Shares of fund management business, BT Investment Management Ltd (ASX: BTT), drifted marginally higher today despite the group announcing a sharp drop in half-year profit this morning.
Here are five things you need to know about BT's report for the six-month period ended 31 March 2015.
- Net Profit after Tax (NPAT) fell to $61.9 million from $78.3 million a year earlier
- Performance fees fell from a record high of $114.7 million in the prior corresponding period to $38 million
- Base management fees were $170.4 million, up 23%
- A dividend of 17 cents per share was declared, up one cent per share
- A record $10.7 billion inflow of funds resulted in $77.1 billion in funds under management (FUM) at March 31.
Whilst performance fees dropped-off significantly during the period a base management fee margin improvement from 0.45% to 0.48% coupled with a strong flow of funds into BT's British fund manager, JO Hambro Capital Management (JOHCM), helped buffer the company's profit result.
"We had record FUM growth of $10.7 billion in the first half of this financial year, driven by strong demand for JOHCM's equity funds, rising markets, a weaker Australian dollar and continued demand for our domestic income products," BT CEO, Emilio Gonzalez, said. "The result demonstrates the benefits of a diversified business across regions, investment strategies, currencies and channel."
Should you buy BT Investment shares?
BT (along with its peers such as Platinum Asset Management Limited (ASX: PTM), Henderson Group Plc (ASX: HGG) and Magellan Financial Group Ltd (ASX: MFG)) generates strong profit margins when equity markets are bounding higher because it experiences strong inflows of new funds, handy performance fees and robust management fees. However profits are also leveraged to downside movements in equity markets.
Therefore investors should not only look to build a position in the fund managers who have strong track records of market outperformance, but aim to enter those holdings during a market trough. Given that most global equity markets are currently hitting all-time highs, long-term investors might be inclined to hold off buying in, for now.
