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Chrysalis Investments and its investment managers are to split from asset management group Jupiter, three years after the trust was acquired as part of a wider deal.
The investment company said on Monday that managers Richard Watts and Nick Williamson would leave Jupiter in spring 2024 and set up their own investment advisory company that will manage Chrysalis, four years after the trust was brought under Jupiter’s control through its acquisition of Merian.
The change follows a shareholder consultation into the trust’s approach, manager pay, and Jupiter’s position as both investors in and investment adviser to Chrysalis. Jupiter has been reducing its stake in the trust, from 23 per cent in July 2022 to 12.2 per cent at the end of October this year.
In a statement on Monday the Chrysalis board said it had concerns about the provision of resources for the management team, and the reduction of Jupiter-managed holdings in the trust, which it wanted to address.
Chrysalis’s board said it had considered the implications of a potential change in manager, including the payment of a “substantial termination fee”, and decided it was best if the trust continued to be managed by the current investment team. It added shareholders had indicated “strong support” for the managers.
The trust, which had assets of £800mn at the end of September, has seen its share price drop 57 per cent in the past three years, as the valuations of the unlisted companies it invests in have crashed following interest rate rises. Its share price is trading at a 46 per cent discount to its net asset value.
Chrysalis attracted criticism last year for paying out £117mn in performance and management fees, with Watts and Williamson taking their £60mn fee in stock and the remainder paid to Jupiter. The fees were propelled by a sharp rise in the valuations of Chrysalis’s holdings such as challenger bank Starling and digital payments platform Wise. Months after the bumper management payout the companies were hit by plummeting share prices, however, and Chrysalis announced it would change the fee structure.
The trust added to its exposure to Starling earlier this year after Jupiter dumped its holdings in the company as part of a wider policy to block the managers of its open-ended funds investing in private companies.
Concern is rising about the impact of higher borrowing costs on valuations in private markets, triggering a review from the UK financial regulator that was announced in September.
The board said it was positive on the outlook for the fund. “While the current NAV per share remains materially below its peak, recent events hopefully point to a more optimistic outlook, with yields generally softening and company specific news . . . also providing a more upbeat prognosis,” it said.
As part of the exit, Jupiter has agreed to waive the six months’ notice period on the existing management contract, which will terminate on April 1 next year, with the managers also released from their contracts, on March 31 2024.
The asset manager will also reduce the management fee from 50 basis points down to 15 basis points for the period between October this year and March 2024, saving shareholders £1.4mn.
The changes are subject to a shareholder vote.
