During the last quarter of 2023, the US economy continued to grow strongly, as in the early part of the year, but in Europe growth remained sluggish. However, the slow-down in consumer prices, the growing challenges facing the global economy and more dovish guidance from central banks led to increased expectations for a reduction in market rates. As concerns about recession are piling up, investors anticipate cuts in key interest rates already in the first half of 2024. Increased risks for the economy were posed by increased geopolitical tensions, including the more tense situation in the Middle East, the signs of wobbling in the Western countries’ support for Ukraine and the protracted war in Ukraine.
The prices of equities and bonds rose during the last quarter, stimulated by interest rate optimism. The rise in share prices was fastest in the US and emerging markets, with share prices up by over ten percent. In Europe, too, share prices rose by over six percent. Higher-rated Investment Grade bonds as well as lower-rated High Yield bonds continued to develop well, as in the early part of the year. Overall, the year 2023 was profitable for equity and fixed income investors. Big tech companies led the equity market, which was reflected in an up to 45 percent rise in the technology-focused Nasdaq index in 2023. The S&P 500 index, seen to reflect the US economy more broadly, gained 25 percent in a year. In contrast, for real estate investors, the past year was difficult: interest rate rises added to debt servicing costs and lowered the value of properties as return requirements increased. Weakened economic outlook as well as companies’ changed needs related to use of space also increased the vacancy rate of offices.
Despite the continued uncertainty in the operating environment, Evli's revenue developed strongly during 2023. Net revenue increased by 13 percent from the corresponding period of the previous year and was EUR 108.7 million (EUR 96.1 million), and operating profit rose over 30 percent and was EUR 40.2 million (EUR 30.9 million). Revenue increased due to increased fund fees in traditional and alternative funds as well as increased commission income in the incentive business.
In the fourth quarter, the Group’s net revenue increased by 4.5 percent from the comparison period and was EUR 30.7 million (EUR 29.4 million). Operating profit, in turn, doubled to EUR 10.9 million (EUR 5.0 million). The positive development was due to the increase of commission income from traditional funds. By contrast, commission income from the Corporate Finance unit and brokerage activities remained lower during the quarter than in the previous year because of the slowdown in M&A activity and lower trading volumes.
In January–December, Evli’s return on equity was 22.8 percent (20.4%). The ratio of recurring revenue to operational costs was 130 percent (123%). The Group’s solvency and liquidity were at an excellent level.
Net revenue in the Wealth Management and Investor Clients segment decreased by two percent in the fourth quarter to EUR 21.4 million (EUR 21.8 million). Client assets under management rose to EUR 18.0 billion (EUR 16.0 billion), driven by positive market development and net subscriptions. Evli Fund Management Company’s mutual fund capital, including alternative investment products, was approximately EUR 12.6 billion (EUR 11.1 billion). Net subscriptions of investment funds amounted to approximately EUR 0.1 billion during the quarter, mainly from short-term fixed income funds as well as from domestic and global equity funds.
Net revenue in the Advisory and Corporate Clients segment remained at the previous year’s level and was EUR 4.9 million (EUR 4.9 million). In the M&A market, the uncertainty of the early part of the year eased towards the end of the year and assignments reached the finish line. Income from the Incentive business was on the previous year’s level at EUR 3.2 million (EUR 3.2 million). In accordance with its strategy, the company has succeeded in winning new customers from both Swedish listed companies and Finnish unlisted companies, and the company's overall outlook is good.
The key drivers of Evli's strategy, international sales, and alternative investment products, developed favorably during the quarter. Net subscriptions by international clients amounted to EUR 30 million. International clients accounted for 19 percent (20%) of Evli’s total fund capital, including alternative investment products. Sales of alternative investment products continued to increase, and subscriptions and investment commitments totaled EUR 32 million (EUR 120 million).
In the fourth quarter, as part of the responsibility work, Evli continued its research project promoting children’s rights and published a Biodiversity Roadmap, which guides our actions to consider biodiversity. In addition, Evli launched a new Article 9 fund Evli Impact Equity.
Maunu Lehtimäki, CEO, Evli Plc