1Q2020 results round-up: Jupiter and Merian suffer outflows

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1Q2020 results round-up: Jupiter and Merian suffer outflows

The first three months of 2020 spelled the end of the longest bull market in history as the combined impact of the coronavirus pandemic and the oil price collapse caused havoc in most asset classes. 

Here is an overview of how the first months of the year affected the UK investment management businesses and what their outlook for the coming year is.


Jupiter and Merian 

Jupiter has reported net outflows of £2.3bn during the three months to 31 March. Its assets under management at 31 March stood at £35bn, a decrease of £7.8bn in the quarter, with the majority of the decline due to "market movements".

Jupiter said, along with the asset management industry as a whole, it had faced challenging market conditions due to the Covid-19 pandemic which had "a significant adverse impact on the economy, global financial markets including asset values and, consequently, on our AUM".

The firm's latest update added: "During this volatile period, which has seen most asset classes experience significant falls in value, Jupiter's relative investment performance has strengthened, with 80% of AUM above median over three years, 75% in the top quartile. This level of performance on behalf of our clients is testimony to the expertise of our investment teams and reaffirms our belief that active management delivers long term returns to clients and supports our commitment to high-conviction active management."

Merian's outflows were slightly higher for the quarter at £2.6bn - mainly comprised £1.4bn from Global Equity Absolute Return and £1bn from other Systematic strategies.

Its AUM at 31 March was £15.7bn, a decrease of £6.8bn in the quarter, with the majority of the decline due to market movements.

Jupiter also gave an update on its acquisition plans for Merian which it said remained "compelling" despite market upheaval. It is due to publish a circular on the deal later this month convening a shareholder general meeting to approve the acquisition after its annual general meeting on 21 May.  

Subject to market conditions, Jupiter also intends to raise Tier 2 subordinated debt in the coming weeks. 

Liontrust

Liontrust's assets under management and advice were £16.1bn at close of business on 31 March, an increase of 27% over the year.

It reported net inflows of £492m in the three months ended 31 March and £2.7bn for the year ended 31 March, an increase of 52% compared to last year.

For the period 1 - 9 April it reported net inflows of £136m and AuMA of £16.8bn at close of business on 9 April 2020.

Liontrust chief executive John Ions said: "Liontrust went into the pandemic in a strong position, and by maintaining the processes we have put in place over the past decade, we have been able to replicate how we work normally.

"It is against this backdrop that we announce sales of £492m for the last three months and £2.7bn for the financial year to 31 March 2020. While this is an incredibly short period, net inflows from 1 to 9 April were £136m."

JPMorgan

JP Morgan Chase has reported a drop in net income of 69% quarter on quarter, falling from $8.5bn to $2.9bn, but insisted it had "performed well" over the past three months.

The firm has increased its total credit reserves to $8.3bn, the highest since 2009, which chairman and CEO Jamie Dimon explained was related to "the likelihood of a fairly severe recession".

He added that JP Morgan Chase has entered the crisis "in a position of strength" with total liquidity resources in excess of $1trn, and noted that despite "a very tough and unique operating environment" the company had grown deposits in every line of business.

The asset and wealth management arm of the firm saw profits remain flat when compared with Q1 2019 and saw revenue increase by 3% to $3.6bn, which it attributed to "higher management fees on higher average market levels and net inflows over the past year", while overall assets under management increased 7% to a total of $2.2trn.

GAM

Assets under management (AUM) in the investment management arm of GAM have fallen 26% from CHF 48.4bn on 1 January 2020 to CHF 35.7bn on 31 March 2020, contributing to the group's overall reduction in AUM of 16%.

The firm has attributed the loss in assets to "market turmoil" impacting both investment performance and client risk appetite but has pointed to "early signs of a recovery" in April so far.

In February 2020, GAM announced an efficiency programme as part of its three pillars strategy of efficiency, transparency and growth, which it has since accelerated, expecting a total cost reduction of "at least" CHF 65m.

A voluntary redundancy programme was finalised over the course of March, with the firm expecting a reduction in full-time headcount of 137, from 817 to 680 by the end of the year.

The remaining employees face a review of fixed compensation levels and are currently all working remotely.

