Jupiter Asset Management has hit back at criticism over a performance fee charged by the £742m Jupiter Absolute Return fund managed by Philip Gibbs, after it was dropped from Hargreaves Lansdown’s fund buy-list.
The fund was taken off the Wealth 150 buy-list of recommended funds last week, amid criticism of its performance fee, which Jupiter says it has not charged since launch in 2009.
The absolute return fund’s performance fee – a 15 per cent fee on returns in excess of the three-month sterling Libor rate – was a reason for its removal from the buy-list.
The rate was historically higher than inflation, but has fallen since the onset of the financial crisis.
Hargreaves Lansdown analyst Richard Troue says it was comfortable with the benchmark at launch but has since changed its mind.
He explains: “In the aftermath of the financial crisis interest rates have remained extraordinarily low, and are significantly below the rate of inflation.
“This means funds can still charge a performance fee even if they have failed to keep pace with inflation, provided they have beaten Libor.”
The analyst called on Jupiter and others to reappraise performance fee structures.
A Jupiter spokesperson says: “The fund is designed to generate an absolute return and we cannot simply change the fee as any changes would require us to seek unitholder approval. Given that we would have to increase the annual fee as a result, it is by no means certain that investors would agree.”
The spokesperson says the charges are among “the most competitive in the sector” adding it was not appropriate to ‘chop and change’ the structure for what it believes is a “unique, temporary situation in markets”.
Troue also highlighted performance. He says: “Sheltering investors’ capital from the worst market falls has been no mean feat, however we feel Philip Gibbs should have been more proactive in using the fund’s full flexibility to capture gains during rising markets.”
He says the fund’s removal from the Wealth 150 was a prudent move and would continue to monitor it for improvement and a change in the charging structure.