REG - Record PLC - Second Quarter Trading Update <Origin Href="QuoteRef">RECL.L</Origin>

RecordAnnouncement

16/10/2015 07:00

RNS Number : 4463C
Record PLC
16 October 2015
 16 OCTOBER 2015
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 30thSeptember2015 totalled $53.3billion (30thJune2015: $56.6billion).
AUME expressed in Sterling as at 30thSeptember2015 totalled 35.2billion (30thJune2015: 36.0billion).
1. AUME composition
AUME expressed in US Dollars decreased by 6% between 30thJune2015 and 30thSeptember2015 and decreased by 2% when expressed in Sterling. The composition of AUME by product was as follows:
AUME $ billion

30thSeptember2015
30thJune2015
Dynamic Hedging
8.7
9.3
Passive Hedging
42.1
42.1
Currency for Return
2.3
4.9
Cash & Futures
0.2
0.3
Total
53.3
56.6
2. AUME Movement
Net client AUME flows in the three months to 30thSeptember2015 by product were as follows:
Net client AUME flows - $ billion

3 months to 30thSeptember2015
3 months to 30thJune2015
Dynamic Hedging
0.1
-
Passive Hedging
1.3
0.5
Currency for Return
(2.5)
0.1
Cash & Futures
(0.1)
-
Total
(1.2)
0.6
Record had 54 clients at 30thSeptember2015 (30thJune2015: 53 clients), which includes three of the six clients whose mandate was signed in the previous quarter, with the remaining three clients expected to fund in the current quarter.
The factors other than client flows, which have had an aggregate impact on AUME during the quarter of -$2.1 billion, were as follows:
(i) Exchange rate movements: -$2.1bn Exchange rate movements during the period affect the conversion of non-US Dollar mandate sizes into US Dollar AUME.
(ii) Movements in global stock and other markets: $0.0bn 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.
3. Investment performance
Our Dynamic Hedging programmes performed as expected for US clients during the quarter, generating positive returns as the Dollar strengthened against the weighted basket of currencies in the programmes. The largest gains came from hedges on the Canadian and Australian Dollars, as hedge ratios for these currencies remained high throughout the period. There were some partially offsetting negative returns from hedging the Euro and Japanese Yen; however, losses were contained as hedge ratios remained low over the quarter.
For UK-based Dynamic Hedging clients the programmes also performed as expected, controlling hedging losses in response to Sterling weakening against the weighted basket of currencies in the programmes. Negative returns came from hedging the Euro, US Dollar and Japanese Yen; however, hedge ratios for all three currencies fell over the quarter, thus limiting losses.
Investment performance in Record's Active Forward Rate Bias (FRB) product was negative during the three months to 30thSeptember2015, and for an ungeared portfolio equated to a return of -0.46% (three months to 30thJune2015: return of
-0.46%). This compares to a -2.80% return in the quarter for the FTSE Currency FRB10 index (excess return in Sterling). This variance was mainly the result of differences in the allocations of these two strategies to some of the weaker performing currencies in the quarter (mostly Australian Dollar). The FTSE FRB10 Index Fund continued to track the index closely, on a 1.8xgeared basis.
Record's Emerging Market product investment performance was negative during the quarter and for an un-geared portfolio equated to a quarterly return of -6.53% (three months to 30thJune2015: return of -0.70%). This negative performance was mainly attributable to losses from the Brazilian Real, South African Rand and Turkish Lira. Annualised performance since inception (30thNovember2009) for an un-geared portfolio was +0.26% p.a.
Investment performance in the Multi-Strategy product that uses the Active FRB strategy was negative during the quarter as gains from the Value and Momentum strategies were overcome by negative returns from the Active FRB and Emerging Market components. For an un-geared portfolio, the return was -0.87% over the quarter (three months to 30thJune2015: return of -0.81%). Annualised performance since inception (31stJuly2012) for an un-geared portfolio is +1.00%p.a.
A version of the Multi-Strategy product which started earlier this year and uses the FTSE Currency FRB10 index strategy instead of the Active FRB product, produced negative returns of -0.95% for an ungeared portfolio during the three months to 30thSeptember2015 (three months to 30thJune2015: return of -1.14%).
4. AVERAGE FEE RATES AND PERFORMANCE FEES
During the quarter to 30thSeptember2015, fee rates for all products remained broadly unchanged from the previous quarter. No performance fees were earned in the quarter.
5. CHIEF EXECUTIVE'S COMMENT
Chief Executive James Wood-Collins, commenting on business development, said:
"This quarter continued to demonstrate heightened currency market volatility, and ongoing debate on the prospects for divergent monetary policy. These factors have served to maintain the current high levels of interest shown in currency hedging and return-seeking products by prospective clients, and to reinforce the strength in diversity of our products.
"The outflow of $2.8billion announced on 25thAugust from a standalone tactical bespoke mandate was a consequence of currency market movements. Whilst it will detract from revenue, our core return-seeking strategies' performance and our ability to continue to build the hedging business remain unaffected.
"It was pleasing to announce, on 29thSeptember, Record's selection for a dynamic hedging mandate, which has now commenced since quarter-end. As already announced on 1stOctober, just post quarter end, we were notified by a UK dynamic hedging client of its intention to terminate the mandate, likely by the end of the current financial year.
"We continue to make progress in engaging with current and potential clients across a broad range of currency issues and geographies and we are hopeful that further progress can be made in the current financial year."
Record will announce its half year results on 24thNovember2015 and its third quarter trading update on 22ndJanuary2016.
For further information, please contact:
Record plc  Tel: +44 (0) 1753 852 222
James Wood-Collins, Chief Executive Officer
Steve Cullen, Chief Finance Officer
MHP  Tel: +44 (0) 20 3128 8100
Nick Denton record@mhpc.com
Ollie Hoare
Jennifer Iveson
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 3rdDecember 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.

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