UK - F&C Asset Management reported net institutional outflows of £1.9bn (€2.4bn) in the first half of 2008, following uncertainty over the future corporate structure of the business.
Interim results for the first half of 2008 showed F&C's assets under management declined by 7% from £103.6bn in December 2007 to £96.5bn, which it attributed to a "combination of reductions in market levels as well as net outflows, concentrated in lower fee margin client categories".
In particular, F&C confirmed while it received £723m of new institutional investment business, outflows of £2.6bn of assets left the firm with a net outflow of £1.9bn, although the majority of the losses - £1.2bn - was reported in the first quarter of the year so just £700m of business was lost in the three months to the end of June.
F&C stated while "it is not aware of any client losses specifically as a result of the corporate uncertainty, there is little doubt that it is impacting on our ability to gather new assets in the UK" as it claimed a number of consultant 'buy' holdings have been changed to 'on hold'.
The downturn in F&C's institutional business was glimpsed in February when Somerset County Council issued a tender for a fixed interest manager to replace F&C following poor performance. (See earlier IPE article: Somerset drops F&C as fixed ineterst manager)
Figures from the report showed as a result of these outflows the total institutional assets under management fell from £27.3bn in December 2007 to £25.4bn at June 30 2008.
However, F&C claimed at the end of June it had a forward pipeline of business estimated at more than £750m to be completed within the rest of the year - including new US mandates and its first Canadian deal.
The "corporate uncertainty" stems from the decision by UK life insurer Friends Provident to sell its 52% stake in F&C following the results of a strategic review of its business in January. (See earlier IPE article: Friends Prov to sell F&C and Lombard)
In his report, Alain Grisay, chief executive of F&C, said the first half of 2008 "saw the toughest market conditions in recent history" and combined with the weak market environment the "uncertainty" resulting from Friends Provident's announcement "constrained our ability to gather new assets".
This resulted in the firm recording first-half profits before tax of £3.4m, compared to £7.9m in the first half of 2007, while operating profit dropped from £36.3m the previous year to £30m in 2008.
The results revealed while the uncertainty over its ownership has "impacted" the institutional business through consultant ratings, F&C claimed it received a "record number" of product ratings, particularly on its liability-driven investment (LDI) range.
As a result, officials have "increased our level of activity with the consultant community and appointed a new head of global consultants, so that we will be well-positioned to accelerate our asset gathering once our ownership situation is resolved".
Both F&C and Friends Provident - who also issued their interim results this week revealing group pension sales fell to £1.2bn in the first half - claimed the decision process over the future ownership of F&C is "making satisfactory progress".
Grisay stated in his report that F&C is "continuing to work with our advisers to find a solution that will enable us to either continue with, or accelerate, our strategy at the same time as enabling Friends Provident to achieve its objective of maximising the value of its holding in F&C".
However, Friends Provident said it would not expect any further updates on the issue until "well in to the second half" of 2008, and added it continues to seek a "suitable outcome" for its stake in F&C. including the option of making a "pro-rata distribution of the stake to shareholders if a suitable alternative is not available".
Elsewhere, Friends Provident's interim results revealed the firm's main defined benefit (DB) scheme, the Friends Provident Pension Scheme (FPPS), increased its surplus from £5m at December 2007 to £74m at the end of June 2008.
It claimed the improvement was the result of increases in corporate bond yields, and confirmed the pension scheme is continuing with a de-risking strategy - which included the partial buyout of its existing pensioner liabilities with Norwich Union in May. (See earlier IPE article: Friends Prov secures first FTSE 100 'buy-in')
Friends Provident highlighted the scheme had reduced its equity exposure from 40% at the end of 2007 to 20% in the first half of 2008, but revealed an additional £20m contribution will be made to the FPPS "in expectation of the sale of non-core business" including F&C and Lombard.
It claimed because few scheme members are involved in these businesses the additional contributions will leave the pension fund with "the same liabilities but a smaller business, albeit with a superior financial covenant".
The report revealed Friends Provident intends to make a further contribution, on top of the agreed £20m and dependent upon the sale proceeds, although it said this would be paid from surplus capital and will not affect the proceeds distributed to shareholders.
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