* 2016 pretax profit up 4 pct to 171.4 mln pounds
* Jupiter to pay special dividend of 12.5 pence
* Shares fall as much as 5 pct, biggest mid-cap faller (Adds detail, CEO quote, analyst quote, share price)
By Simon Jessop
LONDON, Feb 24 (Reuters) - Jupiter Fund Management’s 2016 pretax profit came in slightly below expectations as higher operating costs linked to the firm’s overhaul and expansion offset rising fee income, sending its shares lower.
Active asset managers globally are facing tougher regulations designed to help investors get better value for money at the same time as struggling to outperform passively managed funds and justify higher fees.
Known for using London’s black cabs to market its equity funds to UK retail investors, Jupiter has focused in recent years on expanding its product range, opening overseas offices and wooing institutional investors to diversify its operations.
The process, which included upgrading its infrastructure, contributed to an 11.2 percent rise in operating costs to 182 million pounds ($228 million) in the year to the end of December, Jupiter said.
“We’ve done a number of pieces of our international expansion in 2016, we opened offices in Spain and Italy and we added staff in Germany and Switzerland, all of which adds to the cost base,” Chief Financial Officer Charlotte Jones said.
“And inevitably there’s a little bit of a lag between incurring those costs ... and when the revenue comes through.”
Pretax profit for the year came in at 171.4 million pounds ($215.2 million), just lagging a 173.2 million pounds Thomson Reuters SmartEstimate and weighing on its shares, which were down 3.7 percent at 0943 GMT.
Jupiter said it would pay a full-year dividend of 10.2 pence per share taking the total ordinary dividend for the year to 14.7 pence a share, up 1 percent on 2015. It also plans to pay a special dividend of 12.5 pence per share.
Unlike some rivals, the firm said it had taken in net new money for the year of 1 billion pounds, which helped boost its fee income 10 percent, and added that 2017 had started strongly.
Numis analysts said in a note that the firm had net inflows of 643 million pounds in the first six weeks of the year.
Jupiter Chief Executive Maarten Slendebroek said the impact of rising operational costs would continue into 2017 and the firm had also decided to pay for external investment research from 2018, instead of billing it to the fund, to meet new rules.
That move, which is being driven by European Union regulations to unbundle trading and execution costs due to go live at the start of 2018, would cost Jupiter 5 million pounds a year, it said. ($1 = 0.7965 pounds) (Editing by David Clarke)