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Jupiter profits down 15% ahead of Merian deal

Jupiter profits down 15% ahead of Merian deal

Profits at fund house Jupiter were 15 per cent lower in the year to the end of December 2019, ahead of the company's announcement that it intends to take over rival firm Merian Global Investors. 

The figures were reported in a stock market announcement today, the same day the company announced its £360m all-share acquisition of Merian. 

The company confirmed that it made a statutory profit of £151m in the year to the end of December 2019, down 15 per cent from the previous year. 

The drop in profit came despite assets under management (AUM) at the firm staying stable, with the total increasing from £42.7bn to £42.8bn.

That came despite the firm’s European equity strategy having seen outflows of over £3bn as a result of the departure of fund manager Alex Darwall, who left to set up a rival firm and took the £1bn Jupiter European Opportunities trust with him.

The outflows from the European equity strategy were somewhat offset by inflows of £2bn into the company’s bond funds. 

In its stock market announcement the company said it expects to spend between £40m and £45m on post-takeover integration costs, most of which will happen in the first year, but stated it expects to see considerable cost savings in the future.

Jupiter's share price is up 2.8 per cent today.

There are a number of areas where Merian and Jupiter run funds that compete with each other, particularly UK large cap equities, where Merian’s Richard Buxton and Jupiter’s Ben Whitmore both run funds that use the value style of investing to select stocks.

Adrian Lowcock, head of personal investing at the Willis Owen platform, said: “Ultimately, Jupiter is unlikely to do anything to disrupt the successful Merian teams, particularly the renowned UK equities offering.

"Whilst the acquisition strengthens Jupiter’s offering, it also means that Merian fund managers have access to the resources of a larger group, so this looks to be a good pairing.”

The statement from Jupiter highlighted how the combined entity will be more diversified in terms of revenue and with less reliance on a small number of managers. 

The company said its priorities will be to grow its institutional and investment trust businesses in the years ahead. 

Andrew Fornica, chief executive of Jupiter, previously told FTAdviser that he wants to win investment trust business from “American firms that don’t really understand the structure”.  

Ben Yearsley, director at consultancy firm Fairview, said: “The last year has seen increased corporate activity in the UK fund management space; Liontrust buying Neptune, Miton and Premier merging, and now Jupiter buying Merian.

"Having become an independent company fairly recently it is a bit of a surprise seeing Merian subsumed so quickly.

"Both businesses are UK focused so there is clear overlap within sales and marketing teams, which is where the bulk of costs will be surely be stripped."

He added: "Jupiter was once the darling of the private investor but has struggled with no 'go to' fund in recent years; the share price was well over £6 in 2017 and closed below £4 last Friday.