Investments  

Darwall takes £1bn fund from Jupiter

Darwall takes £1bn fund from Jupiter

Jupiter fund manager Alexander Darwall is taking the £1bn Jupiter European investment trust to his new firm in November and has agreed to drop the performance fee on the fund.

The board of the trust announced on Wednesday (October 2) that it will prematurely terminate the contract in place with Jupiter and switch it to Mr Darwall's new firm Devon Investment Management.

This came after it announced on July 1 that it was carrying out due diligence on Devon Investment Management with a view to transferring the contract. 

Fund Rock will act as the authorised corporate director of the trust.

Under the terms of the agreement, Jupiter will continue to receive the management fee until May 2020, but will not receive any performance fee earned by the manager.

Following that the trust will have a management fee of 0.9 per cent on the first £1bn of assets and 0.8 per cent on any amount above that.

Under the new agreement Devon Investment Management will also not receive a performance fee.

In a stock exchange announcement released after the market closed on Wednesday (September 3) the board of the trust stated: “The Board is pleased to announce that, conditional on the appointment of FundRock and Devon becoming effective, it has reached an agreement with Jupiter regarding the termination of the existing management arrangements.

 

"Under the terms of the existing management arrangements, Jupiter is entitled to a quarterly base management fee of 0.1875 per cent (equivalent to 0.75 per cent per annum) of the total assets of the Company (including drawn down borrowings under the Company's loan facilities) plus an annual performance fee equal to 15 per cent of the outperformance of the benchmark, the FTSE World Europe ex UK Total Return Index (subject to a high water mark and an annual cap).

"Under the early termination arrangements agreed with Jupiter, the base management fee will continue to accrue and be payable to Jupiter after termination but only up until 31 May 2020.

"It has also been agreed that Jupiter will waive any entitlement to a performance fee from the termination date.”

This fee structure is on trend with the wider market, with 41 trusts having introduced a tiered fee structure over the past five years, and 28 trusts having abolished the performance fee, according to data from the Association of Investment Companies (AIC). 

Unlike the management agreement with Jupiter the fee will not be levied on any amount the fund manager may borrow to make new investments. 

Th idea is that by linking the fee to net assets the manager is not incentivised to increase the level of borrowing in the trust to drive up his income.

He is also less incentivised to issue new shares in the trust to boost its size and earn a higher fee. This is because he is not paid on the size of the trust, but on the value of the assets in the trust. 

Jupiter Asset Management declined to comment on the loss of the mandate.