BT Investment Management
About the author:
- Author name:
- By Scott Murdoch
- Job title:
- Senior Analyst
- Date posted:
- 12 April 2016, 11:28 AM
- Sectors Covered:
- Diversified Financials, Professional Services
Key points
- BT Investment Management's (BTT) 2Q16 Funds Under Management (FUM) of A$77.2bn was down 3.1% on 1Q16 (in line with our estimate of A$77bn), driven primarily by the GBP currency drag.
- J O Hambro Capital Management Group (JOHCM) recorded net FUM inflows of A$1.1bn (versus our A$0.80bn estimate), with the composition swinging back to meaningful retail inflows (A$0.8bn vs A$0.2bn in 1Q16).
2Q16 FUM down 3.1% - driven by currency
BTT reported 2Q16 group FUM of A$77.2bn, down 3.1% on the previous quarter and in line with our expectations. The primary driver was currency, creating a A$3bn (or 3.8%) drag compared to opening FUM. Excluding the currency impact, group FUM was up 0.6%.
JOHCM FUM was down 3.6% on the previous quarter to A$37.1bn. JOHCM performance and flows were both positive, with the currency a 7.8% drag on divisional FUM. BTIM FUM was down 2.7% over the quarter, primarily driven by investment performance (down 2.4%, broadly in line with the ASX200 over the quarter). JOHCM continued to record solid net inflows of A$1.1bn (versus 1Q16 of A$0.9bn), with BTIM recording net outflow of A$0.1bn. The annualised impact on group revenues of inflows for the quarter is A$8.3m (vs A$3.7m in 1Q16).
Retail flows rebound in JOHCM - Brexit is the short-term unknown
JOHCM's net FUM inflow of A$1.1bn comprised of A4.8bn in retail funds and A$0.3bn in Institutional FUM. JOHCM's retail flows rebounded meaningfully from the A$0.2bn recorded in 1Q16, a strong result considering the market volatility in January and February.
The 'Brexit' referendum continues to pose short-term uncertainty, especially on the GBP currency direction. While this uncertainty is likely to persist until the outcome is known (referendum date of 23 June), we believe that JOHCM will not be materially impacted under either scenario from an operational perspective.
What we think
BTT's update showed that the structural growth drivers of JOHCM performance and FUM inflow are intact. Despite short-term risks associated with 'Brexit' (predominantly currency) and the potential for increased global market volatility, we believe BTT is executing on its growth plans and is well positioned to maintain solid net inflows and therefore underlying growth.
Taking a 12 month view, we upgrade our BTT recommendation to Add.
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