UK-headquartered investment manager Brooks Macdonald has reported that its international arm suffered a 5.2% drop in funds under management to £1.6bn ($1.97bn, €1.8bn) for the 2019 financial year ending 30 June.
This is a decrease from £1.7bn in FY 2018, which the firm said was due to “client attrition following the previously disclosed loss of a client-facing team in summer 2018”.
The international division also saw a 9.6% fall in net new business, which equates to outflows of £163m.
Overall, Brooks Macdonald reported its group revenue rose by 7.3% to £107.3m in FY19, compared to £99.9m in 2018.
Group profit before tax increased by 22.4% to £8.2m from £6.7m in FY18.
Direction change
In March, International Adviser reported that Brooks Macdonald had promoted Andrew Shepherd to replace Darren Zaman as chief executive of its international business.
Group chief executive Caroline Connellan said in the results that his appointment was “central” to its efforts to revitalise the international arm, and the team “have now mapped out a clear plan to make international a material contributor to the group”.
In June, IA spoke to Shepherd and Richard Hughes, the deputy chief executive of Brooks Macdonald International, about its plans to roll out some of its UK-based offerings to the international market.
This includes its decumulation solution and its responsible investment service.
Legacy settlement
The firm also discussed the legacy issue of its former discretionary fund management business Spearpoint.
In July 2017, Brooks announced it was dealing with “certain legacy matters arising from the former Spearpoint business”, which it acquired in 2013 for a sum of £32.1m.
The matters related to a number of discretionary portfolios formerly managed by Spearpoint, which are now managed by Brooks’ Jersey office, and to a Dublin-based fund for which Spearpoint acted as investment manager.
Connellan added: “While we accept no legal liability in these matters, we have a deep commitment to treating customers fairly and seeking to protect our clients’ best interests.
“We developed a plan to resolve these matters and, accordingly, we made a £6.5m provision in FY17, and a further £5.5m provision in FY18.
“We issued goodwill offer letters to the discretionary clients in March 2018. The deadline for acceptance of offers has now passed, with 84% of the clients who received a goodwill offer having accepted.
“A small number of clients have rejected their goodwill offers and some of those clients may take other routes to pursue their claims. No such claims have been received to date.”
Money spent
“In parallel, we have been in extensive discussions with the board of the Dublin-based fund, seeking to deal with the matter proactively,” she said.
“New directors, who were appointed in November 2018, agreed our goodwill offer of £3.4m and received unanimous shareholder approval at an extraordinary general meeting in April 2019.
“Shareholders had until 4 September 2019 to claim their share, and the company is now going into voluntary liquidation.”
The firm added that, as at 1 July 2018, £5.8m of the total £12m provision set aside for the legacy matter had been utilised, leaving £6.2m outstanding.
Over the financial year to 30 June 2019, a further £5.5m was utilised, leaving a balance of £700,000.
“The total expensed provision remains unchanged and we intend to deal with any residual issues in the ordinary course of business,” Connellan added.
“We continue to be in discussions with all stakeholders, including relevant regulators, as we seek to bring these matters to a conclusion.”
Acquisitions
Connellan added that the group’s “strong foundations” have allowed it “to start looking at potential high-quality acquisitions”.
IA has asked the firm whether it is looking to acquire any businesses for its international arm.
