Ninety One takes a hit from high interest rates

Asset manager Ninety One’s earnings and profit dipped in its 2023/24 financial year as high interest rates weighed on investor appetite.

Ninety One released its results for the year through March 2024 today, which revealed a drop in the firm’s assets under management (AUM).

The firm’s closing AUM was £126 billion (R3 trillion), down 3% from 2023, and its average AUM was £123.9 billion (R2.97 trillion), an 8% decrease.

Net revenue fell by 6%, while after-tax profit remained flat. The firm’s adjusted operating profit fell from £206.9 million (R4.95 billion) in 2023 to £190.5 million (R4.56 billion).

The firm explained that, for the second consecutive year, conditions remained difficult for its industry and business.

“The caution we signalled at the beginning of the financial year was justified,” it said.

In the reporting period to March 2024, the higher-for-longer interest rate scenario played out. 

While this initially supported continued risk aversion and lowered the opportunity cost of not deploying capital into risk assets, it also depressed the appetite for investment in emerging markets. 

In addition, equity market performance was extremely narrow for the first part of the year, favouring passive equity investment over active in developed markets. 

“There are signs that market returns have been broadening towards the back end of the reporting period, which could restore demand for active equity investment in due course,” the firm said. 

“At the time of writing this report, it was still too early to see evidence of returning demand for emerging market investments.”

“These circumstances have impacted our results – in particular, our net flows. However, it has not dampened our motivation.”

Ninety One saw net outflows of £9.4 billion in the reporting period, down from outflows of £10.6 billion the year prior.

In addition, the firm said its firm-wide investment performance deteriorated over the year. 

“Style factors in a few of our large strategies have struggled to keep pace with broad benchmarks while remaining competitive against peers,” it explained. 

“In times like these, we support our investment teams as much as possible by limiting distractions and providing them with the resources they need to deliver competitive investment results.”

Based on these results and the strength of Ninety One’s balance sheet, the firm’s board recommended a final dividend of 6.4 pence per share (R1.50).

This will result in a full-year dividend of 12.3 pence per share (R2.88), slightly down from the 13.2 (R3.09) pence per share paid in 2023.