Edinburgh Partners posts profit fall but chief upbeat as investment style returns to fashion

INVESTMENT house Edinburgh Partners has posted a dip in annual pre-tax profits and revenues on the back of a fall in funds under management.

Chief executive Sandy Nairn, who has built the investment house from a standing start in 2003, pointed out that Edinburgh Partners’ value-based approach had been out of fashion in recent years. However, he highlighted a significant improvement in its relative investment performance in recent months, and declared: “I am quite excited about our prospects.”

Mr Nairn added: “It has really picked up in the last six months.”

Edinburgh Partners’ pre-tax profits fell to £17.4 million in the year to February 29, from £19.8m in the prior 12 months, as revenue dipped from £36.7m to £34.4m.

Average funds under management during the year to February 29 were £7.34bn, compared with £7.72bn in the prior 12 months.

Mr Nairn noted there had been some fund inflows from clients, but also some outflows from global equity funds. He voiced his expectation that the outflows had “probably finished now”, citing the recent strong investment performance.

He added: “We are seeing a pick-up in interest, in speaking to our clients.”

Against a backdrop of rising benchmark US interest rates, Mr Nairn said: “As the yield curve normalises and interest rates become more sensible, valuation becomes more important and that helps us.”

He added: “The value style has not been lauded in the last three, four, five years, but the magnitude of the turnaround and how long this can go makes us pretty positive and optimistic.”

Asked about the outlook for stock markets, Mr Nairn replied: “I think, in absolute terms, very few asset markets are cheap now. In relative terms, I think we are optimistic but [there is] quite a subdued outlook for absolute returns.”

Noting Edinburgh Partners was not exposed to bonds at all, he added: “The yield curve is steepening. Bond markets are not going to be particularly pleasant.”

On the question of which sectors Edinburgh Partners preferred at the moment, Mr Nairn said the investment house had had the biggest exposure to financial and banking, energy, and healthcare stocks over the last 12 months.

The investment house, which is chaired by Edinburgh merchant banker Sir Angus Grossart, had an average of 61 employees during the year to February 29.

Edinburgh Partners is more than 70 per cent -owned by its staff, including Mr Nairn.