F&C returns to net inflow but faces £10m legal bill

F&C Asset Management saw net flows into its products turn positive in the first six months of the year, but the group faces a £10m payout for a lost legal dispute with the founders of its fund of hedge fund arm.

In its results for the six months ended 30 June 2011, F&C reported net flows of £800m, compared to a net outflow of £300m in the first half of 2010.

Assets under management climbed from £105.8bn to £108bn, supported by positive returns from investments and the strengthening of the euro versus sterling, the group said.

Pre-tax profit was £22.6m, up from £14.6m the previous year. Net revenues increased from £106.8m to £137m, driven by the performance of Thames River funds.

This part of the business accounted for £5.4m of the total £5.9m generated in performance fees over the period. The group said 83% of Thames River funds that have performance fees attached are within 5% of their high water marks.

F&C also reported a number of one-off expenses, including £1.8m of costs associated with operational outsourcing, plus £10.3 million for the legal battle against the founding partners of its fund of hedge funds business, which it lost last month. 

The group will pay an unchanged interim dividend of 1p per share on 28 October 2011.

Alain Grisay, chief executive, said: "We made good progress in the first half of 2011 with an 86% increase in new business generation and revenues up 28% over the first half of 2010.

“Encouragingly, increased revenues came from both the legacy F&C business and Thames River. We also maintained a strong cost discipline. These factors resulted in an 86% uplift in our H1 underlying earnings per share.

“As we look to H2, considerable uncertainties persist from the weak macroeconomic environment and concerns about sovereign debt in both Europe and the US.

“However, at a company level, more of our products have performance fees that typically crystallise at year end and in addition we expect to see the first cost benefits emerge from the recent outsourcing of our investment operations.

"Our review of strategy is progressing well and we expect to report to shareholders in October."