UK asset manager Jupiter has “lost its way” and must change its management and overhaul its strategy to preserve its independence, according to a former board director.
In an open letter to Jupiter chair Nichola Pease, fund industry dealmaker Jon Little made a scathing critique of the London-listed group, claiming its chief executive Andrew Formica had “failed to deliver on the key metrics of net sales, shareholder returns and return on equity”.
Little has a personal stake worth millions of pounds in Jupiter, whose share price has dropped almost 70 per cent over the past five years. The company is often cited as a potential takeover target. While Little stopped short of advocating a sale of the business or entertaining a private equity approach, he warned in the letter that if the company failed to improve its performance, “then others may take advantage of this weakness”.
“It is time to act if the firm is to remain independent,” he added.
Little was a non-executive director of Jupiter from November 2011 to October 2016. He is managing partner of Alderwood Capital, a firm that buys equity stakes in asset managers but does not hold shares in Jupiter. He wrote the letter to Pease in a personal capacity as an individual shareholder.
Jupiter’s situation illustrates the challenges facing mid-sized generalist active fund managers, which are squeezed between highly specialised niche players and passive giants such as BlackRock and Vanguard.
“Jupiter has still clearly got its challenges,” said David McCann, a research analyst at Numis. “Many of its core sectors, such as UK equities and European equities, are out of favour with investors. There’s a question as to whether Jupiter’s product range is as focused and relevant to investors as some of its more nimble competitors.”
Jupiter reported net outflows of £1.6bn in the first quarter, and overall assets under management decreased by £5.2bn to £55.3bn, hurt by negative market returns of £3.6bn during the three months.
The company had averaged net outflows of £4bn a year for the past four years, and its operating margin fell from 49 per cent in 2016 to 39 per cent in 2021, while increasing staff numbers by a quarter over the same period, the letter said. Dividends per share have almost halved and the company has £50mn debt.
Little said that “much of the damage has been self-inflicted”, pointing to Jupiter’s acquisition of Merian Global Investors for £370mn in early 2020. The deal was “just about as bad as it gets” and “should not have been undertaken at all . . . by late 2019 [Merian] was a troubled business, haemorrhaging assets, with declining performance and a badly demoralised team”, he wrote.
Little added that he had voted against the re-election of Formica as director, ahead of Jupiter’s AGM next week. He said Formica’s appointment as chief executive in 2019 was “a mistake . . . undertaken with undue haste and without proper consideration of the risks involved”.
Formica was previously chief executive at Janus Henderson, itself the result of a merger between Henderson Global Investors and Janus Capital, which Formica helped orchestrate. The group has struggled to make the combination work and is under pressure from activist investor Nelson Peltz.
Little founded Northill Capital and left three years ago in a disagreement over strategy with its backers, the pharmaceutical billionaire Swiss-Italian Bertarelli family. Before that he was chair at BNY Mellon Asset Management.
Proxy advisers ISS and Glass Lewis are recommending that shareholders approve Formica’s re-election as director.
Formica declined to comment. Jupiter said in a statement: “We listen to and respect the views of our shareholders and will respond to Mr Little directly. We have a clear, consistent strategy which we are focused on executing. We are confident that we have the right foundations in place to deliver on this, underpinned by our strong capital position. We will continue to update the market on our progress.”