Brooks Macdonald faces continued outflows as takeover rumours swirl
Brooks Macdonald investors pulled £154m from the asset manager over the last three months, despite analyst expectations of net inflows, as the company struggles with rumours of a potential takeover attempt.
This has left the company with £616m pulled by clients over the last year, or about four per cent of assets under management, the company revealed in a trading update today.
Brooks Macdonald‘s stock price dropped 4.5 per cent upon the news, before recovering throughout the day.
Rumours have circulated for months that Brooks Macdonald as a mid-sized firm may be a target in a takeover attempt by a larger competitor.
In October, Reuters reported that the company was working with investment bank Raymond James as a defence against a takeover bid, as the investment industry has seen a spike in consolidation.
With low stock prices and cost-cutting programmes as the pressure for fees to come down grows, asset managers have increasingly moved towards acquisitions to prevent falling into ‘the squeezed middle‘.
Brooks Macdonald itself has struggled with many of these problems, with its stock price falling 3.6 per cent over the last year, and down more than a quarter since its peak in 2021. The company also cut around 10 per cent of its workforce late last year.
However, the trading update didn’t contain only bad news for the asset manager.
“Gross inflows of £0.6bn were the highest of any quarter during full-year 2024, whilst gross outflows of £0.8bn reduced six per cent quarter on quarter but remained elevated, tentative signs that outflows may have peaked,” noted Vivek Raja, analyst at Shore Capital.
Despite the outflows over the quarter, the group’s funds under management actually increased from £17.9bn to £18bn, thanks to a strong investment performance over the quarter.
Brooks Macdonald’s platform model portfolio service was a particular star of the results, delivering a strong 13 per cent annualised growth.
“We continue to believe this part of the business will be a long-term beneficiary of Consumer Duty as the industry moves towards outsourced investment management, especially given Brooks’ leading decumulation products,” added Investec analysts Rahim Karim and Jens Ehrenberg, rating the firm a Buy.
This has left the company “very well placed to deliver strong rates of organic growth once market conditions normalise,” said Karim and Ehrenberg, rating the firm a Buy.
However, Shore Capital rated the asset manager a Hold, arguing that competitor Rathbones was a more preferable option due to being more lowly rated while offering a better yield and earnings per share growth.
The asset manager’s full year results are due on 12 September, and will be led for the first time by Andrea Montague, who recently joined as CFO and was then appointed CEO designate. A review of its international operations is due to conclude in time for the results.