Investment managers, in threes

A recent dearth of news items on wealth managers / stockbrokers, and then like London buses three came along in a week. First, WH Ireland announced two contract wins for its Isle of Man office; then Wednesday brought a disappointing IMS from Rathbone, recognising that the first quarter had been a difficult one with lower transaction volumes and values ahead of the Brexit vote in June; it was followed the next day by Brewin Dolphin’s interims showing a significant fall in profits.

WH Ireland’s Isle of Man office has been awarded two investment mandates by the Isle of Man government. The size of the mandates has not been announced but may be assumed to be fairly significant, not just because government mandates tend to be large but because the IoM government expended much time and effort in the process of selecting WHI and judging it to be suitable.

Rathbone had had an excellent run for the last few years so even a slowing in its growth rate in AUM to an annualised rate of 3.6% (including 1.5% organic) was greeted with disappointment. Despite another good performance by the Unit Trust division, investors and analysts are accustomed to good growth in all but exceptional conditions, so the share price has fallen.

A fall in Brewin Dolphin’s FRS3 interim profits was expected since management had cashed in the historic profit on Brewin’s holding of Euroclear in H1 2015, but the fall in “adjusted” profits was an unwelcome surprise and the share price took a hit, down 8% to 258p, despite the small increase in the interim dividend, such that it is now yielding 4.7%

Giving perspective, and suggesting that ‘Brexit’ uncertainty is overdone for sector ratings, is the price paid by Tilney BestInvest for Towry. At c. 5% of AUM it would make all three companies mentioned look ridiculously cheap: Brewin would be worth £1.6bn (more than double current market cap), Rathbone £1.5bn (more than 50% higher) and WHI (excluding the new mandates) £126m (up more than 400% !). Also, Brooks Macdonald would have a value of £400m, 70% above stock-market worth.

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