Wealth manager St. James’s Place has been relegated from the FTSE 100 to the FTSE 250 index after regulatory pressure and fee changes prompted investors to jettison the stock. Online grocer Ocado and industrial services company RS Group have also left the UK’s large-cap index.
Meanwhile, Darktrace, LondonMetric Property and Vistry Group have been promoted to the FTSE 100 as part of FTSE Russell’s annual review. Darktrace, which specialises in cyber security using artificial intelligence, is being acquired by US private equity group Thoma Bravo.
The FTSE 250 Index has six additions and the same number of deletions. As well as the companies moving between the mid- and large-cap indices, Alpha Group International, Renew and XPS Pensions Group are joining the FTSE 250, while Ferrexpo, Mobico Group and Octopus Renewable Infrastructure Trust are leaving.
The changes will be implemented at the close of business on 21 June 2024 and will take effect from the start of trading on 24 June 2024. They will impact the portfolios of investors who own passive and exchange-traded funds tracking the UK’s large and mid-cap indexes.
St James’s Place’s (SJP) share price peaked in December 2021 and January 2022 but has plummeted since then, as the chart below shows.
SJP share price total returns over 5yrs
Source: FE Analytics
SJP scrapped its controversial exit fees last year in response to the Financial Conduct Authority’s Consumer Duty legislation. Fee changes had a detrimental impact on profit margins, according to David Cumming, manager of the BNY Mellon UK Income fund, who recently sold the position in St James’s Place he had inherited when he took over the fund two years ago. Not selling it sooner was a “mistake”, he admitted. “The management were more optimistic than things turned out and we probably stuck with it too long.”
SJP halved its dividend this year and held back £426m in provisions to refund clients who paid its ongoing advice fees but did not receive an “acceptable standard” of service, according to its full-year results.
Chief executive officer Mark FitzPatrick said: “A combination of the provision we have established and an expected decrease in the level of profit growth in the next few years as we transition to our new charging structure, reduces our ability to invest for long-term growth in our business over the next few years.”
Meanwhile, short sellers have been anticipating Ocado’s fall from grace, with the online broker becoming the UK’s second most-shorted stock last month. BlackRock, Millennium International Management and D1 Capital Partners, among others, are betting against the online grocer.
At the other end of the spectrum, LondonMetric Property and housebuilder Vistry joining the FTSE 100 augurs well for the property sector. LondonMetric Property merged with LXI REIT in January to create one of the largest publicly-traded property companies in the UK.
Vistry recently issued guidance that its annual and six-monthly profits would be ahead of last year. Dan Coatsworth, investment analyst at AJ Bell, said: “Investors like what they’re hearing and Vistry’s shares have steadily ticked up since last October with a 38% total return year-to-date (as of 29 May 2024). That makes Vistry the best performing housebuilder in the mid-cap index and the 21st best performing FTSE 350 stock so far in 2024.”