TIDMRIV
RNS Number : 6931L
River and Mercantile Group PLC
23 April 2018
23 April 2018
River and Mercantile Group PLC
Third quarter trading update
31 March 2018
River and Mercantile Group PLC (R&M), the investment
solutions business today provides a trading update for the three
and nine months ended 31 March 2018.
Highlights for the three months ended 31 March 2018:
-- Fee earning AUM/NUM increased by 1% to GBP33.0bn.
-- Sales for the period were GBP2.0bn which included a GBP1.2bn
structured equity mandate for a Local Government Pension
Scheme.
-- Redemptions in the quarter were GBP1.2bn, including GBP0.3bn
of maturing structured equity transactions, and GBP165m and GBP158m
from the UK Smaller Companies Fund and the UK Dynamic Fund,
respectively.
-- Net inflows for the quarter were GBP0.8bn, equivalent to 2.4% of opening AUM/NUM.
-- Investment performance was negative GBP0.4bn, primarily from allocations to equities.
Highlights for the nine months ended 31 March 2018:
-- Fee earning AUM/NUM increased by 6% to GBP33.0bn.
-- Sales for the period were GBP4.6bn, including GBP1.1bn from
Equity Solutions and GBP3.1bn from Derivative Solutions.
-- Redemptions in the period were GBP4.0bn, including GBP1.5bn
of maturing structured equity transactions from a single client
which had met its objectives.
-- Net inflows for the nine months were GBP1.5bn, equivalent to 5% of opening AUM/NUM.
-- Investment performance generated GBP0.4bn and was positive across all divisions.
-- Performance fees earned in the nine months ended 31 March
2018 are estimated to be GBP7.8m, of which GBP5.4m relates to the
Fiduciary Management division with the balance from Equity
Solutions.
-- Net advisory fees earned for the nine months ended 31 March
2018 are estimated to be GBP7.4m.
Mike Faulkner, CEO of River and Mercantile, said:
"Over the period we have seen weakness in equity markets and a
consequent rise in volatility. We believe this is consistent with
what we would consider to be an apprehension phase in the market
cycle. As expected, our AUM has been negatively affected by the
investment return in our equities business, but the effect was more
muted in Fiduciary Management due to our defensive positioning.
Derivative Solutions is not directly exposed to market
movements. As a result, the impact of negative equity market
returns has been significantly reduced at a total firm level by the
diversified nature of our business.
We had previously guided that in these conditions we generally
expect to see strong interest for our equity and structured equity
mandates, and indeed this is what we have seen during the quarter,
with strong flows in particular coming in Derivatives.
It is worth specifically highlighting that we executed a
significant structured equity mandate for a UK local authority.
Local authorities are an exciting new client base for our
outcome-led approach to investing. We continue to see institutional
demand for our global and international equity offerings across all
regions. In Australia and the US we are expanding our fund
offerings in order to target pension, endowment and family offices
where we see opportunity to deliver strong outperformance for
clients.
Our view is that, in the near term, we may be moving into a more
challenging phase of the market cycle. We have therefore been
helping clients to prepare to defend market weakness. Consistent
with this view, in February we launched and seeded the River and
Mercantile Global Macro Fund, which combines our strong
intellectual thinking in macro asset allocation with our
derivatives trading expertise. We believe that this strategy will
deliver significant returns over a full cycle, whilst being
designed to defend a downturn effectively.
Overall, our level of intellectual research and development has
continued to expand and as a result we are well positioned to
continue our growth by assisting our clients in what could be
difficult market conditions in the near term."
Assets Under Management (AUM) and Notional Under Management
(NUM)
AUM/NUM for the three months ended 31 March 2018.
Assets Under Management (AUM) and Notional Under Management (NUM)
Equity Solutions
----------------------------------
Fiduciary Derivative
GBP'm Management Solutions Wholesale Institutional Total Total AUM/NUM
--------------- ---------------- ---------- -------------- ------ --------------
(AUM) (NUM) (AUM) (AUM) (AUM)
Opening fee earning
AUM/NUM 10,953 16,703 2,285 2,640 4,925 32,581
Sales 101 1,672 183 36 219 1,992
Redemptions (97) (680) (378) (79) (457) (1,234)
--------------
4 992 (195) (43) (238) 758
Net rebalance and
transfers (109) 133 - - - 24
Net flow (105) 1,125 (195) (43) (238) 782
Investment
performance (162) - (157) (93) (250) (412)
Fee earning AUM/NUM 10,686 17,828 1,933 2,504 4,437 32,951
Mandates in
transition
(31 March 2018) - 190 - - - 190
Redemptions in - - - - - -
transition (31 March
2018)
Mandated AUM/NUM 10,686 18,018 1,933 2,504 4,437 33,141
=============== ================ ========== ============== ====== ==============
Increase/(decrease)
in fee earning
assets (2%) 7% (15%) (5%) (10%) 1%
--------------- ---------------- ---------- -------------- ------ --------------
Increase/(decrease)
in mandated assets (2%) 12% (15%) (5%) (10%) 4%
--------------- ---------------- ---------- -------------- ------ --------------
At 13 April 2018, AUM was GBP0.7bn for the UK Smaller Companies
Fund and GBP0.2bn for the UK Dynamic Fund.
