Jupiter’s outflows have made it vulnerable to a takeover, a commentator has said.
Last week (April 26), the group posted net outflows of £1.6bn in the first quarter this year, blaming the current “risk off” environment.
The fund house has not seen net inflows since 2017 when it saw net investment of £5.5bn.
Last year its funds suffered net outflows of £3.8bn despite gross inflows of £16.5bn.
Ben Yearsley, consultant at Fairview Investing, said he thinks the group will be taken over this year as a result.
“They’ve still got big outflows, their funds are expensive and they haven’t got any go-to funds anymore,” he said.
“They’re ridiculously vulnerable [to a takeover].”
Earlier this year, the fund house’s chief executive Andrew Formica said he does not see any M&A on the horizon for the firm.
“It is not our intention to look at M&A as part of delivering on our strategy, either through us doing a transaction or else being bought,” he said.
Formica was responding to questions around the group’s hiring of boutique corporate advisory firm Robey Warshaw, which specialises in M&A corporate advice.
The CEO said this was "part of the normal course of business.”
Outflows
The outflows have been predominantly focussed in the group’s European and UK equity funds, but its strategic bond fund has also seen outflows.
The Jupiter European Fund has seen the highest level of outflows in the past year, losing £607mn, according to data from Morningstar.
Every one of its UK funds has seen outflows, with the Jupiter UK Mid Cap Fund seeing net redemptions of £423mn, and its Income Trust (which invests in UK equity income) has lost £170mn.
Jupiter funds with highest outflows in the year to March 31
Fund | Category | Flows year to March 31 |
Jupiter European Fund | Europe ex-UK Equity | -£607mn |
Jupiter UK Mid Cap Fund | UK Mid-Cap Equity | -£423mn |
Jupiter UK Special Situations Fund | UK Large-Cap Equity | -£201mn |
Jupiter Income Trust | UK Equity Income | -£170mn |
Jupiter UK Alpha Fund | UK Large-Cap Equity | -£134mn |
Jupiter Investment Grade Bond Fund | GBP Corporate Bond | -£133mn |
Jupiter UK Growth Fund | UK Flex-Cap Equity | -£116mn |
Jupiter Strategic Bond Fund | Global Flexible Bond - GBP Hedged | -£113mn |
Jupiter UK Smaller Companies Fund | UK Small-Cap Equity | -£93mn |
Jupiter UK Smaller Companies Equity Fund | UK Small-Cap Equity | -£46mn |
Source: Morningstar
UK equities have not been a popular asset class for UK investors in recent years, with £5.3bn being withdrawn from the products in 2021, according to the Investment Association.
The three funds that retain the Merian brand, a fund house Jupiter acquired in 2020, all saw outflows in the year to March.
The worst performing was the Jupiter Merian North American Fund, which saw £481mn in outflows.
Jupiter/Merian branded fund flows for year to March 31
Fund | Category | Flows year to March 31 |
Jupiter Merian North American Equity | US Large-Cap Blend Equity | -£481mn |
Jupiter Merian Global Equity Fund | Global Flex-Cap Equity | -£139mn |
Jupiter Merian Asia Pacific Fund | Asia-Pacific ex-Japan Equity | -£28mn |
Source: Morningstar
Darius McDermott, managing director at Chelsea Financial Services, said this is to be expected after an acquisition.
“When you merge two assets together it takes a bit of bedding in," he said.
"[The outflows are] disappointing for them, nobody likes losing money, but when you get a big franchise investors giveth and eventually they take away."
Yearsley said the group has struggled to show the value of its ‘no house style’ investing.
“Each fund manager has their own style, their own process, their own market philosophy, you’d think they’d have some funds that perform in all market conditions,” he said.
“But they don’t seem to, apart from the bond fund, and that’s it - but nobody wants to buy bonds at the moment.”
Rationalisation on the cards
McDermott highlighted another possibility for the fund house, which is cutting down its fund range.
“Sometimes groups of that size have too many funds, and some form of rationalisation will always be on their mind,” he said.
Although the recent results have not changed his views on Jupiter's funds, he warned about future underperformance.
“No group can see continual outflows forever.”
Jupiter declined to comment.
sally.hickey@ft.com
