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Jupiter adds to the numbers



Type: Unit trust

Aim: Income and growth by investing in corporate bonds, fixed-interest securities and UK stocks and shares

Minimum investment: Lump sum £500, monthly £100. Isa lump sum £1,000, monthly £50

Investment split: Corporate bonds and fixed-interest securities 65%, UK stocks and shares 35%

Yield: 5%

Isa link: Yes

Pep transfers: Yes

Charges: Initial 4.5%, annual 1.25 %

Special offer: Initial charge reduced to 3.5% for direct lump sum investments and Isa investments and Pep transfers

Offer period: Until April 30, 2002 for direct investments, and June 1, 2002 for Isa investments and Pep transfers

Commission: Initial 3 %, renewal on Pep transfers and Isa investments 0.5%

Tel: 0500 050098

The Panel: Steve Laird, Senior partner, Laird Financial Planning,
John Wright, Proprietor, Investment Management Services,
Dawn Slater, Principal, Dawn Slater Associates.

Suitability to market 7.7

Investment strategy 7.0

Past performance 8.0

Company&#39s reputation 8.7

Charges 6.4

Commission 6.0

Product literature 6.7

Jupiter&#39s distribution fund is a unit trust that aims to produce income of 5 per cent a year with the potential for capital growth. It invests 65 per cent in corporate bonds and other fixed-interest securities, with the remaining 35 per cent going into high-yielding UK stocks and shares.

Considering how the fund fits into the market Slater says: “There are not that many funds in the cautious managed sector, so adding one more does not cause an overload.”Wright says: “It is a very good company with a familiar product.” Laird says: “The target yield would be the highest currently available in the cautious managed sector, which will be attractive. The launch discount will help too.”

Identifying the type of client the fund could suit Wright says: “Fairly low-risk clients with an open redemption date.” Laird says: “Someone looking for a high level of income but who also wants to preserve the buying power of his or her capital. Alternatively, a cautious investors looking to accumulate capital in the medium-to-long term.” Slater goes for clients who want either income and stable capital or low risk clients who want to accumulate the income as additional growth.

Discussing the fund&#39s marketing potential Laird says: “It is unusual to have a new product that will provide a genuine marketing opportunity. This is one example, as clients looking at distribution bonds will find this much more tax-efficient in the long run.” Wright says: “It offers nothing particularly new, but it does have the Jupiter name going for it.” Slater says: “Jupiter&#39s name is well-known so the fund will attract a lot of support. If Jupiter can sustain the 5 per cent gross yield, this will put it towards the higher-yield end in this sector.”

Highlighting the main useful features of the fund Wright says: “It is tax-efficient and available as an Isa or Pep transfer. It is low risk and provides income or growth. It has no specific term and should meet its goal of 5 per cent income, which can be reinvested for growth, and the chance of some capital appreciation.”

Slater says:” Being available as an Isa and Pep transfer is very useful as many older clients may want to start consolidating older contracts into lower-risk funds for income or growth. Being able to obtain gross income will be important to income seekers.” Laird says: “The name of Jupiter is a strong point, alongside the availability of monthly income. It&#39s appealing to both taxpayers and non-taxpayers as the full tax credit of 20 per cent can be claimed as appropriate.”

Examining the fund&#39s investment strategy Slater says: “It invests 65 per cent in fixed interest and 35 per cent in equities, which will meet the fund&#39s objectives. As with all funds, its stockpicking will show the men from the boys. Corporate bonds are still at risk from default, but Jupiter&#39s managers have a vast experience in the area. So one expects them to put together a well-designed portfolio.”

Laird says: “It doesn&#39t set my heart on fire, but both Tony Nutt, who manages the equities and John Hamilton, who manages fixed interest are first class managers. They both have long track records which will reassure clients in what are still difficult times.” Wright regards it as a little bit spicier than most distribution funds.

Discussing the drawbacks of the fund Laird says: “In order to reclaim the full credit, the fund will have to remain highly exposed to fixed-interest investments, irrespective of market conditions. This could prove trying for the managers.” Wright says: “Most people are lazy and will not reclaim the tax credits. They may try blaming their adviser in the future.” Slater thinks there are no specific drawbacks for the fund&#39s target market.

Looking at the company&#39s reputation, Wright feels it is first class and Laird agrees. He says: “First class. It is good to see the income fund back in the first quartile. Where are all the critics now? I hope they are embarrassed.” Slater says: “Jupiter is a well-known name and even though its problems with John Duffield have been widely published, it is maintaining its reputation and market share.”

Analysing Jupiter&#39s investment performance track record Slater says: “Overall, it has been very good and the newer managers are proving themselves too. Some of its offshore funds are well below par and they will have to sell of their fortunes reverse once the markets pick up.” Laird says: “Again, it is first class. Few companies have such a large proportion of their funds in first quartile positions.” Wright thinks the company has a good solid past performance record.

Identifying the likely competition for the fund Wright says: “Other low-risk products providing growth interest, for example, ground rent funds and student accommodation funds. Slater says: “There are other established funds with good track records such as Investec&#39s cautious managed. And a range of other funds use Jupiter&#39s own income portfolio. Additionally, with-profit bonds or distribution bonds will challenge this type of fund too.”

Laird says: “Investec&#39s cautious managed fund and Prudential&#39s distribution fund are the obvious targets in this sector. But, they both produce less income than the Jupiter fund, so a yield of 5 per cent would compare with pure corporate bond funds. The top-performing distribution bonds from Clerical Medical and Scottish Amicable would also be a target.”

Wright thinks the commission is reasonable and Slater thinks it is in line with other unit trusts. Laird says: “My only real grumble is how can it justify not having renewal commission on unit trust investments?”

Wright thinks the charges are normal and Slater agrees that they are in line with other funds. Laird says: “The annual charge is competitive at 1.25 per cent. However, by the time other expenses and the spread are taken into account, the resulting reduction in yield is high at 2.4 per cent.”

Looking at the product literature, Slater finds it clear and easy to follow. Wright thinks the product literature is bland and factual. Laird says: “Externally, it is okay. But, by combining Isa and non-Isa investments into one brochure, the small print and tables are rather overwhelming. Put the application forms near the front &#45 smart move.”


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