Speirs & Jeffrey dominates AUM growth at Rathbones

Assets under management grow 18.5% due to the deal

Rathbones

Rathbone Brothers has reaped the benefits from its £104m acquisition of Speirs & Jeffrey in its third quarter results.

In a trading update for the three months to 30 September, Rathbones said assets under management (AUM) rose 18.5% to £47.3bn, up from £39.9bn at 30 June.

The Speirs & Jeffrey deal, which was first announced in April, and completed in August, contributed to £6.7bn of the increase. Excluding the sale, AUM only rose by 1.8% over the period.

The deal consisted of £79m cash and £25m through the issue of one million new Rathbones shares.

Chief executive Philip Howell (pictured), said: “This increase in scale places us in a strong position to continue to improve our service to clients and, mindful of recent volatility in investment markets, to maintain our disciplined investment in the business.”

Investment manager departures

For the investment management arm, net inflows rose 2.8% in annualised terms for the quarter, down from 3.5%.

Additionally, while unit trusts were up 3.4% at £6bn, from £5.8bn at 30 June 2018, net inflows for the business dipped from £342m a year ago to £121m for Q3 2017.

Rathbones said this reflected “a more difficult trading environment for asset management generally”.

However, analysts have argued the departure of investment managers from Rathbones was to blame.

Stuart Duncan, analyst at Peel Hunt, said total net inflows reached £218m, with an annualised organic growth rate of 2.6%, which was consistent with the rate in Q3 2017 despite more challenging conditions.

“There was a modest improvement in gross inflows, with a similar sized increase in gross outflows, related in part, we believe, to the continuing impact from recent investment manager departures,” he said.

Likewise, RBC analyst Gordon Aitken, said net flows continue to be suppressed by the departures of some key asset management professionals.

He said: “As Rathbones has grown and made acquisitions some investment directors have left the group preferring to work within a smaller organisation and some clients have followed them out.

“We expect this headwind will continue into the first half of 2019.”

Forecast

Net operating income was at £80.3m for Q3, up 13.9% from £70.5m in the same period last year. In the investment management arm, this came in at £70.8m, 13.3% higher than the £62.5m in the comparable period in 2017.

Duncan added: “Whilst today’s statement was largely as anticipated, clearly since the end of the quarter market conditions have deteriorated.

“Key to the outcome for the year will be the next billing date on 31 December.”

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