March 5 (The following statement was released by the rating agency)
Fitch Ratings has placed Jupiter India Select SICAV's 'Strong' Fund Quality Rating 'Under Review'. The fund is advised and managed by Jupiter Asset Management Limited (NR), a subsidiary of Jupiter Fund Management PLC (NR).
KEY RATING DRIVERS
Fitch has placed the fund 'Under Review' while it determines the fund's ability to return to sustainable, long-term out-performance. The underperformance of the fund in 2013 tarnished its longer-term track-record. Equity market conditions in India have not favoured the fund, which has a small- and mid-cap bias. In addition, the portfolio includes several material off-index positions which detracted from performance.
Jupiter India Select SICAV is a long-only Indian equities Luxembourg-domiciled fund with USD147m of assets as of end-December 2013.
The investment approach is based on the bottom-up selection of around 60-80 stocks without regard to index weighting. As a long-term shareholder, the fund invests in companies that offer growth at a reasonable price and demonstrate solid corporate governance and sound management. The investment process emphasises proprietary fundamental research and intimate knowledge of the investible universe.
The fund is managed by Avinash Vazirani (19 years' South Asian equity investment experience; six years' tenure) supported by one junior portfolio manager. In line with Jupiter's investment culture, the portfolio managers are both highly accountable and benefit from significant leeway in portfolio construction. Independent functions and committees provide effective risk and performance oversight.
The fund underperformed both peers and the index in 2013. Its longer-term track record has also deteriorated. It has underperformed compared with both peers and the index over three years, and its performance is approximately in line with the index over five years. Its Lipper Leader score for Consistent Return (Luxembourg) was 2 over three years and 4 over five years as of end-January 2014. Its five-year score has oscillated between 3 and 4 since September 2013.
Jupiter is a listed, UK, retail-focused asset manager, managing GBP31.7bn at December 2013.
Fitch will seek to resolve the rating's 'Under Review' status in six months' time. Should the fund continue to underperform, Fitch will likely downgrade the fund's rating to 'Satisfactory'. On the other hand, should the fund return to longer-term out-performance we would likely affirm the rating and remove it from 'Under Review'. Specifically Fitch will measure out-performance relative to the fund's benchmark and peers in the Equity India category over a six-month rolling period and monitor the fund's three- and five-year Lipper Leader scores for Consistent Return, among other risk-adjusted performance metrics.
Fund quality ratings may be sensitive to material changes in the investment or operational processes or market risk profiles of the fund. A material adverse deviation from Fitch's guidelines for any key rating driver could cause Fitch to downgrade the ratings. For example, notable structural deterioration in the fund's performance or departure of key investment professionals may cause a lower rating.
Fitch's Fund Quality Ratings combine Fitch's experience in qualitative fund analysis with rankings and performance data from Lipper, a Thomson Reuters company. Fitch's Fund Quality Ratings offer an independent, forward-looking assessment of a fund's key performance and risk attributes and consistency of longer-term returns, relative to peer group or benchmarks. The ratings focus on the fund manager's investment process, key fund performance drivers, risk management, and the quality of the fund's operational infrastructure.
For more information, please see www.fitchspotlight.com/FQR.
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