UBS has advised its clients to sell Jupiter Fund Management PLC (LON:JUP) shares as it expects outflows from two key funds due to the standing down of a longstanding investment manager.
Jupiter had only recently started to stabilise flows for its Dynamic Bond Fund before it revealed that Alexander Darwall was ceding management of the European and European Growth funds after 18 and 12 years respectively. The two funds are Jupiter’s second and fifth largest funds with £7.7bn of assets under management.
While the FTSE 250 group has poached Mark Nichols from Columbia Threadneedle to take the portfolio manager role of these funds in the second half of 2019, UBS expects the change “will drive an acceleration of outflows at Jupiter”.
READ: Jupiter Fund Management sees assets rise despite outflow
This conclusion was based on examination of more than 70 departures of PMs around Europe with at least 10 years’ tenure that showed the respective funds suffered an average 15% of net outflows over the following 12 months, with outflows concentrated in the first three months and a positive correlation between the fund size and the negative impact of outflows.
These findings drove UBS analysts to make a £0.9bn cut to its 2019 flow forecast and £0.2bn for 2020, resulting in a 2% reduction to their 2019 earnings per share estimates, a 5-6% decline to the 2020-21 EPS estimate.
This resulted in an 8% cut to the Swiss bank’s 12-month price target to 325p and a downgrade to its recommendation on Jupiter to ‘sell’ from ‘neutral’.
The shares, which are reported to be the third most shorted in London, were trading more than 2% lower on Thursday at 365.8p.