Ashmore's AuM recover

23rd Feb 2012 08:00

Ashmore Group, the fund manager specialising in investments in emerging markets, saw its assets under management (AuM) slide in the second half of 2011 as markets took a dive, though things did improve in the final quarter.AuM at the end of 2011 stood at $60.4bn, down $5.4bn (8%) over what is the first half of Ashmore's financial year. The decline was caused by an adverse investment performance, with the value of the portfolios diving by $6.1bn in the six months period, despite a $1.0bn gain in the firm's second quarter. Gross subscriptions totalled $6.7bn in the half-year period, down from $11.4bn in the corresponding period of 2010, while gross redemptions rose to $6.0bn from $2.8bn the year before. That still meant that, on balance, new funds were flowing into the coffers."Our investment performance overall continues to follow our historic profile and strong long term track record with 50% by AuM of those accounts managed to benchmarks outperforming their benchmarks over one year, and 78% outperforming over three years," the company statement said.Total revenue in the six month period rose 4% to £181.0m from £173.7m at the interim stage the year before. That was despite a dip in performance fees to £23.0m from £60.1m the year before. Net management fees shot up by 30% to £151.4m from £116.1m a year earlier, an increase of 30%, due to the higher levels of average AuM compared to a year ago and a stronger US dollar, offset by a reduction in average management fee revenue margins to 76 basis points, or bps (100 bps = one percentage point), from 86 bps the year before.Profit before tax edged up 2% to £129.8m from interim profits of £127.6m in 2010.Basic earnings per share retreated to 13.83p from 14.30p the year before, but the board is still recommending an increase in the interim dividend to 4.25p, up from 4.16p.Despite the AuM number shifting into reverse, the group remains more convinced than ever of the wisdom in focusing on emerging markets."It has been clearer than ever over the last six months that emerging markets are the driver of global GDP [gross domestic product] growth, and negative developed world events are happily having a profound impact on perceptions of relative risk globally and prejudices about emerging markets. Many of the asset classes in emerging markets can now not only be considered as higher returning than their developed market equivalent, but also as safer," claimed Mark Coombs, Chief Executive Officer of Ashmore.Ashmore currently trades at between 14 and 15 times 2013 earnings, with some analysts suggesting that, despite its success, it is quite an expensive way of playing the emerging markets. Speaking to Digital Look, however, the group's Finance Director, Graeme Dell, argued there was "enormous" scope for growth and that there would "always be new themes". He cited local currency corporate funds, for which there is currently not even an index as an example. Dell also pointed out that only a fraction of available capital had been mobilised towards Ashmore's sector, with US pension companies only holding at 5% of their funds in emerging market debt and only 3% in equities. The group maintains a balance between those funds where it is eligible to earn performance fees and those that generate revenues solely through management fees. At December 31st, 2011, the group was eligible to earn performance fees on 32% of AuM (30 June 2011: 38%), or 40% of funds (30 June 2011: 43%). The debt-free group's cash and cash equivalents balance reduced by £45.1m in the period to £323.9m."There are excellent investment opportunities within many of Ashmore's investment themes and performance across all them in 2012 has started well as a result of maintaining and developing our positioning in the final quarter of 2011. The world in many senses looks similar to the same time a year ago, after a little hiatus, but emerging asset classes offer considerably more value than then, having been caught up in the Europe induced general 'risk off' mentality of the last quarter of 2011," Coombs said.jh