August 19, 2011 / 6:46 AM / in 6 years

UPDATE 2-UK fund firm Jupiter eyes Europe, rich clients

* Pledges 2.5 pence maiden interim dividend

* H1 pretax profit 37.3 mln pounds vs 14.6 mln yr ago

* H1 net inflows 676 mln pounds vs 814 mln yr ago

* To set up office in Switzerland

* Private equity team defects (Adds CEO, analyst comments, share price)

By Cecilia Valente

LONDON, Aug 19 (Reuters) - Fund manager Jupiter put a brave face on the financial market turmoil that has rattled its core British customers, saying it was pushing ahead with plans to expand in Europe and attract more wealthy clients.

Jupiter, one of the UK’s largest retail investment fund managers with around 84 percent of assets invested in equities, said on Friday that first-half net inflows to its funds fell to 676 million pounds ($1.1 million) from 814 million a year earlier.

Investor confidence had taken a knock and “significant uncertainty remains,” it said.

“Sentiment is definitively more nervous, it would be surprising if it wasn‘t. I would be quite amazed,” Chief Executive Edward Bonham Carter told Reuters in an interview.

Rival fund house Henderson forecast a near-term decline in investment from retail clients, when it published results earlier this week.

Jupiter is pushing ahead with medium-term plans to diversify its client base, seeking more wealthy investors and expanding into Europe.

The moves “over the course of this year and into next year,” will start with a new office in Switzerland, Bonham Carter said.

Continental investors, who traditionally favour investment in bonds, are becoming more open to putting their money in stocks, he added, a trend Jupiter hopes to harness with its core offering of equity-focused mutual funds.

“I think we are at relatively early stages in the European investment habit where people are moving from cash and a bond culture to increase their weighting to equity over time... we have seen it in Germany in the last few years.”

In the UK, Jupiter is looking to increase its private client business.

“It could range from the private client and wealth management fit of a big bank ... we see it as a growth area in the UK and in Europe as well,” he said.

Bonham Carter also identified long-term trends likely to favour the business, such as pension reforms in the UK that will make workers save more, including a move to automatically enroll workers over 22 in a pension plan.

“I think savings are structurally picking up and that is a very strong positive in our business in the longer term. The UK is behind the U.S. by about at least five or 10 years where people have a greater tendency to invest in mutual funds,” Bonham Carter said.

Jupiter pledged its first interim dividend since floating on the stock market last year after pretax profit more than doubled in the half-year to end-June.

The fund manager will pay a 2.5 pence interim dividend, in line with expectations of analysts at Numis Securities.

Jupiter shares were down 2.8 percent at 1040 GMT, trading at 190.7 pence, underperforming the FTSE 250 index down 1.8 percent.

Analysts at Peel Hunt gave Jupiter a ‘buy’ rating saying “the longer-term attractions of Jupiter’s model remain - strong brand, consistent flows and high margins.”

Market conditions, however, “have clearly changed” since the end of June, Peel Hunt said. Global stock markets have tumbled in recent weeks on fears of another recession and fresh concern over the euro zone debt crisis.

Jupiter’s first-half pre-tax profit rose to 37.3 million pounds from 14.6 million pounds a year earlier.

The company is diversifying its product range, having launched at the end of last year funds in convertible bonds and total return strategies, although Bonham Carter said it will remain focused mainly on equity, long-only funds.

Conditions for new products launches are “particularly hostile,” he said.

Jupiter said its private equity team running 90 million pounds of assets has left to join another company. Jupiter will earn one-off management fees of 3.2 million pounds in the second half of the year as a result of the move.

Assets under management remained at 24.8 million pounds -- the figure for the five months to end-May announced in June. Jupiter had 19.8 billion pounds at June-end 2010. ($1 = 0.607 British Pounds) (Reporting by Cecilia Valente, Editing by Sinead Cruise and Erica Billingham)

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