River and Mercantile is looking to at least double its assets under management over the next five years as it seeks to become more recognisable as a “pure asset management company”.
In its annual results published yesterday (October 8), group chief executive James Barham said the firm’s objective over the next five years was to “significantly increase” its growth rate and profitability by having “at least doubled” its Aum from current levels.
As part of its growth plans, Mr Barham said the fund house would increasingly focus on “products” as opposed to services.
Although consultancy and fiduciary management services — which it provides primarily to pension schemes — would remain “key” to its business, River and Mercantile plans to launch more products over time which will naturally skew the firm’s assets more towards this part of the company.
Mr Barham said: “I strongly believe that River and Mercantile is firmly positioned as ‘the’ pure play business in the solutions market, however we will continue to develop this thinking in product form that can be utilised across a broader market spectrum.”
River and Mercantile said it would continue to invest in its existing teams and add new divisions where appropriate.
The fund house announced in July it was on the lookout for a global quality growth equity team and an alternative credit team to add to its staff. It also poached James Sym from Schroders earlier this year to run a European mandate.
Its second string to its strategic business model includes “investing heavily” in distribution.
Mr Barham said: “The investment we are making will create a large, high quality distribution network in the major global markets for asset management.
“Our focus will still be on selling our products and services to or through professional investors and intermediaries.”
The fund house will also look for distribution partnerships to access markets where the complexity and cost of having its own presence was too much.
To back up the products and distribution push, Mr Barham said the firm was investing in its operational infrastructure to ensure it could provide support as the business “scaled up” over the coming years.
Mr Barham said: “[We] will ensure that by 2025 we have become an investment led asset manager with products at its heart, where in many cases the product has been designed based on holistic solutions mindset.
“This commercial direction of travel will accelerate as we continue to take investment intellectual property and apply it to our strategies.
“We see this as our core competence - the ability to link clients' needs to investment R&D to product design and distribution.”
Mr Barham’s comments come as the fund house reports fee earning Aum of £44.2bn as at June 30, 11 per cent up on 2019, while its underlying revenue for the year to June 30 increased from £65.6m to £69.4m year-on-year.
But its adjusted profit before tax (£13.2m) and statutory profit before tax (£8.3m) had tumbled 36 and 50 per cent respectively.
Chairman of River and Mercantile, Jonathan Dawson, said its profits had been hurt by the “significant investment” it had made in distribution and investment manufacturing, as well as the absence of performance fees.
The fund house received just £1.2m in performance fees in the 12 months to June, around a tenth of the £12.5m it earned from the fees the year before.
Mr Dawson said: “The year has brought huge challenges for our industry. I am proud of the way, however, that the group moved with great speed and efficiency to remote working.
“The challenges of the past year have underscored our strengths - our client focus, our core values, our team spirit and our resilient culture - and we therefore look forward with confidence that we will deliver good performance for our clients and for our shareholders.”
imogen.tew@ft.com
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