Jupiter has been hit by £4bn of net outflows in 2020 after its inherited strategies from Merian including the Global Equity Absolute Return fund continued leaking cash.
The FTSE 250 fund group ended the year with a record £58.7bn in assets under management, up 37% from £42.8bn in 2019. Most of this was from its acquisition of Merian in July which added £16.6bn to the total.
But its purchase of Merian resulted in Jupiter delivering another year of net outflows of £4bn. This was down only slightly from redemptions the year before of £4.5bn.
Gross inflows remained “robust” at £16.5bn and Jupiter saw £3.3bn from positive market movements.
Outflows from Merian funds had been ‘expected’
While Jupiter’s own products returned to modest inflows in the final six months of the year, Merian’s funds continued suffering redemptions. In total its funds accounted for £2.2bn or over half of Jupiter’s net redemptions for the year, despite the business only being absorbed by Jupiter in July.
During a morning teleconference chief executive Andrew Formica (pictured) said outflows from Merian products had been “expected” due to manager changes, with a handful of Merian portfolio managers not coming across to Jupiter, and in cases where investment performance had fallen short.
Merian’s Systematic Equity range, including its $1.5bn Global Equity Absolute Return fund, was singled out as one of the main culprits of client money coming out over the period.
Over three years the fund, run by Ian Heslop and Amadeo Alentorn, is sitting on losses of 15.5% compared with the IA Targeted Absolute Return average of 4.5%.
See also: Richard Buxton’s fund and 20 others to see Merian name dropped in Jupiter rebrand
Though Formica acknowledged Gear had been bogged down by two years of poor performance, he added the fund had begun to see a pickup in performance recently and the strategy was now in net inflows.
Merian acquisition already ‘exceeded our expectations’
Despite the disruptive impact from Covid-19 Formica described 2020 as one of “significant progress” for the business in terms of delivering against its strategic objectives.
Around 70% of its mutual fund AUM was outperforming the median over three years to 31 December 2020.
Formica added that the acquisition of Merian had already financially “exceeded our expectations” and had provided a “significant contribution to group profits” which were up 10% at £179m in 2020.
Jupiter now expects the deal to contribute a fully synergised operating margin of 58%, which Formica said is at “the very top of our original forecasts”.
“This means at the year end, the EV Ebitda valuation multiple for our purchase of Merian was 4.4x, which is better than the multiple based on the 2019 assets before taking account of expected outflows, and probably the lowest of any deal I’ve been associated with in the sector,” Formica said.
“What does that mean in simple terms – we bought an excellent business at a very attractive price.”
Earlier this year it was revealed Jupiter was planning on making up to 90 staff redundant over the next six months which Formica said was necessary for Jupiter to become a more “agile business” and “succeed in a rapidly changing environment”.
See also: Jupiter to axe up to 90 jobs following turbulent year of outflows and senior exits
