Portfolio Adviser • Portfolio Adviser Magazine June 2022 • Jupiter has ‘lost its way’, says ex director

● Former exec slams Jupiter management in open letter and says Formica appointment as CEO was ‘a mistake’

● Ex director insists the company must overhaul its operational strategy if it’s to remain independent

A former non-executive director at Jupiter stuck his head above the parapet and, in an open letter ahead of the firm’s AGM in May, called for significant changes to turn the firm’s dwindling fortunes around.

Jonathan Little, founder and managing partner at Alderwood Capital, personally holds just under 3% of Jupiter having recently upped his stake, he told Portfolio Adviser. His holding is of a similar size to that of the board between them.

But, like other shareholders, he has become frustrated with Jupiter’s performance. As such, he believed putting more skin in the game was the best way to force change.

Little hopes his letter will be a catalyst for change that will see chief executive Andrew Formica replaced, an end to its unsuccessful M&A activity and help the company focus on what it has historically done well.

Given the timing of his letter, Little did not expect the AGM to deliver any shocks. Indeed, Formica was re-elected with no difficulty. His goal is to get the firm focusing on “being a UK house delivering what UK investors want”.

Little warned: “You have a short window to get back on track and if that doesn’t happen soon, it is going to get worse.”

Little believes Jupiter can experience a change of fortunes. “If I was just in it for the money, I would be encouraging somebody to come and buy it.”

When he left the asset manager in 2016, Little said the business “had no debt and its prudent cost management and focus on cash generation meant a high and increasing payout profile with regular special dividends to shareholders”.

Jupiter was pursuing “an incremental growth strategy which avoided either significant mergers or acquisitions and risky global expansion”.

Its target was £50bn of assets under management at 50% margin within five years.

As its latest set of results can attest, AUM hit £55.3bn at the end of Q1 ’22 – but that is down from £60.5bn at the end of ’21, driven by net outflows of £1.6bn and negative returns of £3.6bn as markets turned volatile.

While it may have checked the AUM box, the operating margin dropped from 49% in 2016 to 39% last year.

He described the difficulties Jupiter is facing as “self-inflicted”, given the company “has chosen a different path to that which was outlined in 2016”.

He is particularly scathing about the 2019 acquisition of Merian, which he said “should not have been undertaken”. Little characterised the deal as “a generalist firm buying another generalist firm, with a poor recent performance history, an unstable platform and trying to integrate it without any prior experience of doing so”.

“By late 2019, [Merian] was a troubled business, haemorrhaging assets, with declining performance. Trying to integrate an unstable firm into an inexperienced acquirer in a pandemic was foolhardy, in my view.”

But M&A misfortune has not been the only anchor weighing on Jupiter’s success, Little said, describing the appointment of Formica as chief executive as “a mistake”.

“I believe this was undertaken with undue haste and without proper consideration of the risks involved.”

Little told Portfolio Adviser that he “has nothing against Formica, personally”, but believes his track record as co-CEO at Janus Henderson and performance at Jupiter, along with his prolific M&A history, means he is not the right man for the job.

“I feel strongly that Jupiter has lost its way and that the board needs to urgently prove to shareholders that it has a strategy for improving operational and business performance and thus shareholder returns.”

IN NUMBERS

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