12 Stocks of Christmas: Impax Asset Management
Impax Asset Management (LON:IPX) - A fallen angel fund manager where I’m betting on recovery
Market cap at the time of writing: £320m, at a share price of 241.5p.
I recently added this one to my personal portfolio as my perception of the value on offer created a sense of obligation to buy it.
Impax is an ESG-focused fund manager whose mission since its inception has been sustainable investing.
Founder and CEO Ian Simm retains an interest in 9.5 million shares or 7% of the company.
When it was still enjoying net inflows during the 2021 bubble, the share price reached a level that in hindsight was ludicrous, topping out at £14.80:
The share got another kicking this month, falling 19% on the news that St James’s Place (STJ) was taking away a £5 billion mandate from Impax.
The only consolation was that this particular mandate generated lower margins than Impax generates across the rest of its activities. And when you look into the situation at STJ more closely, it is clear that they (STJ) are under pressure to make changes that in normal circumstances they might not feel obliged to make. So I’m treating this news as a one-off misfortune rather than being representative of a more serious loss of confidence in Impax by its institutional clients.
If we suppose that Impax now has c. £32 billion of AUM after the loss of the STJ mandate, the shares after the recent price drop now offer £100 of AUM for every £1 invested in them.
In bubble territory in late 2021, the shares only offered £19 of AUM for every £1 invested in them.
Similarly, the P/E multiple has moved from over-stretched upper limits back to far more modest, undemanding levels at the bottom of its range:
Analyst Paul Bryant at Equity Development is forecasting adj. EPS of 24.9p in the current financial year (FY Sep 2025), down from 27.4p before the news of the loss of the mandate. That suggests an adj. PER of less than 10x at the current share price.
Of course we risk the possibility that a fund manager such as Impax might permanently fall out of favour. Fund-gathering is a highly competitive business and the competition takes many forms including both passive and active fund managers, with active managers offering a range of different niches and also competing against Impax on their own terms. By betting on Impax, I’m betting that it can still argue that it’s the right choice for sustainability-minded investors.
Quantitatively, Impax ticks the boxes for me in terms of its market cap/AUM multiple and PE ratio. From the point of view of the StockRanks, it offers very high quality and value, but terrible momentum:
The stock passes not one but two Ben Graham screens: the Ben Graham Defensive Investor Screen and the Ben Graham Deep Value Checklist.
I do not expect inflows to reappear any time soon, but my hope is that the company can continue to generate attractive profits and returns even without the tailwind of net flows.
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13 comments
While I see your point, Graham, I guess I am my own ESG fund, with Foresight Environmental Infrastructure (LON:FGEN) ,NextEnergy Solar Fund (LON:NESF) ,Gore Street Energy Storage Fund (LON:GSF) ,SDCL Energy Efficiency Income Trust (LON:SEIT, GCP Infrastructure Investments (LON:GCP) ,Assura (LON:AGR, Social Housing REIT (LON:SOHO) and Care REIT (LON:CRT) , which 8 holdings probably average 10%+ in divs. You can worry about each, but they are all on serious discounts to their NAVs and can give visibility of increasing divs, which I don't think you can say about Impax Asset Management (LON:IPX) . I would be interested in your (or anyone's) reflection on this counter-suggestion.
I hold several of your list as well raggedtp. Lets hope the NAV is accurate, DGI9 continues to reduce NAV and then sell an asset below the reduced value. I feel there is potentially good upside in IPX ( I hold) as a t/o or merger looks the obvious solution tp provide a broader investment sphere.
A good summary Graham - fortunately the St. James's Place business was very low margin and so the profit impact is relatively small. That said, I am definitely not inclined to add to my position just yet.
I was fortunate to buy this company on six separate occasions at c40-50p and it then went on to 30-bag and provide fantastic dividend income along the way. Indeed, its been my best ever performing stock in terms of banked profits although I still hold about 15% of my original holding (now only a 5-bagger which doesn't feel good despite the generous dividends). Ian Simms is an Intelligent Fanatic in this space and leads from the front. I think that, over time, they will still do well. However, I am not buying any fund managers until the US equity bubble bursts as they will all get hammered when this happens. I am very positive on fund managers generally but they are leveraged to how global equities perform and after 2 very strong years on the S&P-500 we are well overdue a sizeable correction.
