Wealth and investment manager Rathbones produced a thoroughly respectable set of figures for 2020 while also making progress on longer-term strategy.
This was despite a year marked by the obvious operational disruption and much lower average market levels year-on-year.
But while the firm was resilient at group level, its standout star performer was its unit trusts (or funds) business, which saw assets under management rise 32.4 percent in 2020, to £9.8 billion.
Unit trust gross sales were up 56.5 percent to £3.6 billion, though redemptions also increased (£2.1 billion), particularly in March when investors initially retreated from markets. Overall, the business line reported four-year compound annual growth of 25 percent. Income growth was also strong, at 22 percent year-on-year, totalling £45.4 million in 2020.
By comparison, funds under management within Rathbones’ main investment management business were up 4.4 percent, to £44.9 billion, a combination of modest net inflows and positive market movements.
Back in unit trusts, net inflows continued to be spread across the range of funds, and strong performance forms part of the answer as to why inflows are booming.
Its two largest funds – Rathbone Global Opportunities Fund (holding £3.2 billion) and the Rathbone Ethical Bond Fund (£2.1 billion) – have both produced top quartile performance over 3 and 5 years against their relevant Investment Association sector benchmark.
According to Pridham & Pridham – which produces a quarterly report monitoring fund sales in the UK – Rathbones funds ranked ninth for net retail sales in the UK in both 2019 and 2020, a strong result for a manager of its size.
But is Rathbones also starting to refer more business to unit trusts internally?
Well, yes, but this still makes up a very small proportion of fund sales, according to comments made by its executives on a results day analyst call last week.
Mike Webb, the chief executive of Rathbone unit trusts, said there was indeed increasing use of Rathbones multi-asset funds by the firm’s lower value wealth management clients, as these funds formed part of the firm’s MPS offering which goes out mostly via IFAs.
However, Rathbones continues to take the view that its investment managers should view its funds “alongside everyone else in that competition space”, Mr Webb said.
“They are welcome to buy them, but we do not force them to do so. There are within [the in-house] range a couple of funds which have seen particular interest from our [Rathbones investment managers].”
These were the £283 million AUM Rathbone High Quality Bond Fund and the £204 million Rathbone Strategic Bond Fund.
Mike Webb
Mr Webb explains: “[This is because], particularly for the lower end of their discretionary portfolios, they are looking for risk-adjusted returns from the fixed income market, which have low correlation to equity-type risk.
“We expect that to continue, but I think the area that we are expecting far greater Rathbones investment management support, for want of a better word, is in the multi-asset space.”
Mr Webb pointed out that about 95 percent of inflows come from external sources – mostly financial advisers and DIY investors using external platforms.
Rathbones group chief executive Paul Stockton was keen to emphasise the “culture” under which investment managers were independent.
“[But] in the multi-asset space, that's a ready-made diversified wealth product, which does have a degree of diversity and indeed transparency... We're quite comfortable that we can build product on such a diverse foundation.”
In June 2020 unit trusts added two new multi-asset funds, and recently announced the 2021 launch of another four ESG-themed funds.
Rathbones unit trusts is expecting another strong year – markets permitting, says Mr Webb.
