Jupiter and Merian to join forces: here’s why fund manager mergers are on the rise

Over the past decade, active managers have come under increased pressure from passive investing options.

Jupiter Asset Management has agreed to purchase fellow fund manager Merian Global, in a move that would make Jupiter Asset Management the second-biggest fund house in the UK.

The move, confirmed by Jupiter’s board over the weekend, would see the fund house’s assets under management rise from £45 billion (as at end of September 2019) to around £65 billion.

Merian was spun off from Old Mutual two years ago, under the control of veteran fund manager Richard Buxton and rebranded as Merian Global Investors.

According to Darius McDermott, managing director of Chelsea Financial Services: “There has been a growing trend of consolidation amongst asset managers in the UK for the past decade or so.”

Most recently, in November 2019, Premier and Miton merged, while in October of the same year Liontrust purchased the smaller fund house Neptune. There have been other notable fund management mergers over the past couple of years, including Standard Life Aberdeen.

Meanwhile, Jupiter chief executive Andrew Formica during his time at Janus Henderson, was responsible for acquisition of New Star Asset Management and Gartmore.

Over the past decade, active managers have come increased pressure from low cost passive investing options. The rise of passive investing has seen increasing amounts of investor money move out of active funds. As a result, fund firms have seen their profits come under increased pressure.

For some, the solution has been consolidation. Fund houses with greater amounts of assets under management can make cost savings and in turn increase profit margins.

For the same reason, smaller fund firms have struggled, making them ripe for a buyout by their larger competitors.

As a study from Deloitte Casey Quirk has showed, from 2009 — when passive investing is often said to have started to take off —  to 2018 the number of mergers per year of publicly traded asset managers doubled on a global scale.  

Jonathan Miller, director of manager research ratings at Morningstar, notes: “The deal is symptomatic of the pressure active managers are finding themselves under.”

He points out that Merian was valued just below £600 million in June 2018, when it was initially spun off. Now, Jupiter is set to pay £390 million for the acquisition.

The decision, however, has been welcomed. According to McDermott while there is some crossover between the fund ranges, he points out “this has the potential to be a good fit, particularly as the senior management of Merian (including respected fund manager Richard Buxton) have already indicated that they are committed to joining Jupiter and will be shareholders, bringing additional stability to the deal.”

Similarly, Miller notes: “In terms of investment teams there is little overlap so this is fairly complementary from that point of view.”