In a rare move Jupiter will delay the wind-up of its UK Alpha and Enhanced Distribution funds to avoid becoming a forced seller as the coronavirus volatility continues to rip through markets.
Both funds were slated to close their doors on 31 March after years of outflows and poor performance had whittled them down to such a small size that made them unwieldy to manage and harder to diversify.
But Jupiter decided on Monday to postpone that process which it said was no longer in investors’ best interest given the impact from the coronavirus on valuations.
“The spread of Covid-19 since January has resulted in extremely volatile market conditions and depressed market levels, which has in turn impacted the fund valuations,” a spokesperson for the fund group said.
“Over the last week, we have also moved our dealing and fund management activities to work in a fully remote environment; this has been carefully managed and gone smoothly but we are very alert to minimising operational risk at this time.
“Given these market conditions we no longer consider it to be in the interests of investors in the funds for us to commence the winding up of the portfolios on 31st March 2020, as originally planned.”
Delay is a sign of the unprecedented times
Choosing to delay a fund wind-up is unusual, said AJ Bell head of active portfolios Ryan Hughes, but something Jupiter likely did to avoid becoming a forced seller in volatile markets.
“I’ve certainly never heard of anyone doing this before but then again a lot of ‘firsts’ are happening at the moment,” Hughes said.
“It is very rare to delay a fund closure as once the decision has been made there is usually no benefit to delaying things,” agreed Willis Owen head of personal investing Adrian Lowcock.
“However, we are clearly living in unprecedented times and things are far from normal. As such a short delay is understandable as businesses adjust and look to operate effectively in this climate.”
Jupiter will continue monitoring the situation
Jupiter did not provide a timeline for when the wind-up might resume but said it would continue to review the situation. Investors can withdraw or transfer their funds at any time, it said.
The dual wind-ups had been hailed as “sensible” amid pressure from the Financial Conduct Authority to deliver value for investors, with commentators noting Jupiter had bigger and better funds in similar areas.
The pint-sized funds had been struggling to hold onto assets in recent years. Jupiter UK Alpha had shrank from £20.1m in January 2018 to £4.2m by December 2019, while Jupiter Enhanced Dynamic was hit by £9.1m worth of outflows over the same period, taking it down to £10.6m, not far off its size at launch of £10.3m.
Jupiter Enhanced Distribution recovers during coronavirus drawdown
The pair of funds have also struggled performance-wise in the long-term.
The 25-year old Jupiter UK Alpha, which has been run by Richard Curling since 2016, is in the fourth quartile of the IA UK All Companies sector over one, three and five years.
Jupiter Enhanced Distribution, co-managed by Alastair Gunn and Rhys Petheram (pictured) since launching in 2015, is third quartile on a three year view. Recently it has seen an improvement in performance, ranking in the top quartile on a six-month view, though it is still loss-making.
Since 20 February when the coronavirus sell-off took off Jupiter Enhanced Distribution is down 11.2%, putting it slightly ahead of the IA Mixed Investment 20-60% Shares which has fallen 14.1%.
Jupiter UK Alpha has slumped further than the average IA UK All Companies fund racking up losses of 30.6% versus the sector’s 28.3%.
