City of London Investment Group expects drop in profits, dividend steady

18th Jul 2016 13:51

(ShareCast News) - City of London Investment Group anticipated a decline in profits as funds under management registered a moderate decline, the emerging markets asset manager said in a pre-close trading update for the financial year to 30 June.Funds under management fell by 5% from $4.2bn to $4.0bn, but positive exchange rate effects saw the sterling value of FuM rise 11% to £3.0bn at period-end, versus £2.7bn last year.Over the reporting period in question, cable weakened from 1.57 to 1.33.The MSCI Emerging Markets TR Net Index dropped 12% in US dollar terms over the year, resulting in a relative change in FuM of +7% when measured against the benchmark, a product of both positive investment performance and new and existing client inflows, City of London said in a statement.The firm's emerging markets closed-end fund (CEF) strategy put in another "strong" performance, City of London said, with its performance in the first or second quartile versus manager peers.Overhead costs were expected to rise from £9.4m to £10.7m and pre-tax profits to decline from £8.9m to £8.0m.Brexit had no effect on FuM and no redemptions had been seen in the fiscal year-to-date, the firm said.City of London's board recommended that the final dividend be kept at 16p per share.However, the falls seen in emerging markets meant that its earnings cover would fall this year, but the Board emphasised that was tempered by the company's "strong" cash position and expressed "optimism" regarding the future.