Jupiter "distressed"

joerugby

There's an article in this weekend's FT which describes Jupiter Fund Management as "distressed", and "grappling with huge outflows and rising costs". Apparently their share price halved in 2018 and they suffered £4.5bn of customer withdrawals. Their shares are increasingly being shorted.

I have about £80,000 invested in their Income and Asian Income funds via HL.

Is my money safe in these circumstances? Should I be worried?

masonic

There should be no issue as your money is invested in ring-fenced assets and would be protected if Jupiter did fail (which is extremely unlikely, despite the scaremongering). You also have FSCS protection of up to £50,000, rising to £85,000 in April. This would meet the cost of Administration if it came to that. More likely another fund house would step in and take over.

I should point out that if the whole fund was a giant fraud and there was actually nothing left of the fund you invested in, you would stand to lose everything over £50,000 until April, but that is a fairly ridiculous scenario.

If you want complete peace of mind, sell half and reinvest in an equivalent fund from a different fund house.

Alexland

I do agree it's hard to see Jupiter as a relevant fund manager these days.

Still there is no reason to suspect fraud and the remaining customer business is valuable enough that the fund manager (or in worst case their administrators) would have no problem finding a new home for the assets. In these situations there is often a merger with another fund manager.

Alex

joerugby

Thanks guys, much appreciated

talexuser

Jupiter have 5 funds in the HL 50 list. I find it hard to believe any one fund house has 5 different funds that beat all others in their sectors!

bowlhead99

talexuser wrote: »

Jupiter have 5 funds in the HL 50 list. I find it hard to believe any one fund house has 5 different funds that beat all others in their sectors!

HL don't actually claim that the constituents of their "HL 50 list" will beat all others in their respective sectors. Their marketing list is just a shortlist to get you to buy the funds which they would like you to buy, if you don't have strong feelings or research to point you to what funds you would like to buy for yourself.

Jonbvn

talexuser wrote: »

Jupiter have 5 funds in the HL 50 list. I find it hard to believe any one fund house has 5 different funds that beat all others in their sectors!

All that tell's us is which funds HL gets the most kick-backs from.:money:

quirkydeptless

Jonbvn wrote: »

All that tell's us is which funds HL gets the most kick-backs from.:money:

There are some funds I've seen on HL with 0.7% loyalty bonus kick backs, more than anything in the Wealth 50 and even the platform fee, and so in effect HL are paying you to hold some of the funds :shocked:

coyrls

quirkydeptless wrote: »

There are some funds I've seen on HL with 0.7% loyalty bonus kick backs, more than anything in the Wealth 50 and even the platform fee, and so in effect HL are paying you to hold some of the funds :shocked:

Please give an example where HL effectively pay you to hold a fund.

talexuser

bowlhead99 wrote: »

HL don't actually claim that the constituents of their "HL 50 list" will beat all others in their respective sectors.

I do realise that, and was being rather tongue in cheek... but there's little point in a list unless the long term performance at least is consistently top performing and better than equivalent trackers and I have thought some questionable funds are there in the past that never seem to get recommended by other intermediaries.

bowlhead99

quirkydeptless wrote: »

There are some funds I've seen on HL with 0.7% loyalty bonus kick backs, more than anything in the Wealth 50 and even the platform fee, and so in effect HL are paying you to hold some of the funds :shocked:

That would only be for 'inclusive' classes of the funds where the management fee charged to the fund is very high, structured that way to allow the fund manager to give kickbacks to a fund platform so that the platforms don't have to charge the customers separately for the platform work.

Since 2014, platforms have to charge explicit platform fees to the customer, so they sell 'unbundled' clean-priced funds instead with a lower management fee and give you an explicit fund platform charge instead. If you are still stuck on an old 'dirty' priced fund, they will effectively give you a huge 'rebate' or 'loyalty payment', but that's just to get you back roughly to the position you would have been in if you had bought the clean priced fund from them instead (or converted your old dirty units to new cheap clean units)

https://www.hl.co.uk/__data/assets/pdf_file/0008/7902638/FAQs-about-converting-units.pdf

So as an example of a dirty priced fund: if the fund charges 1.5% for an inclusive class it might give 0.75% back to HL to pass on to you as a rebate/loyalty bonus, leaving you with a net cost of 0.75% for the fund running costs, and then HL bill you separately 0.45% for platform services. But the fact that the rebate exceeds the price of the platform services doesn't mean "HL are effectively paying you to hold the funds". If instead you just bought the clean class in the first place, it would be 0.75% running cost instead of 1.5% (no rebate needed) and HL would still charge you 0.45% for platform services. In both situations, you're paying 0.45% to HL for the platform services and the fund manager is taking a net 0.75%.

What we are talking about with the HL marketing list is that they arrange with the fund manager that HL will put enough business the manager's way that the manager will be willing to let the HL customers have a net 0.65% or 0.55% fund charge (either by 'exclusive' low-fee units or some sort of kickback) instead of the 'standard' 0.75% net cost for the fund. Then the HL customers can more readily afford the high 0.45% platform fees, because they are no worse off than paying full 0.75% fund cost together with a more competitive platform charge at a rival platform of 0.35% or 0.25%.

But make no mistake about it, they're not 'paying you to hold the fund'. Any massive high incentive/rebate of 0.7% or more is just because you're on the expensive dirty class when you could have saved money by being on the cheap clean-priced one.

The bottom line in terms of loyalty discount is that the 'saving' from dirty to clean prices is nothing magical or platform-dependent. It's just how the FCA say the market should work if people are still stuck on the old very expensive class which allowed platform commission - they should get that commission back themselves in cash.

Beyond the dirty-to-clean pricing issues, if you limit yourself to a restricted list of funds at HL you can get your overall fees down to the aggregate levels that you could find from some rival platforms. It's in HL's interest to have you use those particular funds, which allows HL to deliver on the promise to the fund manager that they'd give them a lot of business if discounts were offered, and it avoids some customers thinking HL is too expensive overall, because of the 'exclusive' discounts they promote. The issue is, the funds might not be particularly good for you, you are just being pushed towards them for marketing reasons.

Examples of fund managers being excluded from the marketing list include Fundsmith, as Mr Smith is always outspoken at his investor meetings that his product is good enough that his team shouldn't need to give up their income for all the management work as a discount, just so that HL can keep taking their massive platform fee while being portrayed as hero figures to the investors for fighting for those discounts. A fund manager giving away a discount doesn't result in a great split of revenue for the fund company doing the investment work vs the platform doing marketing and admin.

Meanwhile, a company such as Lindsell Train does give discounts to HL customers, and have since their early days, recognising they wouldn't have been able to build such a large investor base competing against bigger more established brands without the support that HL gave them on the promotion/distribution side.