Asset managers in the UK are braced for the Financial Conduct Authority’s blockbuster final report on the fund industry, which is due to be published by the end of the month.
In its damning interim report in November, the financial watchdog warned that investors in the UK were being short-changed by an industry making big profits from actively managed funds that do not outperform the market.
Whether the regulator moves to tackle this issue remains to be seen. But even without a push from the FCA, active fund houses — where portfolio managers pick stocks — are under pressure to reduce fees because of the rise of cheaper passive funds that track indices.
Yet despite increased regulatory scrutiny and falling profits across the sector, the UK’s investment industry is expected to expand rapidly as more citizens save for their retirement rather than rely on state pensions.
Premier Asset Management
Premier Asset Management is the UK’s newest listed asset manager, after going public last October on the junior market, Aim. Queripel Partners, a fund linked to the company’s chairman, Mike Vogel, controls about a third of Premier.
The investment house, which manages assets of £5.5bn, specialises in income products and multi-asset funds — a type of actively managed fund that invests across asset classes, which analysts believe will prove popular with investors as they save for retirement.
At a time when many of its larger competitors, such as Aberdeen and Henderson (now Janus Henderson), have experienced outflows, Premier has posted 16 quarters of positive inflows. Earnings have also been strong, with operating profits at the company more than doubling to £4m for the six months to the end of March compared with the same period last year.
According to David McCann, an analyst at broker Numis, Premier is targeting net organic asset growth of £850m to £900m per annum. But this year is proving harder than expected. During the six months to the end of March, the company, which operates only in the UK, reported net new money from investors of £311m, down from £422m a year earlier.
Investors, however, have shrugged this off. Its share price has increased 14 per cent since its October listing. The Guildford-based company, which was set up in the late 1980s, has a market capitalisation of £154.5m.
Impax Asset Management
Impax Asset Management is a specialist fund house that was set up in 1999 using cash from the International Finance Corporation, the private sector arm of the World Bank.
Since its launch, the London-based fund house has invested in companies and projects it believes will benefit from a shift to a greener economy, including businesses focusing on energy and water efficiency. It also offers private equity funds.
The company’s assets under management have grown rapidly since the Paris agreement to tackle global climate change in December 2015. The accord, backed by more than 190 countries globally, forced investors to reconsider their exposure to carbon-intensive industries, with many shifting assets to greener strategies.
Impax’s assets jumped from £3bn before the December 2015 agreement to £6.5bn today, while its share price has increased more than 50 per cent.
Despite president Donald Trump taking the US out of Paris agreement this month, the company has gathered up $1bn in assets across North America.
Revenues have grown quickly, while profits before tax at the company increased marginally in the six months to the end of March, at £2.4m compared with £2.1m for the same period last year.
Gresham House, which can trace its roots back Sir Thomas Gresham, the financier who founded the Royal Exchange in the 16th century, announced on Friday that it had raised £150m for its British Strategic Investment fund, which will invest in the UK housing market and infrastructure sector.
Gresham has secured support from the Royal County of Berkshire Pension Fund, and a second unnamed local government pension scheme, and is aiming to raise more capital from other institutional investors before the final close of the fund in the second half of next year.
The fund, which will run for 12 years, aims to deliver annual returns of up to 10 per cent and will target its activities in socially beneficial projects across UK regions.
The influx of capital takes Gresham’s assets under management to more than £500m and marks another step towards profitability for the company.
This month, Gresham House posted results showing its adjusted operating losses shrank to £1.6m in the year to December, compared with a £3.1m loss in 2015.
Gresham’s share price traded around 319p on Friday, up 7.2 per cent so far this year.