7th Sep 2018 13:49
LONDON (Alliance News) - Investment manager Ashmore Group PLC said Friday that it plans to open an office in Ireland to escape the potential consequences of Brexit, as it reported 26% jump in assets under management on the back of record fund inflows.
Shares in the FTSE 250-listed emerging markets investment manager were trading up 2.1% at 352.40 pence each on Friday afternoon.
The London-listed company plans to open an office in Ireland due to the "substantial uncertainty regarding the terms and the implications for the financial services industry" in the Brexit negotiations.
The company is looking to "ensure continued access" to EU-based institutional clients. Ashmore also believes the operational impact of Brexit will be "manageable" and the financial impact "immaterial" after the move to Ireland.
In the year ended June 30, Ashmore increased its assets under management to USD73.9 billion from USD58.7 billion in the year, reflecting net inflows of USD16.9 billion, up 47% from the year before and highest delivered in a financial year.
Ashmore posted a 7.2% decrease in pretax profit to GBP191.3 million for the 2018 financial year from GBP206.2 million. Total revenue increased 11% to GBP285.7 million from GBP257.2 million.
Management fees increased 15% to GBP259.7 million from GBP226.2 million. The increase was largely attributed to the growth in large accounts which attract lower net management fee margins due to their size.
The fund manager said net flows were strongest in its local currency, blended debt, and corporate debt themes. By client type, retail intermediary, pension funds, government-related pension schemes and insurance companies produced strong net flows.
The company's three largest asset themes all grew in the year: blended debt increased to USD19.7 billion from USD14.6 billion; local currency increased to USD17.0 billion from USD13.7 billion; and external debt increased to USD14.5 billion from USD13.3 billion.
Ashmore's blended debt theme has delivered "significant outperformance" with a gross annualised return of 5.9% over three years compared to the benchmark return of 3.2%.
The company expects "continued demand" for its blended debt funds from both institutional and retail investors.
In a similar story to its blended debt asset class, local currency has also outperformed its three year annualised gross returns - with 3.3% compared to 2.0% for the index.
Ashmore believes the recent correction in the local currency asset class should be seen against the strong return delivered since early 2016. Immediately after the US election, the asset class rallied 15% in 12 months and Ashmore expects a similar run.
The current index yield is 6.8%, similar to the 5.25% seen before the US election. Local currency bonds, however, are predominantly investment grade and offer a real yield of 3%. Ashmore, therefore, expects a "further demand from a broad range of institutional investors".
Ashmore's external debt scheme saw its benchmark add two more countries during the period, taking the total to 67. This "provides significant diversification", according to Ashmore, and "significant opportunities for an active manager to generate value".
Ashmore's believes its "relative performance is strong" in the asset class and has a positive outlook. The possibility of more countries joining the index "increases diversification, raises credit quality and reduces volatility".
The external debt assets - following blended debt and local currency - have delivered three year annualised gross returns of 7.1%, outperforming its benchmark index which posted 4.6% in the same period.
Ashmore said 73% of its assets under management outperformed their benchmarks for the year.
Ashmore doubled its overall gross subscriptions to a record USD30.0 billion from USD14.8 billion. Total gross redemptions were at a "similar level", GBP13.1 billion from GBP12.8 billion, but dropped as a proportion of assets under management to 22% from 26%.
The growth in subscriptions was "broadly spread across investment themes" - with the most significant coming from European retail clients, local currency funds and blended debt.
Looking ahead, Ashmore stressed that the recent challenges faced by the emerging markets countries was not caused by a "deterioration in economic fundamentals" but instead "developed world events".
Ashmore does not buy into the "popular narrative" that has focused on a "small number" of emerging countries that have "specific and self-inflicted challenges".
The correction in asset prices "does not undermine the positive fundamental trends", said Ashmore, which includes GDP growth, increasing credit worthiness and the development of local capital markets.
As such, Ashmore believes the outlook for emerging market countries remains positive. The company believes the recent downward trend presents "another highly attractive entry", similar to levels from just after the US presidential elections.
Ashmore does not expect to repeat its "very strong" net flow performance, but its outlook does remain positive. It proposed a unchanged final dividend of 12.10 pence per share, giving a flat total payout of 16.65p per share for the financial year.
Related Shares:
Ashmore