UK fund houses hit by client exits

LONDON Thu Jan 19, 2012 6:48am EST

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LONDON (Reuters) - British asset managers suffered a wave of withdrawals in the final three months of last year, as clients fretting about a deepening euro zone crisis and choppy financial markets trimmed exposure to investment funds.

Jupiter Fund Management (JUP.L) reported its first quarter of net outflows since returning to the London Stock Exchange in June 2010, while Aberdeen Asset Management (ADN.L) saw clients accelerate withdrawals at the end of last year.

Investors, rattled by volatile markets, have been pulling back from riskier investments across the fund management industry, often plumping instead for cash or passive products.

The trading updates follow Wednesday's news that Man Group (EMG.L), the world's biggest listed hedge fund manager, would cut more jobs after suffering heavy client exits in the fourth quarter.

UK industry body the Investment Management Association said this month that equity funds suffered their largest outflow on record in November.

"Given economic headwinds and deteriorating public and household finances across the euro zone and UK, financial markets are likely to remain volatile and flows subdued," Jupiter said in its trading statement on Thursday.

Analysts, however, said the resilience of demand for higher-margin products supported company bottom lines and made them among the sector's top picks.

Jupiter shares were up 1.04 percent by 1040 GMT, while Aberdeen's were down 2.57 percent, against a 0.93 percent rise in the FTSE 250 index .FTMC.

ASSETS RISE

Aberdeen said a net 2.8 billion pounds of client money left its business in the three months to end-December. Oriel analyst Keith Baird said Aberdeen's outflows were higher than he had expected.

Outflows were largely from lower margin assets such as fixed income, and the loss of one global mandate. The firm lost 1.7 billion pounds the previous quarter.

But clients continue to buy into its higher-margin Asian and emerging market debt funds which, along with positive performance and market gains, helped total assets rise to 173.9 billion pounds, up 2 percent on three months earlier.

"The slowdown in gross sales (in Q4) is welcome. We've been trying to slow down sales in areas where we have capacity constraints. It's mainly emerging market equities -- where we've been trying to slow sales and get margins up -- and global," Aberdeen Chief Executive Martin Gilbert told an analysts' call.

"My instinct is that they've got better," he added, referring to January flows.

For London-based Jupiter -- which invests the bulk of its assets in equities, and counts the UK investor as its core customer base -- the fourth quarter marked the end of a run of consecutive periods attracting more money than it lost.

The firm, which runs 22.8 billion pounds in assets and is headed by chief executive Edward Bonham Carter, said the poor environment for retail sales and the loss of a single segregated mandate from an institutional client resulted in 225 million pounds of redemptions.

This included 93 million pounds of outflows from its mutual funds business, where most Jupiter assets lie, the firm said.

JP Morgan analysts reduced their 2012 estimates to reflect weaker expected client flows over the next six months.

"This leaves Jupiter's profits flat year on year, a relatively good outturn in a sector where we expect most companies to report declining profits this year," they said in a note.

Elsewhere, upmarket manager St James's Place (SJP.L), which focuses on wealthy clients, said on Thursday total new business rose 10 percent last year.

(Reporting by Tommy Wilkes and Laurence Fletcher; Editing by David Hulmes)

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