Fixed income took the greatest hit in the investment management business, losing CHF 8.1bn through outflows and market and FX movements, while equities followed in distant second, losing CHF 2.1bn over the quarter.

Peter Sanderson, group CEO of GAM, said: "GAM remains committed to the strategy we announced in February and we have moved to accelerate the efficiency element of the strategy in order to respond directly to the pressures of the current market environment.

"GAM has not been immune to some of the toughest market conditions the industry has seen, and we saw our assets under management decline as a result of the Covid-19 crisis. We saw strong investment performance until the end of February, but this was impacted by the market environment during March.

"I am pleased that we are now seeing early signs of recovery, both in terms of asset flows and also in the investment performance of our funds.

"We remain committed to the breadth of our distinctive investment management capabilities, our strong client service proposition and our Private Labelling Funds platform, which we believe are particularly well positions to help clients actively navigate these uncertain times."

Polar Capital 

The combined impact of the coronavirus pandemic and the sharp decline in the price of oil saw Polar Capital's AuM fall by £1.9bn in the three months to 31 March, driving a 12% year-on-year drop to £12.2bn.

The firm's quarterly results reveal that net outflows were relatively subdued over the three months, reaching £140m across both long-only funds and alternatives vehicle, but negative market performance cost Polar £1.9bn in AUM. At £1.7bn, long-only funds took the bulk of asset losses while alternatives AUM fell by £209m.

On a 12-month basis, AUM fell by £1.7bn after £1.2bn of net outflows and £500m of market losses.

CEO Gavin Rochussen said:  "The coronavirus pandemic and oil price collapse brought an abrupt end to the longest bull market in history with the S&P500 declining 34% over a four-week period to its low point on 22 March.

"A strong rally to 31 March followed unprecedented fiscal and monetary stimulus to ensure economies and markets continued to function.

"Polar Capital was not immune to this equity market volatility with our AuM decreasing by £1.9bn in the March quarter alone because of market declines."

Rochussen also noted that the "support of our fund investors, clients and other stake holders" had been "comforting" over the period, pointing to the "initial limited quantum of redemptions" and the fact net flows were positive for the first two months of the quarter.

He added: "While AuM has decreased by 12% over the year and the equity bear market means we enter our new financial year with lower average AuM than the previous year, Polar Capital continues to be cash generative and is able to utilise its significant balance sheet to meet our operational and strategic objectives.

"We are comforted by the evidence of our operational resilience in these testing times and, together with our diverse and complementary range of fund strategies with proven track records, we remain well positioned to deliver compelling returns for our clients and shareholders."

Premier Miton 

Premier Miton Group has reported net outflows of £167m during the first quarter of the year and cut its dividend in light of the economic turmoil brought on by the coronavirus pandemic.

Premier Miton, which merged in November last year, said it had £91.bn of assets under management on 31 March. Net outflows of £167m for the quarter ended 31 March compare to £3m inflows for the same period last year.

Its results said: "Due to the rapidly evolving risks and global impact from Covid-19 and the uncertainties as to the duration and impact of the pandemic, the board is working to balance the requirements of all stakeholders of the business while conserving and building the group's cash reserves in the current crisis."

The board said it needed to retain flexibility on the amount of dividend paid and the timing of such payouts during "exceptional times".

It added it would pay 0.75 pence per share for the three-month period to 31 March and in future would move to twice-yearly, rather than quarterly dividend payments.

The business said despite challenges brought on by the covid-19 outbreak its integration was progression "in-line with management expectations".

Chief executive Mike O'Shea said: "This financial quarter initially saw a solid overall performance for the group and good progress on our integration plans. However, in the past few weeks the market turbulence from the Covid-19 pandemic has significantly affected our business.

"It is clear that the current market conditions are particularly challenging for any business in the asset

management sector. I am proud of how well our people have responded."

He added: "It is likely that the current uncertainty will create attractive opportunities in the UK's long-term savings and investment market for firms that have a strong sense of purpose and a full commitment to their clients and their people.

"Well run, active fund management firms will be in a position to capitalise on this for the long-term benefit of investors."

This article was first published by Investment Week