Jupiter’s unlisted assets ban hailed as ‘positive move’ for investors

On Tuesday (7 January), Jupiter’s CEO Matthew Beesley sent a letter to investors announcing a new policy that banned unlisted assets across its open-ended funds.

The move came following a change in “investor sentiment” towards unquoted companies in open-ended vehicles, the chief executive said.

It also coincided with the sale of its last private holding, Starling Bank, which is held in several of the firm’s funds, to various existing shareholders such as investment trust Chrysalis.

Beesley said: “Despite the managers’ strong ongoing conviction in Starling, which is a profitable and fast-growing UK bank, we regularly review and prudently manage our unlisted exposures, especially in open-ended funds.”

“From now on, we will not make any new investments into this asset class through any of our open-ended funds.”

Jupiter cuts investment in unlisted assets for open-ended funds

At the open today, Jupiter’s share price jumped by more than 2%. Meanwhile, Chrysalis is down 2.5% so far and has been downgraded to ‘Sell’ by broker Stifel following its £20m additional purchase of Starling Bank shares. 

Sheridan Admans, head of fund selection at TILLIT, said that Jupiter’s decision to sell its stake in Starling and to no longer buy unlisted assets for its open-ended funds is a positive move for investors, “although it has been far too long coming”.

“Investors have been left in the dark worrying if their money is at risk of going the same way as it did for investors in Woodford,” she said. 

Ben Yearsley, investment consultant  at Fairview Investing, agreed, welcoming Beesley’s decision and noting that the new policy is the right move for the company and its investors. 

“Firstly unquoted equity has no place in open- ended funds – the two simply are not compatible. Jupiter inherited the problem when they bought Merian and should have done something about this much earlier,” he added.

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Laith Khalaf, head of investment analysis at AJ Bell, said that open-ended funds and illiquid assets like private companies “do not make for good bedfellows”, unless you have long notice periods for redemptions, or very high cash balances, and those are both bitter pills for investors to swallow. 

“The fundamental problem of course is that money might flow out of an open-ended fund quicker than illiquid assets can be sold, resulting in them making up an ever-increasing percentage of the portfolio,” he said. “That in itself can then lead to more fund redemptions, and a vicious cycle can develop.”

Although illiquidity concerns may be reflected in a large discount being slapped on, Khalaf pointed to investment trusts as an alternative. 

“Investors are able to retain access to their money and the investment manager does not have to keep looking over their shoulder at the daily fund flows,” he said.