AXA IM's record year for alternatives clouded by net outflows of €6bn in 2018
AXA IM has reported positive third-party net inflows of €3bn over 2018, however total net outflows still amounted to €6bn as the group lost a key mandate and saw negative flows in its Asian joint ventures.
In its full year results for the 12 months to 31 December 2018, the group said net third-party flows were €3bn, largely thanks to success in the alternatives, multi-asset and fixed income space.
However this was "more than offset" by gross outflows of €9bn as net flows amounted to -€6bn.
AXA IM said this was a result of "the loss of a large mandate and outflows from the Asian joint-ventures, mainly as a consequence of large and low-margin alternative products from China joint-ventures reaching maturity, due to local changes of the regulatory requirements in 2018".
Meanwhile, underlying earnings were up by 6% to €270m, driven by lower charges and income tax expenses as well as higher earnings from Asian joint ventures. But revenues were down by 3% to €1.3bn, thanks to lower average management fees as well as outflows "due to adverse market conditions".
AUM was also down, ending the year at €730bn, down €16bn compared to December 2017.
Andrea Rossi, CEO of AXA IM, said: "AXA IM has demonstrated resilience in 2018, delivering robust operating performance with a 6% increase in our underlying earnings despite challenging and volatile market conditions.
"To deliver on our ambitions, we continue to focus and accelerate growth in areas of strength, while further leveraging our AXA experience for the benefit of third-party clients.
"I am convinced that the significant steps we took to transform our company in 2018 will bear fruit, enabling us to better adapt our solutions to our clients' evolving needs."
Record year
Most of the success in 2018 for the group was seen in the alternatives space, with a record year for structured finance which saw significant inflows raised from third party institutional investors and family offices in Europe, North America and Asia.
This was driven by the closing of five CLOs representing €2.1bn, and successes in areas such as Dutch mortgages, global secured assets, insurance-linked securities and regulatory capital.
This year, the group hopes to complete its product range within direct lending in Europe to small and mid-sized companies through its strategic partnership with Capzanine.
The real assets space also saw a positive year with the acquisition of Data 4 and other major transactions, bringing the alternatives platform assets above €7bn. In multi-asset, the Optimal Income range was most successful in the retail space, and now represents over €3.5bn.
In fixed income, cashflow driven investing strategies reached €4.4bn from UK based clients, with additional significant wins in the Buy and Maintain range globally. Inflation strategies also recorded major successes, notably with a major mandate in France.
Group-wide ESG integration plans
The results also highlighted major commitments and plans for 2019, including the launch of a UN sustainable development goals strategy focused on companies that help mitigate climate change or improve transition to sustainable energy sources.
This comes after AXA IM Rosenberg Equities was selected to run an advisory $1bn Global Equity ESG portfolio for CalPERS.
The group also said it plans to integrate ESG across its entire open-ended fund range throughout 2019.
It said: "After the strengthening of resources within its investment platforms, AXA IM is now reinforcing its ESG integration approach across its range of open-ended funds in 2019 by applying the newly defined ESG Standards, representing [approximately] €82bn of assets."
Companies with a low ESG score or those relating to areas such as tobacco, coal and defense will be excluded from all open-ended funds.
Rossi added: "As a responsible investor, we aim to manage ESG risks and opportunities when investing on behalf of our clients in a consistent way. This is why we are committing to this integration for our clients investing in open-ended vehicles.
"We have identified certain sectors in which we will not invest, above a certain exposure threshold to help minimise downside risk.
"Our ESG standards form just one dimension of our approach, and we also plan to enhance our engagement and stewardship to help influence business models of companies to anticipate future changes such as climate change.
"Our integration approach includes ESG corporate analysis, scoring, voting and also training for all staff."
Additionally, AXA IM will provide its clients with reporting on ESG scoring and the carbon footprint for the vast majority of its funds and will pursue further SRI labellisation of some additional strategies in France.
Diversity plans
Meanwhile, the group has also taken action to promote diversity, inclusion and education through its recent partnership with fintech company Dreams.
This involves working with initiatives that aim to bring investment knowledge to diverse audiences such as "Girls Who invest" in the US and partnering with KickStart Money in the UK to transform the long-term savings behaviour of children.
AXA IM is also actively taking steps to tackle gender diversity and representation of women in senior asset management positions and investment roles. It signed the UK Women in Finance Charter and publicly pledged to reach a target of 40% of "senior executive" women in its global population by 2020, and currently stand at 35%.
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