Up 60% in 6 months: why I think Jupiter Fund Management could keep climbing

In October last year, I discussed Jupiter Fund Management (LON:JUP) as a possible buying opportunity in an article looking at UK fund managers with high StockRanks. I concluded:

[ … ] the group’s balance sheet suggests to me that the current operating business might only be valued at five or six times forecast earnings. With a well-supported 5%+ dividend yield, I think Jupiter could also be worth a closer look.

Since then, Jupiter shares have risen by 60%:

At the time of the article, Jupiter had a StockRank of 90 and Super Stock styling. As I write in mid-August, the StockRank stands at 99.

Given the stock’s strong progress and the algorithm’s continued positive view on this previously unloved business, I thought it would be interesting to take a longer look at Jupiter. After all, it’s worth remembering that on a longer view, the Jupiter share price is still trading quite close to all-time lows:

I think there’s a reasonable argument to be made that Jupiter may still be attractively priced, with strong recovery potential. But there are risks too – this sector has been facing some profound changes. I don’t think Jupiter is out of the woods yet.

Summary

Pros:

• Growing scale, tentative signs of a return to net inflows;

• Strong, asset-rich balance sheet;

• Operating margins remain high.

Cons:

• Too soon to know if Jupiter can deliver sustained net inflows and AUM growth;

• Pressure on fee margins is unlikely to abate;

• Jupiter may lack the scale, niche focus and franchise strength of some rivals.

Profile

About the stock

Jupiter Fund Management is a UK asset management company that’s listed in the Investment Banking & Investment Services industry group, within the Financials sector.

Jupiter is a member of the FTSE 250 index, with a market cap of £676m and a recent share price of 131p.

The StockRanks reflect Jupiter’s broad spread of positive factors, albeit with some relative weakness in value reflecting strong recent share price gains.

About the opportunity

UK fund managers have been out of favour for some years. Jupiter’s share price remains around 70% below the all-time highs reached in 2018.

In broad terms, I think there are three main reasons for this decline:

Asset outflows: we’ve seen a long-running pattern of UK Investors selling active funds to switch to cheaper passive funds, US markets and alternative assets.

At the end of June 2025, Jupiter’s assets under management (AUM) were 6% lower than in December 2018. Over the same period, the FTSE 100 has risen by 30% and the S&P 500 has risen by 148%.

This suggests a combination of investment underperformance vs the market and significant outflows.

Poor fund returns: of course, one big reason for investors to ditch UK funds is that passive products – especially those tracking US markets – have offered better performance at lower prices in recent years.

Jupiter says that 64% of its AUM has outperformed the peer group median over the last three years. That may be a creditable performance. But I suspect the difficult reality is that many actively managed funds (with 1%+ fees) may have underperformed much cheaper US tracker funds over this period.

Falling fee margins: indeed, tough competition from passive funds has forced active fund managers to cut their fees. Jupiter’s met management fee margin (as a % of AUM) has fallen from 0.85% in 2017 to 0.66% during the first half of 2025.

When combined with falling AUM, lower fee margins lead to a drastic decline in profits for fund managers. Jupiter’s pre-tax profit was £193m in 2017, but just £88m in 2024.

The early stages of a recovery? The surge of takeover offers for UK firms over the last couple of years has highlighted the value that’s become available in this market. Anecdotally, even US investors are showing more interest in buying UK stocks than was historically the case.

At the same time, US markets have become expensive on most measures and suffered an added measure of geopolitical uncertainty.

Jupiter’s latest results showed – perhaps – some tentative signs that the tide might be turning on flows. Net outflows reduced to just £0.2bn during the first half of this year, compared to a £3.4bn outflow in H1 2024.

Moreover, net flows turned positive in Q2 (+£0.3bn) and both institutional and retail flows are said to have been positive in July, at least until 25/7.

These results reflect a run of positive inflows across the sector since March 2025, according to The Investment Association:

Source: The IA

Fund managers suffer painful reverse operating leverage when AUM falls. Profits tend to collapse. But the opposite is also true. If Jupiter can achieve sustained net inflows and positive market performance over the next year or more, fee income could rise rapidly, supporting a recovery in the share price.

For example, a return to December 2021 AUM of £60.5bn (as implied by the recent CCLA acquisition) would generate around £88m of additional revenue at current margins – much of this would drop straight through to profits, as Jupiter’s costs would remain largely unchanged. For a business that generated £75m of operating profit over the last 12 months, this could be significant. 

