Close Brothers Asset Management has reported a statutory operating profit of £8.7 million for its first half ended 31 January. This represents a year on year increase of 32 percent.
Adjusted operating profit for the business, which is the wealth management arm of the Close Brothers Group, increased 25 percent to £11.4 million.
Total operating income reached £56 million, up 12 percent year on year. Investment management remained the largest generator of operating income. During the period it contributed £35.8 million, 16 percent higher than the first half of the previous year. Advice and other services, which is made up of income from advice and self-directed services, contributed £20 million, up 15 percent. “Other income” contributed £0.2 million, down 11 percent year on year.
Adjusted operating expenses increased nine percent to £44.6 million, which the firm pointed out is less than the income growth and reflects the “operating leverage of the business”. The expense/income ratio reduced to 80 percent, down from 82 percent, while the compensation ratio increased slightly to 57 percent, up from 54 percent, “reflecting new hires and an increase in variable compensation in the period.”
The firm’s interim statement called this “a significant improvement in performance” and said net inflows reflected “the strength of our client proposition for both advice and investment management.”
Total managed assets were up nine percent year on year to £9.7 billion, thanks to “both strong net inflows and favourable market movements.” Net inflows were £573 million, an increase from £125 million a year earlier. The firm said there had been “strong flows across both our integrated wealth and investment management services.” Positive market movements in the period contributed £240 million.
Total client assets, which include advised assets under third-party management, reached £11.8 billion, an increase of six percent.
“Our funds and segregated bespoke portfolios are designed to provide attractive risk adjusted returns for our clients, in line with their long-term goals,” the firm’s interim statement said. “Over the 12 month period to 31 January 2018, 11 out of our 13 unitised funds outperformed their relevant benchmarks, with particularly good performance across our Direct and Managed funds. Over the year to 31 December 2017, 75 percent of our segregated bespoke strategies outperformed their relevant peer groups. This compares to 100 percent over the three year period, in line with our strong long term outperformance track record for our bespoke strategies.”