Hey I follow it. The Net asset Value is the value of each unit...

Hey I follow it.

The Net asset Value is the value of each unit in the fund. If there are investor redemptions, the FUM goes down but that doesn’t change the value of each unit as long as share prices are stable. In reality, redemption requests can be satisfied by funding them with cash or selling portfolio companies which can push shares prices down, so NAV will probably fall as a consequence. The fund’s do have substantial cash holdings but if there is a tactical view that cash should be maintained to protect from falling share prices, they’d need to fund some redemptions through sales.

The reason the NAV is lower than five years ago is not because of bad performance (although performance has been well below objectives and peers) but because the funds have distributed capital to investors during the year. So the NAV of each unit goes down as capital is paid out to investors. rather than performance having been negative. i.e. the NAV doesn’t include income paid out.

The Asian and international funds have recently been put on 'Sell' at one of the major ratings agencies so that is likely to fuel continued redemptions in those funds which are not profitable at current FUM.The large redemption in May within the Australian fund is symptomatic of a move by wholesale investors to reduce costs and invest passively in an area of the market that has gone unrewarded for active management. The well below benchmark performance of this fund and the failure to protect on the downside have compounded issues.

At a company level they do have a sizeable cash backing , but they’ll have a large loss this FY and the outlook isn’t pretty.At a guess, the company needs to have about $400m in FUM to break even on management fees alone and, at that level, performance fees are the sugar on top. With performance having been so bad in the past year or so, the funds are well off being awarded performance fees. Cutting costs drastically is a logical course of action. But that could be detrimental to performance as well because some staff could leave in search of greener pastures. Struggle to see how they are going to raise any capital in the near future. On current metrics that cash backing is going to fall rapidly.

What's the turnaround plan?