24 Jan 2019 07:00
24 January 2019
LEI: 2138005C7REHURGWHW31
River and Mercantile Group PLC
Second Quarter Trading Update
31 December 2018
River and Mercantile Group PLC (R&M), the investment management and solutions business, today provides a trading update for the three and six months ended 31 December 2018.
Highlights for the six months ended 31 December 2018:
· Gross sales for the period were £2.8bn.
· Net sales for the period were £1.3bn, equivalent to 4% of opening AUM/NUM. This included £0.8bn from Equity Solutions and £0.7bn from Fiduciary Management.
· Despite equity market falls, overall investment performance for the period was only negative £1.0bn (occurring in the second quarter), equivalent to 3% of opening AUM/NUM.
· As a result, fee earning AUM/NUM increased by 1.0% to £34.2bn.
· Performance fees earned in the six months ended 31 December 2018 are estimated to be £6.5m, of which £2.0m is from Equity Solutions and £4.5m from Fiduciary Management.
· Advisory fees earned in the six months are estimated to be £4.7m.
Highlights for the three months ended 31 December 2018:
· Gross sales for the period were £1.6bn.
· Net sales for the period were £0.7bn, equivalent to 2% of opening AUM/NUM. This included £0.4bn from Equity Solutions and £0.4bn from Fiduciary Management.
· Despite equity market falls, overall investment performance for the period was only negative £1.0bn, equivalent to 3% of opening AUM/NUM.
· Net rebalance and transfers was negative £0.5bn (1.5% of opening AUM/NUM).
· As a result, fee earning AUM/NUM decreased by 2.3% to £34.2bn.
· Performance fees earned in the three months ended 31 December 2018 are estimated to be £3.1m from Fiduciary Management.
Mike Faulkner, CEO of River and Mercantile, commented:
I am pleased with the results of this quarter, where the Group has performed as we predicted in more challenging market conditions.
Our diversified business model is underscored by our investment performance across the Group during the quarter. Whilst Equity Solutions investment returns were in line with our expectations given market conditions, our other divisions were much less affected by market falls, or not affected at all.
As a result, the negative impact of markets during the quarter on overall opening AUM/NUM was only 3%, ultimately reflecting the diversified nature of our business and revenue streams which are much less exposed to equity market beta than traditional investment businesses.
Our strong distribution capability generated gross sales in the quarter equal to 5% of opening AUM/NUM, with a particularly positive contribution from our Institutional Equities and Fiduciary Management divisions. Our pipeline across the broader business remains strong, with our investment in our US and Australian presence generating a number of interesting and exciting opportunities. Our Fiduciary Management division has seen an increase in new business activity following the conclusion of the CMA review.
I noted in our trading statement following the last quarter, that we believed we were moving into a downturn which would impact absolute returns and we positioned our clients accordingly in preparation for these more difficult market conditions. It is clear that this was the correct decision and these proactive moves insulated client returns from the worst of the market falls.
Looking forward, our investment views are more positive and many of the macro economic signals that concerned us through the majority of the last period have played out in a manner that suggests that risk assets in many markets are likely to provide some positive returns - and in certain areas this may be significant. We are beginning to position our clients accordingly to take advantage of this. Whilst there are still prevalent risks we remain alive to the opportunities and have continued to advance our investment research ideas in order to deliver enhanced outcomes to clients including in emerging market strategies.
We are therefore confident that we are well placed to capitalise on opportunities to deliver positive outcomes to both existing and new clients in the second half of our financial year.
Interim Statements:
The Group will release its interim results for the six month period to 31 December 2018, on 11 March 2019.
Assets Under Management (AUM) and Notional Under Management (NUM)
AUM/NUM for the three months ended 31 December 2018.
