Full Year 2018 earnings

Key points

• Underlying earnings up 6%
• Third-party net inflows up €3 billion
• Commitment to fully integrate ESG in open-ended funds range in 2019
• Building a better tomorrow

“AXA IM has demonstrated resilience in 2018, delivering robust operating performance with a 6% increase in our underlying earnings despite challenging and volatile market conditions. Thanks to the commitment of our teams, we have recorded positive third-party flows, along with growth in areas such as Fixed Income, Alternatives and Multi-Asset, mainly in the institutional segment. We have also diversified further our distribution channels and geographies, through recent acquisitions and partnerships.” said Andrea Rossi, CEO of AXA IM.

“To deliver on our ambitions, we continue to focus and accelerate growth in areas of strength, while further leveraging our AXA experience for the benefit of third-party clients. I am convinced that the significant steps we took to transform our company in 2018 will bear fruit, enabling us to better adapt our solutions to our clients’ evolving needs.” added Andrea Rossi.

Full Year 2018 key highlights

All figures are as of the end of 2018, unless otherwise specified.

Underlying earnings increased by 6%¹  to €270 million, driven by lower financial charges, lower income tax expenses mainly linked to higher real estate performance fees as well as higher earnings from Asian joint-ventures.

Revenues were down 3% to €1,250 million² , driven by lower average management fees, notably due to the loss of a large mandate as well as some outflows due to adverse market conditions.

Net flows amounted to -€6 billion, including positive third-party net flows of +€3 billion³ , derived largely by flows into Alternatives, Multi-Asset and Fixed Income strategies. These inflows were however more than offset by the loss of a large mandate and outflows from the Asian joint-ventures, mainly as a consequence of large and low-margin alternative products from China joint-ventures reaching maturity, due to local changes of the regulatory requirements in 2018.

Assets under management amounted to €730 billion, down €16 billion compared to the end of December 2017, reflecting negative market effects and net outflows.

In 2018, AXA IM recorded successes in the Alternatives investment space, with a record year for Structured Finance seeing significant inflows raised from third party institutional investors and family offices in Europe, Northern America and Asia. This was driven by the closing of five CLOs (in Europe and the US) representing €2.1 billion, and successes in areas such as Dutch Mortgages, Global Secured Assets, Insurance-Linked Securities (ILS) and Regulatory Capital.

For 2019 and beyond, the strategic partnership with Capzanine should enable AXA IM to complete its product range within direct lending in Europe to small and mid-sized companies.

AXA IM - Real Assets pursued the expansion of its real asset platform through major transactions such as the acquisition of Data 4, with a real estate alternatives platform now exceeding €7 billion, while expanding its infrastructure business on both the debt and equity sides. The international expansion was reinforced notably through the agreement to acquire from Quadrant Real Estate Advisors⁴  one of its U.S. focused lines of business, and significant transactions in Asia.

As for the Core investment platforms, commercial momentum continued for the AXA IM Framlington Equities Evolving Economy thematic range, with successes across the Robotech, FinTech and Digital Economy strategies. Overall, this range accounts for c. €4.7 billion in assets under management, and is being further developed with the recent launch of the Clean Economy strategy.

The Optimal Income range from the Multi-Asset team was particularly successful, in the wholesale segment, and now represents more than €3.5 billion of assets under management.

In Fixed Income, Cashflow Driven Investing (CDI) strategies reached €4.4 billion from UK based clients, with additional significant wins in the Buy and Maintain range globally. The inflation strategies also recorded major successes notably with a major mandate in France.

To foster innovation across Core investment platforms and adapt where relevant the offering to clients’ needs, a transversal Quant Lab has been set-up, focusing on quantitative research, portfolio engineering, product engineering and structuring.

AXA IM Rosenberg Equities was last year selected to run an advisory $1 billion Global Equity ESG portfolio for CalPERS⁵ . In 2019, this platform will be launching a UN SDG-aligned strategy focused on companies that help mitigate climate change or improve transition to sustainable energy sources.

Commitment to integrate ESG across open-ended funds range in 2019

Illustrating its long-term commitment to responsible investment, AXA IM’s ESG (Environmental, Social, Governance) integrated assets are €458 billion.

After the strengthening of resources within its investment platforms, AXA IM is now reinforcing its ESG integration approach across its range of open-ended funds in 2019 by applying the newly defined ESG Standards, representing c.€82 billion of assets⁶ .

ESG integration is intended to help manage tail-risks and identify long-term trends. The policy focuses on material issues such as climate change, health and human capital, while also considering severe controversies as well as low ESG quality. Companies with a low ESG score according to AXA IM standards, as well as those relating to the following will be excluded from open-ended funds:

• coal and tar sands producers
• tobacco
• defense,
• severe breaches of UN Global Compact principles.

“As a responsible investor, we aim to manage ESG risks and opportunities when investing on behalf of our clients in a consistent way. This is why we are committing to this integration for our clients investing in open-ended vehicles. We have identified certain sectors in which we will not invest, above a certain exposure threshold to help minimise downside risk. Our ESG standards form just one dimension of our approach, and we also plan to enhance our engagement and stewardship to help influence business models of companies to anticipate future changes such as climate change. Our integration approach includes ESG corporate analysis, scoring, voting and also training for all staff.” added Andrea Rossi, CEO of AXA IM.

Additionally, AXA IM will provide its clients with reporting on ESG scoring and the carbon footprint for the vast majority of its funds and will pursue further SRI labellisation of some additional strategies in France.

Building a better tomorrow

As an active and responsible investor and employer, AXA IM is firmly committed to building a better tomorrow for clients and society at large.

Actions to promote diversity, inclusion and education range from the recent partnership with Dreams, a fintech company helping Millennials bring their projects to life through simple saving and investing, to initiatives that aim to bring investment knowledge to diverse audiences. Some of these include “Girls Who invest” in the US (a project aimed to encourage more women to take investment roles), partnering with KickStart Money in the UK to transform the long-term savings behavior of kids and PolECule in Germany to teach school students political and economic knowledge in both German and English.

AXA IM is also actively taking steps to tackle gender diversity and representation of women in senior asset management positions and investment roles. AXA IM signed the UK Women in Finance Charter and publicly pledged to reach a target of 40% of “senior executive” women in its global population by 2020, and currently stand at 35%.

These commitments support AXA IM’s ambition of driving positive change in the asset management industry and of enabling clients and employees, whatever their background, to be tomorrow ready.

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