Jupiter Fund Management (JUP) is to buy Merian Global Investors to “reinforce [its] core UK franchise and extend capabilities into attractive product gaps”, as well as reduce costs. Jupiter will pay an upfront sum of £370m and may pay some of Merian's shareholders, in aggregate, a further £20m if certain targets are met.
These two asset managers run a number of high-profile funds, but face a number of challenges. Jupiter's most popular funds include Jupiter European (GB00B5STJW84), which has assets under management of about £4.9bn. But its long-standing and highly regarded manager, Alexander Darwall, left last year to set up his own business, Devon Equity Management, and the board of the investment trust he ran decided to follow him there. Jupiter reported net mutual fund outflows of £1bn in the third quarter of 2019 after a net £1.1bn was taken out of its European growth funds.
Merian Global Equity Absolute Return (IE00BLP5S809), meanwhile, has experienced huge outflows over the past year following poor performance.
Ben Yearsley, director at Shore Financial Planning, said of the merger: “There will be lots of fund overlap, so expect a period of mergers and closures once the deal is complete.”
But Jonathan Miller, director of UK manager research at Morningstar, argued that there was “little overlap” between investment approaches at these two asset managers.
A manager change has already been announced – Jupiter UK Growth Investment Trust's (JUKG) board has appointed Richard Buxton, manager of Merian UK Alpha (GB00BFYN3T94), as lead manager of this trust. The trust’s board had already been considering changing portfolio manager after disappointing performance under current manager Steve Davies. It said in October, in the trust's annual report, that it had been “actively engaging with Jupiter Asset Management and our brokers Numis Securities to identify alternative arrangements that could better serve the interests of shareholders. These alternatives include the adoption of an alternative investment approach for the company from within the Jupiter group and a potential appointment from another fund management company”.
Jupiter UK Growth Investment Trust's investment objective and policy will not change. And its base management fee remains 0.5 per cent of adjusted net assets, reducing to 0.45 per cent on assets above £150m and 0.4 per cent on those above £250m. But a base management fee will not be charged for the 2020 calendar year as part of the new arrangements.
Mr Davies continues to manage open-ended fund Jupiter UK Growth (GB00B54CH949), which has underperformed the Investment Association UK All Companies sector average over one, three and five years.
The Jupiter-Merian acquisition comes as Franklin Templeton, which runs high-profile funds such as Templeton Emerging Markets Investment Trust (TEM) and Franklin UK Equity Income (GB00B7MKLS14), has entered into an agreement to buy Legg Mason. The latter and its subsidiaries run funds that invest in a variety of areas including Japanese equities, bonds and infrastructure equities.
At a time when active funds are under increased price pressure because of regulation and increasing popularity of passive funds, mergers should lead to fee reductions and other changes that could benefit investors. But commentators are divided on where these might materialise.
