Charlemagne Capital ‘reviews cost base’ after AUM fall


Emerging market investment specialist Charlemagne Capital is reviewing its cost base after assets under management fell by more than 8 per cent over the opening half of 2013.

In its interim management statement for the six months ending 30 June, the group reveals that AUM stands at $2.4bn (£1.6bn) – down 8.1 per cent from the $2.6bn reported at the start of the year. 

Emerging markets have struggled over the opening half of the year. The MSCI Emerging Markets Index is down 9.6 per cent over the six-month period, with June showing the greatest decline after tumbling 6.4 per cent.

“Despite strong relative performance our asset values have consequently fallen over the period. Although the group remains profitable overall in the year to date, an increase in AUM is required in order to ensure sustainable profits on a recurring management fee basis,” the update says.

“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. We are reviewing the cost base but are committed to preserving the necessary infrastructure required to service our investors and for future expansion.”

The firm’s net management fees were $11.9m, up 10.2 per cent on the previous six months. However, its performance fees were $500,000 – down from $900,000 one year earlier.

Charlemagne’s Magna funds, which include the Charlemagne Magna Emerging Markets Dividend fund, have shown healthy relative performance over the first half of the year, with seven of the nine Magna products sitting in the top half of their FactSet Morningstar peer group.

Charlemagne Magna Emerging Markets Dividend, which is managed by Julian Mayo and Mark Bickford-Smith, has outperformed the MSCI Emerging Markets Index by 7.6 per cent over the period in question and took the bulk of the new money coming into the Magna range. Its AUM has risen from £55.1m at the end of April to £105m today.

The Magna funds benefited from $86m in net inflows over the six-month period but lost $30m through performance. Across all the group’s business, $134m of its AUM was lost because of negative performance, while $80m of the fall is attributed to net outflows.

“We believe that, although markets will remain volatile now that the issue of reduced central bank support to liquidity is out in the open, there are still reasons for a positive outlook,” Charlemagne adds.

“Equity markets have overreacted and have quickly over discounted a worst possible outcome. Deflationary forces are still such that meaningful interest rate hikes are a long way off and valuations are sufficiently below average to suggest returns from such levels should typically be strong over subsequent 12-18 month periods.”

Charlemagne Magna Emerging Markets Dividend’s cumulative performance to 11 July 2013

Charlemagne Magna Emerging Markets Dividend -6.24% 2.41% 18.16% 25.32%
-5.98% -3.98% 6.85% 6.96%
-0.28% 6.65% 10.59% 17.16%
 of Main Unit  38 / 70 7 / 70 3 / 65 8 / 50
3 1 1 1

Source: FE Analytics