If you could have bought the future earnings of the members of Destiny’s Child in 2001, would you really have turned it down because you weren’t sure where Kelly Rowland’s career was headed?
Years of bad publicity have been devastating to AMP’s retail-focused wealth management business. Revenues that were running at more than 1.1% of assets under management five years ago will be in the region of 0.7% this year. Even that is not enough to stem the flood of withdrawals from customers. Net cash outflows since the start of 2018 have amounted to about A$14.67bn, equivalent to nearly half a billion dollars a month.
Macquarie is valued at about 7.6% of its A$607bn in assets under management, at the higher end of the typical 3% to 8% range for the sector. Ares, for its part, runs at about 6.1% of its $179 billion assets under management. Even after surging 22% on Friday on news of the takeover interest from Ares, the whole of AMP is worth only A$5.36bn. That is about 3.4% of AMP Capital’s A$190bn in assets under management, and 2.1% compared with the A$253bn at the group as a whole.
The problems with AMP’s core business have even been modestly beneficial to AMP Capital. The fees it charges to the company’s wealth management arm, at 18.1 basis points in the first half of this year, are not much more than a third of the 45.7 basis points levied on external investors. As AMP’s wealth management customers withdraw their cash and external investors show ongoing demand, that is weighting the business more and more towards its most profitable clients.
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