Below are commonly asked questions Jupiter receives about investment companies. If your question isn't linked, please check the other help pages or call Customer Services on 020 7314 7600.
What is an investment company?
What are the main differences between investment companies and unit trusts?
How many investment companies are there and in what do they invest?
Are there different types of investment company?
Why do investment companies retain some of their income?
How to invest?
What are the charges?
How am I kept informed of the progress of my investment?
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What is an investment company?
Investment companies are quoted stock market companies that have similar objectives and characteristics to unit trusts. They are pooled investment vehicles - also known as "collective investments" - designed to spread risk within a portfolio of shares selected and managed by professional fund managers. The first investment company was formed in 1868.
What are the main differences between investment companies and unit trusts?
1. Share capital - fixed or variable
Investment companies have a fixed share capital. Their shares are issued for public subscription and thereafter, are bought and sold via the stock market, with a constant number of shares in issue. Unit trusts, on the other hand, issue and redeem units subject to demand and supply, so the number of units in issue varies daily. The manager of an investment company does not have to take account of inflows/outflows of money and can, therefore, take a longer-term view of investments. This is an advantage for the investment company investor.
2. Ability to invest borrowed money
As public limited companies, investment companies can borrow money to enhance returns to shareholders over the longer term. This is called "gearing". Shareholders' returns are enhanced when the manager invests this borrowed money in the chosen portfolio and beats the cost of borrowing. Each company will have its own policy towards gearing and those that adopt long-term gearing as part of an investment strategy can have a more volatile share price than those that do not.
3. Management charges
Management charges for investment companies tend to be lower than for unit trusts - normally, 0.5% - 1% in contrast to 1% - 1.5% per annum.
4. Ownership and voting rights
Investment companies are owned by their shareholders who appoint a Board of Directors, independent of the management group, to look after their interests. Shareholders have the right to attend and vote at their company's annual general meeting.
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How many investment companies are there and in what do they invest?
There are more than 320 investment companies listed in the UK (source: AIC) which invest in all major and most minor markets of the world.
Many companies invest globally or specialise in one geographical area, like the UK, Europe, America or Japan. Others invest in sectors, such as smaller companies, or themes like 'technology'. Some aim for capital growth as a primary objective, some for income, and others for a combination of the two.
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Are there different types of investment company?
The two main types of investment company are conventional and split-capital.
1. Conventional companies, such as Jupiter European Opportunities, only issue one class of ordinary share.
2. Split-capital investment companies (splits), such as Jupiter Dividend & Growth, issue two or more different types of share class (not all of which will be found together in the same company). These share classes have specific rights and entitlements to participate in the income and/or capital returns of the portfolio. At least one component share of a split is likely to have a limited life with a fixed wind-up date.
Share classes:
- Zero dividend shares - a pre-determined capital return
- Income shares - emphasis on a high & growing income
- Ordinary income shares - high income plus capital growth prospects
- Capital shares - capital growth only
Individual share classes are geared by virtue of predetermined priority of repayment. In the event of winding up the pre-determined capital return of the zero dividend preference shares take priority over other share classes.
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Why do investment companies retain some of their income?
Investment companies can retain up to 15% of the income they receive each year (paid to them in the form of dividends) and transfer this to revenue reserves. These reserves can be built up in good years - when the profits' of the companies they are investing in tend to be rising - and used to bolster dividends to shareholders in other years. This is known as "smoothing dividends" and can be attractive to investors looking for a consistent level of income.
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How to invest?
Jupiter offers an in-house facility for investors to buy and sell through a Savings Scheme and an ISA. Lump sum and regular savings schemes are both available.
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What are the charges?
The Jupiter Savings Scheme and ISA charge a dealing commission of 1% (capped at £100 per company, per share class, per transaction), plus stamp duty of 0.5%, to buy and a dealing commission of 1% to sell. An ISA Transfer levies an administration charge of 0.5% per annum. These Jupiter schemes are non-certificated and the investment is held in a nominee name on the client's behalf. For further information please refer to the Key Features document (incorporating the Simplified Prospectus).
Investments can also be made through stockbrokers, who will quote their own separate charges for buying and selling shares.
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How am I kept informed of the progress of my investment?
Equity investment should only be considered for the longer-term as stock market volatility can lead to variations in the value of your investment. However, Jupiter will send a statement every six months showing all transactions and a valuation of your holdings. You will also receive annual Reports and Accounts and Interim Statements for all the investment companies in which you invest. In addition, the Financial Times publishes prices and estimated net asset values every day.
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