RLAM AUM shrinks 9% in H1 but sustainable funds remain popular

9% decline in AUM

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Royal London group chief executive Barry O'Dwyer
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Royal London group chief executive Barry O'Dwyer

Royal London Asset Management has had a tough start to 2022 with a 9% decline in its total assets under management during the first six months of the year.

As of 30 June 2022, the AUM sat at £150bn compared with £164bn at the same point in 2021.

In its half-yearly report, the group listed the various headwinds that had depressed its AUM: "Continuing geopolitical and economic uncertainty, stemming from the war in Ukraine, the emergence of stagnation fears and the increased cost of living.

"These factors have led to turbulent market conditions, with a compression in fixed income prices, volatile equity valuations and pressure on customers' disposable income."

Property fund raises red flags at Royal London

The group added that these falls matched the declines seen across global equity and fixed income markets, which have sold off massively due to the aforementioned catalysts. These factors are expected to linger for some time and Royal London is forecasting that the negative impact on assets will continue in the short-term.

Its analysts said: "Equity markets have reacted to the uncertain macro environment and we expect this volatility to continue for the foreseeable future.

"Fixed income returns also continue to be adversely impacted by high inflation and consequent tightening of monetary policy by central banks worldwide."

The past six months has knocked the long-term performance of several RLAM portfolios.

In the report, it detailed that 80% of its actively managed portfolios had outperformed its respective benchmarks in over the three years to 30 June 2022, a year-on-year fall from 97% of portfolios outperforming over the same time frame.

External and internal net inflows increased for the group in H1, up £1.5bn and £1.1 respectively, but this was offset but the overall AUM decrease.

The external net inflows that did occur were mainly driven by institutional investors "as well as ongoing demand for sustainable products in both equity and fixed income, despite their underperformance against their benchmarks", RLAM analysts said.

Analysts attributed the internal flows to its pensions business, with this arm of the company adding £874m of new business in H1, with sales up 19%.

According to the report, this was bolstered by a 24% rise in individual and workplace pensions as individuals were able to access face-to-face adviser appointments post-pandemic, contributing to the boost in confidence and engagement over pensions.

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