MARKETS SPECTATOR: BTIM's Hambro vindication

BT Investment Management chief executive Emilio Gonzalez's decision to acquire J O Hambro two years ago has paid off.

When markets rally, so does BT Investment Management. BTIM’s net profit more than doubled to $22.8 million in the six months to March 31. The stock has done almost as well over the past 12 months: up 82 per cent compared to the S&P/ASX 200 Index’s 17 per cent gain. “We’re a leverage play,” BTIM chief executive Emilio Gonzalez cheerfully admits.

Gonzalez’s decision two years ago to acquire London-based international equities fund manager J O Hambro for $314 million has paid off. Stock markets have rallied. Bond yields are at record lows. In the six months to March, Hambro had $900 million of inflows from individuals and institutions. Hambro’s performance fees were $33.5 million in the six months to March compared with $4.3 million in the previous corresponding period. Its margins were a healthy 63 basis points.

Australia, however, is a tougher market, Gonzalez says. Total outflows from Australian equities has been $38.6 billion from retail and wholesale investors in 2012, he says. Australians are “de-risking”, says Gonzalez. BTIM’s fixed income products have had inflows of $700 million in the six months to March. Gonzalez is trying to tempt investors with a yield-focused equity product that hedges up to 70 per cent of the share price risk. In five months BTIM has more than $60 million of that product.

Gonzalez is cautious on the outlook for the business in the next six months. The S&P/ASX 200 Index is at an inflection point. If it can trade consistently above 5,100 then BTIM’s earnings over the next six months may continue to impress. BTIM shares were up 15 cents, or 4.3 per cent, to $3.66.

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