Impax sharply down on AUM fall ...

... but its relative performance compared to peers and the flight to quality in sustainable investing makes its valuation look out-of-kilter

Impax Asset Management (LSE: IPX) reported an AUM update on 10th Oct for the period ending 30 Sep 23. AUM closed FY23 on £37.4bn, 5% up year on year. But Q4 pegged back growth with AUM falling 6% due to many retail investors withdrawing funds from capital markets and sharp market falls.

The share price fell more than 12% on the day, is now down 72% since 31 Dec 21 (around the peak of the last bull market), with Impax’s PE ratio slipping into the 3rd quartile of a London-listed asset management peer group.

In my latest Equity Development research note, Sector-leading growth, but 3rd quartile valuation, I argue that this doesn’t make sense. Reasons include:

• While comparative peer data is not yet available for the quarter ending 30 Sep, Impax’s relative growth rate over the first nine months of its FY23 was certainly impressive - the highest among UK-listed peers; additionally

• Its net flow rate has exceeded peers in every quarter since 2021, through bull and bear markets;

• Flows into sustainable funds, particularly those with the strongest credentials, and especially climate funds, have held up far better than conventional funds;

• There is clearly increasing sophistication and selectivity from asset owners in choosing asset managers when it comes to sustainable investing; and

• Impax is poised to take advantage of this - in addition to its 25-year track record in this space, it is among those with the very highest credentials, being one of only eight asset managers, out of 108 assessed, to achieve 'Leader' status in The Morningstar ESG Commitment Level assessment (August 2023), and one of only four to maintain this leader status from the previous assessment.

Read the full research note here to see all of the data backing up this argument, and please subscribe to this newsletter to keep up to date with the latest results in the asset and wealth management sectors (there will be quite a few posts over the next few weeks as quarterly updates are published for the Jul-Sep 23 quarter).

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Disclosure: At the time of writing, Paul Bryant was a shareholder in Impax Asset Management and covered Impax Asset Management as an analyst on behalf of Equity Development Limited. Read Equity Development’s research on Impax here (Please read this link for the terms and conditions of reading Equity Development’s research).