K2 Asset Management suffered a $1.3 million loss in financial year 2019, dragging its profit down by 125.71 per cent year-on-year.
The result came in stark contrast to its 2018 profit after tax of $5.2 million.
Revenues from ordinary activities plunged by 65.9 per cent to $4.7 million. Most of the cut came from K2’s performance fee revenue for the year, which sunk by 99 per cent from 2018 to $16,835.
Management fees generated a revenue of $4.3 million, down by 27 per cent.
The group’s funds under management (FUM) came to $239.8 million, almost half of the prior year’s $404.7 million.
Chairman Campbell Neal called the past year “a difficult one for active investment managers,” with the rise of passive investment making market participants appear to be “happy to pay any price for a select basket of index stocks.”
However, Mr Neal remains optimistic that “investors will reach a point where they see the gap in pricing between value and growth as being far too wide and unsustainable.
“Investing with a valuation metric has shown to outperform in the long run and history shows that valuations matter,” he said.
“If we provide consistent long-term performance while minimising risk, the value of our offering will be rewarded from both the retail and institutional markets.”
The K2 Australian Absolute Return Fund generated a revenue of $2.5 million, falling by 67 per cent year-on-year, while its International Absolute Return Fund produced $554,576, down by 78 per cent.
The Global High Alpha Fund’s revenue decreased by 65 per cent to $679,575.
“We see the outflows as a symptom of the late stage of the current market cycle, while it lasts,” Mr Neal noted.
“In FY19, we made significant progress with our partnership with Principals Funds Management by accessing quality participants in the wholesale market.
“We believe this is where FUM growth will ultimately come from with the wholesale market understanding equity cycles and the value of a long-term track record.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].