It's probably worth pointing out that the CCLA AUM appears to carry lower margins and will entail some additional costs. But if this acquisitive growth can be paired with organic inflows, I think there's an exciting opportunity here to benefit from positive operating leverage and potentially a substantial further re-rating.

Business & Model

What is the company’s history and what does it do?

Jupiter Fund Management was founded by financier John Duffield in 1985, as a high conviction, active fund manager. In 1995, he sold the business to German bank COMMERZBANK AG (ETR:CBK) for £670m.

In 2007, Commerzbank agreed to sell Jupiter in a management buyout backed by private equity group TA Associates.

Jupiter was floated on the London market in 2010 at 165p per share – somewhat higher than the current share price.

As an independent asset manager, Jupiter offers a range of products across equities, fixed income, multi-asset and alternatives. Jupiter offers products for both institutional and retail investors.

The business took a step up in size in 2020 when it acquired Merian Global Investors (previously Old Mutual Global Investors) in a £370m deal that added £22bn in AUM.

The purchase was funded through the issue of 95m new shares to the former owners of Merian, including Jupiter’s former PE backer TA Associates. This deal meant that TA became a significant shareholder again – a position that remains today.

Since taking charge in 2022, CEO Matthew Beesley has been focused on streamlining the business, achieving selective increases in scale and improving its client appeal by emphasising the company’s culture of active management and above-average investment performance.

This chart from 2025 half-year results highlights the performance credentials of the company’s equity strategies, in particular:

Source: Jupiter H1 2025 presentation

How does the business model work?

Jupiter offers funds for institutional and retail investors. It uses a fairly standard fund management business model to generate revenue by charging management fees as a percentage of assets under management.

In addition to this, performance fees are sometimes payable when certain hurdles are cleared.

This business relies on scale to generate profits in excess of costs; as mentioned already, significant operating leverage is built into this model due to the predominance of fixed costs – adding additional AUM costs very little.

As a result, this business has the potential to generate very high profit margins, something that’s been true in the past:

This capital-light profitability can support generous shareholder returns. However, it’s also a highly-cyclical business, as investors have found in more recent times.

Markets & Competition

What is the size and state of the company’s market?

Industry body The Investment Association says that its members in the UK manage £9.1 trillion of assets. This includes 32% of the total value of the UK stock market and £1.4bn invested in UK shares, bonds, commercial property and other domestic assets.

In addition to this, UK companies manage £4.5 trillion of assets on behalf of overseas clients, including £2.5 trillion for European clients.

Even within its core peer group, Jupiter is one of the smaller asset managers operating in the UK. With just £47bn of AUM, the company does not even make it onto this (slightly outdated) top 10 list highlighting some of its key competitors:

Source: Statista

For reference, The IA ranks Jupiter in 13th place in the UK, based on UK-domiciled funds only – a subset of the above.

I think it’s fair to say Jupiter is a small-to-mid-sized player in a big market, with ample scope for growth.

How does Jupiter derive its competitive advantage – and are these advantages durable?

Durable advantages for asset managers are not easy to pin down.

Although I would be confident that companies such as Blackrock (NYQ:BLK) or Legal & General (LON:LGEN) have competitive advantages due to their scale and market share in certain sectors, I don’t think this is necessarily true of a company of Jupiter’s size.

Among mid-sized players, my view is that competitive advantages are likely to hinge on a company’s ability to attract and retain investor assets and its investment performance. Consolidation within this sector in recent years suggests this has not been an easy hurdle to clear.

When we consider Jupiter in the context of our economic moat framework, the company’s competitive advantages do not seem especially compelling or durable to me:

Intangible assets: Jupiter’s brand is associated with conviction-led active fund management and provides a certain level of recognition and familiarity among financial advisors and institutions.

There’s also the potential for the company to become associated with ‘star’ in-house fund managers. This can help attract and retain AUM, but it’s a double-edged sword. The departure of former star manager Alexander Darwall led to more than £4bn of outflows in 2019.

On balance, I think any competitive advantages Jupiter derives from intangible assets are not necessarily very durable.

Switching costs: moving assets between fund managers is quicker, cheaper and easier than it was even 10 years ago. For retail investors in particular, access to funds is generally intermediated by an investment platform. This minimises and abstracts switching costs so they are rarely a major concern.

Having said that, there is some friction and risks associated with moving assets. Inertia also plays a role – investors face the difficulty of deciding on an alternative and executing a switch.

