The UK watchdog fined River & Mercantile £109k after it found the fund group, along with Hargreave Hale and Newton Investment Management, had broken competition law by sharing details of the price they intended to pay in one initial public offering and one placing.
One of the firm’s biggest managers, Philip Rodrigs, was also sacked last year following a separate investigation into a professional conduct issue which came about because of the more stringent risk systems put in place following the FCA probe.
Shares in the fund group have taken a beating in the year since the conduct issues came to light, falling 26% from 335p to their current 246p.
Addressing the incident in the group’s interim results, chairman Jonathan Dawson noted the penalty fine was in line with the firm’s previous market guidance.
“While we are glad to put this matter behind us, the board continues to be focused on conduct and ensuring that the group upholds the highest standards at all times,” he added.
EM absolute return launch
The group also took the opportunity in its interim results to tease two upcoming products, Emerging Markets Absolute Return (EMAR) and Global Macro fund.
EMAR is in the late stages of development, while Global Macro has been seeded with £5m of group capital.
River & Mercantile CEO Mike Faulkner said both strategies have “many billions of capacity and can therefore add to the group’s profitability”.
He said EMAR in particular had generated strong client demand. The fund is based on a model portfolio and has been back tested with almost 20% of annualised performance since 2003.
The investment arm endured a “difficult period” over the six months to 31 December 2018, although Faulkner said it had held up better than other industry rivals. River & Mercantile saw net inflows of £1.3bn and a slight increase in assets under management, which rose 1% to £34.2bn.
Mifid II profit hit
Elsewhere the group reported profits had fallen by 13% from £9.6m to £8.4m year-on-year.
Higher revenues in the period were offset by the cost of investments in new products and offices in Australia and the US, as well as Mifid II related research costs.
River & Mercantile decided weeks before Mifid II rules came into force on 3 January 2018 that it would join the majority of firms that agreed to absorb the costs of external research instead of passing them onto clients.
External research costs over the latest interim period reached £700k and made up the bulk of its administrative expenses, which rose from £5.97m to £7.31m in a year.