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Why the BT Investment Management Ltd share price has been smashed today

The BT Investment Management Ltd (ASX: BTT) share price has fallen lower in morning trade after the fund manager released its interim report.

At the time of writing its shares are down 3.5% to $12.54.

Key takeaways from the result include:

  • Total half-year revenue and other income fell 12.4% to $246.3 million.
  • Net profit after tax increased 0.9% to $78.9 million.
  • Average funds under management (FUM) up 10.1% to $86.3 billion.
  • Diluted earnings per share flat at 30 cents.
  • Interim dividend of 19 cents per share (30% franked).

What happened?

The major driver of BTIM’s poor top line result was its Performance Fees revenue. While Investment Management Fees revenue rose 7.6% to $211.6 million, Performance Fees revenue tumbled a massive 62.6% to $27.9 million.

Thankfully a sharp reduction in operating expenses managed to offset this decline in revenue. Operating expenses fell 20% from the prior corresponding period to $134.5 million, largely as a result of a drop in employee expenses due to lower performance fees.

Pleasingly though for the fund manager it is still experiencing strong fund in-flows. Average FUMs increased 10.1% to $86.3 billion during the half, and finished the half up 18% to $91.2 billion.

But with 15 of its 31 funds underperforming their respective benchmarks before fees in the last 12 months, I believe there is a danger that BTIM could be at risk of fund outflows if things don’t improve.

Should you invest?

Whilst I am a fan of the fund manager, I think 22x trailing earnings means its shares are a little on the expensive side.

Because of this I would suggest investors hold off an investment until they come down to a level more befitting its current growth profile. Investors might want to consider an investment in WAM Capital Limited (ASX: WAM) or Challenger Ltd (ASX: CGF) instead.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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