SCOTTISH fund management house Edinburgh Partners rode out global stock market turbulence during its last financial year with a leap in pre-tax profits from £15.7 million to £21.8m.

This surge in profits, which was described by Edinburgh Partners’ directors as an “excellent” result, was achieved on the back of a jump in average funds under management to £8.18bn in the year to February 28 from £5.5bn in the prior 12 months.

The current funds total, which was not disclosed by Edinburgh Partners, is likely to be higher than the £8.18bn average for the last financial year.

Edinburgh Partners, which is chaired by Edinburgh merchant banker Sir Angus Grossart, has grown into one of Scotland’s major fund management houses from a standing start in 2003, when chief executive Sandy Nairn quit Scottish Widows Investment Partnership to set up the business. He was joined by several of his former colleagues from SWIP.

Mr Nairn told The Herald that he believed global equity markets, which have been on a rollercoaster ride, were “around fair value” at the moment. He remains positive about the long-term outlook for equities, relative to bonds and cash.

Edinburgh Partners’ pre-tax profits of £21.8m in the last financial year were up 75% on the £12.4m figure for the 12 months to February 2009.

Revenues at Edinburgh Partners, which runs funds for institutional investors including pension funds and public authorities, rose to £40.5m in the year to February 2011, from £29.1m in the prior 12 months.

Edinburgh Partners’ net profit, after taxation, rose to £15.6m in the year to February 28 from £11.5m in the prior 12 months.

In their report on the accounts, which have just been filed with Companies House, the directors of Edinburgh Partners say: “During the year, the company continued to increase funds under management and consequently revenue and profit.

“This was an excellent result... The directors remain confident in the long-term outlook for the company.”

They note that the increase in revenue is attributable to the increase in average funds under management and new business mandates won.

The directors highlight the fact that Edinburgh Partners has, since May 2010, been closed to new segregated account business to focus on the existing client base. Segregated account business is where a client’s funds are run on their own, rather than being pooled with other funds in collective investment vehicles. This closure to new segregated business applies to global and EAFE, Europe, Australasia and Far East, equity management mandates.

Edinburgh Partners is ahead of the market in terms of the investment performance of its global funds in the year to date, after a tougher 2010.

Its European funds business has been doing very well.

Funds under management rose during the year to February 2011 partly because clients with which Edinburgh Partners had been talking before it closed to new segregated global and EAFE mandates gave the investment house assets to run during the period.

Edinburgh Partners had an average of 63 employees during the year to February, compared with a figure of 61 in the prior financial year.

The investment house’s employees, including Mr Nairn, own the majority of Edinburgh Partners. Sir Angus’s Edinburgh-based merchant bank, Noble Grossart, has a minority stake.

Asked by The Herald about current stock market valuations, Mr Nairn replied: “I think, generally, equity markets are around fair value at the moment, and that is in anticipation of pretty anaemic growth.”

Mr Nairn said that, on a long-term view, equity markets were likely to “gradually move up” but he also acknowledged the possibility of “short-term shocks”.

He added: “I think, in five to 10 years’ time, you will look back and be glad you put money in equities, but it won’t feel like that as you go through each individual year. There is a lot of fear out there.”

Asked about Edinburgh Partners’ growth into a major Scottish fund management company, Mr Nairn highlighted his view that other big investment houses north of the Border such as Baillie Gifford and Walter Scott were also doing well.

And he believes the success of other firms such as these is good for Edinburgh Partners in terms of the overall reputation of Scotland’s fund management sector.

Mr Nairn said: “The bottom line is we are not competing against them. We are competing with them against the rest of the world. The more fund management firms in Scotland do well, the better it is for us because it enhances everyone’s reputation.”