Jupiter chief banks on growth to revive fund manager’s fortunes

As soon as he took over as chief executive of Jupiter in October, Matthew Beesley launched a plan to cut costs following a torrid period for the City fund manager.

Expenses and the “bloated” range of funds were chopped, 80 employees let go and the executive committee shrunk. Just a few months on and Beesley now has his sights set on growth: expanding in overseas markets and offering funds in specialist areas such as the environment.

He has his work cut out. Jupiter has not had an easy ride in recent years. Its share price has dropped more than 75 per cent from its peak in 2017, costs are still high and it has reported four years of net outflows.

The business has also attracted significant attention this month over its India fund’s participation in Adani Enterprise’s failed share sale, although Jupiter received its full £3.4mn back — and the asset manager has stressed the small size of this investment as part of one portfolio.

Jupiter has not suffered alone: volatile markets and stiff competition from lower-cost index-tracking products have troubled many active fund managers. But some of the issues are particular to Jupiter, from controversy over high fees at listed investment trust Chrysalis to the amount of money flowing out. “It’s the recurring nature of their outflows compared with other fund groups,” said Stuart Duncan, analyst at Peel Hunt.

Analysts said Jupiter’s outflows had been exacerbated by the poor performance of UK equities, while its European Corporate bond fund was hit particularly hard in 2018. The business also lost assets when one of its top managers, Alexander Darwall, departed a few years ago.

Jupiter was founded in 1985 by John Duffield, a renowned City investor. A decade later, it was sold to Commerzbank and then bought out in 2007 by management led by Edward Bonham Carter, co-chief executive at the time. In 2010, it floated at 165p a share. Today, it trades at around 140p.

Under Maarten Slendebroek, chief executive from 2014, Jupiter attempted to expand across Europe but never built a significant presence. Slendebroek’s successor, Andrew Formica, tried to grow Jupiter in the UK by acquiring boutique asset manager Merian in 2020 for £370mn.

After Formica announced his retirement last year, Beesley, who only joined Jupiter a year ago, was quickly promoted. His first task was the restructuring; now he wants to pursue growth in Europe.

“We haven’t really scaled up in those markets in the way that we should. There is a fixed cost element to this that we’re wearing today,” he told the Financial Times in an interview. “The opportunity is to increase revenues without substantially having to add to the cost in some of the [markets].”

He wants the company to widen some of its product ranges. “We’ve got a real opportunity, without much investment, to really build a fixed income platform that I think will rival our peers. We’re nowhere near the size and scale that we could be.”

Plans for thematic funds are also under consideration, giving customers access to products that aim to benefit from environmental and demographic trends. For example, Beesley wants to provide a 130/30 product, which largely invests in stocks but also bets against some in the sector.

The chief executive has imposed a safeguard on open-ended funds by stating that they cannot buy unlisted stocks. Jupiter’s UK Mid Cap fund earlier this month offloaded its 6.5 per cent in private company Starling Bank, as the valuations of tech start-ups have come under pressure.

Rae Maile, analyst at Panmure Gordon, is sceptical about the plans for expansion. “Given the market conditions and the recent history, a strategy based on rapid growth is unlikely to convince anyone,” he said.

“There needs to be a very level-headed explanation of which funds, which strategies and which geographies can be made to work, but also a recognition that costs are just too high for what should be a simple business.”

Beesley acknowledged Jupiter had become an acquisition target. The group, which has a market value of about £764mn and a price-to-earnings ratio of 6.8, has consulted advisers including Robey Warshaw on the subject.

Jupiter’s second-largest shareholder is TA Associates with a 15 per cent stake, which it acquired in the course of the Merian deal. Most of the restrictions on TA’s ability to sell its Jupiter shares expired last summer.

“At some point, someone might find [Jupiter] attractive ,” said Beesley. “But I’ve got no insight and it’s not something I’m planning for. I’m focused on running the business.”

Beesley’s first foray in asset management was at Mercury in 1997. He later worked at JP Morgan Asset Management, Henderson Global Investors and fund house GAM before moving to Artemis as chief investment officer.

His ascent at Jupiter has been rapid but he looks forward to the challenge. Panmure’s Maile said that “at least Beesley has the benefit of timing: it was so bad that it should not be that difficult to show some progress.”

The year ahead is also expected to be more promising for active fund managers. Some analysts predict Jupiter’s fourth-quarter results could finally show net inflows, fuelled by interest from institutional investors.

“I suspect we’re going to enter a period that will be quite fruitful for active managers,” Beesley said. “Volatility and a high dispersion of returns within sectors creates a fertile environment for active managers.”