Best-in-class growth in very difficult markets

In our 18 October note, we stated how impressed we were with Tatton’s strong net inflows during H1-23 (to 30 Sep 22), an extremely testing economic period. These totalled +£907m (H1-22: £652m), an annualised rate of 16% of opening AUM, just offsetting a negative investment performance of -£905m (-8.0% of opening AUM compared to the MSCI PIMFA Private Investor Balanced Index fall of -9.6%), leaving AUM at £11.3bn (£12.3 bn including c£1.0bn of ‘assets under influence’ from the acquisition of 50% of 8AM Global, growing to £12.9bn in the post-results period).

With more peers releasing trading updates since that note, Tatton’s performance now looks even more impressive than first thought. It was the ONLY company in our peer group that grew AUM, with all comparable peers recording AUM declines (between 5% and 11%).

We highlight the significant growth potential beyond their three-year plan: Tatton is in a growing market with significant tailwinds; it has a market-leading proposition and is gaining market share; it has a huge opportunity to grow AUM even without winning new clients (by increasing average AUM per client); and it can accelerate growth through strategic partnerships and acquisitions.

Our core value is 500p per share, 14% above the current share price. This increases from 460p on better-than-expected interims and a fall in the 10-year Gilt rate, the risk-free rate in our DCF valuation.