Ashmore profit hit by outflows, emerging market downturn

The emerging markets investment firm said its pretax profit was 116 million pounds ($157 million) during the period, while adjusted diluted earnings per share slipped 19% to 10.4 pence, which analysts said was broadly in line with expectations.

Ashmore’s shares slipped as much as 3% in early trading, before recouping some ground to trade down 0.5% at 277.6 pence.

“These financial results reflect the negative sentiment towards Emerging Markets assets at this point in the cycle,” Ashmore’s CEO Mark Coombs said, adding that he expected headwinds for developing market assets to fade.

Emerging market equities dropped nearly 5% in 2021, while both emerging market hard-currency and local-currency debt indexes showed negative returns.

A negative investment performance of $3.9 billion and net outflows of $3.2 billion saw Ashmore’s assets under management shrink to $87.3 billion in the period.

“Emerging Markets typically outperform in a period of rising U.S. interest rates, so a Fed rate move should be a significant catalyst,” Coombs said in a statement.

Analysts were somewhat less upbeat as markets gear up for the U.S. Federal Reserve to deliver the first of a number of rate hikes, possibly in March.

“Whilst management expects the environment to be better in 2022, this is still yet to be seen and uncertainty remains on how clients behave in a rising rate environment,” Gurjit S Kambo at JPMorgan said of Ashmore’s results.

Finance Director Tom Shippey said Ashmore had seen interest in fixed income investment grade strategies from a range of institutional clients, which make up over 90% of its assets.

Ashmore hoped to grow its retail investor base again, which had shrunk from around 15% pre-COVID to just under 10% of assets, Shippey said, adding: “What we need to do is see higher levels of assets under management to grow our profits”.

It said it would maintain its interim dividend at 4.80 pence.

($1 = 0.7386 pounds)

(Reporting by Karin Strohecker; Editing by Saikat Chatterjee and Alexander Smith)