Ashmore Group PLC on Friday said assets under management were hit by ‘widespread risk aversion’ in the second half of its financial year, posting a dive in annual profit.

But the London-based emerging markets investment manager said it has a positive outlook, ‘underpinned by exceptionally attractive valuations across emerging markets’.

Pretax profit in the year to June 30 more than halved to £118.4 million from £282.5 million, as management fees fell to £247.0 million from £276.4 million. ‘Second-half market weakness resulted in £49.9 million unrealised mark-to-market loss on seed capital investments,’ it said, leading to the drop in profit.

Still, Ashmore maintained the year’s dividend at 16.90 pence, having declared an unchanged final payout of 12.10p.

Assets under management fell to $64.0 billion as at June 30 from $94.4 billion a year prior, Ashmore reported. This 32% decline was due to negative investment performance of $16.6 billion and net outflows of $13.5 billion. Further, Ashmore incurred a £61.3 million loss on investment securities, compared to a profit of £123.5 million a year ago.

‘The combination of geopolitical tension, high inflation figures and central banks tightening monetary policy, including the Fed in the second half of the year, with the consequent negative impact on market levels, meant that investor risk appetite was markedly lower as the period developed,’ the Ashmore said, adding that mood was further soured by the war in Ukraine.

Looking ahead, Ashmore said it expects inflationary pressures to reduce in the coming quarters, despite the war being anticipated to continue.

‘On balance, the combination of highly attractive absolute and relative valuations, resilient growth and the potential easing of macro headwinds, mean that emerging markets assets should outperform. The drivers of long-term emerging markets growth are well-established and continue to underpin higher investor allocations to the asset classes,’ it said.

Chief Executive Mark Coombs commented: ‘While the global macro environment still presents some near-term uncertainty, the situation in emerging markets is improving and the breadth of investment opportunity helps to mitigate the risks...Risk appetite will improve as some of the recent macro headwinds abate, supporting a recovery in emerging markets asset prices and higher investor allocations.’

He added that ‘market conditions have left valuations across emerging markets at exceptionally attractive levels.

‘Current asset prices heavily discount the known risks surrounding inflation, global rates, economic growth and, on probable scenarios, geopolitical issues.’

Ashmore shares were up 0.5% at 195.30 pence each in London on Friday morning.

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