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Business bounces back after 'one-off' bad year

INVESTMENT house Martin Currie has bounced back from its first ever loss with a £14 million profit turnaround and a 17% rise in assets under management to £5.6 billion.

WILLIE WATT: Chief executive of Edinburgh investment house Martin Currie described 2013 as a good year for the business, making a £4.8m profit.

The Edinburgh business, 50% owned by its staff, attracted net new inflows of over £450m last year and entered 2014 with £700m of unfunded new business, expecting to build on last year's 47% growth in revenue from £34m to £50m.

The 2013 operating profit was £4.8m following the loss of £9.3m in 2012, the first in Currie's 133-year history, when it was battling the fall-out from the sale of its China private equity business and £8.8m of regulatory fines in the UK and US.

Willie Watt, chief executive, said: "We said a year ago we expected 2012 to be a one-off bad year and we then had to go and deliver on that but we feel we have delivered. It was a good year and from an investment flows point of view 2014 has started well."

He went on: "I think a lot of what worked last year came from our long-term plan, which is pleasing but also gives us confidence we can continue to grow in future. We feel the decision to maintain the infrastructure of the company last year was a difficult one to take and we are glad we took it because it has allowed us to bounce back quicker."

Mr Watt said the firm's ­headcount had remained steady at 200 including 47 investment professionals, turnover was around the industry average of 13% and there had been four senior hires last year.

He said Currie's external ­investors, Crestview Partners and other interests of Jacob Rothschild, now held about 50% of the firm with staff holdings and share schemes accounting for the rest.

The firm's debt, held by its Bermuda-based holding company, was unchanged at around £30m while cash generation had moved from a £13m outflow to a £5.4m inflow last year and balance sheet cash was up from £13m to £18m.

Growth came across Currie's Asian, global emerging markets, Japan and Europe funds, though performance at its North American fund has recovered strongly after a trough. The firm's six-strong office in Singapore helped drive sales of its Asian equity product to Asian sovereign wealth funds and its Asian and emerging markets offerings to Australian pension funds.

The firm's strategy is to focus on emerging markets, absolute return, and equity income.

"Last year was not a good year for emerging markets but a lot of the professional investors we are dealing with were underweight in emerging markets because they had tended to focus on developed markets, particularly in Australia," Mr Watt said.

Currie's investment trusts Global Portfolio and the long-established Securities Trust of Scotland managed by Alan Porter are both top quartile performers over three years (STS also over five years) and have continued to benefit from the demand for equity income.

Mr Watt commented: "You tend to think of investment trusts as static but they can grow if shares are at a premium, which is where we have been with Securities Trust over the past 18 months."

Currie's absolute return funds have delivered 7.4% a year (Europe) and 5.6% (Japan) since inception, with lower volatility than the benchmark and Currie has now created an Asian fund. They all have UCITS versions for access by wealth managers, which now account for over 20% of the $2.5billion of assets.

Mr Watt said: "Absolute return is beginning to get more to the man in the street through UCITS wrappers.

"We were one of the first firms to do that and we are glad we did."

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