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Jupiter’s new orbit

The last 12 months have been evolutionary for Jupiter chief executive Edward Bonham Carter, who has overseen a management buyout while running a fund in the middle of a bear market.

He says: “Jupiter has been through challenging times before and it will continue to be challenging but part of asset management is to deal with ups and downs in markets.”

He points to the fact that the FTSE 100 index is nowhere near its low of 3,287 on March 12, 2003, when some were spec- ulating whether it was the end of equities.

Jupiter’s £740m MBO, backed by private equity firm TA Associates, was one of the big investment stories of 2007. The deal was announced in March and completed in the summer.

Bonham Carter says Jupiter had a number a potential suitors but TA stood out from the crowd, given its experience in the market, having already conducted 11 asset management deals.

He says: “They are growth investors. They seek to achieve their returns without the use of excessive leverage which is a big plus given the conditions. The other thing is that they do not seek to cost-cut their way to returns. They see us as an opportunity and they understand the market and cycles.”

Bonham Carter says there are four board meetings a year with TA. “They want us to build the business in terms of breadth of product and expertise. It is still early days and they are hands-off but the MBO means we are ultimately accountable to ourselves. If clients do well, the business will do well in terms of profits,” he says. One thing Bonham Carter is particularly pleased with is that 95 per cent of Jupiter employees now have some ownership of the firm. He says: “The emphasis has switched from salaries and bonuses to equity which is on a medium return.”

The company has also held equity in reserve to reward new talent joining the business. Bonham Carter says the firm is on the lookout but it is a case of finding the right fit.

“The key shortage in the City is talent and not availability of capital. We want the right talent that fits the strong Jupiter culture,” he says.

Bonham Carter says one of Jupiter’s targets in the next five years is to widen its scope in Europe, which it failed to do when it was owned by Commerzbank.

However, he does say this means the firm has not been exposed to the difficult markets in Europe while the UK has been more resilient. He says: “We have not had to experience the torrid flows that Europe has seen but I think over the next five to seven years we want to widen our presence there on a selective basis.”

Jupiter also wants to do more in emerging markets. It has set up strategic alliances with companies such as Taiwan’s second-biggest financial holding company, Taishin Bank. Fund launches will continue to come, provided it finds the right opportunities. Jupiter has already highlighted this with the launch of China and India funds for Philip Ehrmann and Avinash Vazirani.

It has also looked to tap into the UK corporate bond sector, which recently brought the launch of a UK strategic bond fund under the management of Ariel Bezalel. Bonham Carter says he is interested in absolute return and may look to offer something there in the medium term.

“One problem we have is that investors believe there is a guarantee in absolute return products so education is needed from fund managers and advisers. Fund managers need the skills in house, in terms of shorting, but I feel there is scope for the right person and process and it is ultimately an area I would like to get involved in,” he says.

His own fund skills have come under scrutiny in the past 12 months, with his undervalued assets fund falling into the bottom quartile of the Investment Management Association’s UK all companies sector.

A comment by Bonham Carter that he would “sack himself” if performance continued like this for the next 12 months hit the headlines recently but he claims it is something he has said before.

“The important thing to realise is that I am no special case. As CIO, I am paid to back or change fund managers which is painful but has to be done. We did this with Justin Seager, who I felt was not the right manager for UK growth.

“If a fund manager underperforms, it is not a reason to change, you need to understand the underperformance. You need to find the balance of not changing or changing managers too often.”

Jupiter recently added another institutional mandate on fund of funds following those with Investment Solutions and Russells. Bonham Carter says this is evidence that the institutional world is merging with the retail open-ended one.

He says: “A lot of institutional accounts, particularly the small to mid-size ones, now want to access retail fund managers and are prepared to put investments straight into unit trusts. People are willing to pay for that extra performance.”

Looking to the future, Bonham Carter says: “Continuous improvement is a good motto for us in terms of people, product and process. The flows reflect the job we are doing and we will continue developing the business as areas such as the private client and international side continue to grow.”

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