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Prudential may relocate M&G funds following Brexit vote Prudential may relocate M&G funds following Brexit vote
(35 minutes later)
The new head of Prudential’s M&G fund management arm, Anne Richards, has said it is considering moving funds to Dublin and Luxembourg following the Brexit vote. The new head of Prudential’s M&G fund management arm, Anne Richards, has said it is considering shifting more funds to Dublin and Luxembourg after the Brexit vote.
Richards, who joined in June from Aberdeen Asset Management, said a tenth of M&G’s £255.4bn assets under management were from EU clients. “It’s a very important client base for us.”Richards, who joined in June from Aberdeen Asset Management, said a tenth of M&G’s £255.4bn assets under management were from EU clients. “It’s a very important client base for us.”
Related: Property fund turmoil continues as three more firms cut valueRelated: Property fund turmoil continues as three more firms cut value
Investors spooked by the EU referendum have been withdrawing their money, causing a 10% drop in M&G’s first-half profits. Richards said the firm was considering relocating some funds to be closer to its European clients. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe,” she said. This would depend on how the UK’s Brexit negotiations with the EU pan out. Investors spooked by the EU referendum have been withdrawing their money, causing a 10% drop in M&G’s first-half profits. Richards said the firm was considering expanding its Dublin base, where it began building a funds business shortly after the Brexit vote, to maintain access to the EU’s single market. “What we are trying to do … is give ourselves options so we are in a position to react and adapt.
Mike Wells, Prudential’s chief executive who took over from Tidjane Thiam last summer, said there was no question of leaving the UK behind following the country’s vote to quit the EU. “We like the market, we are succeeding here,” he said. Wells insisted that “at group level the immediate impact will not be material”. Prudential generates 80% of its sales and 70% of its profits outside Europe. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe,” she added. This would depend on how the UK’s Brexit negotiations with the EU pan out. Under current rules, investment managers need a base in the EU to sell their funds to continental European retail investors.
Mike Wells, Prudential’s chief executive who took over from Tidjane Thiam last summer, said there was no question of leaving the UK behind after the country’s vote to quit the EU. “We like the market, we are succeeding here,” he said. Wells insisted that “at group level the immediate impact will not be material”. Prudential generates 80% of its sales and 70% of its profits outside Europe.
M&G’s operating profits dropped 10% to £225m in the first six months of the year, as investors pulled out nearly £7bn in the run-up to the EU referendum. The fund outflows are now slowing, after the Brexit vote triggered a spike in withdrawals.M&G’s operating profits dropped 10% to £225m in the first six months of the year, as investors pulled out nearly £7bn in the run-up to the EU referendum. The fund outflows are now slowing, after the Brexit vote triggered a spike in withdrawals.
This was offset by strong performances elsewhere: in Asia, Prudential’s profits rose 15% to £743m, while the US posted a 9% rise to £642m and the UK was up 8% to £473m. As a result, group profits increased 6% to £2.1bn, beating analysts’ forecasts of £1.8bn.This was offset by strong performances elsewhere: in Asia, Prudential’s profits rose 15% to £743m, while the US posted a 9% rise to £642m and the UK was up 8% to £473m. As a result, group profits increased 6% to £2.1bn, beating analysts’ forecasts of £1.8bn.
M&G’s Optimal Income fund, which has many European clients, has seen the biggest withdrawals, while its Global Dividend fund has also been hit. To offset the fund outflows, M&G has cut costs by 8% – “around compensation, marketing and good housekeeping,” Richards said. M&G’s Optimal Income fund, which has many European clients, has seen the biggest withdrawals, while its Global Dividend fund has also been hit. To offset the fund outflows, M&G has cut costs by 8% – “around compensation, marketing and good housekeeping”, Richards said.
M&G barred redemptions to its £4.4bn Property Portfolio fund in early July, one of several property funds that suspended trading to stop the rush of withdrawals following the Brexit vote. M&G barred redemptions to its £4.4bn Property Portfolio fund in early July, one of several property funds that suspended trading to stop the rush of withdrawals after the Brexit vote.
Rival insurer Aviva’s investment arm said on Wednesday (pdf) the suspension of its property fund would last at least six to eight months. Aviva Investors said this reflected the “considerable time” it takes to sell commercial properties.Rival insurer Aviva’s investment arm said on Wednesday (pdf) the suspension of its property fund would last at least six to eight months. Aviva Investors said this reflected the “considerable time” it takes to sell commercial properties.
Prudential raised its interim dividend by 5% to 12.93p a share. The shares rose 2% to £14.20 on Wednesday afternoon.Prudential raised its interim dividend by 5% to 12.93p a share. The shares rose 2% to £14.20 on Wednesday afternoon.
Shore Capital analyst Eamonn Flanagan said: “The new CEO has settled in well, with a seamless transition from Tidjane Thiam. We now anticipate Mike Wells to make his mark on the business in the coming years.”Shore Capital analyst Eamonn Flanagan said: “The new CEO has settled in well, with a seamless transition from Tidjane Thiam. We now anticipate Mike Wells to make his mark on the business in the coming years.”
In the UK, Prudential has withdrawn from bulk annuities and blamed the “onerous” capital impact under the Solvency II rules.In the UK, Prudential has withdrawn from bulk annuities and blamed the “onerous” capital impact under the Solvency II rules.