Jupiter Fund Management’s deal to buy Merian Global Investors is like watching an old play reinterpreted for a modern audience by a troupe of travelling players. The cast is the same, just in different roles. TA Associates and the puckish Edward Bonham Carter bought Jupiter from Commerzbank in 2007 and took a couple of board seats for a few years. TA and Richard Buxton bought out Merian from Old Mutual in 2017. Now Andrew Formica, an equally puckish Antipodean, former co-chief of Janus Henderson and now chief executive of Jupiter, is bringing TA back to Jupiter as a shareholder and board member. And he’s picking up Mr Buxton along the way.
Where Mr Bonham Carter was an old-fashioned gatherer of fund managers, Mr Formica is a gatherer of assets. He is doing what he did at Henderson — picking off woebegone rivals such as Gartmore, which were haemorrhaging assets at a time of market uncertainty. Other industry heads worried about squishing star fund managers and cultures together. Mr Formica didn’t. And he was right. It worked. Operating margins post-Gartmore plumped above 50 per cent.
Now Mr Formica has similar plans for Jupiter. Again the moment is right. Merian’s global equity absolute fund is a quarter of the size it was two years ago. Markets are as uncertain as ever and, after the collapse of Neil Woodford’s fund business, the existential crisis facing active fund managers has worsened. Defensive consolidation is the name of the game.
Jupiter’s star has dimmed more than most. Its assets have fallen to about £43bn from £45bn plus in six months, following the defection of one of its stars Alexander Darwall last year. It needs Merian. But Jupiter is paying £400m or so — about 1.8 per cent of funds under management. That’s 25 per cent less than TA shelled out for a majority stake in the group in 2017. And Mr F is leaving behind the big costs and locking in a couple of big-name managers. Jupiter’s operating margins will rise from about 40 per cent to 50 per cent, and perhaps higher.
This time around, Mr F has also shrewdly organised downside protection. If assets fall by 15 per cent after the deal is done, TA promises to pay back £20m of the purchase price. If assets fall by 40 per cent or more, TA will pay back £100m. That is one new trick for modern directors of old fund management dramas.