Jupiter CEO Maarten Slendebroek (pictured) is leaving “with a smile on my face … not looking back in anger” as he prepares to hand off the business to incoming boss Andrew Formica after a difficult year that saw assets tumble from a record high.
The fund group ended 2018 with assets under management at £42.7bn, some £7.5bn lower than at the start of the year. It was hit by net outflows of £4.6bn, while profits for the year fell to £179.2m.
Closing the chapter on his five years as Jupiter’s CEO, Slendebroek told Portfolio Adviser he was happy with what he had accomplished at the firm and said his successor, former Janus Henderson co-CEO Formica, was an “excellent choice”.
“I’ve loved working here at Jupiter, and I do leave with a smile on my face,” he said. “I’m not looking back in anger in any kind of way. My successor is someone I like and, for me, I will remain a shareholder in this company for years to come.”
Full of surprises
But Jupiter’s final results surpassed expectations with adjusted earnings per share of 31.7p coming in ahead of the consensus view of 31.6p. But it was the two surprises baked into the announcement – a cost cutting programme for 2019 and a smaller dividend cut – that sent markets into a tizzy.
Shares had shot up over 7% to 362p at the time of writing though were still 30% lower from one year ago.
Numis Securities upgraded its recommendation from ‘hold’ to ‘add,’ proclaiming that “a reasonable amount of shorter-term uncertainty has been removed by today’s update” but stopped short of recommending Jupiter as a ‘buy’ due to the change in management and “unpredictable” short-term flows outlook. In addition to Jupiter’s cost cutting and “broadly unchanged” total dividend payout ratio, analysts from Numis noted the revenue margin “held up better than we feared”.
Dynamic Bond ‘in balance’
Jupiter was one of the fund groups that struggled the most in 2018 during what was a challenging period for the asset management industry. Problems cropped up early on in the first quarter as the FTSE 250 firm unveiled £1.3bn in net outflows which continued steadily into the tail end of the year.
While Slendebroek admits performance of Jupiter’s funds during the year was “up and down” he said the group’s strategies performed better than the markets during the volatile fourth quarter. After fees 77% of Jupiter’s mutual fund assets have outperformed the median over three years.
The Dynamic Bond fund, the primary culprit of net outflows for the year, was among those funds that posted stronger Q4 performance, he said.
The €6.1bn Sicav vehicle managed by Ariel Bezalel, which had been one of the group’s biggest sources of net inflows, attracting £8.7bn in the five years to 2017, saw a sharp reversal in investor sentiment. It was responsible for £4.4bn or 96% of the firm’s total £4.6bn net outflows for the year.
“The violence around that fund has been quite enormous,” said Slendebroek. But he said “year-to-date the fixed income franchise is more or less in balance. That’s not totally surprising given the fixed income markets have rallied in the fourth quarter and our performance has picked up.”
Analysts at Numis Securities agreed the outlook for Jupiter’s problem fund is improving in the short-term. According to the broker’s calculations the fund saw net inflows in February though it said Jupiter was still net flow negative due to other funds.
M&A
Although today is Slendebroek’s final day as CEO of the group he will remain on call as a senior adviser to help Formica with his transition.
“It is really in my interest to make sure this is a smooth transition to the new chief executive,” he said. “Just like Edward Bonham Carter was very helpful in the beginning when I took over, I also want to extend that to Andrew.”
Formica’s appointment to the helm of the FTSE 250 firm reignited rumours the asset manager was heading for a potential takeover.
Slendebroek told Portfolio Adviser that M&A was not more likely to happen under Formica but conceded “I can’t predict the future”.
“I’m not saying M&A won’t happen. It could have happened under my stewardship as well. Andrew has looked and studied our strategy and signed up to that strategy and that will remain in place until he decides to change it.”
