Multi-manager asset management business Virtus Investment Partners has reported strong mutual fund sales for Q2 2013 as well as record levels of revenue, operating income, as adjusted, and related margin, primarily reflecting the cumulative benefit of high levels of positive net flows.
Operating income, as adjusted, was USD31.7m for the quarter ended 30 June 2013, an increase of 66 per cent from USD19.2m in the second quarter of 2012 and 27 per cent from USD25.1m in the first quarter of 2013. The related operating margin was 44 per cent, compared with 38 per cent for the prior-year quarter and 39 per cent for the first quarter of 2013.
Operating income was USD26.9m, compared with USD14.3m in the second quarter of 2012 and USD21.1m in the first quarter of 2013. Net income attributable to common stockholders was USD15.4m or USD1.91 per fully diluted common share, an increase of 84 per cent from USD8.4m or USD1.04 per share in the second quarter of 2012, and 10 per cent from USD14.0m or USD1.73 per share in the first quarter of 2013. Net income attributable to common stockholders included net unrealised adjustments on marketable securities of USD(0.22), USD(0.02) and USD0.07 per fully diluted share for the respective quarters.
Assets under management were USD52.7bn at June 30, 2013, an increase of 36 per cent from USD38.8bn at 30 June 2012 and three per cent from USD51.2bn at 31 March, 2013. Long-term assets under management were USD50.9bn at the end of the second quarter, an increase of 38 per cent from 30 June 2012 and three per cent from 31 March 2013.
"We generated record financial results this quarter with significant growth in revenues, operating earnings and margin that reflect the cumulative benefit of consistently strong net inflows over the past several years," says George R Aylward (pictured), president and chief executive officer. "Despite investor uncertainty and volatility in the financial markets, we reported our seventeenth consecutive quarter of positive net flows by maintaining above-average sales and flows, as well as positive net flows in both equity and fixed income products. Our sustained high levels of positive net flows offset market depreciation, resulting in a three per cent sequential increase in assets under management.
“The company reported its highest quarterly operating earnings with a 66 per cent increase in operating income, as adjusted, to USD31.7m, primarily as a result of increased revenue, as adjusted, from higher investment management and other fees from the company’s growing asset base. The operating margin, as adjusted, increased to 44 per cent, reflecting the higher revenue from continued asset growth and the leveragability of the business.
“Total sales increased 76 per cent to USD5.6bn and long-term open-end mutual fund sales increased 84 per cent from the prior year. Mutual fund net flows of USD2.6bn, which were positive for each month of the quarter, represented an annualised organic growth rate of 34 per cent, among the highest for companies that sell through financial intermediaries.
"Our fund sales and net flows were reflective of the market dynamics in the quarter. The industry in general saw investors reposition their portfolios in response to expectations of changes in the interest rate environment and views of the equity markets. With our highly diverse product offerings, we were able to provide attractive options for investors who had changing needs. In the second quarter, sales of our defensive equity and long/short funds in particular accelerated in response to the volatility in the markets as investors looked for strategies that can provide appropriate, risk-adjusted returns.
"We had above-average growth in a quarter with a challenging market environment. These solid business and financial results reflect the benefit of our sustained asset growth as well as the strength of our business model, distinctive and differentiated product offerings, and effective distribution.”