Record’s Q320 update was positive, with a 4% inflow of assets under management equivalent (AUME) and the crystallisation of a performance fee in the period. AUME flows have now been positive since Q120, totalling $4.5bn (+8%) over nine months. The performance fees in this quarter follow on from a material contribution during FY19, reflecting value added for clients. Record continues to innovate and invest to counter competitive pressure, which has contributed to broadly stable management fee rates.
AUME of $64.7bn at the end of December was up 8% in the quarter. We calculate that average sterling AUME in the quarter was virtually unchanged compared with H120, with the positive impact of net inflows offsetting strength in the pound towards the end of the calendar year. There were net inflows of $2.5bn, including a previously announced $1bn tactical mandate that is only expected to be in place for a short period. Other inflows were primarily in passive hedging and all came from existing clients or were associated with existing relationships. Market moves were neutral but foreign exchange movements added $2.3bn (Exhibit 1). Performance fees of £1.8m were crystallised in Q320 relating to performance over the six and 12 months to end December.
We have raised our estimates to reflect the AUME inflows, the performance fee reported and the sterling/dollar rate. We have only included the tactical mandate AUME for Q420 to show an FY21 estimate without the benefit of the related shortterm revenue: in reality the mandate is quite likely to remain in place for longer than this. Our estimates do not assume the crystallisation of further performance fees and do not include potential AUME inflows or other outflows. Our EPS estimates increase by 30% and 14% for FY20 and FY21 respectively
Record shares trade below a comparative group of UK asset managers both in terms of P/E and EV/EBITDA (page 3). This is true even when performance fees are excluded. The shares offer a yield premium based on the ordinary dividend and the potential for additional income in the form of potential special payments, subject to the level of earnings