RWC sales buoyed by EM fund lacking track record

Investors rotate into higher beta products

Photo by Niels Steeman on Unsplash

Bumper inflows into emerging market funds helped offset outflows from higher margin products at RWC Partners delivering nearly half of net new business in the latest financial year.

Assets under management (AUM) at RWC Partners rose from $10.4bn to $14.2bn for the year ended 31 December 2017, according to its latest annual financial statements. In September 2017, it officially acquired Pensato Capital adding $280m to AUM.

The emerging markets team attracted a bumper $1.9bn over the year. Emerging markets inflows represented 42% of RWC’s net new business, which totaled $4.5bn.

It added a further $900m to AUM through performance.

Despite being several months shy of its three-year track record, the Global Emerging Markets sector Sicav now has $1.2bn assets under management, according to Trustnet.

The strong sales were a welcome surprise, according to RWC chief executive Dan Mannix, who said they were preparing for a challenging year heading into 2017 due to economic, geopolitical and regulatory headwinds. “Flows had been rotating out of some of our higher margin products and, as yet, we were not seeing a pickup in flows for the developing global and emerging market teams.”

Mannix described the Global Emerging Markets Equity Fund as “one of the most exciting team launches across the industry over the last few years”. The fund, which launched in December 2015 and is managed by the emerging markets team, headed by John Malloy and James Johnstone.

It returned 31.1% during 2017 compared to 24.4% in the Investment Association Global Emerging Markets sector and 25.4% in the MSCI Emerging Markets index, according to FE Analytics. However, it has underperformed in the year to date, losing investors 14.6% compared to 9.2% losses in the sector and 6.8% falls in the index.

Rotation from low to high beta products 

The global equity team, led by Louise Keeling, plus the European equity team also had a strong year, he added. Institutional investors in America, Australia and the Middle East were keen buyers into the equity strategies.

However, clients rotated out of lower beta products, he said.

The income, convertible and US long/short teams all faced outflows. The results also noted RWC closed its European Long Short team under Ajay Gambhir and the UK Focus Strategy led by Paul Harrison and Nigel Davies over the period.

Brexit set to hit international investor base

Luxembourg business was the largest contributor to turnover over the period representing £32.6m compared to £7.9m from the UK.

“With a significant proportion of our business being undertaken in Europe, Brexit is also likely to have an impact on the organisation,” said Mannix.

He said relevant preparations for Brexit are underway but did not go into detail.

While assets rose over the period, profits fell from £9.5m to £6.7m. Costs increased for administrative expenses and members’ remuneration. However, the highest paid director took home £1.9m in 2017 compared with £2.8m the year before.

RWC strengthened its sales and marketing team, including moving one staff member to Miami to strengthen its onshore and offshore US presence.

Its London headquarters also moved to the Verde building in Victoria, London.

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