The new head of Prudential’s M&G fund management arm, Anne Richards, has said it is considering shifting more funds to Dublin and Luxembourg after the Brexit vote.
Richards, who joined in June from Aberdeen Asset Management, said a tenth of M&G’s £255.4bn assets under management were from EU clients. “It’s a very important client base for us.”
Investors spooked by the EU referendum have been withdrawing their money, causing a 10% drop in M&G’s first-half profits. Richards said the firm was considering expanding its Dublin base, where it began building a funds business shortly after the Brexit vote, to maintain access to the EU’s single market.
“What we are trying to do … is give ourselves options so we are in a position to react and adapt,” she said. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.”
This will depend on how the UK’s Brexit negotiations with the EU pan out. Under current rules, investment managers need a base in the EU to sell their funds to continental European retail investors.
Mike Wells, Prudential’s chief executive, who took over from Tidjane Thiam last year, said there was no question of leaving the UK behind after the country’s vote to quit the EU. “We like the market, we are succeeding here,” he said, adding that “at group level the immediate impact will not be material”. Prudential generates 80% of its sales and 70% of its profits outside Europe.
M&G’s operating profits dropped 10% to £225m in the first six months of the year, as investors pulled out nearly £7bn in the run-up to the EU referendum. The fund outflows are now slowing, after the Brexit vote triggered a spike in withdrawals.
This was offset by strong performances elsewhere. Prudential’s profits rose 15% to £743m in Asia, 9% to £642m in the US and 8% to £473m in the UK. Overall, group profits increased 6% to £2.1bn, beating analysts’ forecasts of £1.8bn.
M&G’s optimal income fund, which has many European clients, has seen the biggest withdrawals, and its global dividend fund has also been hit. To offset the outflows, M&G had cut costs by 8% “around compensation, marketing and good housekeeping”, Richards said.
In early July, M&G barred redemptions to its £4.4bn property portfolio fund, one of several property funds that suspended trading to stop the rush of withdrawals after the Brexit vote.
Rival insurer Aviva’s investment arm said on Wednesday that its property fund would be suspended for at least six to eight months (pdf). Aviva Investors said this reflected the considerable time it took to sell commercial properties.
Prudential raised its interim dividend by 5% to 12.93p a share. The shares rose 2% to £14.20 on Wednesday afternoon.
Eamonn Flanagan, an analysts at Shore Capital, said: “The new CEO has settled in well, with a seamless transition from Tidjane Thiam. We now anticipate Mike Wells to make his mark on the business in the coming years.”
In the UK, Prudential has withdrawn from bulk annuities and blamed what it said was the onerous capital impact under the Solvency II rules.
