AMP Capital sees $2.1 billion outflows as scandal continues to bite
Investors have pulled more than $2.1 billion in funds from AMP Capital in the past quarter as the reputational fallout from its botched handling of a sexual harassment complaint continues to damage the brand.
AMP’s share price slid by more than 5 per cent on Thursday to $1.36 amid concerns steps the company has taken to regain market trust haven’t gone far enough. Merlon Capital Partners portfolio manager Hamish Carlisle reiterated his calls for AMP Capital’s private markets business with its “disastrous track record” to be sold off, saying management tarnished by the scandal would continue to hurt the brand.
AMP copped a massive backlash after it was revealed money manager Boe Pahari was promoted to lead AMP Capital despite being fined $500,000 for sexually harassing a former subordinate colleague. Mr Pahari has been since demoted but remains in a senior leadership position within the company.
Tribeca Partners senior portfolio manager Jun Bei Liu called for a major leadership shake-up to put an end to the fund outflows, arguing the recent departures of chairman David Murray and board director John Fraser weren’t enough to alleviate investor concerns over the wealth manager’s corporate governance.
“At a board level, they need a complete refresh,” Ms Liu said, though conceding “it’s a really tricky position. Who within the business will be able to guarantee or present a plan to the investors of how they might come back from here?”
Redemptions by super funds and other institutional clients saw AMP Capital’s assets shrink to $189.8 billion in the three months to June 30. The company’s wealth management arm saw total assets increase by 2 per cent to $122.1 billion, but outflows persisted due to a loss of corporate super mandates and payments to clients accessing their superannuation early in the COVID-19 crisis, AMP said in a trading update to the ASX.
After his demotion, Mr Pahari retained a key leadership role overseeing AMP Capital’s expansion of unlisted assets – a part of the company that has seen $688 million growth in infrastructure debt.
Morningstar analyst Shaun Lerr said AMP was exposed to “key person risk” as investment mandates linked to individual employees were closely tied to AMP’s performance. Mr Lerr said the high turnover of staff following the sexual harassment scandal had hurt the business, but it would be made worse if Mr Pahari was sacked.
“Rightfully or wrongfully, Boe Pahari has been doing a very good job at managing money. He is quite a necessary evil they have to retain,” Mr Lerr said.
AMP chief executive Mr De Ferrari said the results showed “underlying improvement”, with its online fund management platform, North, seeing $818 million in net inflows over the quarter and wealth assets growing by 0.3 per cent to $121.4 billion.
“Our business has performed resiliently through the challenges of COVID-19 and a period of internal change in the third quarter,” Mr De Ferrari said.
AMP announced last month that it was exploring options to spin off parts of the company. Mr Lerr said AMP was undervalued but it appeared Mr De Ferrari did not want to splinter the company.
“I get the sense that [Mr] De Ferrari wants to keep it as is, he wants to continue running the empire but everyone else wants to see it torn apart and fed to the wolves,” Mr Lerr said.
AMP Bank saw deposits increase by $52 million but its total loan book decreased by $303 million to $206 billion. Mr Lerr said this was a “disappointing” result but could improve with the proposed axing of responsible lending laws.
“No doubt AMP will be a very turbulent investment, it will have its ups and downs, but when you look at long-term fundamentals, management is doing the right job of simplifying the business,” he added.