Merian managers in line for extra £10m

Merian managers in line for extra £10m

The six fund managers who are shareholders in Merian Global Investors are in line for a £10m cash windfall as a result of the company's sale to Jupiter Asset Management.

UK equities head Richard Buxton, global equities head Ian Heslop, UK small cap manager Dan Nickols, UK Mid Cap fund manager Richard Watts, and global equity managers Mike Servant and Amadeo Alernton all partnered with private equity house TA Associates to buy the Old Mutual Global Investors business for £550m in June 2018.

As part of that deal, if the managers were still employed at the business three years later and had hit certain revenue targets, they would collectively be paid £10m by TA Associates. 

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The sale of the business to Jupiter does not remove this clause, FTAdviser understands. 

That is in addition to the six receiving shares in Jupiter in exchange for their shares in Merian, and a potential £20m in cash they may earn from Jupiter if they hit certain revenue targets.

Jupiter’s acquisition of Merian values the company at £370m, all of which will be paid to Merian shareholders through shares in Jupiter. Merian's chief executive Mark Gregory will leave the company when the deal is completed. 

The five fund managers will own 1 per cent of Jupiter between them while TA Associates will own 16 per cent. 

The Boston-based private equity firm had previously backed Jupiter's management buyout from Commerzbank in 2007.  

Merian Global Investors had been suffering very significant outflows thoughout 2019 as the performance of the strategies run by Mr Heslop, Mr Alernton and Mr Servant dipped, while the UK equity funds run by Mr Buxton, Mr Watts and Mr Nickols struggled to attract inflows amid market negativity around the outcome of the Brexit process.

Jupiter has also suffered outflows in recent years, with its assets under management falling from £48.3bn in 2018 to £45bn towards the end of last year.

One of the recent reasons for outflows has been the departure of star fund manager Alexander Darwall to set up his own investment business, and the subsequent announcement by the board of the trust he runs, the Jupiter European Opportunities Trust, that it would follow Mr Darwall to his new company.

James Sullivan, multi-asset fund manager at Miton Optimal, has been keen on the investment case for UK fund houses for some time but he sold his stake in Jupiter in 2019, and this deal has not changed his view. 

He said: "Both businesses have a big UK retail following, whilst both have suffered material redemptions in the past 12 months and carry key man risk. From the outside looking in, it’s more a case of doubling up on the negatives. We hope for shareholders sake, the cost savings make it worthwhile.

"Despite applauding the appointment of [Jupiter chief executive Andrew Formica], we sold our holding in Jupiter early last year. We were of the view that the business had stagnated, and despite what was a very healthy dividend yield, the potential for capital growth was muted. Now, the coupon is likely to be lower due to the integration costs nullifying the special dividend, and the short term prospects for growth remain opaque.”