Specialist fund manager River & Mercantile (RIV) is one of the top gainers in London, up 12% to 204p, after it said market volatility in June had little impact on assets under management (AuM).
In a trading update for the 11 months to 31 May, R&M included extra commentary on performance in June to give investors a better idea of the impact on its business from Britain’s vote to leave the EU.
‘Our expectation is that the only Brexit-related negative flows will be in our Wholesale Equity Solutions business, with only minimal net outflows in the days immediately following Brexit, representing less than 1% of the £1.3bn Wholesale AuM at the end of May,’ said chief executive Kevin Hayes.
‘Otherwise, our flows are normal and we have experienced no outflows in our other business lines as a result of the referendum.’
AuM increased 3% to £24.3 billion in the 11 months to 31 May, a number which includes a notional £13.4 billion of derivatives managed by River & Mercantile on behalf of clients.
‘I hope this provides reassurance to our investors that the business model continues to deliver and has the attributes to offer resilience in the event of difficult market conditions,’ adds Hayes.
‘Equally, we obviously live in uncertain times, and we cannot rule out circumstances in which we will find it more difficult.’
Concern over the outlook for financial services in a post-Brexit market has seen shares in the asset manager, which provides advice to companies with defined benefit pension schemes, slide 20% over the past two weeks.
‘Overall, the performance over the fourth quarter is expected by the company to be solid, with negative post-Brexit flows solely from the equities division which represents just 8% of group AUM,’ writes analyst Keith Baird, at broker Cantor Fitzgerald.
‘The strengths of River & Mercantile’s business model which, unlike pure asset managers, benefit from volatile markets, are sustainable over the long term and able in our view to drive consistent earnings growth.
‘Further, ever lower interest rates serve to highlight the widening funding gap facing many pension schemes.
This update is moderately ahead of our FY16 forecasts which remain unchanged.'
Sales and earnings per share in the year to 30 June are forecast at £47.0 million and 11.3p, respectively, according to consensus analyst estimates.
In the year to 30 June 2017, sales are forecast at £52 million and EPS 13.2p.
Shares in River & Mercantile trade 4.5% higher at 190p.