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F&C suffers £4.9bn outflow in fourth quarter

F&C suffers £4.9bn outflow in fourth quarter

F&C was hit by steep outflows in the final quarter of last year due to the combination of Friends Life moving its fixed income business in house, and lack of demand for its government bond and cash management services.

Net outflows in the fourth quarter for the asset manager stood at £4.9 billion with assets under management falling from £96.8 billion to £95.2 billion.  

Its strategic partners business bore the brunt of this with an outflow of £3.6 billion. This was largely due to the withdrawal of £2.4 billion in fixed income assets by Friends Life, which F&C had anticipated after the life office made the decision to manage bond assets in house.

F&C expects further withdrawals of £6.2 billion in fixed income assets this year, although it said the impact on revenues will be ‘moderated’ as the assets are expected to move across in the middle of the year. After the transition, F&C expects to manage £2.4 billion in fixed income assets on behalf of Friends Life.

Meanwhile F&C’s third party institutional business was hit by an outflow of £956 million over the quarter on the back of gross outflows of £1.3 billion in its cash management and government bond mandates. The majority of remaining outflows were a consequence of property asset realisations.

The wholesale business experienced a net outflow of £0.3 billion, with the most significant outflows found in the Thames River Global Credit funds, which the group attributed to a period of weak performance.

However, there was better news for its consumer business, which saw a positive inflow of £30 million in which the retail arm accounted for £19 million and investment trusts the remaining £11 million.

The numbers give new F&C chief Richard Wilson plenty of food for thought and he drew comfort from the fact the outflows were mainly on lower margin products.

‘Performance in the quarter was good in most asset categories and revenue yields on inflows continue to exceed those on outflows,’ Wilson told the stockmarket. ‘We look forward to continuing progress in executing our third-party institutional and consumer growth strategies.’

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Profile: Kevin Doran's formula for success at AJ Bell

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From a degree in theoretical physics to teaching and becoming one of the youngest chief investment officers in the UK, Kevin Doran has certainly had an interesting career.

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