The group’s Q4 update confirmed that a transformational year (AUM +72%) finished well, with another 6% growth in AUM during the final three months to £12.5bn at end September 2018. That was above our forecast and comprised a £334m net inflow, boosted by £534m of investment performance/FX.
Aggregate growth was driven by an acquisition, completed in January, creating Impax AM LLC. The latter finished FY18 at £3.04bn AUM. It has moved ahead since purchase, and Impax expects operational synergies to become apparent over the next two to three years.
AUM growth managed by Impax’s UK thematic funds was 33% y-o-y, from £6.79bn to £9.02bn, and 11% in Q4 alone. In aggregate, c 77% of overall AUM growth reported during FY18 (c £1.72bn) comprised net client inflows.
AUM for real assets stood at £450m at end Sep 2018. That comprised the €357m (£313m) raised by NEF3 at its end May 2018 final close, plus Impax’s £22m property fund and remaining holdings. As it previously confirmed that it had sold the bulk (95%) of NEF2’s investments our forecasts assume that Impax will have exited most of its real asset holdings other than NEF3 by end September 2019.
We have held our end FY19e AUM forecast at £14.4bn. That assumes net inflows by the UK operation in line with FY18 at £1.75bn, US ahead (+£0.3bn) and neutral investment performance for both. Private funds relate entirely to NEF3, and FY18e PBT/EPS includes one material one-off in respect of the carried interest received post completion of exits from investments in NEF2. The £3.2m received in the first half underpinned a 2.6p/share special dividend; we assume a small further contribution in FY19e.
Recent market-led volatility doesn’t change the core message, which is that demand for Impax’s specific skillset will continue to gather pace on the back of accelerating recognition that the global economy needs to transition to a more sustainable growth model.