They are always honest, open and happy to talk to whoever wants to bend their ear.
But if the industry anecdotes – and to be honest, some of the headline numbers – are to be believed, then as a retail fund house it still has plenty of challenges to face up to.
Looking over the edge
According to the latest IMA stats, the firm ran £920m in assets under management at the end of March last year. Twelve months down the line and this figure is 30% lower, at just under £710m.
Three years ago, just as its well-documented China problems kicked in and its real troubles kicked off, it ran more than £1.5bn so over this time period the firm has actually lost more than half its retail AUM.
Managing director Andy Sowerby is honest enough to give the complete picture when he says that at the start of 2010, and the start of 2011, total company assets under management stood at £10bn. At the beginning of 2012 this was down to £5bn, hitting £4.2bn by the middle of the year.
Profits fell too and in the most recent calendar year the firm actually made a loss.
The good news is this downward trend has been well and truly bucked, as AUM of £5.5bn, growth of 30% in three months and three consecutive quarters of positive sales will testify. These are positive numbers that are not necessarily the subject of industry anecdotes…
Its momentum has picked up through, for example, a $250m mandate win from the Pennsylvania State Employees’ Retirement System at the end of last year.
There is also some encouragement from an analysis of the relationship between some of Martin Currie’s fund flows and those funds’ performance.
The Big Three
Its problem child has been, and reputationally still is, China. Never the biggest of its fund range, in its current post-Chris Ruffle guise the Martin Currie China Oeic’s AUM has been as high as £42m (July 2011) and as low as £15m. Unfortunately that low is right now and, since April 2010, the fund has shed 35% of its assets, 65% since July 2011.
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But its performance has been far more positive than these fund flows would suggest, generating returns of 13.4% in the year from April 2010 to April 2011 (compared to 6.2% by the sector), -10.3% (-8.6%) for the following 12 months, and 2.4% (2.7%) for the next 12.
In the most recent 12 months, manager James Chong has maintained a second quartile position and returned 23% compared to 24% by its IMA China/Greater China sector peer group.
Similarly, the Martin Currie Asia Pacific Fund shows negative net outflows, starting May 2010 with £280m that has subsequently been whittled away to £112m.
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Again, looking back at how it has done in the past three years, its performance has been superior to its peer group, returning 5% more than the IMA Asia Pacific ex Japan category to the end of March this year (25.8% compared to 20.8%) , 10.9% (3.3%) for the previous 12 months and 10.5% (12.2%) for the 12 months prior to that.
Where this comparison breaks down is probably the firm’s biggest disappointment of all, its US offering. What was far and away the biggest of its retail funds, Martin Currie North American has shed 68% of its £740m AUM since the end of April three years ago and currently holds £235m.
Its performance has lagged as well, returning 22.2% over that time compared to its IMA peers returning 29.5%.
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Moving forward
But it is also a good example of how Martin Currie has reacted as a group, supporting those it believes in and being open and honest in its dealings.
Tom Walker was joined as co-manager of the high-conviction, 40-stock North American Fund by Penny Kyle in September last year, bringing with her five years’ experience at the Kuwaiti Investment Office where she ran the US equities team.
“Tom did not become a bad manager overnight”, explained Martin Currie’s managing director Andy Sowerby. “We are confident in the portfolio and the process and very positive on the fund and sector. We want to be competitive in each of the sectors we operate in.
“Our job is to add value and, while we haven’t done so in the US for the past three or four years, I am confident we will.”
Whether this support and rhetoric is enough to tempt investors back into the fund Sowerby will find out, as he is now back on the road talking to the top-end discretionary market.
However, there are two ‘Buts’ to consider:
- The numbers really do not look great – even the best performance figures face stiff competition from better performance figures from its competitors;
- Sowerby has had a cunning long-term strategy in place since 2009 and published in 2010 – as it happens, a week before the firm’s China crisis – and it is now bearing fruit.
Next week I will explain in more detail how the strategy has developed and how the firm is positioned in an increasingly competitive world…
