undergone a number of changes. As a result we no longer feel it merits its place on the Wealth 150 list of our favourite funds in each sector.

In January 2010 Guy de Blonay rejoined Jupiter following a spell at New Star, and was appointed co-manager of the fund in June 2010. We saw this as a positive move for investors - Guy de Blonay had previously worked with Philip Gibbs and we believed they would make a good team. In January 2011 he assumed the role of lead manager, in order to allow Philip Gibbs to focus on managing his Jupiter Absolute Return Fund. At the time, we were told Philip Gibbs would remain involved with this fund and have some influence over asset allocation. However, this is now no longer the case.

Nevertheless, Guy de Blonay has a good track record in the sector, and we had high hopes he would be able to continue the fund's impressive track record. However, under his stewardship the fund has struggled. Since he took over the portfolio it has been positioned for a recovery in the financial sector - a recovery which is yet to materialise. Despite his cautious stance on the euro zone, preferring businesses in more robust economies such as Switzerland, Sweden and Germany, overall performance has been poor. Exposure to emerging markets has also had a negative impact as they have been especially hard-hit in this year's volatility.

Furthermore, Jupiter now believe it is appropriate to limit the fund's flexibility to offer shelter in a market downturn by restricting the amount the portfolio can hold in cash and bonds. They feel this limitation is more consistent with the fund's stated objective to achieve long-term capital growth principally through investment in equities of financial sector companies.

Given these changes, we have removed this fund from the Wealth 150. We would stress that this does not constitute a recommendation to sell the fund, and we believe existing investors should generally continue to hold if the fund meets their objectives.

However, those investors who bought the fund to access the skills and economic views of Philip Gibbs could consider his Jupiter Absolute Return Fund as an alternative. It is important to note that the two funds are extremely different. The Jupiter Absolute Return Fund has the ability to take 'short' positions to profit from assets which fall in value, and has no explicit focus on the financial sector. It is therefore likely to underperform a strongly rising market, but should offer shelter during turbulent periods if he makes the right calls. If he gets it wrong, the fund will fall in value. It also carries a performance fee. Since launching in December 2009 the fund has been a little disappointing, but it has held up well during the recent market turbulence, and we retain our long-term confidence in Philip Gibbs.

We will continue to monitor both funds and will keep investors apprised of our views.

22-12-2011