Fixed Income  

Jupiter seeks derivative powers for Bezalel’s bond fund

Jupiter is seeking investors’ permission to expand the remit of Ariel Bezalel’s £1.6bn Strategic Bond fund in an effort to better manage potential liquidity issues.

In its correspondence with clients, Jupiter said Mr Bezalel wanted to increase his usage of derivatives in order to put cash to use more quickly and protect against market falls by taking up short positions - bets that the price of assets will fall.

Jupiter’s letter said: “The derivatives market is deep and liquid. If required, it is possible to take £50m-£100m market exposures very quickly. In contrast, liquidity in the cash bond market has contracted in recent years due to the tougher regulatory environment imposed on banks.

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“It might be more effective to use derivatives to gain market exposure rather than buying individual bond issues in the first instance.

“The liquidity in the derivative market provides the potential to reduce exposure to credit risk quickly, which can be especially important if liquidity is evaporating quickly in cash bond markets.”

The changes - which have already been approved by the FCA - will take effect from December 19 if agreed by investors.

Since its launch in June 2008 the Jupiter Strategic Bond fund has ranked second in the IMA Strategic Bond sector with a gain of 75.8 per cent according to FE Analytics.