Jupiter Fund Management (JUP) has been hit with the double whammy of negative market movements and clients pulling their money out of the company’s products.
The result is a drop in assets under management (AUM) of £3.3bn down to £46.9bn in its first quarter to 31 March. This is a culmination of £1.3bn of client redemptions and negative market moves accounting for £2.08bn.
With small and specialised asset managers posting increases in assets under management recently while operating in the same market conditions, why has larger player Jupiter been so badly impacted?
The majority of outflows came from retail investors taking money out of the company’s fixed income offering including its Dynamic Bond Fund. The firm said this amounted to £1.1bn. The irony is that fixed income was responsible for the majority of inflows in 2017 and shows what a difference a year can make.
Jupiter’s share price dropped by 5.2% to 441.9p on the latest news although since the start of the year it has dropped by almost 30%.
REVERSAL OF FORTUNES
Chief executive Maarten Slendebroek says ‘it has been a challenging start to 2018’.
Jupiter’s revenue comes from recurring management fees which are based on outstanding AUM. A decline in assets due to poor market performance will further impact the ability of fund managers to generate fees.
If Jupiter is viewed as not performing well, this may impact its reputation and also its ability to attract clients’ funds. If star fund managers feel they are not part of a winning team there is yet another risk of them leaving for greener pastures.
Due to the heightened levels of transparency in the asset management industry, it is easy for investors to see how funds have performed against their relative benchmark. A sustained period of underperformance could see further flight of assets from the company.
As Keith Baird, analyst at Cantor Fitzgerald, says ‘as an asset manager Jupiter is sensitive to market levels, investor sentiment and net fund flows, staff retention and currencies’.
Using forecasts from investment bank UBS, Jupiter is trading on 13.3-times 2019’s 33.29p of earnings. It has a 6.8% prospective dividend yield.
