Record PLC Trading Statement (1105N)

TIDMREC

RNS Number : 1105N

Record PLC

21 October 2016

21 OCTOBER 2016

RECORD PLC

SECOND QUARTER TRADING UPDATE

Record plc ("Record" or "the Company"), the specialist currency manager, announces today that the Group's assets under management equivalents ("AUME") as at 30(th) September 2016 totalled $55.8 billion (30(th) June 2016: $53.0 billion).

AUME expressed in sterling as at 30(th) September 2016 totalled GBP42.9 billion (30(th) June 2016: GBP39.7 billion).

   1.         AUME composition 

AUME expressed in US dollars increased by 5.2% between 30(th) June 2016 and 30(th) September 2016 and increased by 8.3% when expressed in sterling. The composition of AUME by product was as follows:

 
                    AUME $ billion 
                        30(th) September   30(th) June 
                              2016             2016 
                       -----------------  ------------ 
 Dynamic Hedging                     7.5           7.3 
 Passive Hedging                    46.0          43.6 
 Currency for Return                 2.1           1.9 
                       -----------------  ------------ 
 Cash & Futures                      0.2           0.2 
                       -----------------  ------------ 
 Total                              55.8          53.0 
                       -----------------  ------------ 
 
   2.         AUME Movement 

Net client AUME flows in the three months to 30(th) September 2016 by product were as follows:

 
            Net client AUME flows - $ billion 
                           3 months to      3 months to 
                         30(th) September    30(th) June 
                               2016             2016 
                       ------------------  ------------- 
 Dynamic Hedging                        -            0.1 
 Passive Hedging                      1.3          (0.4) 
 Currency for Return                  0.2            0.2 
                       ------------------  ------------- 
 Cash & Futures                         -              - 
                       ------------------  ------------- 
 Total                                1.5          (0.1) 
                       ------------------  ------------- 
 

Record had 61 clients at 30(th) September 2016 (30(th) June 2016: 61 clients).

Other than client flows, the factors which have had an aggregate impact on AUME during the quarter of $1.3 billion, were as follows:

   (i)         Movements in global stock and other markets:                         +$1.4bn 

Substantially all the Passive and Dynamic Hedging, and some of the Currency for Return mandates, are linked to stock and other market levels. Consequently AUME may be affected by movements in these markets.

(ii) Exchange rate movements: -$0.1bn

Exchange rate movements during the period affect the conversion of non-US dollar mandate sizes into US dollar AUME.

   3.         Investment performance 

For US Dynamic Hedging clients during the quarter, hedging returns in the programmes were negative, as the US dollar weakened against the basket of hedged currencies. Losses came primarily from hedging the Japanese yen and the euro, where the Japanese yen appreciated following a shift by the Bank of Japan to a tighter monetary policy stance in September. The Dynamic Hedging programmes performed as expected, with hedge ratios varying systematically in line with US dollar movements, although costs were incurred in adjusting the hedges.

For UK-based Dynamic Hedging clients the programmes controlled hedging losses in response to sterling weakness against the weighted basket of currencies. Negative returns came mostly from hedging the US dollar and euro, however, losses were limited as hedge ratios remained low over the period, and fell in line with further sterling weakness in September.

Investment performance of the FTSE Currency FRB10 index (excess return in sterling) during the three months to 30(th) September 2016 was +1.37% (three months to 30(th) June 2016: return of +0.78%). The FTSE FRB10 Index Fund continued to track the index closely, on a 1.8x--geared basis. By the end of the quarter, all Record Active Forward Rate Bias portfolios had been transitioned to the FTSE Currency FRB10 Index strategy as agreed with the respective clients.

Record's Emerging Market product investment performance was positive during the quarter and for an un-geared portfolio equated to a quarterly return of +2.51% (three months to 30(th) June 2016: return of +0.63%). Annualised performance since inception (30(th) November 2009) for an un-geared portfolio was +1.38% p.a.

Investment performance in the Multi-Strategy product that used the Active FRB strategy before switching to the FRB10 strategy, was positive during the quarter as the Momentum and Emerging Market components offset losses from the Value and Active FRB strategies. For an un-geared portfolio, the return was +1.03% over the quarter (three months to 30(th) June 2016: return of +1.48%). Annualised performance since inception (31(st) July 2012) for an un-geared portfolio is +1.56% p.a.

