Jupiter’s Next Big Challenge Is Key-Man Risk After Client Exits

With six straight years of client outflows, revolving-door leadership and several rounds of job cuts, Jupiter Fund Management Plc has seen plenty of turmoil.

(Bloomberg) -- With six straight years of client outflows, revolving-door leadership and several rounds of job cuts, Jupiter Fund Management Plc has seen plenty of turmoil.

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Now the impending exit of Ben Whitmore, who oversees about a fifth of the London-based money manager’s £52 billion ($66 billion) of assets, is pointing to another potential trouble at the struggling firm: Key-man risk.

Whitmore is leaving later this year in a well-telegraphed move and the company has even announced a replacement. Executives worry that some of the investor money would rush out along with him. But for Chief Executive Officer Matthew Beesley, one of the biggest challenges is in finding ways to mitigate the impact of possible future departures, as he battles to revive the fortunes of the 39-year-old company.

In an interview, Beesley said he’s focused on the matter and is stepping up efforts to address the issue.

“At some point everyone will leave Jupiter, it’s inevitable, because people will retire, no one works forever,” the CEO told Bloomberg News. “My job is to put in place succession plans, sometimes internal, others external.”

Whitmore oversees almost £10 billion in public and private funds, according to Jupiter, while bond manager Ariel Bezalel, who’s been with the firm since 1997, runs about £8 billion across two public funds, data compiled by Bloomberg and company documents show. Amadeo Alentorn, who joined the firm four years ago via the acquisition of Merian Global Investors, manages about £3.5 billion. A multiasset team of five managers, led by 62-year-old John Chatfield-Roberts, runs at least £5.8 billion in public funds.

“The statistic masks the fact that many of these funds are managed by a few key individuals,” said Peter Sleep, a portfolio manager at London-based Seven Investment Management. He added that Bezalel, for example, “clearly carries key-man risk.”

Founded in 1985, Jupiter was once a household name in the UK. But it has been through an upheaval of late with three CEOs since 2018, about £22 billion of client outflows and a more than 80% plunge in its share price in those six years. The acquisition of Merian in 2020 hasn’t been of much help to turn its performance around.

The company’s troubles are also symbolic of the woes plaguing the broader active asset management industry as firms on both sides of the Atlantic try to eke out gains in the face of outflows and squeezed margins. Investors are increasingly turning their back on mutual funds as they look for better returns from cheaper products such as exchange-traded and passive funds.

As a result, growing any actively managed fund isn’t as easy as it was 20 years ago. By mid 2023, for example, passive funds accounted for half of all assets in mutual funds and ETFs in the US, up from 47% in 2022 and 44% in 2021, according to data compiled by Bloomberg.

Yet Jupiter’s problems stand out from those of its larger rivals, who are typically diversified and don’t face similar levels of concentration or the risk of clients pulling a chunk of money overnight. Some listed rivals comparable in size with Jupiter have somewhat similar concentration but they haven’t been hit by as much outflows.

“Concentration is common at small and mid-sized asset managers,” Numis analyst David McCann said. “Clients can generally subscribe and withdraw assets at short notice” and that can impact the bottom line quite meaningfully, he said.

Since taking over in October 2022, CEO Beesley has sought to make Jupiter less reliant on just a few strategies, with the aim of making it more diversified by pushing smaller funds to build scale. He’s kicked off a range of thematic vehicles he expects will attract more cash.

Outside Talent

Beesley said that the concentration is not as bad as it looks and added that he, accompanied by top lieutenants, meets one or two investment managers from other fund houses per week as part of Jupiter’s “ongoing assessment of talent outside the building” either for succession planning or to attract new talent.

He believes the hiring of Alex Savvides from a rival to replace Whitmore shows Jupiter can still attract top names and draw inflows. He said that Jupiter pays top performers so well that no star manager has left to join a rival in recent years.

Since Beesley became CEO, Jupiter has hired five money managers and seen as many leave, including Whitmore. Some of them left in a revamp while others started their own outfits.

Some of Jupiter’s rivals are already sensing an opportunity. UK equities funds managed by three rival firms, including Schroders Plc — where Whitmore used to work — have seen interest from some clients of both Whitmore’s and Savvides’, people familiar with the matter said, asking not to be identified discussing confidential information.

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Meanwhile, one of Jupiter’s minority shareholders, the GVQ UK Focus fund, pitched itself as a better option in a February note to investors. It owns 1.6% of Jupiter shares, Bloomberg-compiled data show.

Despite two quarters of inflows in 2023, Jupiter reported £2.2 billion of net outflows for the year but said that it had seen success with cutting costs and building scale in its institutional business. Some analysts are sounding more positive, but none of the 10 tracked by Bloomberg rates the stock a buy yet.

The share price soared 11% on Feb. 22 when Jupiter announced its earnings, but is still down about 40% from a year ago.

“I don’t think the outside world can see yet the full extent of the work we are doing as a business,” Beesley said. “It’s too early for that.”

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