Ashmore suffers emerging market sell-off, warns recovery unlikely in short-term

13th Jan 2015 11:15

A sharp sell-off in December hit second-quarter figures for Ashmore Group, the emerging markets investment specialist, dragging assets under management (AuM) lower than analyst expectations.Any short-term rebound in emerging markets is unlikely, the FTSE 250 group warned, as uncertainty over the timing and pace of Federal Reserve rate increases was likely to weigh on sentiment for a while.AuM at the end of 31 December was $63.7bn, well short of the $67bn predicted by the analysts consensus and the $71bn in the first quarter, after Ashmore suffered $2.8bn of negative investment performance and $4.2bn of net outflows. AuM was also reduced by $0.6bn of disposals in its Chinese real estate joint venture.The investment performance was mainly down to the market sell-off hitting local currency markets badly, in which the company has several investment themes."Weaker commodity prices, US dollar strength and increased price volatility impacted upon emerging markets during the quarter, although the diverse range of return opportunities in the asset class continued to show through," said chief executive Mark Coombs.Performance was therefore weakest in the local currency and blended debt themes, with the latter having an allocation to local currency assets, while external debt, corporate debt and multi-strategy also saw negative investment performance. Equities, alternatives and overlay/liquidity were flat.Ashmore said a small number of segregated accounts had withdrawn from its blended debt theme, which led to net outflows, while net outflows were also experienced in equities, external debt and, to a lesser extent, in local currency, multi-strategy, corporate debt and overlay/liquidity."While asset prices have fallen, uncertainty over the timing and pace of Federal Reserve rate increases is likely to weigh on sentiment in the near term," Coombs added."However, emerging markets' fundamentals remain sound and previous uncertainties, such as election cycles, have abated."Therefore, as is typically the case following a sharp and widespread fall in asset prices, emerging markets provide very attractive near-term return opportunities, particularly in blended debt, local currency and equities, for Ashmore's investment processes to capture on behalf of clients."Broker Canaccord noted that the consensus was looking for around $67bn, based on estimates of $3.5bn of negative performance and around $1bn of net outflows."Flows in EM debt markets still remain challenging with minus-$4bn of net outflows since the beginning of December," analysts wrote. "Low oil and commodity prices are likely to lead to low inflation expectations and thus reduced propensity of EM rates rises. This reduces the relative attraction of EM Debt themes in the near term."