The Multi-Strategy product that has used the FTSE Currency FRB10 Index strategy throughout produced positive returns of +1.35% for an ungeared portfolio during the three months to 30(th) September 2016 (three months to 30(th) June 2016: return of +1.79%) as positive returns from the FRB10, Emerging Markets and Momentum strategies more than offset losses from the Value component. Annualised performance since inception (27(th) February 2015) for an un-geared portfolio is +2.06% p.a.

   4.         AVERAGE FEE RATES, PERFORMANCE FEES AND PRODUCT DEVELOPMENT 

During the quarter to 30(th) September 2016, fee rates for all products remained broadly unchanged from the previous quarter. No performance fees were earned in the quarter.

Our relationship with WisdomTree Investments, Inc. was extended during the quarter to include signals that will be used to dynamically hedge currency exposures within their newly-launched Canadian rules-based index family.

   5.         CHIEF EXECUTIVE'S COMMENT 

Chief Executive James Wood-Collins, commenting on business development, said:

"Volatility continued during the quarter, albeit at less dramatic levels than the previous quarter as the immediate uncertainty caused by the EU referendum result on 24(th) June receded. Sterling has continued to weaken against most major currencies over the quarter, with a more significant decline since quarter end following the government's announcement of a deadline of 31(st) March 2017 for triggering the formal negotiations for exiting the EU.

"The Bank of England's decision on 4(th) August to reduce the base rate to 0.25% brought it into parity with the Federal Reserve rate, and further suppressed expectations for increased monetary policy divergence in the short-term. A consequence of such ultra-low rate environments and continued Central Bank intervention is a recovery in risk sentiment, as observed for example by more recent and consistent flows into Emerging Market economies, as investors seek out higher and more sustainable returns. In such challenging conditions, we continue to be encouraged by the performance of the Multi-Strategy product, which has returned 3.16% for the six months ended 30(th) September 2016.

"We continue to see heightened investor awareness of the risks and opportunities posed by currency fluctuations arising from volatile market conditions. These concerns are seemingly set to endure due to the continued geopolitical tensions across the globe, the forthcoming presidential elections in the US, and the UK's exit from the EU. Such awareness is provoking interest from investors across a broad spectrum of Record products and we believe further progress will be made in the current financial year."

Record will announce its half year results on 18(th) November 2016 and its third quarter trading update on 20(th) January 2017.

For further information, please contact:

Record plc Tel: [phone]

James Wood-Collins, Chief Executive Officer

Steve Cullen, Chief Finance Officer

MHP Tel: [phone]

Nick Denton [e-mail]

Ollie Hoare

Notes to Editors

Record plc

Record is a specialist currency manager and provider of currency hedging services for institutional clients. Founded in 1983, Record has established a market leading position as a currency manager. Specifically, the Group has a leading position in managing Currency Hedging and Currency for Return for institutional clients.

The Group has three principal product lines:

- Dynamic Hedging, where Record seeks to eliminate the impact of currency movements on elements of clients' investment portfolios that are denominated in foreign currencies when these movements are expected to result in an economic loss to the client, but not to do so when they are expected to result in an economic gain;

- Passive Hedging, where Record seeks to eliminate fully or partially the economic impact of currency movements on elements of clients' investment portfolios that are denominated in foreign currencies; and

- Currency for Return, in which Record enters into currency contracts for clients with the objective of generating positive returns.

Record (LSE: REC) was admitted to trading on the London Stock Exchange on 3(rd) December 2007.

This announcement includes information with respect to Record's financial condition, its results of operations and business, strategy, plans and objectives. All statements in this document, other than statements of historical fact, including words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "will", "continue", "project" and similar expressions, are forward-looking statements.

These forward-looking statements are not guarantees of the Company's future performance and are subject to risks, uncertainties and assumptions that could cause the actual future results, performance or achievements of the Company to differ materially from those expressed in or implied by such forward-looking statements.

The forward-looking statements contained in this document are based on numerous assumptions regarding Record's present and future business and strategy and speak only as at the date of this announcement.

The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement whether as a result of new information, future events or otherwise.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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October 21, 2016 02:00 ET (06:00 GMT)