EDINBURGH Partners, one of Scotland’s biggest independent fund management houses, has reported a dip in annual profits to just below £20m on the back of modest declines in funds under management and revenues.
But Sandy Nairn, who has built the investment house from a standing start in 2003, highlighted his belief that Edinburgh Partners would achieve a net inflow of funds in the current financial year to next February.
And he declared that Edinburgh Partners, which is chaired by venerable Scottish merchant banker Sir Angus Grossart, was likely to add to its workforce of about 60 through the recruitment of more fund managers.
Mr Nairn, a global fund management industry veteran who started building Edinburgh Partners after deciding to move on from his previous role as chief investment officer of Scottish Widows Investment Partnership, said he had a “reasonably cautious take” on stock markets at current levels.
He highlighted his view that it would still be possible to make positive real returns on equities over the medium and long term, albeit these were likely to be less than in the past.
Mr Nairn meanwhile underlined his belief that US equity markets were overvalued.
He acknowledged that Edinburgh Partners’ wary stance on US stocks had for a time weighed on the relative performance of its global equity funds.
Mr Nairn said: “That has been a tough headwind to fight against, with what the US market has done in recent years. We haven’t been terrible. We will be a lot better when that flips over.
“The US outperformed the world market by about 15 per cent last year and about 15 per cent the year before. That is a big number.”
Mr Nairn noted that Edinburgh Partners had seen some outflows of client funds in the global equity category in the year to February 2015.
However, he emphasised that the situation had improved and highlighted his expectation that Edinburgh Partners’ global funds would by the year-end show an outperformance over the key time periods.
Mr Nairn said: “Our global numbers have been improving. I think, by the end of the year, we should be positive [in terms of] relative numbers over one, three and five years.”
The Edinburgh Partners chief executive highlighted strong inflows of client money in the international equity category since the last financial year-end. International equity funds are invested in global stock markets excluding the US.
Mr Nairn also flagged inflows of client money in the emerging market and European equity categories.
The investment house manages funds for clients around the world, including institutions in North America, Europe, and Australasia. Mr Nairn noted that it had more clients overseas than in the UK.
Asked if, overall, he expected Edinburgh Partners to achieve a net inflow of funds in the current financial year, Mr Nairn replied: “I am reasonably comfortable we will have a net inflow. Since the turn of the financial year, we have put on a reasonable chunk of assets.”
In the year to February 2015, Edinburgh Partners saw its pre-tax profits dip to £19.6m, from £21.5m in the prior 12 months.
This dip in profits came on the back of a fall in revenues, to £36.7m in the year to February from £38.5m in the prior 12 months. The decline in revenues resulted from a dip in funds under management.
Average funds under management fell to £7.72 billion in the year to February, from £8.15bn during the prior 12 months.
Mr Nairn said that this fall in funds under management reflected a mixture of fund outflows and stock market movements.
Asked about the overall outlook for world stock markets, Mr Nairn replied: “I think you just need quite a lot of care at the moment. I don’t think there are many asset markets I would describe as cheap. There are certainly some I would describe as expensive. Reasonably cautious is my take.”
Edinburgh Partners has opened an office in Palm Beach in Florida within the last year, hiring analysts Neil Devlin and Eric Howe from Templeton.
Mr Nairn worked previously with Mr Devlin at Templeton.
Edinburgh Partners, which is more than 70 per cent -owned by its staff including Mr Nairn, also has a sales office in California.
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