TIDMREC
RNS Number : 6484V
Record PLC
17 January 2012
17 January 2012
RECORD PLC
THIRD QUARTER TRADING UPDATE
Record plc ("Record" or the "Company"), the specialist currency
manager, announces today that as at 31(st) December 2011 the
Group's assets under management equivalents ("AuME") totalled $25.4
billion (30(th) September 2011: $28.9 billion).
AuME expressed in Sterling as at 31(st) December 2011 totalled
GBP16.4 billion (30(th) September 2011: GBP18.6 billion).
1. AuME composition
Record saw an overall decrease in AuME when expressed in both US
Dollars and Sterling during the period between 30(th) September
2011 and 31(st) December 2011, largely due to the previously
announced loss of the second largest Dynamic Hedging mandate and a
continuation in outflows from Currency for Return. There has also
been a change to a Dynamic Hedging mandate and changes to Currency
for Return mandates during the period. The composition of AuME at
31(st) December 2011 was as follows:
AuME $ bn
----------------------------------------------------------------------
31(st) December 30(th) September
2011 2011
----------------------------- ------------------ -------------------
Currency for Return
Segregated (Note
1) 1.4 2.0
Pooled 0.3 0.8
-------- --------
Currency for Return
Sub Total 1.7 2.8
Dynamic Hedging 9.1 11.1
Passive Hedging 14.4 14.7
Cash & Futures 0.2 0.3
----------------------------- -------- -------- -------- ---------
Total 25.4 28.9
----------------------------- -------- -------- -------- ---------
Note 1: This includes $0.8 billion of Emerging Market strategies
(30(th) September 2011 $1.1 billion).
2. AuME MOVEMENT
Net client AuME flows in the three months to 31(st) December
2011 by product were as follows:
Net client AuME flows - $ bn
------------------------------------------------------------------
3 months to 3 months to
31(st) December 30(th) September
2011 2011
----------------------- ------------------- --------------------
Currency for Return
Segregated (0.7) -
Pooled (0.6) (0.2)
--------- ---------
Currency for Return
Sub Total (1.3) (0.2)
Dynamic Hedging (2.5) 1.4
Passive Hedging (0.4) 0.3
Cash & Futures (0.1) (0.1)
----------------------- --------- -------- --------- ---------
Total (4.3) 1.4
----------------------- --------- -------- --------- ---------
Record had 40 clients at 31(st) December 2011, compared to 43
clients at 30(th) September 2011.
The factors other than client flows which impacted AuME during
the quarter, totalling $0.8 billion, were:
(i) Movements in global stock and other markets: $1.1bn Substantially all the Passive and Dynamic Hedging, and some of the Currency for Return mandates are linked to stock and other market levels. Consequently AuME is affected by movements in these markets;
(ii) Exchange rate movements: ($0.3bn) Exchange rate movements
during the period affect the conversion of non-US Dollar mandate
sizes into US Dollar AuME;
(iii) Pooled fund investment performance: $-bn Investment returns are compounded on a geared basis into the AuME of the pooled funds and so impact AuME.
Our Dynamic Hedging programmes performed as expected for US
clients during the quarter although the hedge ratios varied
significantly in response to movements in exchange rates. The
product performed particularly well in November when the US Dollar
started strengthening following a period of weakness in October. As
the US Dollar strengthened against the Euro and Swiss Franc towards
the end of the quarter the hedge ratios increased. In this
positioning any further weakness in these currencies will be
translated into positive performance going forward.
For the UK based Dynamic Hedging clients, Sterling started the
quarter with strong performance especially against the US dollar
but declined in value towards the quarter end when measured against
a basket of currencies. Overall, the programmes generated value
during the period of Sterling strength and passed through
approximately half of the foreign currency gains during the period
of Sterling weakness.
Investment performance in Record's established active Forward
Rate Bias (FRB) product was marginally positive during the quarter
ending 31(st) December 2011 and for an un-geared portfolio equated
to a positive return of 0.03% over the quarter (3 months to 30(th)
September 2011: positive return of 0.34%). This compares to a
positive return in the quarter of 2.70% for the FTSE Currency FRB10
index (excess return in Sterling). The FRB10 index has outperformed
the active FRB product principally because of the index's greater
exposure to less liquid currencies and absence of risk management
costs.
3. AVERAGE FEE RATES
During the quarter to 31(st) December 2011, fee rates for all
products remained broadly unchanged from the six months ended
30(th) September 2011.
During the quarter Dynamic Hedging AuME reduced by $2.0 billion.
Of this $2.0bn, net client outflows contribute $2.5 billion,
including $1.5 billion from the previously announced termination by
Record's second largest client and $1.2 billion from Record's
largest client restructuring their programme. As previously
announced, this client has a tiered fee structure and the reduction
in AuME has a significantly lower impact on income than the average
Dynamic Hedging fee rate would imply.
4. CHIEF EXECUTIVE'S COMMENT
Chief Executive James Wood-Collins, commenting on trading, said
"Although the quarter has seen an overall decline in AuME, we
continue to believe we are well positioned to secure further
hedging mandates in the current financial year. The decline in AuME
is largely due to two events in Dynamic Hedging - namely the
previously announced loss of a large client, and our largest client
amending their programme with a relatively modest impact on income
- and to Currency for Return products, principally active FRB,
continuing to see client outflows.
"By contrast, we have seen a number of enquiries and RFPs for
Passive Hedging in Continental Europe, in particular Switzerland,
and for Dynamic Hedging in the UK. We are optimistic about our
prospects with these opportunities and we have been awarded, but
not yet started, Passive Hedging mandates including one for CHF1.8
billion. In the longer term, we are also confident that the
increased attention being paid to currency risk by US investors
will create more opportunities for hedging in that market."
Record will announce its fourth quarter trading update on 20(th)
April 2012.
ENDS
For further information, please contact:
Record plc Tel: +44 (0) 1753 852 222
James Wood-Collins
Paul Sheriff
MHP Tel: +44 (0) 20 3128 8100
Nick Denton
John Olsen
Vicky Watkins
Notes to Editors
Record plc
Record is a specialist currency manager and provider of currency
hedging services for institutional clients. Founded in 1983, Record
has established a market leading position as a currency manager.
Specifically, the Group has a leading position in managing Dynamic
Hedging and Currency for Return for institutional clients.
The Group has three principal product lines:
- Currency for Return, formerly known as Absolute Return, in
which Record enters into currency contracts for clients with the
objective of generating positive returns;
- Dynamic Hedging, formerly known as Active Hedging, where
Record seeks to eliminate the impact of currency movements on
elements of clients' investment portfolios that are denominated in
foreign currencies when these movements are expected to result in
an economic loss to the client, but not to do so when they are
expected to result in an economic gain; and
- Passive Hedging, where Record seeks to eliminate fully or
partially the economic impact of currency movements on elements of
clients' investment portfolios that are denominated in foreign
currencies.
Record (LSE: REC) was admitted to trading on the London Stock
Exchange on 3(rd) December 2007.
This announcement includes information with respect to Record's
financial condition, its results of operations and business,
strategy, plans and objectives. All statements in this document,
other than statements of historical fact, including words such as
"anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates", "may", "will", "continue", "project" and similar
expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the
Company's future performance and are subject to risks,
uncertainties and assumptions that could cause the actual future
results, performance or achievements of the Company to differ
materially from those expressed in or implied by such
forward-looking statements.
The forward-looking statements contained in this document are
based on numerous assumptions regarding Record's present and future
business and strategy and speak only as at the date of this
announcement.
The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statements contained in this announcement whether as a result of
new information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
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