Analyst Peel Hunt has issued buy ratings on Brooks Macdonald, Ashmore and Charles Stanley despite all three suffering outflows in the first three months of the year as Covid-19 took hold, while Schroders has reported a £30bn drop in assets.
All four firms published updates on their assets under management for the first quarter of the year on Thursday.
Charles Stanley’s balance sheet strength
Peel Hunt lauded Charles Stanley’s strong balance sheet despite the wealth manager reporting a 20% fall in assets over its fourth quarter (1 January to 31 March).
Charles Stanley reported a 20% decrease in its overall AUM during the quarter to £20.2bn.This loss comprised negative investment performance of £4.6bn and £500m of net outflows.
Its discretionary service saw a net inflow of £100m, but lost £2.5bn due to market movements, taking AUM in that part of the business to £12bn – 16.7% lower than the previous quarter. Its advisory managed business saw flat inflows but took a £200m hit to AUM from market movements taking the total to £1.2bn.
The execution-only business was hit by a £600m net outflow and lost £1.7bn to market movements. Closing AUM as at 31 March was £6bn.
But at £44.8m the firm’s revenue was 12.6% higher than the previous quarter. Its total revenue for the year was £172.9m, very near to Peel Hunt’s forecast of about £172m.
> See also: John Redwood adjusts outlook as coronavirus mounts ‘substantial attack’
Peel Hunt said: “Much remains to be done at Charles Stanley, in terms of starting to increase the rate of growth, and then subsequently drive higher operating margins from the rebased level. We reduce our target price to 320p from 350p, although remain at buy given the significant gearing into any market recovery.”
Charles Stanley chief executive Paul Abberley (pictured) said: “The group has a very strong balance sheet with significant capital resources and no borrowings. This places us in a very robust position to navigate the current situation and emerge strongly. We are therefore confident about prospects for the business.”
Brooks Macdonald sees AUM drop 7%
Brooks Macdonald’s assets under management dropped 7% for the quarter to 31 March to £12.2bn. Negative markets and investment performance equated to a £1.8bn loss, or around 14% of opening AUM, marginally better than the MSCI WMA Private Investor Balanced Index decline of 15.2%.
This is despite the £1.2bn of assets taken on from the acquisition of Cornelian Asset Managers which completed at the end of February.
> See also: Brooks unveils senior management line-up post Cornelian acquisition
Net outflows across the business were £204m compared with £478m in the previous quarter. The UK business made up £125m of the net outflow, all related to its bespoke portfolio service, despite the addition of £400m from Cornelian’s direct client book. The international business accounted for £48m of outflows.
Despite this, regarding the UK business Peel Hunt said: “Inflows continued to increase and we believe the business still has a solid pipeline to fund in the coming months, which will hopefully result in broadly flat flows in Q4.”
It added: “Wealth management has typically proven its resilience over the longer term, and we do not expect this downturn to be any different.”
Brooks Macdonald chief executive Caroline Connellan said: “Given our focus on clients and advisers, our actions in response to the crisis, and our continuing strategic execution, we are well positioned to take advantage of opportunities once the worst of the Covid-19 crisis is past.”
She added: “We have no current intention to take advantage of any of the government backed lending schemes, or to furlough any permanent staff.”
Ashmore shares look cheap and dividend attractive
On Ashmore, Peel Hunt said despite a 22% drop in assets under management over the firm’s third quarter, 1 January to 31 March, due to market movements and outflows, the share price has rebounded near 40% over the past three months leaving shares looking cheap with an attractive dividend yield of 5%.
Assets under management declined by $21.6bn over the quarter to $76.8bn (£61.6bn), reflecting negative investment performance of $18bn and net outflows of $3.6bn.
Peel Hunt said: “Although markets have been difficult, the business has adapted well to working remotely and the £700m of financial resources means the group has an exceptionally robust balance sheet.”
Ashmore ‘s update said: The group’s business continuity plan has been operational globally since mid-March and has been fully effective with the vast majority of employees in its global operating hubs and local offices working remotely, in accordance with the relevant government advice in each location.”
It also alluded to its “strong, liquid balance sheet” with no debt and more than £700m of financial resources including more than £400m of cash as at 31 March.
Ashmore chief executive Mark Coombs said: “Ashmore’s business model and investment processes are designed to manage severe market dislocations such as that caused by the cumulative impact of a correction to the overpriced US equity market, an oil price war and Covid-19.”
Schroders loses £30bn in AUM during ‘extreme’ volatility
Schroders shed £29.7bn in assets in the first quarter of the year, taking its assets to £470bn from £500.2bn at the end of 2019.
The firm saw net a inflow of £30.4bn during the quarter in which it added the final chunk of the Scottish Widows mandate, which contributed £29.5bn. This is despite market movements and investment performance delivering a £61bn hit.
> See also: Schroders reporting revamp to provide more clarity on fee pressure
Schroders’ solutions, asset management and wealth management businesses saw positive net flows of £35.3bn, £29.8bn and £600m, respectively. However, private assets and alternatives, mutual funds, and institutional saw net outflows of £800m, £4.2bn and £500m respectively.
The only section of the business to deliver a positive investment return was alternatives and private assets which delivered £300m during the quarter.
Schroders group chief executive Peter Harrison said the business has proven to be “resilient” during extreme market volatility and social and economic uncertainty.
“We are committed to supporting our clients, colleagues and the wider community throughout the current Covid crisis. We are not seeking any government assistance globally, nor are we furloughing any employees or enacting any related redundancy programmes.”
