Ashmore Group has reported record annual net inflows despite emerging market volatility in the final quarter.
Retail demand was up year-on-year adding to total net inflows of $16.9bn for the period ended 30 June 2018. Retail assets under management (AUM) surged 47%, while total assets grew 26% from $58.7bn to $73.9bn.
Ashmore chief executive Mark Coombs said growing retail AUM had been a key strategic initiative for the group. Retail clients now represent 14% of group AUM.
During the year, 73% of the emerging markets specialist’s AUM outperformed the benchmark.
Emerging markets volatility
Coombs put a positive spin on recent emerging markets volatility, stating the outlook for the company was positive due to attractive valuations and underweight investor allocations.
He said: “While asset prices were more volatile in the final quarter of the financial year, this largely reflected nervousness about a small number of emerging countries with particular issues such as Turkey, with the market extrapolating these concerns across the broad and highly diverse emerging markets universe of more than 70 countries.
“This mispricing therefore presents another very appealing entry point for investors.”
However, Peel Hunt analyst Stuart Duncan described the outlook as mixed. “A more cautious short-term view given increased asset price volatility and risk aversion. However, it is also highlighted that this is largely a reflection of developed market events, with emerging market economic fundamentals largely unchanged.”
The typical investor has an allocation below 10% compared to a global benchmark neutral weight of 15% to 20%, the Ashmore results noted.
Segregated mandates reduce margins
More large segregated accounts meant revenue margins declined over the period from 52 basis points to 49bps, Duncan said.
Management fees net of distribution costs brought in £250.5m over the period while performance fee revenue was £21.9m up 13% from the previous year.
Net revenue totalled £276.3m, while profit before tax was £191.3m.
Duncan attributed recent share price weakness to emerging market sentiment and said a yield of circa 5% offered some short-term compensation. Ashmore’s shares are down 12% year-to-date trading on 355p per share.
The asset manager is in the process of establishing an office in Ireland to continue accessing EU clients following Brexit.
