Surprisingly strong inflows into fixed income funds have boosted Ashmore’s share price as investors looked to take advantage of depressed prices in emerging market assets.
The specialist investment manager took in $1.9bn net inflows over the quarter ended 30 September 2018, which was ahead of consensus.
Net inflows and positive investment performance of $300m helped push assets under management up by $2.5bn to $76.4bn. The group also received a $300m injection from its acquisition of a 56% stake in Colombian real estate manager Avenida.
Ashmore’s shares were perked up by the news rising 2% to 358p during early trading on Friday. However, they are still down 14% year-to-date.
Volatility fails to dent emerging market specialist’s flows
Peel Hunt analyst Stuart Duncan said the strength of the inflows is surprising given the more volatile market conditions during the period.
But Ashmore chief executive Mark Coombs said this is precisely why investors were drawn to the “attractively valued” asset class.
“Net inflows continued through the quarter as clients responded positively to the opportunities created by price volatility across a broad range of emerging markets asset classes,” he said.
Coombs said the team had been selectively adding risk which had resulted in strong relative performance.
“Given the likelihood for mispricing around near-term events such as elections in the US and several Emerging Markets countries, we anticipate there will be more opportunities to buy attractively-valued assets and to embed long-term value into portfolios,” he added.
EM debt funds lead flows
Most of the positive flows were into its fixed income strategies. Ashmore said flows were broadly spread across external debt, local currency, corporate debt and blended debt products.
Flows into equities were flat, while its multi-asset and overlay/liquidity funds saw small net outflows.
Its alternatives funds also were hit by net outflows but total assets were lifted because of the Avenida purchase.
Investors remain underweight emerging markets
Duncan said he does not anticipate Peel Hunt will change its profits forecast for the group. It is currently predicting profit before tax of £216.3m and earnings of 24.1p, which it said is broadly in line with consensus.
He maintained his ‘buy’ recommendation for the firm, blaming current share price weakness on pessimistic sentiment about emerging markets assets rather than the underlying performance of the business.
“The longer-term opportunity remains intact – investors remain underweight emerging markets, from both a structural and cyclical point of view, and are more consistent in their engagement with Ashmore,” said Duncan. “There is also the attractive yield of almost 5% that is well supported by the strength of the balance sheet.”
