What's new:
■ Sharp rise in asset inflows
■ Strong investment performance
■ Rising demand for emerging market exposure
Ashmore has attracted a good deal of investor interest thanks to the asset manager's large exposure to investments in emerging markets. Faced with the prospect of pedestrian growth at best in the major industrialised economies, investors, buoyed further with the prospect of cheap money, are becoming more relaxed about introducing a greater element of risk into their investments in the search for better returns.
In the first quarter, the group's assets under management (AUM) rose by 18 per cent to $41.6bn (£26.3bn), reflecting a positive investment performance of $2.9bn and a $3.4bn net inflow of fresh funds. Most of the new money came from Asian retail investors and found its way into the group's multi-strategy funds. AUM here jumped 145 per cent to $4.9m between the start of July and the end of September. The other popular investment strategy has been currency hedging, given sharp fluctuations in the dollar and the growing prospect of a currency war.
However, typical margins on currency hedging strategies are relatively low at 25 basis points compared with the average of 90 basis points for other investment strategies. Even so, the size of recent inflows will make up for this, and have more than offset redemptions from some other funds as investors took profits.
Numis Securities says...
Hold. AUM in the first quarter were 6.4 per cent ahead of our estimate. However, taking away the flow of funds into low-margin currency strategies and high-margin multi-strategies, there was a 4.9 per cent fall in core product areas such as corporate debt and specialised funds, mainly as a result of profit-taking. Shares in Ashmore are trading on 16 times our EPS estimate of 23.2p for the 12 months to June 2011, some way above the sector average of 13. And there are better opportunities such as BlueBay, trading on 12 times forecast earnings, and Hansard on 13 times.
KBC Peel Hunt says...
Buy. Shares in Ashmore have risen 12 per cent in the past month and 35 per cent over the last three months, a performance justified by the group's strong investment performance. Fund inflows have been much stronger than we expected, and while the low-margin nature of some of the new business means that the impact on profits will be moderated, the demand for currency-related funds together with continued solid inflows from Asian investors should see profits rise further. We are currently reviewing our numbers and expect to upgrade current adjusted EPS estimates of 21.7p.
