‘Its profit margins have risen rapidly under the guidance of an excellent management team installed 18 months ago,’ said Dodd and Paterson.
‘Rigorous attention to costs and streamlining of the business has enabled the company to attain similar financial performance to that of its main competitors and now the focus is on how to drive revenues forward.
'By forcing many of the industry’s smaller players out of the market, the increased costs of regulation should benefit the more established companies in this sector. Brewin Dolphin should be in an excellent position to grow its assets under management in the years ahead.’
Brewin Dolphin was the third-greatest contributor to the trust’s performance in the year ended 30 April 2014, when Artemis Alpha returned 13.3% on a net asset value basis compared with the FTSE All Share index’s 10.5%.
Since 1 June 2003, when Artemis was appointed as its investment manager, the trust has generated 422% on a net asset value basis versus the index’s 168%.
‘Both companies are benefiting from rising equity markets and strong flows into their funds,’ they said.
‘These businesses have worked hard over the last couple of years to diversify their product offerings and to attract high calibre individuals, for whom the opportunity to own a stake in a successful, growing business is appealing. Furthermore, both are benefiting from the high levels of operational gearing, with margins increasing as assets under management grow.’
Elsewhere in the financials sector, Dodd and Paterson noted a new investment in peer-to-peer lending specialist GLI Finance.
‘As a consequence of the reluctance of the major banks to lend to individuals and small businesses, peer-to-peer lending is one of the fastest growing areas in the UK economy,’ said Dodd and Paterson.
‘A number of platforms have been set up to match borrowers with lenders, ensuring that high quality borrowers can access loans at an appropriate interest rate. This industry appears to be a win-win for both borrowers and lenders alike.
‘It has strong government support, and although some of the bigger peer-to-peer businesses might float over the next 18 months, GLI Finance is the only quoted company in the UK that gives investors access to this exciting growth area.’