Hennessy Advisors reports 2019 earnings drop 46%; CEO says 'investors will return to active management'
Novato-based Hennessy Advisors Inc. reported fiscal 2019 results, showing drops in net income, revenue, and total assets under management, compared with fiscal 2018.
“While our industry has faced many hurdles this year and actively managed U.S. mutual funds in particular have experienced net outflows, I firmly believe the future for asset managers is promising,” said Chairman and CEO Neil Hennessy in a statement. “With the increase in market volatility, I believe investors will return to active management after years of buying passive index funds.”
The company saw net income of $11 million in the 2019 fiscal year, a decrease of 46.5% from 2018. During that same period, total assets under management decreased 21.4% to $4.9 billion, while total revenue decreased 21.8% to $42.7 million. The company also noted that cash and cash equivalents decreased 2.8% to $24.7 million
The company said in the news release that its quarterly dividend increased 10% to 11 cents per share in October 2018 and 25% to 13.8 cents per share in August 2019.
The Business Journal previously reported that the company’s third-quarter results from August also showed a decrease in total revenue and assets under management, compared with the same period last year.
The company also said the decreases in year over year numbers were due in part to the Tax Cuts and Jobs Act of 2017, which caused it to reassess its deferred tax liability in 2018 to account for the future impact of a lower corporate tax rate. The company said that “As a result, we recorded a large, one-time adjustment in our prior year first fiscal quarter that created a tax benefit of approximately $4 million, which translated to $0.54 in earnings per share.”
For the three months ended June 30, the firm’s total revenue decreased 23% to $10.4 million from a year before. Total assets under management decreased 22% to $5.0 billion over the same period.
Hennessy previously told the Business Journal the declines were the result of a strong overall market, resulting in investors moving capital away from actively managed funds like his.
“Over the last year and a half to two years especially, there’s been movement from actively managed funds to passive funds which are essentially index funds with very, very, low fees, in some cases zero,” Hennessy said in August.
The company is a publicly traded investment manager that oversees, services and markets the family of Hennessy Funds. Hennessy offers a range of mutual funds, including traditional equity, specialty category and sector funds, as well as more conservative multi-asset products,