Ninety One struggles for relevance

Fund manager Ninety One (N91) has struggled to achieve any traction this year, which was again underlined by a disappointing set of interim results that showed little in the way of recovery potential. Net outflows for the half were £4.3bn – notably higher than an already pessimistic consensus forecast – while the fall in earnings prompted a 9 per cent cut in the dividend. Fundamentally, the results beg questions about Ninety One's target markets. Is it big enough to compete with the largest asset managers on volume? Does it have enough specialist expertise to call itself niche? On current evidence, the answer to both questions seems to be a resounding 'no'.

Ninety One operates long-only strategies which are often badly affected when market volatility is high. The company's quest for relevance is even more pronounced at the moment given investors are locking in guaranteed returns by simply holding cash. The outflows contributed heavily to a 5 per cent fall in assets under management (AUM) to £123bn, with institutional clients pulling £3.39bn of funds alone.

Equities are the biggest asset class by total weighting and the 6 per cent fall here to £56.2bn affected the overall numbers disproportionately. Interestingly, the company did see some net inflows from African clients, which were positive by £158mn, but these weren’t enough to change the overall balance.  

Ninety One’s large private holding does shield the company somewhat, but it seems that it only has one of two available options; either to await a sale to a larger competitor or to fundamentally restructure its offering. With Numis’s 13.5 PE rating still considered a premium to other distressed managers, there is no reason yet to bottom fish. Sell.

Last IC view: Sell, 165p, 17 May 2023