Ninety One per cent certain of hard times

Fund managers have generally endured a terrible quarter as combination of inflation, rising interest rates, an imploding tech bubble and a major land war in Europe sent investors scurrying for safety. South African fund manager outfit Ninety One (N91) could not escape the carnage, either, and its shares were heavily marked down on results day as much as a consequence of market sentiment, as any particular performance on the part of the company. In the end, investors will withdraw liquidity when they need it, or when rising interests make cash more attractive and there is little that the industry can do about it.

Reported asset flows held up reasonably during the year, with assets under management coming in 10 per cent higher at £144bn, although this included £8bn of positive foreign exchange effects. Equities form the bulk of Ninety One’s portfolios, and assets here rose 9 per cent to £63bn, although this paled alongside the inflows into alternative investments, which saw assets rise 15 per cent to over £4bn. Overall, Ninety One saw net inflows of £5bn for the year. Management noted a “reduction of client risk appetite” as the second half progressed, which reflected increasingly unstable global events. One positive was the stable picture on staff costs, which fell marginally to £276mn.    

There also seems to be a greater rush towards market and asset diversification; the company noted strong inflows from US institutional clients, suggesting that the discounts available on UK equities are attracting interest.

Investors can’t complain about N91’s basic performance and the company still returns an average of 63 per cent on capital invested. However, positive investor sentiment is key to a share price re-rating, and that is currently in short supply. Hold. 

Last IC View: Hold, 218p, 26 Aug 2020