Its a quality asset manager. I am encouraged by its move into fixed interest recently. Their private assets business is also too small and so they could do with a deal in this sector as well as the margins are much higher in this line of business. They are too exposed to public equities...this was great on the way up but painful on the way down as their performance inevitably lagged nvidia (as everything has!). Their cost base was also expanded quite a bit in recent years although there is the mitigation of high variable pay elements. I do hold Foresight as well which is similarly owner managed and less exposed to public markets.
Anyway, I think they are a world class fund manager but now may not be the best time. Possibly one to watch when it starts breaking out from a stage 1 to a stage 2 chart. It's currently still in a stage 4 downtrend. Just my thoughts - might be wrong!
I've been researching Impax Asset Management (LON:IPX) today - it was on my list to look at anyway but Graham has piqued my interest! On the whole I think it looks like a good potential recovery play as we have got to be at or VERY near the low point for fund managers. Even if It just gets back to 2024 highs that is a 100% return and a 11% divi! It has a massive dividend that looks safe-ish - even if it was cut slightly earnings would still cover something near 10%, supported by their cash balances. It's niche position as a ESG fund manager potentially supports its business longevity versus other undifferentiated UK fund managers like Jupiter or Liontrust. So I will probably buy this ahead of the stonking 22p ex divi in Feb.
I do have some questions/queries below I have not been able to answer in my research though. Would welcome comments!
I would think the N.I increase will not make a major difference to net profits. (Since NI comes of PBT the Government has a potential own goal with reduced income from Corporation Tax). Fee margin should increase as STP was low margin.
Impax Asset Management (LON:IPX) Sorry to be negative but Why?
Clients are now shying away from specific ESG strategies
Impax have not been in the news for winning business but for loosing
They do not feature on the biggest UK platform - HL - and if you look them up on trustnet their funds are, as far as I can see, all at the bottom of the ladder. There is no moat in the Fund Management business - on the contrary - too many to choose from so what is going to lift them up...?
Yes not too sure about this one either - they have been seeing heavy outflows for a while now. The recent large redemption from SJP was certainly not a one-off. Given the move away from all things ESG and the fairly average performance of their funds I think outflows are likely to continue for a while yet. Perhaps a recovery play at some point but feels a bit early for me. There is always a chance of a bid I suppose as IPX could make a nice bolt-on for a larger fund manager.
A bid / merger. Is the reason I am holding on.
The annual dividend is also 11.25% currently
If maintained- lets hope. A merger makes sense as it would fit well as a division in a larger group.
"Clients are now shying away from specific ESG strategies"
True. I personally still want to hold funds or stocks with ESG credentials but you do have to be clear with yourself why you are holding a stock; e..g. I recenly bought Liontrust Asset Management (LON:LIO) and sold it on the bounce (Graham gave it amber-green but said it wouldn't be his first choice). So perhaps Impax Asset Management (LON:IPX) might be cheap enough to take a chance?
For its ESG credentials I held onto IPX for longer than I would have otherwise. On the other hand I have holdings in Foresight Solar Fund (LON:FSFL) which I am keeping for its ESG credentials and dividends and I would have held Foresight Sustainable Forestry (LON:FSF^G24) had I not allocated those funds to a Finnish company for diversification. What I'm trying to say is that I try and balance ESG against pure profit (and I hope that holdings with ESG credentials will prove resilient in the long term).
So analysis of potential holdings with ESG credentials is welcome. But without more information I might be inclined to buy Foresight group (LON:FSG) rather than Impax Asset Management (LON:IPX) ; its yield is a fraction of IPX's (and with a shorter history) even though it is proportionately not much more expensive but could it be one to put away and forget about?
Hi Grippie. TBF the coys you mention just illustrate why ESG is now out of fashion. Even the Foresight parent shares are suffering - and frankly I would not describe them as ESG -they are purely and simply playing on the ESG bandwagon to make themselves money. They sold out the forestry at very good timing. Did you switch into UPM ?- they have in recent years sold most of their UK business. Take a look at Montanaro Better World. Classic ESG fund run by wonderful people - but with awful results. Th one stock in their top ten - Halma (LON:HLMA) I would love to buy but its so expensive and despite the boast that it has paid an increased dividend for years (40 I think) - it actually pays less than 1%
Yes, no easy choices then...