AUM was up by £2.2bn or 6% over H1-24, reaching £39.6bn on 31 Mar 24 (30 Sep 23: £37.4bn). This is slightly above the trajectory required to meet our FY24 AUM forecast of £41.1bn (+10% annual growth) but taking a cautious approach our FY24 forecasts remain unchanged.
A very strong investment performance was the growth driver in H1, contributing +£4.9bn (+13%) while net outflows were -£2.7bn. Impax noted: “The outflows were overwhelmingly from a small number of intermediary clients largely representing European private wealth, and we again recorded an increase in the number of institutional clients, and no segregated mandate terminations. Following nearly two years of relative headwinds, asset owner sentiment around the transition to a more sustainable economy and associated areas of Impax expertise has improved in recent months.”
Bullish medium-term outlook with some shorter-term ‘green shoots’
We maintain our strong conviction that medium-to-long term structural factors favour Impax, but also flag some positive shorter-term cyclical data points which support Impax’s comments above:
• The growth trajectories of and opportunities for the companies Impax invests in (the ‘sustainable economy’) are as robust as ever e.g. in sectors such as renewable energy, energy storage, environmental services, climate change mitigation, sustainable agriculture, food, and water.
• Valuations in some of these high-growth sectors have been hard hit over the last two years and have arguably become detached from fundamentals.
• With 25 years’ track record, knowledge, and experience, Impax is among the best positioned globally (if not the best positioned) to generate superior returns from these investments.
• In Europe, the largest sustainable fund market by far (84% of global market1 ), fund flows have remained far stronger than conventional funds, even through the last two years (page 2).
• Despite negative publicity and a weaker environment in the US, there are still pockets of strength such as sustainable bond funds and climate funds, and a far more favourable environment in East and West coast states (e.g. New York and California) with huge capital markets (page 2).
• Recent fund flow data suggests ‘green shoots’ are emerging for flows into sustainable funds, equity funds more generally, and actively managed funds (pages 3 & 4).
Gap between share price and our fundamental value has widened
With strong growth prospects, margins and balance sheet, our fundamental valuation remains 800p per share, over 80% above the share price, and we see a PER of 14.5 as undemanding.
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