Impax Asset Management gives new meaning to the word sustainable. A decade ago, it managed £ 1.9 billion in client assets, part of a select group of fund managers specializing in this area. That figure has risen from its latest to £ 41.4 billion trade update on Monday. In an arena filled with mimicking environmentally responsible funds, Impax, which focuses on public equities, stands out. Its long history and strong distribution networks have deservedly raised its valuation.
Impax, which has been listed on the smaller AIM market since 2001, combined early distribution transactions involving BNP Paribas and St James’s Place with a meaningful US acquisition. It bought Pax World Management in 2018, an unrelated business with an even longer history in sustainable investments stretching back to the 1970s.
It is the distribution agreements that have made the difference. A surge in assets coupled with a delay in appointment helped increase profitability. Its operating margin shot up more than 12 percentage points in the year to September to a record 39 percent. Even Impax’s broker Peel Hunt believes the margin will shrink by 2023.
Impax has hit its sweet spot. Stock performance over three and five years has mostly beaten broad world benchmarks. Yes, the weight of so much new money in the entire industry that goes into this style of investing will pick up most boats due to market performance. But Impax’s rise in assets under management also reflects net inflows. In the year to September 2021, it accounted for almost two-thirds of a £ 17.2 billion increase in customer assets. In the last five quarters, inflows have at least matched the market effect.
Any investors hoping that Impax will be eaten up by a larger group may not get their wish soon. With 30 times forward earnings, its shares trade well above the 15 times average of local niche managers like Liontrust. With market value of more than 4.5 percent of customer assets, holders will need the ESG wave to climb higher. Today’s news suggests that this is a credible assumption.
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