Martin Currie suffers first loss following China ‘conflict of interest’

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Martin Currie has suffered its first loss in over 130 years as clients sought redemptions following a previous “conflict of interest” issue and “performance problems” concerning its China fund, it has been reported.

The asset manager saw a £9.3m loss before tax and interest and other items last year, compared with a £7.7m profit during 2011. The loss is thought to be the first since Martin Currie was founded in 1881, according to The Scotsman.

Martin Currie chief executive Willie Watt attributes the loss as being largely caused by a previous “conflict of interest” issue relating to two funds managed by its Shanghai office.

The asset manager was found guilty of wrongly advising the China Fund Inc, a US mutual fund, to invest £15m in a transaction that saved a Chinese hedge fund that had got into difficulty.

The asset manager was subsequently fined a combined total of £8.6m by FSA and US regulators in May 2012 and long-standing Asian manager Chris Ruffle also left the firm.

The China investment book has taken a significant hit as a result of this conflict, according to the newspaper, while overall assets under management have fallen from £5.6bn to £4.7bn. Group revenue also dropped down to £33.8m from £65.5m.

Watt says the “performance problems” during 2008-09, mainly concerning the China Fund, resulted in redemptions as well as the loss of some big clients who chose to withdraw all their funds.

He adds that income has also been impacted by companies including BP and RBS paying lower-than-expected or no dividends.

The board has accepted the full loss on the accounts in order to avoid making large job cuts, according to Watt. He told the newspaper: “We took the view that we could have shrunk the loss if we had reduced our cost base significantly.

“We would have made significant redundancies, but we took it on the chin.”

Watt has also described the loss as a “one-off”, adding that the firm is now profitable and in the process of rebuilding its assets under management.

The asset manager is expected to be in profit this financial year, according to The Scotsman. Revenue is said to be up 50 per cent year-on-year and net sales have been positive for four consecutive quarters.

At the end of July assets under management regained 28 per cent from their previous low point to reach £5.5bn.