Income Asset Management comes up apples as Q3 revenue grows 90%, conditions ripen for corporate bonds
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IAM said the significant growth was driven primarily by another strong contribution from placement fees, which were up 276% on pcp to $1.1million, the largest achieved to date.
The jump follows the successful placement of $85m for Moneyme (ASX:MME). The placement was a significant milestone for IAM, with 100 institutions and wholesale investors participating in the raising during volatile market conditions.
While net operating cash outflows hit some $2m – excluding seasonality and market volatility – IAM says given ther strong March revenue result, net outflows should slow considerably.
Cash outflows to suppliers and employees remained relatively flat.
With rising yields and interest rates, IAM is seeing growing demand from corporates to issue bonds and investors looking for investment grade bonds.
The company said its capital markets team are well placed to facilitate investment demand with expertise in all debt instruments, listed, OTC and private debt in loan format.
IAM said secondary market trading, while up 19% on pcp to $514k for Q3, was impacted by the seasonally slow holiday month of January along with volatile trading conditions due to the Russian invasion of Ukraine and an uncertain interest rate environment.
There was a marked improvement in trading activity in March, and it is expected that this momentum will continue into Q4.
Highlighting the breadth of the IAM Capital Markets fixed income offering, Q3 continued IAM’s increased participation in internally originated high yield offers and investment grade capital market transactions along with ASX listed hybrids.
New clients have spiked 210% on pcp which IAM attributes to strong marketing activities and sales team growth.
Growth in clients represents a major opportunity for IAM to further grow assets under administration (AUA). The company is working with new advisers and direct clients to build income investment portfolios already laid out in the months ahead.
To support IAMs significant array of partnerships with new, boutique and larger financial adviser groups, along with private investors, the team now offers more than 500 securities in parcel sizes of $50,000.00 across AUD, EUR, GBP and USD.
The diversity enables investors increased access to the corporate bond market and enhanced ability to build robust and diversified fixed income portfolios.
The increased scope of its small parcel bond offering supports the company’s strive towards providing investors unparalleled choice in the fixed income market at the most competitive price.
IAM has launched its managed account service, which enables investors with larger pools of capital to work with IAM, within their investment mandates, to increase investment returns whilst managing their stated risk tolerance.
The service is bespoke to individual investors and provided on a co-management or discretionary management basis.
Significant experience within the IAM Group across fixed income research, portfolio/risk management, execution, and reporting, provides investors cost effective and transparent means to generate better risk adjusted returns.
Early results from IAM Funds management show a positive outlook with the model built replicating other successful incubation fund managers such as Pinnacle Investment Management and Fidante Partners who have an annuity style.
IAM Group holds a 25% investment in Fortlake Asset Management. The funds have demonstrated strong risk adjusted returns for investors over CY 2021 across its three public offer funds, well above relevant peers, and strategy objectives.
The company said momentum continues to build across investor channels, with initial support through private clients, independent financial planning groups and continued engagement with key consultants and research gatekeepers.
Fortlake is also well progressed in preparation for the listing of its first ETF into the retail market. Considerable work was done over Q3 in rolling out initiatives across distribution and operations, to drive fee income going forward.
IAM will drive income through dividends and distribution fees. In addition, the group will recognise 25% of Fortlake’s earnings through equity accounting.
Following completion of the 25% strategic investment in fund manager Tactical Global Management Ltd (TGM) which included a $3m payment for the investment.
Much of Q3 was focused on developing the strategic joint venture partnerships on ESG and Sustainable Development Goals (SDG).
Soon the business plans to launch funds that will only invest in climate-friendly global equities or those compliant with the Sustainable Development Goals.
Based on TGM’s rigorous framework and access to data, these strategies will be at the forefront of this area of investing and provide clients with access to innovative and market leading capabilities.
The Group will earn revenue from TGM through distribution fees, dividends and 25% earnings recognition through equity accounting.
Cash markets revenue was down $29,000 on pcp to $165k. The decline in funds under management (FUM) and revenue reflects the seasonal decline combined with the low interest environment.
IAM said the segment remains a relatively small contributor to the overall business.
With enhancements made to the products available to clients and a more focussed segment sales effort the business is positioned to grow strongly in a rising interest rate environment.
CEO Jon Lechte, said the investments made across the business since February 2021 have added significant scale and capabilities that are delivering improved financial outcomes.
“While we are still in a period of investment, we are making large strides, as we offer investors and portfolio managers the most trustworthy and capable platform to research, execute, and manage their income investments,” Lechte said.
He said with market expectations of interest rate hikes the company’s growing demand in corporate bond issuance is forecasted to continue driving our placement fee performance.
“We are seeing corporates look to debt markets as an alternative source of funding and believe we are well placed to support these companies,” he said.
“We have a strong pipeline of transactions, with currently over $200m primary issuances mandated for completion in Q4 2022.
“When combined with our secondary trading revenue and expected uplift in cash deposits as a result of higher cash earning rates on offer, we are in a positive position to deliver further growth in Q4.”
Lechte said Q3 saw the most challenging conditions for fixed income markets in a generation.
“We believe the debt markets now provide returns that compete with those of equities and property, both of which now face their own headwinds as interest rates rise.
“We are already seeing significant flow from stockbrokers, with clients looking to invest in investment grade, floating rate corporate bonds at rates not seen for nearly a decade.
“We have built an investment house, focused on debt markets, and we are at scale at precisely the right time,” he added.
About Income Asset Management Group Ltd. (IAM) (ASX:IAM)
Income Asset Management Group Ltd (ASX:IAM), (IAM), has seen tremendous growth into a sophisticated income investment firm. The Group delivers unique solutions in Treasury Management, Cash, Bonds and Funds Management for sophisticated investors and professional investment managers. Our vision is to provide investors and portfolio managers with the most trustworthy and capable services to research, invest and manage their income investments.