Exceptionally strong half-year of net inflows

Even in more ‘normal’ economic times, Tatton’s net inflows over H1-23 (to 30 Sep 22) would have been impressive. But given the weak economic and market environments, it is an exceptional performance. Net inflows totalled £907m (annualised rate of 16% of opening AUM), averaging £150m per month. This is a sharp increase (+39%) over H1-22 which saw £652m of net inflows (annualised rate of 14.5% of opening AUM), averaging £100m per month.

Falls in financial markets, however, offset most of these AUM gains. The MSCI PIMFA Private Investor Balanced Index fell 9.6% over the period with market movements and investment performance being responsible for a £905m reduction in Tatton’s AUM (-8.0% of opening AUM). AUM closed the half-year marginally up at £11.343bn (31 Mar 22: £11.341bn).

While net inflows are ahead of our forecasts by some margin (previous estimate £1.3bn for the full FY23), market falls lead us to reduce our end-FY23 AUM forecast from £13.0bn to £12.2bn (Tatton has also flagged that H1 inflows were boosted by several ‘wins’ with H2 net inflows likely to be lower than H1). This, coupled with the jump in UK Gilt yields (the risk-free rate in our DCF valuation), reduces our fundamental value from 540p to 460p, still 30% above the current share price.

We also highlight that while only a limited data set is available, it seems that Tatton’s H1 performance of net inflows exceeding negative investment performance (i.e., a net increase in AUM) appears to be a standout performance among London-listed asset and wealth management peers (see page 2). We will revisit this comparison when interim results are released in November.