GQG Partners has been wounded by the UK pension fund crunch with UK-domiciled clients liquidating roughly US$1.5 billion.
In an ASX update on Friday, GQG reported a drop in funds under management (FUM) from US$87.4 billion at the end of August to US$79.2 billion as at 30 September given the backdrop of heightened volatility in markets.
The fund manager said it continued to see equity de-risking among institutional clients and “tax-loss harvesting” among retail clients, which have driven higher outflows during the quarter.
“In particular, the recent extreme volatility in gilts and currencies contributed to gross outflows of roughly US$1.5 billion from our UK domiciled clients,” GQG said.
Of the US$79.2 billion in total FUM, US$29 billion was in international equity (down from US$31.5 billion at the end of August), US$22.8 billion was in global equity (down from US$26.0 billion), US$21.7 billion was in emerging market equity (down from US$23.6 billion) and US$5.7 billion was in US equity (down from US$6.3 billion).
The fund manager did, however, report “strong traction” with its more recently launched products (including US Equity and dividend income strategies), as well as notable momentum in the Australian market.
“We note that the strength of the US dollar against other currencies (including AUD) provided a natural hedge to our earnings and dividend for the quarter. As in prior periods, our management fees (fees that are a percentage of assets managed) as opposed to performance fees (fees linked to investment performance) continue to comprise the vast majority of our net revenue,” GQG said.
“As the largest shareholders in GQG, our management team remains highly aligned with shareholders, and acutely focused on and committed to GQG’s future.”
The Bank of England confirmed on Thursday that pension funds in the UK came close to collapse amid an unprecedented meltdown in UK government bond markets sparked by Kwasi Kwarteng’s mini-budget.
In a letter to Commons Treasury committee, deputy governor at the Bank of England, Jon Cunliffe, argued that had the bank not intervened with a temporary gilt-purchasing program, funds would have been left with negative net asset value.
“The bank was informed by a number of LDI [liability-driven investments] fund managers that, at the prevailing yields, multiple LDI funds were likely to fall into negative net asset value. As a result, it was likely that these funds would have to begin the process of winding up the following morning,” Mr Cunliffe said.
“In that eventuality, a large quantity of gilts, held as collateral by banks that had lent to these LDI funds, was likely to be sold on the market, driving a potentially self-reinforcing spiral and threatening severe disruption of core funding markets and consequent widespread financial instability.”
