Virus volatility saps AMP wealth, as assets under management slip

AMP is blaming COVID-19 for an $18.2bn fall in its assets under management.

AMP has reported a 5.3 per cent fall in its total assets under management. Picture: Hollie Adams

AMP has suffered a large drop in assets under management in its embattled wealth unit, stemming from the impact of COVID-19 market falls and net cash outflows of $1.9bn.

In a statement to the ASX on Thursday, AMP said assets under management as at March 31 slumped 13.5 per cent to $116.3bn, largely reflecting weaker investment markets.

Net cash outflow of $1.9bn in the March quarter took into account inflow of $5.8bn buoyed by an increase in funds on its North platform. But that was exceeded by outflow of $7.7bn, which included the expected exit of several corporate superannuation mandates.

The outflows also included $563m in regular pension, and a $205m impact due to the federal government’s Protecting Your Super legislation. The anticipated exit of corporate super mandates represented $430m.

AMP is not alone in being dealt a blow by severe market movements in March and outflows.

On Wednesday, annuities group Challenger reported a 10 per cent hit to its funds under management during the March quarter was mostly on the back of the market meltdown in March. But it also revealed its portfolio also saw some redemptions.

AMP’s shares closed 0.8 per cent lower at $1.295 on Thursday.

UBS analyst Kieren Chidgey highlighted that the wealth division’s net outflows “marginally eclipsed” AMP’s previous record seen in the September quarter 2019.

“While net outflows on AMP's retail platforms eased slightly, as AMP narrows its aligned adviser footprint and COVID-19 market and mobility impacts continue into the second quarter 2020, near-term prospects for improved net flows appear low,” he said.

But Allan Gray managing director Simon Mawhinney labelled the AMP update “pretty innocuous”.

“Wealth management net outflows have continued but this would have been anticipated and they don’t appear to be worsening significantly,” he said. “AMP Capital seems to be performing well under the circumstances. The bank’s growth is somewhat concerning in today’s environment and New Zealand continues be a great small business for AMP.”

AMP chief executive Francesco De Ferrari said during the COVID-19 period of uncertainty the group was responding to a record level of client inquiries for advice and support as people weigh up important financial decisions.

“Markets in Q1 were extremely volatile particularly in March, with significant falls in equities, fixed income and key commodities impacting our assets under management. We have seen some recovery since the quarter-end, but expect market volatility to continue and the economic impact of the pandemic to emerge over the remainder of the year,” he said in the statement.

“In Australian wealth management, our North platform continued its strong growth. North net inflows were higher against Q1 19, and drove a better performance across our retail platforms, with net outflows reducing. The Protecting Your Super legislation and the expected exit of corporate super mandates in the quarter impacted overall net cash outflows for the business.”

AMP’s infrastructure and real estate arm AMP Capital saw assets under management as at March 31 decline 5.3 per cent to $192.4bn, compared to the prior three months, largely due to weaker investment markets.

AMP Capital’s net external cashflow increased to $1.3n in the quarter, underpinned by “strong inflows” in China Life AMP Asset Management, across money market funds and fixed income products as investors moved to defensive asset classes.

During the March quarter, the division’s outflow included the return of $300m to investors in the AMP Capital Infrastructure Debt Fund II and III. It has $8.1bn in committed capital available for real assets investment, with $1.6bn earmarked for transactions yet to close.

“AMP Capital saw strong external cashflows, particularly into fixed income products through our asset management partnership in China. Our infrastructure teams are also seeing opportunities for further investment, particularly in infrastructure debt,” Mr De Ferrari said.

“Amid the uncertainty, I’m pleased we are showing up strongly for our clients and demonstrating the resilience of our business.”

AMP’s banking unit saw its loan portfolio grow $162m to $20.8bn in the March quarter as home loan volumes increased.

Total deposits rose 5.4 per cent to $15.2 billion, in line with a strategy for the bank to become increasingly deposit funded.

AMP posted a 32 per cent slump in 2019 underlying profit and booked a $2.5bn statutory loss, due in part to impairment charges and massive fund outflows.

Following Thursday’s update investors are also keen to understands how AMP is viewing its capital position and its ability to return any surplus on completion of the sale of its life insurance business. AMP has reiterated it expects to complete the $2.5bn divestment by June 30.

The Australian Prudential Regulation Authority has released a directive on capital management during the pandemic crisis, though, calling for boards to seriously consider deferring dividends or materially reducing them.

AMP’s pay structures are also under fire ahead of an annual general meeting on May 8.

This week influential proxy advisory house ISS urged investors to vote against AMP’s annual pay report, citing “grossly excessive” long-term bonuses and a misalignment of executive remuneration with shareholder interests.

APRA’s directive also made reference to executive pay, saying it expected boards to “appropriately limit” executive cash bonuses during the challenging environment.

AMP’s update on Thursday showed assets under management in its New Zealand unit declining. Assets under management fell 9.8 per cent to $11.1bn, while the NZ wealth unit saw “broadly stable” net cash outflows of $56m.