Currency volatility leads to Record outflows
UK - Record plc, the listed company behind Record Currency Management, has admitted the firm saw client assets outflows worth $2.6bn (€2bn) in its third quarter trading and its assets under management fell by 25% when combined with market and currency turbulence.
Details of Record's third quarter trading update, to the end of December 2008, revealed the group's ‘assets under management equivalent' (AuME) fell from $47.8bn by 30 September 2008 to $35.6bn by the end of 2008, largely because of the huge shift in those three months between the dollar/sterling exchange rates.
Had the group's results been denominated in sterling, Record would still have seen a reduction in its AuME from £26.8bn in September to £24.7bn by 31 December 2008.
A further breakdown of where the losses stem from sees Record admit it has been losing mandates, as the firm said it had 137 clients at the end of the calendar year, compared with 150 in September.
The loss of clients appears to have been largely a departure from its absolute return portfolios, as the absolute return segregated portfolio sub portfolio saw outflows of $3bn compared with $1.2bn in September, while both the segregated and pooled portfolios both saw outflows of $1.7bn and $1.3bn respectively.
The firm also admitted it had seen negative investment performance on its absolute return strategies of 1.5% at an ungeared level for the quarter, as currency volatility was said to be "more than four times normal historical levels".
Interestingly, Record did see $1bn in inflows to its passive hedging, while active hedging saw a $100m outflow and cash and futures reduced in AuME by $500m.
Similarly, exchange rate movements seriously affected the conversion of non-US dollar mandates into US dollar AuME, and reduced the value of assets by $4.4bn.
Movements in global stock and other markets also reduced the value of assets by $3.bn as its passive and active hedging, as well as some absolute return, portfolios are linked to market activity.
Pooled fund investment performance also deteriorated by $1.8bn while de-gearing from currency positions lowered asset values by a further $400m.
Neil Record, chairman and chief executive of Record, also acknowledged there could be further outflows to come as he said: "Whilst there may be further Absolute Return outflows, we continue to work hard to maintain these relationships and to communicate information on market developments and the implications from Absolute Return investment performance to investment consultants and clients. We remain confident in and committed to our long-term strategy."
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