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F&C begins to stem outflows

F&C grew its operating profit by 16.4 per cent in 2004 despite a third consecutive year of net outflows that have seen the fund company lose 19bn of assets.

Inflows of 4.2bn over the year were offset by 5bn of outflows. The flow of redemptions was slowing by the fourth quarter, as the July merger with Isis started to bed down, but still equated to -300m net.

Chief executive Howard Carter says he is confident the group will stem the flow of redemptions by 2006 but admits that any expectations that this can be achieved next year may be premature.

He says while consultants and investors are naturally wary about investing with the group when a large-scale merger is being worked through, F&C has been particularly hit by its heavy exposure to insurance funds.

Insurance funds make up 63 per cent of the group’s assets under management and the nature of this client base means they are more likely to redeem as they are typically older.

There is also a wider market trend of moving out of these mandates into more specialist higher alpha products.

The fund manager’s results, which cover nine months trading by Isis and three months by the enlarged F&C group, reveal it was still able to raise its total operating profit by 16 per cent from 13.29m to 15.475m. Isis paid 748m to acquire F&C in 2004 and the cost of integrating the two businesses was 18.3m.

Carter says: “There were net outflows although the pattern is improving. The nature of the client base – the high proportion of insurance assets and the high level of redemptions from these – has been a factor. By 2006, I am confident we will be in a position to see overall net inflows.”

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