AUM/NUM for the nine months ended 31 March 2018.
Assets Under Management (AUM) and Notional Under Management (NUM)
Equity Solutions
----------------------------------
Fiduciary Derivative
GBP'm Management Solutions Wholesale Institutional Total Total AUM/NUM
------------- -------------- ---------- -------------- ------ --------------
(AUM) (NUM) (AUM) (AUM) (AUM)
Opening fee earning
AUM/NUM 10,528 16,888 1,821 1,812 3,633 31,049
Sales 457 3,069 628 464 1,092 4,618
Redemptions (327) (2,993) (572) (148) (720) (4,040)
--------------
130 76 56 316 372 578
Net rebalance and
transfers (182) 864 - 280 280 962
Net flow (52) 940 56 596 652 1,540
Investment performance 210 - 56 96 152 362
Fee earning AUM/NUM 10,686 17,828 1,933 2,504 4,437 32,951
Mandates in transition
(30 June 2017) - - - - - -
Transitions/adjustments - 190 - - - 190
--------------
Mandates in transition
(31 March 2018) - 190 - - - 190
Redemptions in
transition
(30 June 2017) (2) (572) - - - (574)
Transitions 2 572 - - - 574
--------------
Redemptions in - - - - - -
transition
(31 March 2018)
-------------
Mandated AUM/NUM 10,686 18,018 1,933 2,504 4,437 33,141
============= ============== ========== ============== ====== ==============
Increase/(decrease) in
fee earning assets 2% 6% 6% 38% 22% 6.1%
------------- -------------- ---------- -------------- ------ --------------
Increase/(decrease) in
mandated assets 2% 10% 6% 38% 22% 8.7%
------------- -------------- ---------- -------------- ------ --------------
Performance fees
Performance fees earned in the nine months ended 31 March 2018
are estimated to be GBP7.8m, of which GBP5.4m relates to the
Fiduciary Management division with the balance from Equity
Solutions.
Based on the current performance of Fiduciary Management, we do
not anticipate recognising any further performance fees in the
fourth quarter. At 0% outperformance against benchmark, performance
fees from Fiduciary Management for the year ended June 2019 are
estimated to be GBP10m.
Notes to editors:
River and Mercantile Group PLC (R&M) is an investment
solutions business with a broad range of services, from consulting
and advisory, to fully delegated fiduciary management and asset
management.
R&M is focussed on creating investment solutions for
institutional pension schemes, insurance and financial
intermediaries and operates through four divisions: Investment
Solutions encompassing both advisory and fiduciary management,
Derivatives Solutions providing structured equity and Liability
Driven Investing (LDI), Equity Solutions providing UK and global
equity strategies and Multi Asset Solutions, providing dynamic
asset allocation and other multi asset based solutions.
For further information please contact:
River & Mercantile Group PLC +44 (0)20 3327 5100
Chris Rutt, Deputy Chief Financial Officer and Investor
Relations
Forward-looking statements
This announcement contains forward-looking statements with
respect to the financial conditions, results and business of the
Group. By their nature, forward looking statements involve risk and
uncertainty because they relate to events, and depend on
circumstances that will occur in the future. River and Mercantile
Group's actual results may differ materially from the results
expressed or implied in these forward looking statements. Nothing
in this announcement should be construed as a profit forecast.
Notes:
Assets Under Management (AUM) represents the assets over which
we act either as a discretionary investment manager on a partial or
fully delegated basis in accordance with an investment management
agreement.
Notional Under Management (NUM) represents the aggregate billing
notional of derivative contracts and is the basis on which
management fees are charged.
Net rebalance and transfers represents the net change in billing
notional values of Derivatives (including Gilts) from existing
client mandates and can increase or decrease based on changes in
the underlying hedging strategies.
The category also represents transfers of client assets between
divisions. The different billing structures between divisions,
including the use of AUM or NUM, means that transfers will not net
to zero. The acquisition of AUM as part of the Credit Suisse ILC
Co-operation agreement has also been recognised on this line.
Fee earning AUM/NUM represents amounts on which management fees
and performance fees are charged.
Mandates in transition represent the AUM/NUM of mandates which
have been awarded by clients at the period-end date and will
transition into fee earning assets. The timing, and ultimate amount
transitioned is determined by the client. We report an estimated
AUM/NUM for those mandates where there is a high likelihood of the
amount being transitioned within the next three months.
Redemptions in transition are redemptions which have been
notified by the client at the period-end date, but where the
AUM/NUM is included in fee earning assets at period end. We report
an estimated AUM/NUM for those mandates where there is a high
likelihood of the amount being redeemed within the next three
months.
This information is provided by RNS
The company news service from the London Stock Exchange
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