Rathbones divides brokers as funds under management continue to climb

Listed asset manager Rathbone Brothers announced its funds under management had crept up to £37.5bn in a third-quarter trading update this morning.

Constituting a 2.5 per cent rise over the three months, Rathbone Investment Management had £32.5m under management while its ethical investment service Greenbank hit £1bn and the unit trusts business reached £5bn.

Net operating income for the main investment management business was up to £62.5m for the three months ending in September, 5.6 per cent higher than the same period last year.

"We continue to progress our strategic initiatives and invest in our core infrastructure,” said chief executive Philip Howell.

“We are well positioned for the future and will continue to pursue growth opportunities both organically and through acquisition, approaching each with discipline.”

The firm gave up its pursuit of rival Smith & Williamson at the end of August, saying it was unable to reach a deal that was in shareholders' best interests.

But brokers were divided by today's seemingly innocuous trading statement. Analyst Stuart Duncan at Peel Hunt said the update reflected “another solid quarter” from Rathbones' core division, with stronger growth in unit trusts and Greenbank. It left the target price at 2,630p – still above today's close price of 2,590p after a 1.77 per cent climb following the announcement.

But N+1 Singer was noticeably more downbeat. The 2.5 per cent organic net inflows in funds under management disappointed the analysts' three per cent “assumption”, as Andrew Watson reiterated a target price of 2,100p and a “sell” recommendation.

“We continue to see potential for margin erosion from growth initiatives, alongside challenges to generate material funds-under-management growth as a larger business. These factors are likely to weigh on earnings growth in the medium term,” said Watson.

Last month Rathbones' share price dropped due to an anonymous allegation made by a Reddit user, which the firm claimed was baseless.

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