Jupiter Unit Trust Managers has today (19 July) proposed the amalgamation of two of its bond funds – the £399m Jupiter Merian Global Strategic Bond Fund and the ailing £31m Jupiter Flexible Macro Fund – into one mandate, subject to unitholder approval.
The funds, both of which have been run by Mark Nash (pictured) since November last year, would collectively be renamed the Jupiter Global Macro Bond Fund.
The letter stated that, over one, three and five years, Jupiter Flexible Macro has lost a respective 12.3%, 24.3% and 39.5% in total return terms. It has lost 30% over the last decade. Meanwhile, Jupiter Merian Global Strategic Bond has returned 2.2%, 6.9% and 24.8% over the same time frames respectively. It has also returned 21.4% over ten years, outperforming the proposed new target benchmark – the Sterling Overnight Index Average (SONIA).
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The letter explained that, despite both funds following “a similar investment approach with immaterial differences in their risk and liquidity profiles”, Merian’s larger size has helped bolster its performance.
“This merger is part of a broader rationalisation of our product range to provide a more focused offering for clients which enhances clarity and assists them in better understanding how we can serve them,” it said. “This rationalisation also seeks to achieve funds which have the scale to allow clients to allocate to them and meet the patterns of demand that we are seeing in the market going forward.
“This in turn will allow us to offer enhanced distribution support and service to our clients while helping to contain costs over time and reduce operational risk.”
Benchmark and sector switch
Changes were approved by unitholders on the Merian fund just two days ago, including the proposal to switch its benchmark from the Bloomberg Barclays Global Aggregate Index to the SONIA, and to move the fund from the IA Sterling Strategic Bond sector into the IA Targeted Absolute Return sector. This now means both funds have the same sector and benchmark.
However, they have a different legal structure, given the Flexible fund is an authorised unit trust without a standalone legal identity, while Merian is a subfund of an umbrella company so therefore does have its own separate legal identity – with each subfund being separate from each other.
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This means that investors in the former fund will see their units held onto by the product’s trustee.
“Shareholders in the Receiving Fund [Merian] own shares in [Merian], rather than having a direct interest in [its] investments,” the letter explained.
“Notwithstanding these differences in legal structure, the rights of investors under both structures are very similar and both forms of structure are widely used for UK regulated funds.
“In practice this will have no impact on investors from a tax or UCITS investment and borrowing powers perspective. However, the Receiving Fund will be under a separate legal structure and as such there may be impacts on investors holding the fund in an ISA wrapper that need to be specifically addressed.”
Approval
In order for the merger to go ahead, however, it must be approved by unitholders in a meeting, which will take place at 10am on 21 August.
If the proposals are not approved, both funds will continue to operate while Jupiter considers “alternative options” for Jupiter Flexible Macro, which could include its termination.
A sea of changes for Jupiter
The proposed merger comes following a raft of announcements from the firm recently, as part of its bid to ‘streamline’ its product range. These include the impending closure of Jupiter Merlin Real Return Portfolio in September this year, the winding up of Jupiter Merlin Real Return from the end of the month, and the closure of Merian Asian Equity Income at the end of last year.
Jupiter Europe (ex UK) Smaller Companies Fund was terminated on 12 May, Jupiter Asia Pacific Income was wound up just five days later on the 17 May, and Merian European Equity (ex UK) was closed at the start of the year.
Jupiter Asian was merged into Jupiter Asian Income in February, Jupiter North American Income was merged with Jupiter Merian North American Equity in March, and the amalgamation of Jupiter Investment Grade Bond and Jupiter Corporate Bond is set to take place this Friday (21 July).
Several funds have experienced changes to their benchmarks, sectors, names or investment approaches since the start of the year – some of which come following the closure of similar mandates. These include: Jupiter Pacific Equity, Jupiter Global Sovereign Opportunities, Jupiter Pan European Smaller Companies and Jupiter European Smaller Companies.