Nevertheless, I don’t see switching costs providing much of an advantage to Jupiter (or any other mainstream asset manager).

Network effects: investors don’t derive any direct benefit from investing with the same manager as their peers or competitors.

Perhaps an exception to this is FOMO, in particular if a specific fund (or fund manager) has enjoyed an exceptional run of performance.

Nevertheless, I don’t see any genuine network effects in this business, other than some economies of scale.

Cost advantages: a mainstream fund manager, based in London and using industry-standard technology and staffing to manage client money is unlikely to have any structural cost advantages over peers, except perhaps relating to scale.

Greater scale: checking recent half-year results reveals that Jupiter’s cost:income ratio for H1 2025 was 78%. 

The group’s much larger rival, Schroders (LON:SDR), reported an adjusted cost:income ratio of 74%. Schroders has 16x more AUM than Jupiter. While both companies are hoping to lower their cost ratios, these figures suggest to me that only limited economies of scale arise as asset managers expand.

Perhaps a more significant advantage of scale is the distribution reach enjoyed by an asset manager. Because most retail investors invest through platforms and advisers (who also use platforms), it’s important for an asset manager to be large enough to have good distribution within its target markets.

My impression is that Jupiter is already large enough to clear this hurdle, on the whole. The current CEO’s efforts to streamline its fund offering should also help the company concentrate its efforts (and costs) in areas where it has good scale.

Financials & Ownership

What is the record of growth & profitability?

Jupiter’s growth has gone into reverse in recent years, with profits collapsing as AUM and revenue have fallen.

*Forecasts derived from company-provided analyst consensus

To gain a better understanding of these changes I’ve compared the company’s AUM with its operating expenses over the same period.

As AUM peaked during the pandemic investing boom, Jupiter’s cost base also rose sharply. Unfortunately, while AUM peaked in 2021, costs as a percentage of AUM did not peak until 2022/23. This will have put significant pressure on profits:

However, costs as a percentage of AUM have now dropped to the level seen in 2017, when Jupiter was far more profitable and boasted an operating margin in excess of 40%:

If Jupiter can deliver AUM growth while maintaining costs relative to AUM, then I think the company could be positioned well to deliver positive operating leverage and good profit growth over the next few years.

There’s no guarantee of this of course – but it would be a classic cyclical fund manager recovery play.

However, before I move on I want to mention another potential weakness that’s emerged and is highlighted above.

While Jupiter’s operating margins have remained seemingly healthy, the company’s return on equity – a more accurate measure of the returns available to investors – have fallen and are currently languishing below 10%.

As a rule of thumb, I tend to assume that ROE of under 10% is unlikely to be attractive unless a stock is trading at a meaningful discount to its book value. As it happens, that’s the case here – Jupiter is trading nearly 20% below its June 2025 book value:

That discount implies a return on cost of equity of around 12.5% - a little more attractive. 

There’s also a second factor worth considering. The net cash and other assets on Jupiter’s balance sheet mean the return on operating equity is potentially higher than the statutory figures on the StockReport suggest.

Balance sheet

One of the key conclusions from my previous review of Jupiter was that it had a strong balance sheet.

At the time, my reading of Jupiter’s balance sheet (H1 24) suggested the company could have net cash and investments of around £225m, including £146m of seed investments (new funds the company hopes to commercialise in the future).

In October 2024 the market cap was around £440m, so these assets accounted for a significant proportion of the company’s market cap. Stripping these out showed a business trading on a very low multiple of operating earnings (seed assets don’t generate fee income).

Moving forwards to today, the June 2025 accounts suggest to me an equivalent net cash and investment figure of about £250m. That’s consistent with the company’s own measure of regulatory capital surplus of £237m and is equivalent to around 35% of the £690m market cap.

Source: Jupiter H1 2025 presentation

It’s worth noting that this surplus coverage is expected to fall when the acquisition of CCLA completes (I’ll cover this shortly). Even so, the surplus multiple is expected to remain above 2.5x regulatory requirements, providing plenty of headroom.

In addition, the company is maintaining a disciplined level of dividend coverage by targeting a payout of 50% of pre-performance fee earnings per share.

In 2025, at least, the company is also planning to distribute 50% of performance fee earnings to shareholders. Even so, the upshot should still be that Jupiter’s balance sheet position remains strong.

