Jupiter surges on diversification strategy

This strong performance indicates that management efforts to diversify the business by asset mix, client type and geography seem to be paying off. During the past seven years, Jupiter has been reducing its exposure to equities, varying the geography of its invested assets and growing its exposure to non-UK clients. At the end of 2011, 80 per cent of the fund manager's assets were invested in equities. Yet by the end of 2016 this had fallen to a little over half, with the remainder split between fixed income and multi-asset investments. Investment returns, along with currency effects, were £1.7bn during the first three months of the year. Management reported particularly strong inflows into its fixed income, absolute return, multi-asset and global emerging market strategies.

Let the good times flow

The fund manager also opened offices in Spain and Italy at the end of last year and reported positive contributions during the first three months of this year. The group now has offices in 19 countries. Management also reported particularly strong inflows in Asia and continental Europe. This builds on last year when the majority of net inflows came from its growing network of overseas offices. It is also broadening its product range in countries where it has an established presence. Admittedly, UK business still makes up a significant proportion of its overall client base - 78 per cent by the end of December. However, this compares with 90 per cent at the same time in 2011.

Jupiter still has a high exposure to the retail market, with 87 per cent of its assets in mutual funds at the end of March. This means not only that flows can be more volatile, but management fees could come under pressure if fund distribution platforms continue to consolidate and starts to exert more pricing power. The fund manager is also less exposed to performance fees, which means it is less able to reap the gains of strong periods of active performance. Jupiter's cash profit margin remained strong at 49 per cent at the end of December 2016. However, this was down from 51 per cent in the previous year, following the introduction of an aggregate operating fee for its SICAV funds.

Jupiter continues to maintain a strong balance sheet. At the end of last year, it had net cash of £259m. This backs up its generous dividend policy of paying out a base dividend of half its earnings, plus returning any further cash it does not feel it needs. This meant special dividends in 2014, 2015 and 2016 (see table). Analysts at Numis are forecasting further special payments this year and next.