Last checked at 20 Jan 2009 07:00
20 January 2009
RECORD PLC
THIRD QUARTER TRADING UPDATE
Record plc ("Record" or the "Company"), the specialist currency investment manager, announces today that as at 31st December 2008 the Group's assets under management equivalents ("AuME") totalled $35.6 billion (30th September 2008: $47.8 billion). In addition, Record has been selected for two large US active hedging mandates during the third quarter that have not yet commenced and are therefore not included in these figures. Contract discussions with both parties are progressing well.
A significant proportion of the movement in AuME is due to the US Dollar:Sterling exchange rate. AuME expressed in Sterling as at 31st December 2008 totalled £24.7 billion (30th September 2008: £26.8 billion).
1 AuME composition
Record saw a decline in AuME and client numbers during the period between 30th September 2008 and 31st December 2008. The composition of AuME at 31st December 2008 was as follows:
| AuME $ bn | ||||
| 31st December 2008 | 30th September 2008 | |||
| Absolute Return | ||||
| Segregated | 8.7 | 12.0 | ||
| Pooled | 6.5 | 12.1 | ||
| Absolute Return Sub Total | 15.2 | 24.1 | ||
| Active Hedging | 4.8 | 5.9 | ||
| Passive Hedging | 13.9 | 15.2 | ||
| Cash & Futures | 1.7 | 2.6 | ||
| Total | 35.6 | 47.8 | ||
2 AuME MOVEMENT
Net client AuME flows in the three months to 31st December 2008 by product were as follows:
| Net Client AuME flows - $ bn | ||||
| 3 mths to 31st December 2008 | 3 mths to 30th September 2008 | |||
| Absolute Return | ||||
| Segregated | (1.7) | (1.0) | ||
| Pooled | (1.3) | (0.2) | ||
| Absolute Return Sub Total | (3.0) | (1.2) | ||
| Active Hedging | (0.1) | 0.9 | ||
| Passive Hedging | 1.0 | 0.1 | ||
| Cash & Futures | (0.5) | 0.1 | ||
| Total | (2.6) | (0.1) | ||
Record had 137 clients at 31st December 2008, compared to 150 at 30th September 2008.
The factors other than client flows which impacted AuME during the quarter were:
| (i) Exchange rate movements: | -$4.4bn |
Exchange rate movements during the period affect the conversion of non-US dollar mandate sizes into US Dollar AuME. Given the significant movement in the US Dollar relative to Sterling, this was the most significant factor influencing AuME during the quarter;
| (ii) Movements in global stock and other markets: | -$3.0bn |
Substantially all the Passive and Active Hedging, and some of the Absolute Return mandates are linked to stock and other market levels. Consequently AuME is affected by movements in these markets which had a negative impact in the quarter;
| (iii) Pooled fund investment performance: | -$1.8bn |
Investment returns are compounded on a geared basis into the AuME of the pooled funds and so impact AuME;
| (iv) Degearing of pooled funds: | -$0.4bn |
Due to changes in market conditions it has been necessary to de-gear the currency positions within certain equity based funds, resulting in a fall in AuME.
Investment performance in Record's Absolute Return product was negative during the quarter ending 31st December 2008 and for an un-geared portfolio equated to -150 bps over the quarter as a whole. The quarter was characterised by unprecedented volatility in the currency markets, particularly during October, when volatility was more than four times normal historical levels. This impacted fund performance during the quarter due to the costs of opening and closing out trading positions as part of the risk management process. Record's Directors are encouraged by the performance of the risk management process and are confident that the long term investment strategy remains robust.
3 AVERAGE FEE RATES
During the quarter to 31st December 2008, average management fee rates were maintained across all product categories.
The changes in AuME during the third quarter are estimated to reduce management fee revenue (excluding performance fees) in the second half by approximately 14%. The reduction in management fee revenue was partially offset in the third quarter by performance fees of £0.8m that are unlikely to recur in the fourth quarter. The large US active mandates for which Record has been selected are unlikely to make a significant contribution to revenue in the second half but revenue from these mandates is expected to be reflected fully in the financial year ended 31 March 2010. This income reduction will be partially mitigated in pre tax profits by reductions in payments under the Group Bonus Scheme, which represents 30% of pre bonus operating profit.
Chairman and CEO, Neil Record, commenting on trading, said 'In these turbulent times, we are seeing an increasing interest in active hedging particularly in the US and are pleased to have been selected by two large state pension funds during the third quarter. During the recent challenging environment we have continued to receive support from the high quality relationships we have developed with investment consultants and with our clients, which are based on our long term track record and our commitment to communicate. Whilst there may be further Absolute Return outflows, we continue to work hard to maintain these relationships and to communicate information on market developments and the implications for Absolute Return investment performance to investment consultants and clients. We remain confident in and committed to our long-term investment strategy.'
Record will announce its fourth quarter trading update on 21 April 2009.
For further information, please contact:
| Record plc | Tel: +44 (0) 1753 852 222 |
Neil Record
Paul Sheriff
| Hogarth | Tel: +44 (0)20 7357 9477 |
Nick Denton
Julian Walker
Notes to Editors
Record plc
Record is a specialist currency investment manager and provider of currency hedging services for institutional clients. Founded in 1983, Record has established a market leading position as a currency asset manager. Specifically, the Group has a leading position in managing currency for Absolute Return for institutional clients.
The Group has three principal product lines:
currency for Absolute Return, in which Record enters into currency contracts for clients with the objective of generating positive returns;
active hedging, where Record seeks to eliminate the impact of currency movements on elements of clients' investment portfolios that are denominated in foreign currencies when these movements are expected to result in an economic loss to the client, but not to do so when they are expected to result in an economic gain; and
passive hedging, where Record seeks to eliminate fully the economic impact of currency movements on elements of clients' investment portfolios that are denominated in foreign currencies.
Record (LSE: REC) was admitted to trading on the London Stock Exchange on 3rd December 2007.
This announcement includes information with respect to Record's financial condition, its results of operations and business, strategy, plans and objectives. All statements in this document, other than statements of historical fact, including words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "will", "continue", "project" and similar expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the Company's future performance and are subject to risks, uncertainties and assumptions that could cause the actual future results, performance or achievements of the Company to differ materially from those expressed in or implied by such forward-looking statements.
The forward-looking statements contained in this document are based on numerous assumptions regarding Record's present and future business and strategy and speak only as at the date of this announcement.
The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement whether as a result of new information, future events or otherwise.