An energetic option from Jupiter
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Jupiter Asset Management - Global Energy Fund
Type: Unit trust
Aim: Growth by investing globally in companies involved in the exploration, production, transmission and distribution of energy
Minimum investment: Lump sum £500, monthly £50
Investment split: 100% globally in companies involved in the exploration, production, transmission and distribution of energy
Isa link: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 020 7314 7699
The Jupiter global energy fund is a unit trust that invests globally in companies in the energy sector. It will invest mainly in equity, equity-related and fixed income securities, with a typical portfolio of 30 to 60 holdings.
Putting the fund in to its market context, Flowers McEwan director David Flowers says: “The Jupiter global energy fund is, in terms of its investment objectives, a fund for our time. The fund is hunting for growth in the energy sector, investing mainly in growth stocks.
“The rationale is that energy demands are inexorably rising as the developing world becomes dependant upon a ready supply of heat, light and power.”
Flowers adds that the developed world continues to chew up vast amounts of natural resources in maintaining its chosen lifestyle.
“In exploiting this, the fund managers are almost certainly correct. So the question comes down to whether the manager, Derek Pound, knows his onions - or rather his acreage and exploration blocks.”
Acreage refers to the measurement of land in acres and exploration blocks are areas of land that are drilled in the search for oil and gas.
Flowers feels that Pound has a good track record managing money in the energy sector within Jupiter over the last 12 years. “Nevertheless the new fund has got to be acknowledged as a high risk one and we can expect quite extreme volatility as it is exposed to all sorts of geo-political and economic vagaries,” says Flowers. He notes that Pound is not constrained by geography, style or company size, but is likely to be growth and equity biased.
“Interestingly, despite Jupiter’s wonderful pedigree in environmental and green investing, this fund will make no attempt to follow that investment view. There is no green screening or positive investing. This seems a shame and somewhat conflicts with the ethos at Jupiter,” says Flowers.
In Flowers’ view, the fund will be an attractive proposition for someone who is willing to take a longer-term view and comfortable with a high degree of volatility, with no environmental concerns.
However, he takes issue with the fund’s charges of initial 5.25 per cent and annual 1.5 per cent. “The fund comes from an old-school charging structure with a painful reduction in yield of 2.7 per cent at best. Assuming 6 to 7 per cent annual returns and with the current rate of inflation, that doesn’t leave much return at all to compensate for the risk being taken.
“It is going to have to go some to justify the charges and the likely volatility,” he says.
Discussing funds that could provide competition, Flowers says: “There are two established funds – the Investec global energy fund which has a good track record and is not too expensive; and the Capita Junior oils trust with a good track record too. But it is a smaller fund at £50m and is more costly.”
Flowers adds that Artemis and BlackRock are among a small number of managers that have launched similar funds recently.
BROKER RATINGS
Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average
Overall 8/10
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