Jupiter European Opportunities Trust’s (JEO) board plans to follow its current manager, Alexander Darwall, to his new firm, scrap the performance fee and change its name to European Opportunities Trust. But it will not change the trust's investment objective or policy.
Mr Darwall announced in July that he would be leaving Jupiter Asset Management to set up his own company, Devon Equity Management. In response, the trust’s board instructed its professional advisers to conduct due diligence and consult with its shareholders on the possibility of appointing Devon as its investment manager in place of Jupiter. The board has now decided that it will appoint Devon as investment manager and FundRock Management Company as alternative investment fund manager in November if its due diligence is satisfactorily completed. This is likely to be in the second half of November after the trust’s annual general meeting on 14 November.
If this goes ahead, from 1 June 2020 Devon and FundRock will be paid aggregate management fees of 0.90 per cent a year of net assets on assets up to £1bn and 0.80 per cent a year on net assets over this amount. There will be no performance fee.
At present, the trust, which has net assets of about £964m, pays Jupiter a base management fee of 0.75 per cent of its total assets of about £1.04bn plus a performance fee of 15 per cent of the outperformance of its benchmark, FTSE World Europe ex UK Total Return index. The performance fee has resulted in very high charges. For example, in its financial year to 31 May 2019, the trust’s ongoing charge was 0.9 per cent, but with the performance fee added on this came to 1.71 per cent. And in its financial year to 31 May 2018, the performance fee took its ongoing charge of 0.9 per cent up to 2.5 per cent.
Between the date of Devon and FundRock’s appointment in November and 31 May 2020, Jupiter will continue to receive the base management fee, but the performance fee will be terminated. And during this period the trust will pay FundRock 0.03 per cent of net assets and 0.1 per cent of net assets to Devon.
The trust’s board says the removal of the performance fee entitlement will over time result in a material cost saving to shareholders.
“This is a good outcome for shareholders,” added analysts at Numis Securities. “Under Mr Darwall’s management since November 2000, the trust has delivered net asset value total returns of 13 per cent a year versus just 4.9 per cent for MSCI Europe ex UK index through a stockpicking approach and investing in a focused portfolio of growth companies. These arrangements appear to lead to a smooth transition, including an early termination with Jupiter. Significantly, the board has renegotiated the fees with Devon Equity Management, removing the performance fee. This has the potential to significantly reduce costs for investors, as the trust’s strong returns have led to an average performance fee of 1.1 per cent of net assets over the past five years. In return, there will be a relatively modest increase in the base fees by around 0.15 per cent.”
