Shares in Jupiter Fund Management PLC (LON:JUP) dived after assets under management (AUM) fell by more than expected in the first quarter.
Net outflows in the quarter totalled £1.3bn, versus the £0.9bn expected by UBS; the decline was driven by net outflows of £1.1bn from Fixed Income funds.
READ: UBS downgrades Jupiter Fund Management to ‘sell’ as it expects shares to suffer a de-rating
AUM as at March 31, clocked in at £46.9bn, down from £50.2bn at the end of 2017; UBS had pencilled in a figure of £48.0bn.
The fund manager experienced negative market returns across all channels.
Chief executive of Jupiter Fund Management, Maarten Slendebroek, admitted it had been a challenging start to the year.
“We have seen a period of market turbulence together with subdued demand, resulting in net outflows of £1.3bn in the first quarter,” he said.
“As indicated in our financial results presentation on 27 February 2018, this change in the flows trend is not unexpected. The growth of assets sourced from international distribution partners has changed Jupiter's flow profile to being less predictable in the short term. As a result, in future we expect to see continued growth but with higher quarterly differentiation,” he advised.
“The continuation of our strategy of diversification by product, client type and geography and our approach to active asset management leave us well placed, both internationally and within the UK across a broad range of strategies," Slendebroek advised.
Liberum still thinks the shares are worth buying.
The broker said the declines should not have come as a surprise as Slendebroek tipped the market the wink in a trading update at the time of the full-year results announcement in February.
The broker's forecasts for earnings per share in 2018 and 2019 are 4% and 7% ahead respectively of consensus forecasts and it admitted it would “have to play catch-up” with the likelihood being that the consensus forecasts would fall further after Wednesday morning's update.
“Stock will probably go a little weaker in the short-term but we like the business and see value over the medium-term, supported by an attractive DPS [dividend per share] policy,” Liberum said.
Shore Capital rates the shares as no more than a 'hold' after what it termed a weak update, although it did say if the price dropped beneath 450p – which it has – it might be tempted to adopt a more positive stance.
“This update is in contrast to sector peers Polar Capital Holdings (Buy at 534p), which saw positive net flows as part of an AuM increase of 2.5% in the same three months; Man Group (Buy at 183p) also positive net flows with AuM up 3.3% in this quarter, and Ashmore (Hold at 411p), which reported blow-out net inflows yesterday as part of an AuM increase of 10% in the quarter,” Shore noted.
“Today’s statement notes that the majority of the outflows came from the Fixed Income asset class which contains Jupiter’s two largest funds, Dynamic Bond (AuM £9.7bn at 31st December, 19% of Group AuM) and Strategic Bond (AuM £4.9bn at 31st December, 10% of Group AuM),” Shore noted.
“In terms of geography, the UK was said to be broadly flat with other regions (which have been a major source of growth) seeing net outflows, particularly continental Europa and Asia. There was also a £0.3m net outflow from the segregated mandate category as one long standing client withdrew assets as part of a portfolio rebalance,” it added.
Shore thinks the management is making good progress on its ambition to reduce its over-reliance on the UK retail market, it remains concerned “at the exposure to a UK regulator determined to reduce the overall cost of investment in the retail market”.
Shares in Jupiter were down 5.3% at 441.5p towards the end of the morning trading session.