Jupiter: fees squeeze keeps pressure on asset manager

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A year ago, Matt Beesley took the top job at Jupiter at an apparent turning point. A recovery in its share price and client inflows did not last long. On Tuesday, the London-listed asset manager announced £1bn of outflows in the quarter to September, a less lucrative fee structure and higher staff costs. The share price fell by a tenth to an all-time low.

Beesley puts a brave face on the retail outflows, citing clients cutting risks by shifting out of equities. He still promises to win more institutional mandates despite no significant inflows in the latest quarter. That business, though less profitable, is relatively sticky.

He could not gloss over the impact of the new tiered fee structure. This will cut the costs of unit trusts and open ended investment companies when they reach a certain size, knocking an extra 1.5 to 2.0 basis points off fee margins. That adds to any erosion caused by the shift towards institutional clients.

Allowing clients to benefit from economies of scale could attract more business. But it also crimps gains when assets under management rise.

Higher pay, too, squeezes profitability. Remuneration to net revenues, at 33 per cent in 2022, could hit the mid-to-high 40s in 2024. Every 100bp rise reduces pre-tax profits by 3 to 4 per cent, with revenues flat, says Citi.

Trading on a price/earnings multiple of seven, Jupiter’s valuation is at about half its long-term average and below most peers, partly due to lacklustre investment performance. The end of the cheap money era should give active fund managers a chance to shine. But Jupiter has little yet to boast about.

If that changed, Jupiter’s assets under management would swell and the pay ratio decline. That would boost its own share price, making retaining top performers easier. Beesley is steering round a vicious circle of cost-cutting and falling revenues, a track not worth entering.