The Income, Balanced and Growth portfolios, which total £5.8bn assets under management, have all been reduced from silver to bronze ratings. The Conservative portfolio already had a bronze rating and faces no change under the latest downgrades, while the Worldwide portfolio is considered more of an equity product than multi-asset.
Morningstar senior manager research analyst Rajesh Yadav said in a research note: “While we appreciate the success achieved so far by an experienced team headed by John Chatfeild-Roberts (pictured), our conviction in the team’s process has diminished somewhat.
“This is down to how the peer groups have evolved and our assessment on a relative basis, as well some structural limitations we see regarding the team’s ability to implement its views effectively across portfolios. Higher fees are also a further drag across the Merlin range.”
Active managers hit fees
Yadav told Portfolio Adviser other multi-managers, at asset managers such as BMO Gam and Premier, have been more willing to bring down costs by investing in passive products. These low-cost market trackers are also used to dial market exposure up or down during times of market stress, he said.
Of the Merlin trio, the £1.7bn Growth portfolio, which sits in the Investment Association Flexible Investment sector has the highest ongoing charges figure (OCF) at 1.72%. The £2.4bn Income portfolio, which sits in the Mixed Investment 20%-60% Shares sector and is the largest fund of the three, has an OCF of 1.48%. The £1.7bn Balanced portfolio, in the Mixed Investment 40%-85% Shares sector, has an OCF of 1.6%.
Another route other managers have taken more than Merlin is using in-house funds, where they don’t double charge investors, he said.
Jupiter Merlin has also stuck to plain vanilla funds where its rivals have sought diversification in alternatives like infrastructure and listed private equity funds, he said.
Jupiter Merlin rivals
Willis Owen head of personal investing Adrian Lowcock said he likes the Jupiter Merlin range, but also highlighted the BMO MM Navigator Cautious and SLI MyFolio range as alternatives in the multi-manager space that he rates highly.
However, Lowcock noted the BMO Gam team, headed by Gary Potter and Robert Burdett, is more expensive than the average in the peer group as the managers are prepared to pay more for what they deem to be the highest quality investments.
In contrast, Bambos Hambi’s range at Aberdeen Standard Investments makes use of tracker funds.
‘Sizeable legacy book of assets’
Tilney managing director Jason Hollands said Jupiter was one of the first fund groups to build a significant unfettered multi-manager franchise and so have a sizeable legacy book of assets within the Merlin range.
Hollands said: “With so many players and products jostling in this space, this a tougher environment within which to differentiate your offering for a big player with a mature client book, there will inevitably be an element of run-off as clients naturally draw down on their assets or advisers decide to switch to alternative providers.”
The range has recently been a source of outflows for the FTSE 250 asset manager with Numis calculating that trend has continued into 2019.
The broker argued Merlin was responsible for £110m of outflows in January and February, according to an analyst note that coincided with the firm’s 2018 annual results.