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A convertible solution from Jupiter

Jupiter Asset Management – Global Convertibles Fund

Type: Sicav

Aim: Growth by investing globally in a long-only portfolio of convertible bonds and other assets

Minimum investment: Lump sum £1,000, $1,000, euro 1,000

Investment split: 100% in convertible bonds and other assets

Place of registration: Luxemburg

Charges: Initial 5%, annual 1.7%

Commission: Initial up to 5%, renewal 0.5%

Tel: 020 7412 0703

This Luxemburg-based Sicav from Jupiter invests mainly in convertible bonds on a global basis. Convertible bonds

Considering how the fund could be useful to IFAs and investors, Chadney Bulgin partner Bruce Bulgin says: “This is an unusual fund which is of most appeal to European investors and as such, it is structured as a Luxembourg Sicav. The new fund is a rarity in that it invests in a global range of long-only convertibles. There are no benchmark constraints and the average credit quality is investment grade,but there is no credit limitation on individual issues.”

Bulgin notes that the fund is in the FO convertibles sector, in which there are three onshore funds offered by M&G, F&C and Jupiter. “The rest are offshore and there are 32 funds in total,” he says.

“Jupiter is promoting the fund as offering cash plus returns. A fund of this type can be more flexible than a conventional bond fund in that there is the prospect of equity participation. In reality the fund has a huge amount of flexibility as to the type of security it can hold. Also, subject to the limits set out in the investment restrictions it can hedge against directional risk using a range of techniques.”

The fund managers, Miles Geldard and Lee Manzi have a great deal of experience in Bulgin’s view and are widely respected. “They formerly occupied senior positions at JP Morgan and latterly RWC Partners, immediately prior to joining Jupiter,” he says.

Bulgin adds that the fund should be available on wrap platforms and fund supermarkets. “It is likely to be included as an asset in offshore bonds and possibly Sipps. It is essentially a growth holding and is not designed to distribute income. As well as sterling, there are Euro and US Dollar share classes,” he says.

Turning to the potential drawbacks, Bulgin says:”The fund is unlikely to be on the shopping list of many mainstream advisers in that it is not an equity fund and it is not a fixed interest fund. Convertibles have become less popular over the years and many advisers will have opted for fixed interest funds, where there is a great deal of choice.

“Potential risks relate to deterioration in credit profile and possible default. Owing to the nature of convertibles in some cases falls in equities can lead to corresponding falls in the values of some convertibles.”

He adds that liquidity is an issue, along with the possibility of wide bid-offer spreads. “New convertible issuance can fluctuate considerably so that there can be periods of illiquidity or oversupply,” he says. He also thinks the annual management charge for the retail share class is on the high side.

“Competition is likely to come from other funds in the sector rather than from other types of funds. This of course assumes that the adviser has considered convertibles as an asset class within a broader spread of asset classes. Convertibles do not replace cash or fixed interest and in many ways can be considered an attractive asset class,” says Bulgin.

Summing up Bulgin says: “The way in which the Jupiter fund is structured means that it is offering the best of bonds and the best of equities.

With the expertise and track record of the fund managers coupled with the wide remit of the fund it is to be hoped that investors will benefit from attractive returns in the form of long term capital growth.”

BROKER RATINGS

Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average

Overall 8/10

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