Jupiter has become the first UK-listed asset manager to say it will begin covering the cost of external research payments itself, as pressure mounts on Europe’s fund industry to prepare for sweeping reforms of the financial industry that come into force in 2018.
Jupiter said it would begin paying for research from banks and brokerages as the FTSE 250-listed company announced its results for 2016, which showed a 7 per cent hike to its dividend.
The decision to cover the cost of research comes after Neil Woodford, one of Britain’s best-known fund managers, and Prudential-owned fund house M&G, also said they would stop passing the cost of analyst reports and broker notes onto clients last year.
Jupiter’s shares slumped to the bottom of the FTSE index at the start of Friday’s, losing 5 per cent.
Fund houses have been forced to overhaul their approach to research payments before a vast set of rules, known in the industry as Mifid II, comes into force in Europe in 2018. This will bring to a close the fund industry’s murky practice of lumping together the fees they pay investment banks for research and trading.
Under the new rules, fund companies must make it clear to investors how much they are being charged for research, prompting some asset managers to decide it will be simpler to cover the payments themselves.
Jupiter said the move will add another £5m of costs from 2018 onwards and will not affect management fees.
The FTSE 250 fund house also said it would stop taking “box profits” – an additional source of revenue some companies book when their clients buy and sell funds – from next year onwards.
Jupiter booked £12.8m from box profits in 2016, but this source of income came under fire from the UK regulator last year, which indicated it might force investment managers to redirect that money to clients.
Jupiter’s dividend boost came on the back of an increase in profits before tax of 4 per cent to £171.4m, slightly below what analysts anticipated. The fund company is the only large UK-listed asset manager to have posted net inflows last year.
Maarten Slendebroek, chief executive of Jupiter, said:
In a year which many have described as challenging, I am pleased that Jupiter continued to deliver growth for shareholders and value for clients.
Investor sentiment was affected by a number of macro events, but against this backdrop we saw inflows alongside healthy growth in profits. In 2017 we will build on this through our ongoing investment in the people, systems and infrastructure which will help underpin our future growth.
Henderson, Aberdeen Asset Management and Ashmore, the FTSE 250 fund companies, have all reported billions of pounds of net outflows in 2016. Schroders, the UK’s largest listed fund company, will release its full year results next week.
Mr Slendebroek added:
Our net inflows of £1bn were a good result in a year when many active managers suffered net outflows. Our international distribution, largely built up in the last four years, accounted for 100 per cent of net inflows, compensating for a tough year in the UK and demonstrating the success of our diversification approach.