Record’s Q220 update is positive, showing assets under management equivalent (AUME) up 2.7% to $59.9bn (+6.1% in sterling terms). The AUME flow was a positive $1.7bn after a modest $0.3bn inflow in Q1. Market movements (+$1.3bn) and exchange rate and mandate volatility targeting movements (-$1.4bn) broadly balanced each other. Most of the AUME inflow was in passive hedging and reflected increased mandates from existing clients (tending to validate Record’s focus on service enhancement and innovation).
Two new clients were added in the quarter taking the total to 70 following the addition of three in Q1. Investment performance for the currency for return strategies was positive in the period; the Multi-Strategy composite, targeting 4% volatility, recorded a three-month return of +1.47% with an annualised performance since inception of +1.52% p.a. No performance fees were crystallised in the quarter.
Looking ahead, Record notes that the prevailing global macro uncertainties continue to facilitate conversations with clients and potential clients while its strategy of differentiating its offering through customised and enhanced service is helping to counter the (unchanged) competitive and fee pressures. The increase in AUME is encouraging and a positive driver for fee revenue but we estimate this would be broadly offset for the second half and FY21 if the sterling/dollar rate stayed at its current level. Given the potential for further significant Brexit-related moves in the sterling exchange rate in the near term and the proximity of the H120 results, due 22 November, we will review our estimates at that stage. Record continues to trade at a discount to a peer group of asset managers (details in last note linked below) at a CY19e multiple of 13.1x vs 15.0x.
Author: Andrew Mitchell