TIDMREC
RNS Number : 5274L
Record PLC
20 April 2018
RECORD PLC
FOURTH QUARTER TRADING UPDATE
Record plc ("Record" or "the Company"), the specialist currency
manager, announces today that the Group's assets under management
equivalents ("AUME") as at 31(st) March 2018 totalled $62.2 billion
(31(st) December 2017: $63.9 billion).
AUME expressed in sterling as at 31(st) March 2018 totalled
GBP44.3 billion (31(st) December 2017: GBP47.3 billion).
1. AUME composition
AUME expressed in US dollars decreased by 2.7% between 31(st)
December 2017 and 31(st) March 2018 and decreased by 6.3% when
expressed in sterling. The composition of AUME by product was as
follows:
AUME $ billion
------------------------------------------------------
31(st) March 31(st) December
2018 2017
--------------------- ------------- ----------------
Dynamic Hedging 4.3 4.5
Passive Hedging 53.0 54.3
Currency for Return 1.6 1.7
Multi-Product 3.0 3.1
--------------------- ------------- ----------------
Cash & Futures 0.3 0.3
--------------------- ------------- ----------------
Total 62.2 63.9
--------------------- ------------- ----------------
2. AUME Movement
Net client AUME flows in the three months to 31(st) March 2018
by product were as follows:
Net client AUME flows - $ billion
--------------------------------------------------------
3 months to 3 months to
31(st) March 31(st) December
2018 2017
--------------------- -------------- -----------------
Dynamic Hedging (0.1) 0.1
Passive Hedging (1.5) 1.3
Currency for Return - -
Multi-Product - -
--------------------- -------------- -----------------
Cash & Futures - -
--------------------- -------------- -----------------
Total (1.6) 1.4
--------------------- -------------- -----------------
Record had 60 clients at 31(st) March 2018 (31(st) December
2017: 60 clients). During the quarter Record was awarded, subject
to contract, a Passive Hedging mandate representing $2.2 billion
AUME, and signed a Multi-Strategy mandate of $0.3 billion, with
both expected to fund in the current quarter. Record has been
notified of the termination of a Passive Hedging mandate of $1.7
billion expected during the current quarter.
Other than client flows, the factors which have had an aggregate
impact on AUME during the quarter of -$0.1 billion were as
follows:
(i) Movements in global stock and other markets: -$1.4bn
Substantially all the Passive and Dynamic Hedging, and some of
the Multi-Product mandates, are linked to stock and other market
levels. Consequently AUME may be affected by movements in these
markets.
(ii) Exchange rate movements: +$1.3bn
Exchange rate movements during the period affect the conversion
of non-US dollar mandate sizes into US dollar AUME.
3. Investment performance
For US Dynamic Hedging clients during the quarter, hedging
returns in the programmes were negative, as the US dollar weakened
against the weighted basket of hedged currencies. Losses came
primarily from hedging the Japanese yen. The Dynamic Hedging
programmes performed as expected, and low hedge ratios in line with
US dollar weakness allowed US investors to keep currency gains in
the underlying assets.
Investment performance of the FTSE Currency FRB10 index (excess
return in sterling) during the three months to 31(st) March 2018
was -0.65% (three months to 31(st) December 2017 was -0.09%). The
FTSE FRB10 Index Fund continued to track the index closely, on a
1.8x geared basis.
Record's Emerging Market product investment performance was
negative during the quarter and for an un-geared portfolio equated
to a quarterly return of -0.73% (three months to 31(st) December
2017: return of +1.29%). Annualised performance since inception
(30(th) November 2009) for an un-geared portfolio was +2.08%
p.a.
Investment performance in the Multi-Strategy product that
comprises the FTSE Currency FRB10, Emerging Market, Value and
Momentum strategies was negative during the quarter as gains in
Value were offset by losses in the Momentum, Emerging Markets and
FRB10 components. For an un-geared portfolio, the return was -0.68%
over the quarter (three months to 31(st) December 2017: return of
+0.30%). Annualised performance since inception (31(st) July 2012)
for Record's longest-standing Multi-Strategy mandate on an
un-geared portfolio basis is +1.30% p.a.
4. AVERAGE FEE RATES AND PERFORMANCE FEES
During the quarter to 31(st) March 2018, fee rates for most
products remained substantially unchanged from the previous
quarter. No performance fees were earned in the quarter.
During the year to 31(st) March 2018, we have continued to
innovate and enhance all our services to meet clients' developing
needs. This is particularly true in Passive Hedging, where changes
in FX market structure have allowed Record to enhance Passive
Hedging programmes so as to minimise costs and to add value for
clients. We have been working with our clients to identify and
recognise this added-value, and as a result some Passive Hedging
clients have changed from a management fee only to a lower
management fee with a performance-related fee. This change creates
the opportunity for Record to earn performance fees which over time
are expected to match or exceed the foregone management fees.
The revenue effect from this change for the year ended 31(st)
March 2018 is not expected to be material. For the year ending
31(st) March 2019, this change is expected to reduce total Passive
Hedging management fee revenues by approximately 10% compared to
the level that would otherwise have been expected to be earned,
everything else being equal. The first performance fees capable of
being earned under these changes would be earned in the year ending
31(st) March 2019, and if earned will be disclosed in quarterly
Trading Updates in the ordinary course.
The continued innovation and enhancement of Passive Hedging
services has also required a continuation of the investment in
additional resources, as highlighted in the Group's results to
30(th) September 2017.
5. CHIEF EXECUTIVE'S COMMENT
Chief Executive James Wood-Collins, commenting on business
development, said:
"Over recent years, a key driver behind Record's growth has been
the increase in Passive Hedging AUME, and the business has worked
hard to meet the challenges in achieving this growth.
"We have always offered a differentiated and customised service
in Passive Hedging, and in this respect a key differentiator has
been the trend towards offering continued innovation and
enhancement of the product.
"This trend towards added-value for some Passive Hedging
mandates has led to changes in two specific areas of the business.
The first is the change in mix between management fee only mandates
and management plus performance fee mandates. The second is the
requirement for continued investment in our people and resources to
maintain and support the level of service and innovation which
underpins our unique offerings.
"We expect that these performance fees will more than offset the
reduction in management fees over the longer-term, although the
timing of performance fees alongside the additional investment in
resources may reduce the operating margin of the business over the
short to medium term. Over time we are confident that the continued
enhancement of all our products including Passive Hedging will lead
to further growth opportunities.
"Progress on Record's Currency for Return product has continued
to be made with the seeding of a Multi-Strategy fund during the
quarter and, as noted above, the signing of a segregated
Multi-Strategy client expected to fund in the current quarter.
"We continue to engage with existing and potential clients on
currency management strategies across Record's full product suite,
and we are optimistic about making further progress in the current
financial year."
Record will announce its financial results for the year ended
31(st) March 2018 on 15(th) June 2018 and its first quarter trading
update on 20(th) July 2018.
For further information, please contact:
Record plc Tel: +44 (0)
James Wood-Collins, Chief Executive 1753 852 222
Officer
Steve Cullen, Chief Finance
Officer
MHP Tel: +44 (0)
Nick Denton 20 3128 8100
Ollie Hoare record@mhpc.com
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 Currency
Hedging and Currency for Return for institutional clients.
The Group has four principal reporting lines:
- Dynamic 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;
- 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;
- Currency for Return, in which Record enters into currency
contracts for clients with the objective of generating positive
returns; and
- Multi-Product, where the client mandate includes combined
hedging and return-seeking objectives.
Record (LSE: REC) was admitted to trading on the London Stock
Exchange on 3rd 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
END
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