In terms of valuation, I estimate that Jupiter is currently trading on a multiple of around 10x operating earnings, if we exclude seed capital but conservatively include all of the company’s net cash position.

When paired with a well-covered forecast yield of c.4.5%, this doesn’t seem too expensive to me at this point in the cycle.

Is there evidence of historic share dilution?

Jupiter has only issued shares once in the last decade, to fund the acquisition of Merian Global Investors in 2020.

I don’t see dilution as a concern here, unless the company embarks on a misguided acquisition spree.

What is the ownership of the company? Does management have stakes?

The 2024 annual report shows CEO Matthew Beesley owning 235k shares outright at the end of last year, worth around £300k at current prices. That doesn’t seem very significant to me, relative to the £2.2m remuneration package he received last year.

As is the norm with FTSE 350 firms, ownership is concentrated in institutions. But the two largest shareholders here are not just index trackers or asset management giants. Both be seen as active, discretionary investors.

Jupiter’s largest shareholder – with nearly 20% – is value investing specialist Silchester International.

In second place with c.16% is private equity group TA Associates, which still appears to own the shares it received when Jupiter acquired Merian. TA has a long history with Jupiter and presumably knows the business very well.

Silchester and TA control more than 35% of the stock, so I’d argue that for most practical purposes they could be considered controlling shareholders – particularly in the event of a takeover scenario.

Valuation

How does the relative valuation compare versus industry peers?

Jupiter doesn’t look especially cheap relative to its industry group and the wider market:

A more targeted comparison suggests the company is trading on a comparable valuation to various UK-listed peers:

It’s impossible to know whether the company’s profits and AUM will now start to recover as forecast. On balance, I think the current valuation is striking a middle ground between optimism and caution.

What is the stock’s intrinsic valuation?

By their nature, intrinsic valuations tend to rely on guesswork or assumptions about the future. There aren’t any certainties, but I think they can still provide useful insights.

As a starting point, the average of current broker price targets for Jupiter Fund Management is 117p:

Analyst price targets are typically calculated using a variety of methods. Collectively, City analysts – some of which may work for competing businesses – appear to be taking a fairly bleak view on Jupiter’s growth prospects. Note the slightly negative estimated long-term growth rate.

To get a better understanding of the assumptions that may lie behind this consensus figure, I’ve also calculated some estimates myself using fairly simple and standard assumptions.

I wrote more about the methods mentioned below in this article on producing your own target prices for stocks.

For each method I used an 8% required rate of return, as I would normally with big cap stocks. Arguably, Jupiter’s size and cyclical nature mean that a 10% required return would be more appropriate – making this change would reduce the fair value estimates in each case.

Earnings Power Value: this method assumes Jupiter’s operating profit (EBIT) will remain stable indefinitely at current levels. It’s not perfectly realistic – no company will achieve this – but I find it a useful way to generate a baseline valuation for a business without making assumptions about future growth.

Using operating profit for the last 12 months and a 25% tax rate gave me an earnings power value estimate of 160-175p per share for Jupiter, depending on how I estimated net cash.

Dividend Discount Model: this approach estimates an intrinsic value of a stock based on expected future cash flows from dividends alone – effectively a buy-and-hold model.

I used consensus forecasts for the next two years and modelled a gradual return to growth thereafter. This gave me a fair value estimate of 133p for Jupiter, including the expected distribution of performance fees this year.

Discounted Cash Flow model (DCF): I don’t normally delve into the complexities of DCF models as they involve a lot of predictions about the future. But using a grossly simplified model based on consensus forecasts and a 3% sustainable growth rate suggested a fair value of around 170p.

My target price estimate: averaging these results gives me an approximate target price of c.155p.

Why are my estimates so much higher than the consensus price target on the StockReport?

• My estimates were very crude and simple ballpark figures, lacking many of the refinements used in more sophisticated models;

• City forecasts may include some outliers that skew the average. For example, in a July 2025 note available on Research Tree, Singer Capital Markets has published a 12-month target price of 60p. Singer’s analysts appear to have a more downbeat view on the outlook than many others, pointing to the lack of an established return to organic growth.

Trends & Catalysts

What underlying trends are affecting the business?

