SHARES in the investment firm chaired by Martin Gilbert fell nearly 5% after losses widened to £26.7 million, following write-downs on loss-making businesses during an “exceptionally difficult” year for the asset management sector.
AssetCo declared it had “not been immune” from “rising interest rates, inflation and the residual impact of the pandemic” as its core River Global business reported “outflows from a number of its investment strategies, particularly UK equities”.
However, Mr Gilbert said that although the “uncertain global economic and political backdrop continues to weigh on financial markets… there are tentative signs that overall market activity may finally be picking up”.
Mr Gilbert, who co-founded Aberdeen Asset Management in the early 1980s, has built up AssetCo through a series of investment firm acquisitions over recent years, following his departure from Edinburgh-based Standard Life Aberdeen, now abrdn, nearly five years ago. He had been a key architect of the £11 billion merger of Aberdeen Asset Management and Standard Life in 2017, and ran the business jointly with former Standard Life chief Keith Skeoch before departing two years later.
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AssetCo reported that active assets under management had dipped to £2.4bn by September 30, 2023 from £2.3bn the year before. The fall in AUM came amid challenging conditions in the UK asset management sector. AssetCo noted that UK investor funds under management had seen net outflows across the industry of £34.8bn, equating to outflows of 2.5%, for the 2022/2023 year, ending the period at £1.38 trillion. Investors have been moving money from equity funds to debt products and cash to take advantage of higher interest rates.
AssetCo cited “uncertain” global macroeconomic conditions, arising from war in Ukraine and Middle East, Brexit, inflation and “sluggish” recovery from the pandemic and said it had responded to the “challenging backdrop” by taking action to cut costs and exit loss-making businesses.
In September, it announced the sale of its 70% equity interest in Rize, a thematic ETF (exchange-traded fund) specialist to ARK Invest LLP, which was followed by a deal in principle to sell its interest in River and Mercantile Infrastructure LLP. “While that transaction has still to complete, the business has stabilised and is no longer loss making,” AssetCo said.
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Although the company move to exit early-stage businesses, it “significantly expanded” its Scottish footprint with the completion of SVM Asset Management in Edinburgh, following the announcement of that deal in October 2022. It said the SVM deal “facilitated consolidation of operating facilities in Edinburgh”, with AssetCo’s Revera and Saracen fund management businesses in Scotland moving into the larger SVM offices prior to the end of the 2023 calendar year, “making an early start to realising cost efficiencies across the group”.
AssetCo acquired Ocean Dial Asset Management last March, with the deal completing immediately after year-end on October 2, while it completed the sale of River and Mercantile’s loss-making business in the US, allowing it to focus equity management operations solely on the UK.
AssetCo brought all of its equities businesses under the River Global brand and operating model in December.
The company reported a loss for the year of £26.7m, compared with £8.5m the year before, following losses on discontinued operations.
It removed £2.3m of costs during the year and has identified further savings of £2m to £3m.
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Mr Gilbert said: “Rising interest rates, inflation, and the residual impact from the pandemic have all contributed to large net retail outflows from UK equities in particular, estimated at £13.6bn, accounting for 39% of total net outflows across the industry over the period.
“AssetCo has not been immune from this pressure and River Global saw outflows from a number of its investment strategies, particularly UK equities.
“The challenging backdrop has required us to take definitive action and we have cut costs in our equities business and moved to exit other early-stage or loss-making businesses. That has, unfortunately, required us to take significant write-downs which have impacted our results for the year.
“The remaining equities business has been simplified and consolidated, however, and it is encouraging to see an improvement in our fee rates as unprofitable funds have been merged or closed and inflows have been added at higher fee rates than outflows.”
Shares in AssetCo closed down 1.75p or 4.795% at 34.75p.
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