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Home/News/Jupiters Phil Wagstaff unfazed by absolute return issues ahead of Merian takeover
Richard Buxton and Merian Chrysalis confirmed as moving over in acquisition
Jupiters global head of distribution has said the acquisition of Merian Global Investors was driven by delivering results for clients rather than gathering assets, but has no concerns over both firms underperforming absolute return funds.
Speaking toPortfolio Adviser, Wagstaff (pictured) said thedealmakes the combined entity a very significant player in the home market, but adds new capabilities which Jupiter has been lacking.
He said there are one or two areas of overlap but in the main the product suites are complementary, noting Jupiters strength in value equities and Merians in growth equities, as well as Merians systematic capability as being beneficial to Jupiter.
Theyve got one or two things that we dont have and there are one or two small areas of overlap. Well start getting into that during the integration about what we think the overlapping products are, but I dont anticipate a great deal.
Wagstaff would not be drawn on specific areas of crossover.
He added: The key thing is to make sure that youve got the right product suite for the clients and its set up properly for them. So youve got to make sure its optimal. And well be working on that over the next few months.
Both companies flagship absolute return funds have struggled over the past 12-18 months.
In 2019 the Merian Global Equity Absolute Return (Gear) fund went from 9.6bn to 2.7bn, according to Morningstar flows data. James Clunies Absolute Return fund has suffered a long run of underperformance, delivering negative returns over all time periods, and went from 1.53bn to 1.16bn in AUM last year, according to Morningstar.
Wagstaff said he was not authorised to talk about Merian Gear, but addressing Jupiter Absolute Return, he accepted the fund has struggled over the past year against a bizarre and unprecedented set of market conditions.
Clunie has persisted in taking short positions in highly-valued growth stocks, such asTesla and the Scottish Mortgage Investment Trust, in the hope they fall back, but the market keeps driving their prices higher.
Wagstaff said: The overvaluation of growth relative to value is at an all-time high; that valuation metric has never been more stretched. And some of our individual stock shorts in there like Tesla, for example, have gone to record highs. Our view is that were right in that portfolio, but it is hurting us in the short term.
Interestingly, we do have some buyers of that fund because they understand that it is a hedge; it is short growth style, it is long value style, it is short tech as a result of that, and as a consequence, is very much a hedge in peoples portfolios. But I cant disagree that its been a challenging year for the strategy.
Last week,Jupiter closed Clunies Jupiter Global Levered Absolute Return fundafter a series of redemptions since the start of the year. But the fund group said it fully supported the manager, a sentiment echoed by Wagstaff.
Were 100% behind James, we think hes great, he said. Most of the clients invested with him know him, understand his philosophy and understand how hes positioned. Obviously, theyd prefer not to have the drawdown that hes had, but we are keeping those investors up to date regularly with all these views.
Wagstaff also confirmed that five Merian managers Richard Buxton, Dan Nickols, Richard Watts, Ian Heslop and Amadeo Alentorn have signed employment contracts with Jupiter.
He said: Until last night, they were the only members of the management team that wed engage with but that is because they run nearly 90% of all the AUM [at Merian]. In essence, my number one issue is clients dont like uncertainty, so in announcing the deal and saying that the managers of 90% of the assets are coming over, that provides a certainty to the clients.
It was also confirmed in a stock exchange announcement on Monday afternoon that the Merian Chrysalis Investment Trust, managed by Watts and Nick Williamson, will move over to Jupiter as part of the deal.
The announcement said: Subject to the board conducting appropriate due diligence, the board anticipates there will be no change to the company following completion of the transaction, with Richard and Nick retaining portfolio management responsibilities.
Wagstaff added: This isnt about acquiring assets and bolting on assets and adding scale. The most determinant factor of whether we succeed as a business or not, will be the quality of our investment offering and we have to focus on that.
Can we run the funds were running at the scale they are and are they doing the right thing for the client? This the most important consideration for us.
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