CEO's review


A year of significant arrangements went favorably

The year 2022 was historically weak for investments. All major asset classes, equities, government bonds and corporate bonds, fell in value as the war in Ukraine, geopolitical tensions, rising energy prices and wildly rampant inflation, plus the policy rate hikes to contain it, all took their toll. The rise in the US dollar also led to higher budget deficits and debt servicing costs in many emerging economies and increased their risk of default. The prices of growth stocks, especially tech companies, which rose to great heights during the era of low interest rates and quantitative easing, fell particularly hard. The few stocks that rose in value were mainly found in the energy and weapons industries.

The weak market development levelled off in the last quarter of the year as investors saw the first signs of a possible slowdown in inflation. Despite this, the normalisation of the interest rate environment, the weakened purchasing power for consumers, as well as global economic uncertainties and the continuation of the war, are all expected to push Europe into a recession during the current year.

The year 2022 was particularly significant for Evli with two large and successful M&A transactions. In the spring, Evli carried out a partial demerger. In the transaction, Evli focused on providing investment services and merged its banking operations with Fellow Finance to form a new digital bank, Fellow Bank Plc. Evli is a significant owner of the bank created by the merger. In the autumn, Evli strengthened its position as Finland's leading asset manager by the merger of EAB Group Plc into Evli. The corporate transactions contributed to the negative impact on Evli's profitability during the 2022 financial year, but positive synergies are expected in the coming years.

The weakness in the market and operating environment was reflected in Evli’s performance in the fourth quarter. Net turnover decreased by approximately 16 percent to EUR 29.4 million and the Group's operating profit fell by about 70 percent to EUR 5.0 million. Fee income from alternative investment products and the incentive business increased, but fee income from traditional funds and the Corporate Finance unit was well below the previous year. The decline in fee income was driven by lower asset values, increased redemptions, and a slowdown in M&A activity. In addition, the result for the fourth quarter was negatively impacted by non-recurring items related to the merger with EAB Group Plc.

In January-December, Evli's return on equity was 20.4 percent (50.4%). The ratio of recurring income to operating expenses, on the other hand, was 123 percent (135%). The Group's solvency and liquidity were at an excellent level.

Net turnover in the Wealth Management and Investor Clients segment decreased by 17 percent to EUR 75.7 million in the reporting period. Client assets under management, including EAB Group Plc's client assets, decreased to EUR 16 billion (EUR 17.5 billion) due to the weak market development and increased net redemptions. Evli Fund Management Company’s mutual fund capital, including alternative investment products, amounted to EUR 11.1 billion (EUR 12.2 billion). Net redemptions of traditional investment funds amounted to around EUR 1 billion during the beginning of the year. Redemptions were mainly in short dated fixed income funds, corporate bond funds and European equities. However, fee income from alternative investment products increased by approximately 50 percent and thus already accounted for around 30 percent of total fund fees.

Net turnover in the Advisory and Corporate Clients segment decreased by 19 percent to EUR 16.4 million. Corporate Finance invoicing fell by over 50 percent from the compa¬rative period to EUR 5.8 million in the quarter (EUR 11.7 million). The mandate base of the Corporate Finance unit is good, and the outlook has brightened to some extent. Income from the Incentive business increased to EUR 10.4 million (EUR 8.5 million). The company has continued to win new incentive plan design and administration clients and the outlook is also good.

The key drivers of Evli's strategy, international sales and alternative investment products, showed a mixed performance during the quarter. International sales, with Evli's corporate bond funds at its core, suffered in the first half of the year from rising interest rates and general market uncertainty. Redemptions by international clients amounted to almost EUR 670 million and the share of international clients in total fund capital, including alternative investment products, fell to 20% (27%).

In the fourth quarter, sales of alternative investment products reached a total of EUR 120 million (EUR 153 million). The sales were spread across several funds, with the largest subscription amount coming from the Evli Private Equity III fund.

Responsibility is one of Evli's strategic focus areas. In the fourth quarter, as part of its work to support human rights, Evli launched a research project together with UNICEF Finland to explore how investors and asset managers can promote the fulfilment of children's rights. Evli's work on responsibility was again praised by clients, who rated Evli as the best asset manager in Finland in terms of responsible investing in a survey of institutional clients conducted by SFR Scandinavian Financial Research.

I want to thank our clients, shareholders and my colleagues at Evli. Let’s continue our journey together for a better future!  

Maunu Lehtimäki, CEO, Evli Plc

Updated: January 26, 2023