Charlemagne warns emerging markets doldrums could hit profits

12th Jul 2013 10:39

Emerging markets focused investment group Charlemagne Capital warned that declines in assets under management (AuM) in the first half must be reversed for it to generate continuing profit. The AIM-listed asset manager saw AuM retreat 8.1% to $2.4bn between the start of the year and June 30th, leading to net outflows from its funds. The company attributed the fall in AuM to the increasing negative returns in emerging markets during the period, with the MSCI Emerging markets index giving up 9.6% over the half year.Charlemagne conceded that although it remained profitable "overall" in the year to date, an increase in AuM was required "in order to ensure sustainable profits on a recurring management fee basis"."Under current circumstances, the generation of performance fees during the remainder of the year will be a significant factor in determining full year profit levels." Management have begun to review the company's fixed costs but insisted they were "committed to preserving the necessary infrastructure required to service our investors and for future expansion".The statement also revealed that Charlemagne has suffered net outflows from three of its four fund areas. Institutional funds saw the greatest outflows during the period, of $113m or 7.4%, while the OCCO hedge fund range lost $36m of client subscriptions and specialist funds $17m or 11.7%.The range of Magna mutual funds saw a strong inflow, however, with a $86m net increase in subscriptions, a rise of 23.6% partially attributed to strong relative performance against their peer group. Despite the outflows, Charlemagne enjoyed much higher management fees of $11.9m, up 10.2% on the $10.8m for the previous six months and 22.7% on the $9.7m from the comparable period of 2012. The company reported that this reflected the higher average AuM over the period of $2.6bn and a small increase in net margin arising from a greater proportion of higher-fee OCCO funds in the mix. OCCO management fees, which are subject to a minority interest, accounted for nearly 44% of total net fee income during the period.The board confirmed it intended to pay a dividend, with details to come when results are released on September 17th. Shares in Charlemagne Capital were down 8.3% at 11p at 11:10 on Friday.OH