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Jupiter deemed ‘safest’ fund group after Brexit

Jupiter deemed ‘safest’ fund group after Brexit

Jupiter Asset Management is best placed to cope following the UK’s vote to leave the European Union, according to RBC Capital Markets.

Analyst Peter Lenardos said Jupiter was his preferred asset manager because it is the “safest” company in its peer group.

Last week, the RBC Capital Markets analyst said Henderson was the “most vulnerable” to outflows, after Brexit triggered a looming sense of pessimism around commercial property. The following day, trading was suspended on the Henderson UK Property PAIF and the Henderson UK Property PAIF Feeder fund to “safeguard the interests of all investors”.

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Several other fund houses have also suspended their open-ended commercial property funds in recent weeks.

Mr Lenardos said, compared to other asset managers in the UK, Jupiter is better positioned from an operational viewpoint in the wake of the referendum.

He estimated the firm will see a 7 per cent dividend yield this year – the highest in the sector – and will have a 20 per cent “all-in” implied return.

Looking at the industry as a whole, Mr Lenardos expects net flows to “remain subdued” for the rest of this year and through 2017 and 2018, adding RBC has reduced its forecasts for assets under management to reflect an uncertain market outlook.

However, Jupiter’s push towards diversification across its product offering and distribution means it will continue to forecast net inflows going forward.

Mr Lenardos said: “It may be the case that Jupiter has to establish European subsidiaries to continue its current arrangement with regard to EU distribution, which would increase its cost of doing business.”

While Jupiter is diversifying geographically, including expanding its European presence, he highlighted that 80 per cent of its clients are still UK-based.

“With its European footprint still in the build-out phase, in our opinion Jupiter would be impacted to a lesser degree than peers with large established European distribution networks,” he said.

But Mr Lenardos also said one of the company’s downsides was that its assets under management remain primarily invested in equities for UK retail clients, meaning Jupiter remains exposed to a greater downturn in the UK economy.

“Retail flows are also traditionally less stable and sticky than institutional flows,” he said.

Jupiter reported more than £700m of net inflows in the first quarter of 2016, split between mutual funds and segregated mandates, on top of £1.9bn of net inflows in 2015.

Responding to the comments, a Jupiter spokeswoman said its UK business is conducted via a range of unit trusts and, outside the UK, through a Luxembourg-domiciled Sicav.

The spokeswoman also said Jupiter is confident it will continue to conduct its business without disruption to clients once Britain has left the EU.

katherine.denham@ft.com