Berenberg downgrades Jupiter Fund Management on challenging markets, net outflows
Jupiter Fund Management
75.60p
16:45 24/04/24
Berenberg downgraded its view on shares of Jupiter Fund Management in light of the increasingly volatile and difficult market backdrop, which would only make it harder for the firm to address the multiple strategic challenges that it was facing.
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Among those, in a research note sent to clients, analysts Chris Turner and Panos Ellinas cited sustained net outflows, the increasing concentration of distribution channels in the UK, focus on retail (89%) and high exposure to equities (57%).
Thus far in the first quarter, they estimated that the outfit, which on 17 February had acquired Merian Global Investors, had already experienced £2.2bn of net outflows from its combined mutual fund products.
The bulk of outflows came from Merian, but Jupiter had also lost £700m, on top of the £4.5bn of outflows seen in 2019, with the latter due in part to a change in manager in Europe.
And during the previous year, higher values for its asset under management had acted as an offset, but that would now be harder.
Would Merian be earnings accretive for Jupiter? Forget it, the analysts said, pointing to declines in financial markets and outflows.
Even if one assumed a benign market backdrop and a steady improvement in flows, the shares' 10.0% discount to the sector did not accurately reflect their higher risk.
And given the volatility in markets, Jupiter's shares might overshoot to the downside, they added.
Applying a price-to-earnings multiple of 9.1 to their 2021 earnings estimates yielded a target price of 262.0p for the stock, down from 367.0p previously.
The broker also lowered its recommendation on the shares from 'hold' to 'sell'.