Jupiter has introduced sweeping changes across its unit trust range after it found certain retail share classes, including funds run by James Clunie and Ben Whitmore had not been delivering value consistently.
In its debut value assessment Jupiter’s fund board said 20 out of 40 funds scored two stars out of a possible four in the retail share class, meaning they have “demonstrated value although not consistently”.
None of its retail unit classes snagged a four-star rating compared with 12 funds that were awarded top marks in the I, P, X, Z unit classes for institutional investors, advisers and platforms.
Overall Jupiter’s fund board found 27 unit classes had failed to demonstrate value consistently but it said the majority, 64 out of 91 unit classes, had “demonstrated value” or “consistently demonstrated strong value”.
To address these issues Jupiter’s fund board said it had taken a number of steps to “enhance value” across its range including introducing 69 new unit classes with reduced AMC charges that will affect 49,000 non-advised investors.
This includes a new ‘J’ share class for unit holders directly invested in retail income and accumulation classes that was rolled out at the end of May, which the board said could reduce charges by up to 30 basis points per annum for some investors.
Additionally, the FTSE 250 fund group said it had slashed the ongoing charges figure (OCF) across 21 funds by simplifying administrative and operating costs under a single “Aggregate Operating Fee”, which would benefit 42,000 investors.
30bp cut is ‘significant’
Willis Owen head of personal investing Adrian Lowcock called the 30bp cut “significant”.
Jupiter’s proposed changes are “a testament to the effectiveness of the value for money rules,” he said, “and demonstrates the industry needed to be pushed to address charges”.
“Fund managers are making some big first steps in cutting charges but I expect this to be a learning curve and further reductions to follow in coming years as the value assessments evolve, and fund managers get better insight to value and what the reports tell them,” Lowcock continued.
“Overall, it is good that companies are willing to recognise past mistakes and do something to address this, rather than look for excuses to justify charges.”
Ben Whitmore and James Clunie retail units flagged
James Clunie’s £322.9m Absolute Return fund, was among the 20 retail unit classes awarded two stars, for failing to generate a positive absolute return higher than LIBOR GBP 3-month independent of market conditions over a 3-year rolling period. However for investors in the ‘I’ clean share class for platforms and intermediaries, the fund was awarded three stars, meaning it has “demonstrated value”.
According to Trustnet the fund has lost 22.4% over three years compared with the average peer in the IA Targeted Return sector which has returned 0.8%.
The board said over the period equity markets had not favoured the manager’s approach “which anticipated a rise in UK stocks such as oil and banking companies, and a fall in other stocks including high-growth, US companies such as technology businesses”.
“As a result, the fund did not gain from the rally in high-growth equities and was hampered by the prolonged political uncertainty of Brexit in the UK.”
But it added Clunie’s fund had done well during two of the most challenging periods in recent years – Q4 2018 and the Covid-19 led sell-off in March.
See also: James Clunie’s absolute return fund assets fall by a third in one month
Ben Whitmore’s £1.6bn UK Special Situation fund and £1.2bn Income trust were some of the largest funds found to not be delivering value consistently for retail unit holders.
In separate statements for each fund the board said both vehicles had failed to meet their stated performance objectives of beating the FTSE All Share index over five years net of fees which it said was the result of Whitmore’s value style being out of favour.
On a five-year view UK Special Situations has returned 4.0%, half of the IA UK All Companies’ 8.1% gains, according to Trustnet, while the Income trust is down 1.8% against the IA UK Equity Income’s 0.1%.
Whitmore’s Income trust received two stars in both the legacy retail and I, P, X, Z categories alongside five other funds, including European Income, Global Emerging Markets, Growth & Income and North American Income.
Jupiter’s UK Growth fund also came up short, according to the report. The FTSE 250 firm removed manager Steve Davies from the £527.6m fund, which is third from the bottom in the IA UK All Companies sector having lost 32.5% over five years, replacing him with Newton manager Christopher Smith earlier this year.
Two other funds flagged for delivering inconsistent value for retail investors, UK Alpha and Enhanced Distribution, were shuttered on 22 July. A third fund, Jupiter Strategic Reserve, closed during the reporting period in May 2019.
A full list of the 20 retail unit classes failing to deliver value is included below.
| Jupiter Asian |
| Jupiter China |
| Jupiter European Income |
| Jupiter European Special Situations |
| Jupiter Global Emerging Markets |
| Jupiter Global Equity Income |
| Jupiter Growth & Income |
| Jupiter Income trust |
| Jupiter India |
| Jupiter North American Income |
| Jupiter Responsible Income |
| Jupiter UK Alpha |
| Jupiter UK Growth |
| Jupiter UK Special Situations |
| Jupiter Corporate Bond |
| Jupiter Distribution and Growth |
| Jupiter Enhanced Distribution |
| Jupiter Absolute Return |
| Jupiter Merlin Real Return |
| Jupiter Merlin Worldwide Portfolio |
