Close Brothers Asset Management On Track To Achieve Margin Goal - CEO

Tom Burroughes

12 March 2014

Close Brothers Asset Management, the business that reported half-year results yesterday along with UK-listed parent Close Brothers, is on track to achieve an operating margin of 15 per cent by the end of the 2015 financial year, its leader has said.

The unit is currently reporting an operating margin of 8 per cent, which in term has risen from 3 per cent in 2013, Martin Andrew, chief executive, told this publication in a telephone call after group results for the six months to end-January 2014 were announced.

The AuM division reported adjusted operating income had risen 9 per cent to £40.5 million . Income on assets under management increased 11 per cent to £40.0 million , predominantly reflecting growth in AuM to £9.3 billion, while the revenue margin increased slightly to 87 basis points .

Adjusted operating expenses increased by £1.2 million to £37.3 million . The expense/income ratio was 92 per cent, down from 97 per cent. The division's return on opening equity increased to 16 per cent .

The firm said it continued to see “good momentum in gross inflows”. AuM increased 2 per cent in the first half to £9.3 billion at 31 January 2014 , with net inflows across distribution channels, supported by modest market movements, it said.

Andrew told this publication that Close Brothers AM now had the breadth of products and services to achieve sustained growth.

"We have got what we need to do the job - all the relevant pieces of the jigsaw are now in place,” he said, adding: "We have got our proposition where we want it to be."

"Our profile and the understanding of our brand is still not as high as we would like and a bit more work needs to be done on that,” he said.

He pointed to the net inflows logged in asset management sector , which, when market and other issues are stripped out, equates to an annualised growth rate of 4 per cent on opening assets.

He said that one impact of RDR, which the firm has experienced, is increasing use of discretionary asset managers from IFAs. "There is a lot of talk about price but not a lot of talk about the value of financial advice," he said. "I feel that is not sufficiently spoken about in this marketplace,” Andrew added.

To see yesterday's full group figures, see here.