After the steep decline in share prices at the end of last year the market environment calmed down and equity and corporate bond prices recovered.
Despite this, investor activity and sentiment were cautious at the beginning of the year and this was reflected in Evli’s first quarter financial performance. During the review period, our net revenue declined 1 percent, net commission income by 8 percent and operating profit by 18 percent year on year. A decline in fund and brokerage fees, in particular, had a negative effect on performance. However, the balance sheet returns developed exceptionally well and was EUR 1.1 million in the first quarter.
The core areas in Evli’s strategy performed according to expectations during the first quarter. In line with the strategy we focused on developing alternative investment products, on international fund sales and on projects to improve client experience and digitalization.
In the area of alternative investment products, we launched the new Evli Private Equity II Ky fund that invests in private equity funds in the first quarter and raised around EUR 60 million for our real estate equity funds. The Evli Healthcare I fund, which invests in care facilities, reached its target size of EUR 200 million and was closed to new subscriptions. The total capital in the alternative investment products, including investment commitments, was around EUR 400 million at the end of the review period compared with around EUR 100 million a year earlier.
International fund sales grew by around EUR 100 million during the first quarter, the majority of the growth came from corporate bond funds. As was the case in the previous year, foreign investors were interested in the Nordic Corporate Bond fund and the fund’s capital increased to almost EUR 700 million. Overall, our international fund capital grew to EUR 2.1 billion compared with EUR 1.7 billion a year earlier. Evli’s major markets outside Finland are Sweden and the other Nordic countries and large countries in Central Europe, particularly Germany, France and Spain.
In Finland, the sales performance of fund products and discretionary asset management services was varied. The sale of asset management services to private and institutional clients increased according to plan. However, fund sales were negative during the first quarter on account of a couple of large redemptions. Evli Fund Management Company’s net subscriptions to traditional mutual funds were around EUR 100 million negative, but as a result of the recovery of share prices our fund capital increased and exceeded that of the end of last year at EUR 8.1 billion. Evli is the fourth largest fund management company in Finland and its market share was 7.1 percent at the end of March. Our client assets under management grew to EUR 11.9 billion.
In the Advisory and Corporate Clients segment the Corporate Finance business area performed in line with expectations and invoicing was at the level of the previous year. The company’s mandate base is stable so the outlook for the coming quarters is also positive. The incentive system management business grew as it has in previous years due to new clients and existing clients extending their current incentive systems.
We will continue our resolute work to develop our strategic focus areas in order to reach our target of achieving an even broader selection of funds and more international clientele. By developing new alternative investment products, we want to meet client demand even better and strengthen the average margin of our fund products. We will also continue our work to create a unique client experience and to boost the efficiency of our investment processes. We have invested in the development of our information systems for a long time now. During 2019 our target is to launch new digital services and update our back-office systems. We believe this work will have a positive impact on client satisfaction and our profitability.
Updated: April 26, 2019