Equity Solutions | |||||||||||
£'m | Fiduciary Management | Derivative Solutions | Wholesale | Institutional | Total | Total AUM/NUM | |||||
(AUM) | (NUM) | (AUM) | (AUM) | (AUM) | |||||||
Opening fee earning AUM/NUM | 10,919 | 19,050 | 1,817 | 3,179 | 4,996 | 34,965 | |||||
Sales | 584 | 305 | 52 | 700 | 752 | 1,641 | |||||
Redemptions | (158) | (346) | (155) | (239) | (394) | (898) | |||||
426 | (41) | (103) | 461 | 358 | 743 | ||||||
Net rebalance and transfers | (348) | (192) | - | - | - | (540) | |||||
Net flow | 78 | (233) | (103) | 461 | 358 | 203 | |||||
Investment performance | (237) | - | (276) | (486) | (762) | (999) | |||||
Fee earning AUM/NUM | 10,760 | 18,817 | 1,438 | 3,154 | 4,592 | 34,169 | |||||
Mandates in transition (31 December 2018) | - | - | - | - | - | - | |||||
Redemptions in transition (31 December 2018) | - | - | - | - | - | - | |||||
Mandated AUM/NUM | 10,760 | 18,817 | 1,438 | 3,154 | 4,592 | 34,169 | |||||
Increase/(decrease) in fee earning assets | (1.5%) | (1.2%) | (20.9%) | (0.8%) | (8.1%) | (2.3%) | |||||
Increase/(decrease) in mandated assets | (4.1%) | (1.8%) | (20.9%) | (0.8%) | (8.1%) | (3.4%) | |||||
AUM/NUM for the six months ended 31 December 2018
Equity Solutions | |||||||||||
£'m | Fiduciary Management | Derivative Solutions | Wholesale | Institutional | Total | Total AUM/NUM | |||||
(AUM) | (NUM) | (AUM) | (AUM) | (AUM) | |||||||
Opening fee earning AUM/NUM | 10,642 | 18,622 | 1,887 | 2,692 | 4,579 | 33,843 | |||||
Sales | 1,039 | 452 | 131 | 1,194 | 1,325 | 2,816 | |||||
Redemptions | (339) | (645) | (285) | (267) | (552) | (1,536) | |||||
700 | (193) | (154) | 927 | 773 | 1,280 | ||||||
Net rebalance and transfers | (353) | 388 | - | - | - | 35 | |||||
Net flow | 347 | 195 | (154) | 927 | 773 | 1,315 | |||||
Investment performance | (229) | - | (295) | (465) | (760) | (989) | |||||
Fee earning AUM/NUM | 10,760 | 18,817 | 1,438 | 3,154 | 4,592 | 34,169 | |||||
Mandates in transition (31 December 2018) | - | - | - | - | - | - | |||||
Redemptions in transition (31 December 2018) | - | - | - | - | - | - | |||||
Mandated AUM/NUM | 10,760 | 18,817 | 1,438 | 3,154 | 4,592 | 34,169 | |||||
Increase/(decrease) in fee earning assets | 1.1% | 1.0% | (23.8%) | 17.2% | 0.3% | 1.0% | |||||
Increase/(decrease) in mandated assets | 1.5% | 1.1% | (23.8%) | 9.5% | (3.7%) | 0.5% | |||||
Performance fees
Performance fees earned in the three months ended 31 December 2018 are estimated to be £3.1m from Fiduciary Management. Performance fees earned in the six months ended 31 December 2018 are estimated to be £6.5m, which includes the previously announced performance fee from the River and Mercantile UK Micro Cap Investment Company Limited of approximately £2.0m and approximately £4.5m relating to Fiduciary Management. Advisory fees earned in the six months are estimated to be £4.7m.
Notes to editors:
River and Mercantile Group PLC (R&M) is an investment solutions business with a broad range of services, from consulting and advisory, to fully delegated fiduciary management and asset management.
R&M is focussed on creating investment solutions for institutional pension schemes, insurance and financial intermediaries.
For further information, please contact:
River & Mercantile Group PLC
Chris Rutt
Deputy Chief Financial Officer and Investor Relations
Email: chris.rutt@riverandmercantile.com
Tel: +44 (0)20 3327 5100
Forward-looking statements
This announcement contains forward-looking statements with respect to the financial conditions, results and business of the Group. By their nature, forward looking statements involve risk and uncertainty because they relate to events, and depend on circumstances that will occur in the future. River and Mercantile Group's actual results may differ materially from the results expressed or implied in these forward looking statements. Nothing in this announcement should be construed as a profit forecast.
Notes:
Assets Under Management (AUM) represents the assets over which we act either as a discretionary investment manager on a partial or fully delegated basis in accordance with an investment management agreement.
Fee earning AUM/NUM represents amounts on which management fees and performance fees are charged.
Notional Under Management (NUM) represents the aggregate billing notional of derivative contracts and is the basis on which management fees are charged.
Net rebalance and transfers represents the net change in billing notional values of Derivatives (including Gilts) from existing client mandates and can increase or decrease based on changes in the underlying hedging strategies.
The category also represents transfers of client assets between divisions. The different billing structures between divisions, including the use of AUM or NUM, means that transfers will not net to zero.