Premier delivering stellar growth

Premier operates a range of 24 funds and two investment trusts, in addition two segregated mandates. Its shares floated on the junior market after private equity groups Electra and Queripel Partners sold down their majority stakes. In the process, the UK-focused active manager raised £47m, which it used to pay down all its debt. Queripel and Electra retain a 33 per cent and 8 per cent stake respectively.

The fund manager sells most of its products via financial advisers who invest their retail clients’ funds. It particularly focuses on multi-asset strategies, which have become popular with retail investors seeking income growth in a low-interest-rate environment. Premier focuses on developing relationships with independent financial advisers because their low-cost platforms are more attractive to retail investors than the comparatively expensive products offered by wealth managers.

This strategy seems to be paying off. The fund manager has grown assets under management by almost half to £6.1bn in the two years to the end of September. More impressively, Premier has recorded more than four years of organic asset growth, rather than solely relying on market gains.

Admittedly, net inflows during its 2016-17 financial year were slightly below that achieved during the prior 12 months, quite likely due to referendum-related nervousness on the part of Premier's retail investors. That's consistent with the lowest organic growth of the year coming in the quarter immediately following the referendum when the net inflow was just £95m. However, this compares well with the performance of similar fund managers. Liontrust Asset Management (LIO) – its closest UK-listed peer – recorded inflows of £282m during the six months to the end of December. That compared with £356m gained in net new business by Premier during the same period.

With the fund manager achieving new inflows of £747m during 2017 – equivalent to 15 per cent organic growth – analysts at house broker Numis have forecast a 29 per cent increase in pre-tax profits to £13.7m for 2016-17 (see table). The broker also expects profit growth of more than a third in 2017-18, reflecting the benefit of Premier's higher level of assets under management. True, Premier faces a continual threat from passively-managed funds, which are growing in popularity among retail investors and charge lower fees than active products. Besides, retail investors can be fickle and disappear during tough times.