Fund management boost hopes

Sep 3 2009 by Iain Laing, The Journal

FUND manager Hargreaves Lansdown expects to boost business as record low interest rates prompt investors to seek other homes for their cash.

The Bristol firm is braced for more market turmoil but posted a better-than-expected 20% hike in pre-tax profits to £73.1m for the year to June 30.

Chief executive Peter Hargreaves said markets “are still nervous” but is confident of growing the company’s market share despite gloomy and uncertain conditions.

“Many investors are seeking alternative income-producing investments to compensate for low interest rates,” he said.

Interest rates were slashed to just 0.5% by the Bank of England in March to tackle recession and experts predict they will stay at this level well into next year. Although the company will also take a hit from lower returns on its cash holdings, the likely move towards greater investment activity after people clear debts “will eventually benefit” the firm, Mr Hargreaves added.

The group flagged up better-than-expected profits in June as it benefited from the rally in stock markets since March’s lows, through record volumes of share dealing.

Hargreaves’ assets under administration rose 7% to £11.9bn during the year, of which £10.7bn was held in its Vantage fund ’supermarket’. This allows investors to hold cash and shares in tax-free homes, as well as trade funds and shares.

Revenues from Vantage rose by £12.7m to £84.9m, driving a 10% increase in revenues across the overall group to £132.8m.

Numis analyst James Hamilton said: “We expect Hargreaves Lansdown to generate strong growth driven by continued market share gains.”