Jupiter fund managers paying for equity stake

By Kira Nickerson

Jupiter fund managers will have to put up their own money each year, in some cases six figure sums, to be part of the group's four-year rolling equity share scheme.

Half of their remuneration through the scheme will be dependent on the growth of Jupiter's profits, while the other 50% will depend on the outperformance of a fund manager's portfolio against a given benchmark.

The twist in the scheme is that the employees have to pay for their equity stake, although the shares do not have voting rights.

Edward Bonham Carter, joint chief executive of Jupiter, said: "For some these are meaningful sums, enough to make people concentrate."

All 44 of the group's fund managers have signed the arrangement and while Bonham Carter admits this does not prevent any manager from leaving, he said: "It will be painful to walk away because you are leaving money on the table."

The sums are proportionate to the position and contribution each employee makes to the company and as such will vary.

While the scheme has only just been announced, it is effective from the start of January 2001.

The basis of the company profitability element of the scheme runs on a four-year basis. After four years, if the annual profits of the company are above those in year one, the scheme will pay out. What happens to profitability in years two and three is irrelevant.

Each year a new tranche of shares will be granted, maturing in a further four years' time.

Crucial to the scheme is the base profits starting point for 2001. This has not been disclosed by Jupiter, although Investment Week understands it is £52.5m and that Jupiter's profits have fallen from £172m for the 1999/2000 tax year to £42m for 2000/01.

The maximum Jupiter employees collectively will be able to hold in the company is 25% at any one time. Once the shares can be sold back to Commerzbank, employees have the option of spreading the encashment over two years.

Bonham Carter is looking to promote Jupiter fund distribution in Europe and said that in the UK, retail would continue to be significant, although the group was not going to be driven by market share.

The group intends to maintain its institutional business, with £5.5bn assets, and specialist pensions mandates. It also aims to build up its presence in ethical and green investment markets.

Jupiter launches its first fund of hedge funds in September and Bonham Carter believes such products will add substantially to the group.

He said: "In three to five year's time we expect people will have 5%-10% of their assets invested in funds such as these. I don't mind what we raise in September because I think it will take some time for these funds to grow and for people to understand them properly."

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