9th Sep 2013 12:53
LONDON (Alliance News) - City of London Investment Group PLC Monday said its full-year funds under management declined after a single client of nearly five years decided to manage its emerging market exposure itself.
City of London said its funds under management decreased to USD3.7 billion for the year to May 31, down from USD4.5 billion for the corresponding period the year prior after the decision by the client, whom it didn't name.
The investment trust said it is now open to new investors and is now seeking to attract up to USD500 million by December 31, 2014.
"Whilst a comment on outlook is expected from a chairman, when it comes to predicting market movements I have always been a sceptical crystal ball gazer," Chairman David Cardale said in a statement. "However, following stabilisation of our business, the improved investment performance and with the recent operational efficiencies working through to the bottom line, then based on current market levels and assuming reasonable trading activity, I anticipate a satisfactory outcome for the current year."
Meanwhile, Chief Executive Barry Olliff, who is based in America, launched an attack on EU regulatory proposals for fund managers, questioning whether its "bureaucrats" understand basic principles of fund management and predicting that the proposals would "weaken London as a financial centre and make Europe less relevant in terms of the provision of certain financial services".
"American corporations involved in investment management are rubbing their hands together," he warned.
Olliff implied it is wrong for fund managers to be threatened with "arbitrary remuneration rules that were introduced by the EU for bankers", arguing that fund managers were not the cause of the financial crisis and pose "no systemic risk to the banking system".
"Given that the remuneration of [fund] managers is, at least partly, based on the performance of the fund, there is an incentive to increase the level of risk in a fund's portfolio in order to increase potential returns. However, the higher level of risk exposes the fund investors to higher potential losses than might be expected given the disclosed risk profile of the fund," the European Commission said in July 2012.
The proposed changes to existing legislation for fund managers have been made in light of the Bernard Madoff fraud, which, according to the European Commission, resulted in one EU fund losing around EUR1.4 billion. The EC said the fraud went undetected for so long because the fund delegated custody of the assets to an entity run by Madoff, who also happened to be the manager and broker responsible for purchasing financial instruments on behalf of the fund. The EC proposals aim to make clearer the relationships between funds and the managers they appoint.
City of London shares were Monday quoted at 225 pence, up 11.50 pence, or 5.4%.
City of London's full-year dividend was left unchanged at 24 pence per share.
By Samuel Agini; [email protected]; @samuelagini
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