Emerging market specialist boutique Somerset Capital Management saw profits fall by almost a quarter and assets under management (AUM) by a fifth in the 12 months to 31 March 2020, despite net inflows.
Somerset said revenues in the period fell to £34m in its full-year results, from £38.8m the year before, with profits slipping to £14.9m, from £19.5m in 2019.
While the 12 month period saw net inflows to the firm's mandates of £33m, negative market moves due to the Covid-19 pandemic combined to push AUM down to £4.5bn at its year-end, compared to £5.6bn last year. However, the firm's AUM had almost fully recovered those losses, reaching £5.4bn by 31 July 2020. Inflows in 2020 as at 31 July added up to £310m.
CEO Dominic Johnson said Somerset's financial year "clearly divides pre and post Covid-19", with emerging markets performing well in 2019 before finding 2020 "much more challenging".
Indeed, Somerset said all of its EM-focused funds had outperformed their benchmarks in the 2019 calendar year.
Johnson added that the EM asset class "remains out of favour for now", but reasoned that "the opportunity for longer-term investors is significant at current levels".
"EMs have recovered around 30% in GBP terms since late March and yet valuations remain at near record lows on almost every conceivable measure," the CEO said. "We have been reassured by the resilience of the companies we own despite the difficult backdrop and look forward to much brighter times ahead."
The firm said it had been a "busy" year, having launched the MI Somerset Emerging Markets Discovery fund for Mark Asquith in October. Johnson claimed interest in the mandate had been "strong", helped by the firm waiving its management fee until the end of 2020.
The boss said Somerset will launch "at least one other fund" before the end of the calendar year.
Elsewhere, it also added to its ESG capabilities by hiring sustainability specialist Olivia Seddon-Daines from New Financial LLP in November.
"ESG has been fully integrated into our investment process for a number of years but we continue to look for ways in which to improve - particularly in terms of communication and reporting - and Olivia will play a key role in our development," Johnson continued.
"The start of our current financial year coincided with a tumultuous period, but we look ahead with confidence to the longer term. We have been fortunate in our ability to continue our work, but we are nevertheless looking forward to getting back in the office later on in the year, all being well.
"I would like to thank my colleagues for their ongoing hard work and also our investors for their continued support."
The firm added that its founding partners have continued to distribute equity in the company to non-founding partners, with 2.9% redistributed during the 12-month period referenced.