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‘Jupiter’s outflows make it vulnerable to a takeover’

‘Jupiter’s outflows make it vulnerable to a takeover’
 

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.”