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Jupiter Merlin portfolios hit by £223m outflows

Jupiter Independent Funds Team strategy head John Chatfeild-Roberts

Jupiter Fund Management’s £7.5bn multi-manager range, Merlin, suffered £223.8m net outflows in Q4, according to data from Morningstar, in the face of increasing competition and a spotlight on fees.

Money Marketing sourced data from Morningstar on the Merlin portfolios following a trading update from Jupiter this week, which revealed the range continues to be one of the few sources of net outflows at the boutique manager.

More than half of outflows came from the largest fund in the range, the £2.9bn Jupiter Merlin Income portfolio, which saw £126.7m withdrawn over the period. That’s slightly below the average quarterly outflows for 2017, which were £131.5m.

The £1.9bn Jupiter Merlin Growth and £1.7bn Balanced portfolios are the next largest in the range and suffered net outflows of £55.8m and £17.0m respectively.

Jupiter’s global head of distribution Nick Ring says they work hard to retain assets and are always concerned by outflows from any product.

Ring adds: “It is, however, the nature of our industry and of markets that some products will be out of favour at times and that is why it is important to have a range of strategies that appeal to investors at different stages of the cycle.”

The Jupiter Merlin Conservative and the Real Return funds were the only funds in the range not to suffer outflows in Q4, attracting £5.9m and £255,785 respectively.

Outflows from the fund range are not new and in 2015 John Chatfeild-Roberts stood down as Jupiter’s CIO to focus on running the Merlin funds. At the time, investors welcomed the move arguing it would give him more time to focus on the portfolios. Total AUM in the range at the end of that year sat at £8.3bn.

Morningstar director of manager research ratings Jonathan Miller says multi-manager funds have come under scrutiny due to their additional layer of fees.

“When we divide a category’s fund fees into quintiles, multi-manager funds tend to sit in the most expensive one and the new wave of multi-asset launches has been an area investors have been switching into,” Miller says.

The Jupiter Merlin range’s OCF varies across funds with a charge of 1.48 per cent on the Merlin Income portfolio, while the Worldwide portfolio has a charge of 1.8 per cent and the Conservative portfolio charges 1 per cent.

Tilney Group managing director Jason Hollands says the Merlin range is facing more competition in an area where it was a pioneer.

Jupiter were at the forefront of capitalising on a secular trend for financial advisers to adopt outsourced investment solutions for their clients through the use of multi-manager funds and in so doing managed to build a sizeable book in the Merlin fund range,” Hollands says.

“However, there is simply a lot more competition now in this space both from unitised funds, including lower cost passives options that appeal to some advisers, and of course from discretionary managers offering centralised model portfolios, so it is perhaps unsurprising that the book has seen outflows.”

Miller says Morningstar analysts still hold a high opinion of the Merlin team and funds from across the range retain positive ratings from the research agency.

Despite the fee drag, risk adjusted performance has generally been stronger than peers and it’s the Merlin Income fund that’s suffered the most outflows,” Miller says.

An equities research note from Cantor Fitzgerald says while the Merlin range has suffered outflows, Jupiter has been diversifying its business through new fund launches in global and emerging markets in fixed income and absolute returns.

Jupiter Merlin portfolios performance vs sector (%)

OCF 1yr 3yr 5yr
Jupiter Merlin Balanced Portfolio 1.63% 10.2 32.7 56.7
Mixed Investment 40-85% Shares sector 10.2 32.7 56.7
Jupiter Merlin Conservative Portfolio 1.00% 5.3 14.3 21.1
Mixed Investment 0-35% Shares sector 4.3 13.2 23.5
Jupiter Merlin Growth Portfolio 1.73% 9.9 35.2 65
Flexible Investment sector 10.5 29.5 52.7
Jupiter Merlin Income Portfolio 1.48% 7.3 17.5 30.1
Mixed Investment 20-60% Shares sector 6.7 19.3 34.5
Jupiter Merlin Worldwide Portfolio 1.80% 11.1 38.4 65.6
Global sector 13.7 45.7 83.5

Source: FE Analytics

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