A substantial share sale, reforms of the performance fee and the hire of more analysts are among the changes at the £770mn Chrysalis investment trust, as the board tries to turn the vehicle around ahead of a shareholder vote next year.
The board of the trust recently announced fund managers Richard Watts and Nick Williamson were to leave their employer, Jupiter, and create a new asset management company to run Chrysalis.
As the chart below shows, the trust has sharply underperformed relative both to its own peer group and to global equitiy index funds over the past three years.
Speaking to FT Adviser, the trust’s chairman Andrew Haining said: “From my point of view, and that of the board of directors, we had been speaking with Jupiter for some time about having more resource managing Chrysalis.
"While Richard and Nick were keen to move to managing this full time, they had other things to do at Jupiter.
"And from [Jupiter chief executive] Matt Beesley’s point of view, there are a lot of things he wants to do with Jupiter and so was happy to see Chrysalis move on."
He added: "It’s not unusual in the private equity world to have the sort of arrangement we have now."
One of the issues some shareholders had expressed concern around was the 8 per cent stake in the Chrysalis trust owned by the Jupiter Mid Cap fund, an open-ended vehicle which was also previously managed by Watts.
FT Adviser analysis shows just over half of this stake was sold on December 11.
Investors have been expecting that fund to sell its Chrysalis stake for some time, and Haining acknowledged this fear of an “overhang” on the share price was putting some potential shareholders off.
A new business
Watts and Williamson will formally take control of the Chrysalis trust next year, though they have yet to find a name for their new business, one which is related to Chrysalis and has not yet been taken by another firm.
Haining said: “The investment management contract for the new firm is the same as the one Jupiter had, they are bringing with them a senior analyst and a financial and legal professional from Jupiter.
"The aim, subject to the shareholders voting to continue with the strategy next year, is to then hire more analysts.
"We have outsourced the administration and compliance oversight to a firm called IQEQ, those functions were previously performed by Jupiter."
Chrysalis hit the headlines in January 2022 when FT Adviser revealed Watts and Williamson received over £60mn worth of shares in the trust as a performance fee, while their employer, Jupiter, received around £50mn in cash.
They received the performance fee after hitting annual performance targets for the year to the end of September 2021, but the trust's fortunes turned soon after.
Shortly after the company confirmed a review of the fees was taking place.
Haining said with hindsight it was a mistake to have manager remuneration linked to the valuations of companies in the portfolio, when those valuations were on paper only, rather than the proceeds of actual sales.
