Private fund manager Mercia gears up for boost from Mansion House Compact

Mercia Asset Management has said it plans to reclassify as a trading company and cease to be an investing company as the firm focuses on its profitable funds under management (FUM).

The AIM-listed specialist said on Tuesday that it achieved record fund inflows of around £562m for the financial year ending on 31 March 2024, while its assets under management (AUM) swelled to £1.82bn from £1.44bn.

Revenue rose to £30.4m from £25.9m over the year, although the firm swung to a pretax loss of £8.2m from a £2.4m profit. It also made a loss per share of 1.71p, from an earnings per share of 0.64p in 2023.

Mercia said its board would propose a resolution at its annual meeting in September that the firm reclassifies under AIM rules as part of efforts to grow its FUM, with cash proceeds from direct investment portfolio exits to wholly or partly fund inorganic FUM growth, instead of new direct investments.

The company is now aiming to increase its AUM to more than £3bn over the next three years while doubling its earnings before interest, tax, depreciation and amortisation (EBITDA). It branded the new strategy “Mercia 27: 100 per cent growth”.

Mercia’s chief executive, Mark Payton, said the “ambitious goal” provided “a clear framework for shareholder value creation”.

The firm’s EBITDA came in at £5.5m for its last financial year, up slightly from £5.2m in 2023.

Mercia previously announced in November that it would take a “more cautionary approach” to direct investing from its balance sheet capital and pause adding new companies to its direct investment portfolio.

“As we advance our journey to scale, we will harness our local knowledge and presence to expand into adjacent asset classes and sustain our resilient financial performance,” Payton said on Tuesday.

“The world faces continued volatility driven by political change, geopolitical challenges and caution across both public and private markets.

“Amidst this, initiatives such as the Mansion House Compact and an increasing focus by investors on domestic deployment, coupled with our continued investment performance as a specialist alternative asset manager, puts Mercia in a strong position as investors shift capital allocations toward impact investing and private markets.”