Ashmore Group, the specialist emerging markets asset manager, reported a decline in assets under management (AUM), profits and earnings, despite recent evidence that emerging markets have rallied.
The London-listed company’s AUM dropped by 3% to $75 billion (€58 billion) from $77.4 billion at the end of June 2013, a fall that Ashmore attributes to redemptions from lower margin business.
There have been signs recently that investors are starting to return to emerging markets. Investors increased allocations to emerging markets equity exchange-traded products in August in search of relative value, BlackRock noted.
Emerging market equity had a fifth straight month of inflows with $4.7 billion focused in broad emerging market and China funds.
Despite this trend, Ashmore’s results show that adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) were down from £249.2 million to £171.0 million, and profit before tax declined 34% from £257.6 million to £170.3 million, compared to the last financial year of 2012/13.
However, long-term investment performance was strong; with 81% of AUM outperforming benchmarks over three years and 92% over five years. Total operating costs were also reduced by 23% from £127.2 million for 2012/13 to £97.9 million.
Mark Coombs, chief executive officer for Ashmore Group, says: “Ashmore’s financial results for the year reflect the impact of market volatility experienced for much of the period and the effects of Sterling strength.
“Emerging nations are generally in good health; aggregate GDP growth in emerging markets was 4.5% in 2013 and is expected to be higher still in 2014, inflation is at acceptable levels, and foreign exchange reserves remain strong.”
Chairman, Michael Benson, adds: “Market conditions in the financial year were the reverse of those experienced in the previous year, in that turbulence prevailed for much of the period before a recovery in sentiment and asset prices occurred in the second half.
“Ashmore’s singular focus on emerging markets has enabled it to contend with the volatile market conditions evident for most of the past financial year. Assets under management were resilient, and the Group’s investment processes identified and acted upon value, becoming apparent as non-dedicated investors withdrew from the asset class.”
Last year was the best year ever for the global asset management industry, according to McKinsey & Company, which says the rise in assets under management globally was a result of performance of financial markets rather than cost discipline. However, there are concerns that an over-reliance on specialist asset classes, such as emerging market debt, is risky.
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