PRESS RELEASE
ROBECO IN 2004; OPERATING RESULT +3%, AuM +4,6%
In 2004, Robeco improved its operating profit by 3% to EUR 187.0 million. Robeco's assets under management increased 4.6% to EUR 113.2 billion. These positive results were achieved despite the fact that asset managers in Europe experienced increasing competition. The once comfortable and protected positions these managers enjoyed with their captive distribution channels are gradually coming under attack. The open-architecture trend is developing slowly but surely. Demand for mutual funds from retail investors in Europe, especially in the Netherlands, has also contracted significantly over the last few years. In 2004, Robeco proved it is able to come up with alternative investment structures that address the specific needs of retail clients.
Assets under management
Robeco's assets under management increased 4.6% to EUR 113.2 billion. This was caused by a positive investment result and net inflows from clients. The investment result amounted to EUR 4.6 billion, helped by the strong performance of capital markets but partly offset by the depreciation of the US dollar in 2004. Robeco achieved a net cash flow of EUR 1.1 billion, arising from retail clients investing in our US mutual funds and in the European structured products which generated net cash flow of EUR 2.4 billion. However, Robeco experienced net outflows in its institutional business of EUR 1.3 billion, mainly from US institutional clients. These outflows mainly occurred in lower-fee institutional mandates. 'Other losses' amount to EUR 0.7 billion, which consists of annual dividend and interest distributions to investors, as well as a termination of a fee-generating agreement for real-estate assets.
For some time in 2004, Robeco ranked as Europe's number one fixed-income manager in the Global Investor rankings, based on the Morningstar ratings of our European managed fixed-income funds.
Operating profit
In 2004, Robeco improved its operating profit by 3% to EUR 187.0 million. This increase was caused by continued strong growth in the alternative investment business. The success arising from developing and distributing truly unique structured products, which combine absolute returns from hedge funds with Rabobank's AAA guarantee, has boosted Robeco's income in the alternatives business. The managed-futures hedge fund, Transtrend, posted excellent investment returns in 2004. This futures hedge fund's continually strong investment track record combined with the increased size of the fund, has led to a further increase in performance fees. Partly as a result of the increased scale of the alternative investment business, the relative importance of structuring fees has declined, whereas the importance of recurring income from management fees has increased, thereby providing a solid basis for future income.
The success in alternative investments was followed at a certain distance by the developments in the traditional business where client inflows were mainly in fixed-income products and Robeco experienced outflows in the equity area. The management fee for the funds in Europe was increased in the reporting year, while the spread was narrowed. The distribution fees which were previously paid out of the spread revenues are now paid out of the management fees. This adjustment was made in order to align the fee structure with international standards and to strengthen the position with fund distributors. Also, positive developments in the capital markets have had a positive effect on the level of management fees.
The favorable business performance was, to some extent, offset by the (continued) depreciation of the US dollar against the euro which had an adverse effect on Robeco's profitability.
Outlook for 2005
Robeco expects that given the improved market climate assets under management will increase further in 2005 through cash inflows as well as investment results.
Consolidated income statement
For the years ended 31 December
(EUR x million) 2004 2003
REVENUES
Management and transaction fees 628.8 590.0
Interest result of banking operations 78.5 83.6
Other revenues 35.3 30.9
Total revenues 742.6 704.5
OPERATING EXPENSES
Staff 217.4 208.4
Distribution expenses and direct costs 183.4 152.9
Depreciation 11.8 13.2
Other expenses 143.0 148.7
Total operating expenses 555.6 523.2
Operating income 187.0 181.3
NON-OPERATING INCOME AND EXPENSES
Interest income 21.9 12.6
Interest expense - 34.2 - 25.2
Investment income 2.3 - 0.3
Total non-operating income and expenses - 10.0 - 12.9
Income before tax 177.0 168.4
Tax - 31.8 - 49.3
Group result after tax 145.2 119.1
Minority interest third parties 0.3 - 6.3
Net income 145.5 112.8
About Robeco
Robeco provides discretionary asset management products and services, as well as a complete range of mutual funds to a large number of institutional and retail clients worldwide. Robeco's product range encompasses fixed-income and equity investments, as well as balanced accounts, money-market funds and alternative investments.
Robeco distributes its funds for the retail market directly, and through other financial institutions. Several of its mutual funds, including the flagship Robeco N.V., are listed on major European stock exchanges such as Amsterdam, Paris, Frankfurt and London.
As well as from its head office in Rotterdam, Robeco services its clients from its European offices in Belgium, France, Switzerland, Germany and Spain. In the United States, Robeco has offices in New York, Chicago and San Francisco (Weiss, Peck & Greer), Boston (Boston Partners), White Plains (Sage Capital Management) and Toledo (Harbor Capital Advisors), and in the Middle East it has an office in Bahrain.
Robeco is the center for asset management with full operational independence within the Rabobank Group. The combination of the highest credit ratings from the major international rating agencies and the highest Sustainability Cluster Score within the banking sector reflects the high added value Rabobank has always offered its investors, members, clients and employees.