Jupiter Fund Management has reported strong performance from its flagship actively managed fund, contributing to a significant rise in the company’s profits. The fund’s success, combined with rising global equity markets, has enabled Jupiter to bolster its total assets and position its shares attractively after a prolonged period of underperformance.

The key driver of this turnaround is the Jupiter Merian Global Equity Absolute Return fund, known as Gear. Unlike traditional equity funds, Gear maintains a market-neutral position by simultaneously taking long and short positions in selected stocks, aiming to generate positive returns regardless of broader market movements. The fund employs a computer-driven system overseen by an investment team led by Amadeo Alentorn, which continuously refines its strategy to exploit pricing inefficiencies across nearly 1,400 holdings.

Gear targets a return around 9% annually—roughly 4% from cash savings plus an additional 5%—but has outperformed these expectations in recent years. It posted a 12% gain in the year ending August, with a three-year return of 39% and a five-year return of 65%. Investors in the fund pay a 20% performance fee on profits.

Jupiter’s current success follows challenges between 2017 and 2020, when the fund struggled amid rising interest rates and market concentration in a handful of large U.S. technology firms. During that period, assets under management in Gear fell by 90% as investors withdrew their money. At the time, the fund was operated by Merian Global Investors, a firm spun out of Old Mutual Global Investors in 2018 and led by Richard Buxton, a noted stock picker. Jupiter acquired Merian in 2020 and Buxton stepped back from management in 2023. Since making adjustments to Gear’s stock selection process, Jupiter has seen assets in the fund rebound to £9.3 billion by the end of August, contributing to the group’s total assets under management of £73.7 billion.

Matthew Beesley, chief executive of Jupiter, expressed optimism about the prospects for actively managed funds in the current volatile environment, suggesting that the ability to generate returns “whatever the weather” appeals to wealth managers aiming to safeguard client savings. Jupiter recorded its first net inflow of assets since 2017 last year. However, roughly £4 billion of the £19.7 billion increase in assets during the first half of this year was attributable to rising stock market valuations rather than new money.

Jupiter also expanded through acquisition, purchasing CCLA Wealth Management, which oversees £15 billion in funds for churches, charities, and local authorities. This deal highlights the company’s capability to generate substantial cash flow; Jupiter distributes half of its profits to shareholders via dividends and may issue special dividends if acquisition opportunities are limited.

Analysts from Deutsche Numis have projected a 52% increase in adjusted earnings per share for the year, reaching 24 pence. Jupiter shares currently trade at about seven times earnings, which analysts consider attractive amid ongoing market uncertainty. With the Gear fund delivering strong performance early in this new five-year cycle, fees are compounding on a larger asset base. While fund flows can be volatile, current conditions suggest a positive outlook ahead of the company’s trading update scheduled for October 15.