Ashmore bought heavily into Lebanon’s short-term debt ahead of the country’s first sovereign default in March © Bloomberg

Ashmore has warned of sustained risk aversion among investors after the emerging markets fund manager’s assets under management fell 9 per cent.

The coronavirus-induced sell-off in EMs this year hit Ashmore hard, resulting in negative investment performance of $8.1bn and net client withdrawals of $100m in the year to June 30.

The London-based fund manager said in July it had ended the period with assets of $83.6bn, down from $91.8bn a year earlier.

While Ashmore’s fund performance and client flows stabilised in the second quarter on the back of the market recovery, the group said on Friday it would take time for investor confidence to return.

“The uncertainties relating to Covid-19 and the worsening economic fundamentals in the developed world . . . are likely to keep risk aversion high for a period of time,” said Mark Coombs, chief executive.

He added that Ashmore expected to see “a continued mix of client behaviours until there is a greater degree of conviction in respect of economic and market developments”.

Tension between the US and China ahead of the US presidential election in November could further mute investor risk appetite, he warned.

Chris Turner, analyst at Berenberg, which recently downgraded Ashmore to a “sell” rating because of weakness in its fund performance, said its lacklustre returns were likely to hit investor flows over the next 12 months.

As at June 30, just 9 per cent of Ashmore’s funds were ahead of their benchmarks over one year, compared with 90 per cent a year earlier, while 17 per cent were ahead over three years.

As well as the March sell-off, Ashmore has been stung by bets on countries whose economies have run into trouble. It bought heavily into Lebanon’s short-term debt ahead of the country’s first-ever sovereign default in March.

Ashmore finance director Tom Shippey said the group was on track to turn round investment performance after repositioning its portfolios to benefit from the market rebound.

“We’re only in the early stages of the recovery,” he said, adding that EM asset prices had “plenty more to run”. He declined to comment on Ashmore’s exposure to Lebanese debt.

Despite the drop in its asset pool, Ashmore reported a marginal rise in pre-tax profits to £221.5m, partly resulting from lower operating costs linked to travel restrictions and remote working.

The group also reduced its total staff bonus pool by 5 per cent compared with the previous year in recognition of the challenging market conditions and associated impact on its fund performance.

Ashmore said that, while large-scale homeworking had functioned well for the group during the pandemic, it wanted staff to return to the office when safe to do so.

“[Working in an office] is a key and central part of our culture, and it makes day-to-day decision-making more straightforward,” said Mr Shippey. He acknowledged that while reducing office space by moving to more permanent homeworking arrangements could save Ashmore money, this would be offset by “the bigger detrimental impact on our working practices and culture”.

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