Jupiter’s Formica says expect smaller, targeted M&A

Addresses Darwall-driven outflows

Newly minted CEO Andrew Formica (pictured) says to expect M&A while he is at the helm of Jupiter but nothing of the large-scale variety as he aims to get the business back to a position of net inflows.

Formica, who was one of the co-CEOs at combined fund group Janus Henderson, is slated for his “buy and build” approach, having steered Henderson through several acquisitions, purchasing and integrating John Duffield-owned New Star Asset Management, then Gartmore, and finally merging with Janus in May 2017.

His appointment to the top job at Jupiter prompted speculation that the FTSE 250 fund group was in for a similar fate.

“Larger scale M&A transformative type deals really aren’t something we’re thinking about. We don’t feel the business needs it and we don’t think it’ll necessarily help the business,”  he told Portfolio Adviser after the publication of its interim results for the period ending 30 June.

“So you should think there will be activity but it’s at a much smaller end and very targeted, like a team with assets or performance track record or all that coming through.”

Darwall hasn’t resigned yet

Formica also addressed European equities star Alexander Darwall’s status at the firm.

Jupiter caught analysts and commentators off guard when it announced in April that Darwall had decided to take a step back from running the Jupiter European fund and Jupiter Growth Sicav, which hold a combined £8bn in assets.

The news stunned investors too who promptly rushed to yank money out of the fund. Darwall’s open-ended funds accounted for the majority of Jupiter’s net outflows over the first six months of the year. Total mutual fund outflows for the period were £1.1bn, £600m of which was from money pouring out of its European equities products.

In another surprise twist Darwall informed Formica at the beginning of July that he was thinking of leaving the asset manager altogether after 23 years to set up his own shop, a move which Formica said the team at Jupiter is supporting.

But Formica stressed Darwall is still with the firm and hasn’t resigned yet.

“He’s [Darwall] currently talking to the FCA about what an application in a firm might look like. He hasn’t resigned, he hasn’t fully formulated his plan. But having gone down that path, there’s a clear likelihood that he will set up his own firm subject to those sorts of approvals.”

Dynamic Bond in the clear

While Jupiter was unable to stop haemorrhaging cash over the first half of the year, there was a spot of good news as Ariel Bezalel’s Dynamic Bond fund, the main culprit of redemptions in 2018, returned to net inflows.

The €7.5bn Sicav vehicle was hammered by £4.4bn of net outflows last year but Formica said both the fund and Jupiter’s fixed income unit had ended June with money coming in.

Formica said the return of investor confidence in the fund reflects stronger performance and is vindication that Bezalel’s contrarian take on fixed income markets was “spot on”.

“Last year he [Ariel] took a very non-consensus view around where interest rates might go, and he was much more bearish on the outlook for growth,” he said. “He felt that the US in particular would flick up rates and that would obviously boost treasuries. That was a view not shared by a lot of our clients.

“Roll forward nine months, 12 months, and actually, he was spot on. And the performance of his funds have reflected that, and clients have accepted the fact that he had pretty good insights and you’ve seen that reversal of clients leaving to actually clients coming on board.”

Dynamic Bond is currently third quartile over one, three and five years and has returned 7.7% in sterling terms so far this year.

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