I’ve already touched on many of these factors, but let’s summarise them here:

• A widespread shift to low-cost passive investment has resulted in AUM outflows from UK actively-managed funds in recent years;

• This trend has been turbocharged by the outperformance of the US market and Magnificent 7 in recent years – simply owning an S&P 500 tracker (or the Mag 7 stocks) has made it easy to outperform almost any other benchmark, including many more conservatively-positioned professional fund managers;

• Pressure on fee margins due to the above factors;

• Growing popularity of alternative assets such as gold and crypto, areas where a conventional fund manager struggles to provide exposure;

• The need for economies of scale – with £47bn of AUM, Jupiter is outside the top 10 asset managers operating in the UK. Consolidation is taking place in this sector and Jupiter has made acquisitions but might also be acquired at some point.

Are there any catalysts that could drive a re-rating in the medium term?

There are two catalysts that could drive a re-rating here, in my view:

• Non-negotiable: a return to consistent net inflows

• Almost (but not quite) essential: positive market performance, preferably with flagship Jupiter funds outperforming their benchmarks

This combination would be likely to generate predictable positive operating leverage, leading to a sharp increase in profits and cash generation. Market consensus would be likely to turn more positive towards this sector, supporting a cyclical re-rating.

Risks

There are two main risks here, in my view – company specific and sector wide:

• Structural change? What if the fund management sector is undergoing a structural change, not just a cyclical slowdown? Even if we are nearing peak passive investing – and I have no idea if this is likely – the market has changed over the last 15 years. Newer innovations such as roboadvisors and AI may also mean that investors seeking active options with expert guidance will not need to choose traditional funds. Even if actively-managed funds remain popular, the pricing power they enjoyed in the past may be permanently diminished.

• Company-specific risks: Jupiter is neither large nor small and does not have a clearly-defined niche where it’s an accepted market leader. As a result, the only way the company has to distinguish itself with potential investors is through investment outperformance, ideally across multiple strategies. That’s not always easy to achieve or sustain through varying market conditions. In addition, there’s the risk that the company’s turnaround will ultimately underperform expectations or that Jupiter’s execution will falter – perhaps as a result of a problematic acquisition.

Recent trading & news

10 July 25 (Acquisition of CCLA Investment Mgt): CCLA is a UK asset manager specialising in serving non-profit organisations with more than £15bn of AUM.

Jupiter will pay £100m to acquire CCLA, which has generated net inflows in each of the last 15 years and achieved an adjusted operating profit of just under £13m last year.

As Graham commented in the DSMR, this looks like a sensible acquisition at a reasonable price and could be a step-change in scale for Jupiter. AMBER/GREEN.

25 July 25 (half-year results): these interim results showed stable fee margins on lower AUM, resulting in an 11% fall in revenue. Reverse operating leverage meant this translated into a 36% drop in pre-tax profit.

However, there were some signs that flows might be improving. H1 net outflows were reduced to £0.2bn and Jupiter reported net inflows for Q2 and for July.

I covered Jupiter’s half-year results in more detail here in the DSMR, retaining our AMBER/GREEN view.

Sentiment & Outlook

What do brokers currently think and are they upgrading estimates?

Jupiter’s H1 outlook statement didn’t provide specific new financial guidance. But the StockReport consensus trend chart reveals that analysts have upgraded their estimates several times since May, including after the recent results.

Consensus estimates tend to be a lagging indicator of expectations, earnings momentum looks to be quite strong at the moment:

What would the person selling to us be thinking and who are they?

Turnarounds do not always turn. There’s no guarantee that these early signs of momentum can become an established trend of rising AUM and recovering profits. If profits don’t start to recover, then I think it’s fair to suggest Jupiter’s shares are already fully priced.

Investors who bought stock at c.80p over the last year may well be tempted to lock in a quick 50% profit in case recent progress stalls.

The resurgent strength of US markets (and the FTSE 100) may also mean that investors are seeing more exciting opportunities elsewhere and are choosing to reallocate cash.

Conclusions

I can’t rule out the risk that traditional fund managers will continue to face problems competing with more glamorous alternative choices. But I can’t help feeling that Jupiter is both reasonably valued and attractively positioned to deliver profit growth from current levels.

The investment performance of Jupiter’s larger funds has – mostly – been relatively strong against peer comparisons, which could help to attract institutional business.

The changes being made by CEO Beesley seem sensible and there are some tentative signs net inflows may be returning to both Jupiter and the wider UK market. The strong balance sheet, seed capital and recent CCLA acquisition could also help drive additional incremental returns over time.

Further gains may not be as rapid as the re-rating we’ve seen over the last six months. But on balance, I think the investment case continues to look attractive.

Disclosure: at the time of publication, Roland owned Legal & General shares.