Portfolio Adviser • Portfolio Adviser Magazine February 2022 • Jupiter duo paid £60m fee in Chrysalis shares

• Nick Williamson and Richard Watts handed a combined £60.5m in newly issued ordinary shares

• Chrysalis has announced it will assume direct responsibility for the AIFM role in 2022

Jupiter fund managers Nick Williamson and Richard Watts are being given a combined £60.5m in newly issued Chrysalis shares.

Chrysalis said: “On 29 November, the company announced it had entered into an agreement with the AIFM (alternative investment fund manager) Jupiter Unit Trust Managers to settle 51% (£60.5m) of the performance fee due in respect of the year to 30 September 2021 in ordinary shares.”

It added: “The remaining 46% (£51.5m) of the performance fee amount will be settled in cash.”

An analyst note from Peel Hunt stated its early modelling had put the performance fee at £60m, but this nearly doubled to more than £112.1m due to the 57% growth in the trust’s net asset value (NAV) over the year to 30 September 2021.

As Chrysalis’ manager, Jupiter is currently entitled to 20% of all profits by which the adjusted NAV exceeds the higher of the performance hurdle, set at 8%, and the high water mark at the end of the relevant period.

A Jupiter spokesperson told Portfolio Adviser: “The performance fee, as in any year, is reflective of the significant value that has been created for shareholders by the investment management team over the course of the year.

“The calculation for the fee is consistent year on year, and fully set out in the company’s prospectus.

“Jupiter, alongside the board of the trust, is committed to ensuring continued alignment with the company’s shareholders, and keeps all fee arrangements under constant review.”

When asked if this type of fee arrangement is something the company will pursue moving forward, the spokesperson said Jupiter has very few funds with performance fees and, in this instance, the structure was set by the independent board of the trust.

Chrysalis chairman Andrew Haining credited the growth to strong performances and fund raising by key holdings Klarna, Wise and Starling Bank.

Referring to the performance fee arrangement, he said “the board was pleased that the portfolio management team requested that the deferred element of its performance fee be taken in new Chrysalis shares […], a stance the board believes was extremely constructive”.

But added: “To ensure continued alignment with stakeholders, the board will review fee arrangements, including the performance fee payment structure, in 2022 after consultation with relevant parties.”

In a further change, Chrysalis will assume direct responsibility for the AIFM role, including the valuation and risk management aspects, replacing Jupiter Unit Trust Managers.

“The board has determined it has now reached a stage in its evolution at which it would be more efficient to become a self-managed investment company in 2022,” Haining said.

Jupiter Investment Management will, however, continue to provide portfolio management services. The change is expected to take place by 30 June.

REGULATORY ROUND-UP

• The Financial Conduct Authority has taken aim at the promotion of high-risk investments. It is launching a consultation to address concerns with the ease and speed with which people can make such investment by proposing “a significant strengthening of its rules”. Under the proposals, the FCA would ensure firms that approve and communicate financial marketing have relevant expertise and understanding of the investments being o ered, improve risk warnings on advertisements and ban incentives to invest.

• The UK financial watchdog also said businesses could face “assertive action” if they use company or insolvency law to manage their liabilities at the expense of customers. It follows an increase in proposals, such as scheme of arrangements. Some firms have requested ‘letters of non-objection’ from the FCA in relation to their proposal to manage their liabilities. The FCA said it would be unlikely to ever issue such a letter. It will instead focus on assessing each proposal on a case-by-case basis to ensure firms are meeting their regulatory obligations, including treating their customers fairly.

• In an attempt to fight fire with fire, the FCA spent over £41,000 on a Christmas anti-fraud jingle. It said: “Since 2018 we have invested to warn people about loan fee fraud, which affects the most vulnerable, particularly around Christmas. This year we sought an innovative approach, using music to help people to avoid being scammed. We are pleased with the reaction to it.”