Hennessy Advisors says Q3 decrease in revenue, assets under management part of cyclical shift

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Novato-based Hennessy Advisors Inc. reported third-quarter results that showed a decrease in total revenue and assets under management, compared with the same period last year.

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.

Chairman and President Neil J. Hennessy attributed the declines to 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.

He noted that index funds works well in an up market like the one the country is currently experiencing. “They do not work well in a flat, down or volatile market,” he said.

He said the trend affected all active asset managers like himself.

“This we’ve seen before, so you don’t have to wait until the end of the movie," he said. "It will crash and burn, and money will come back over to active managers … you just have to weather the storm.”

He also noted the company held more cash than debt and continued to accumulate cash at about $1 million per month.

The firm also declared a quarterly dividend of $0.1375 per share, a 25% increase, which will be paid on Sept. 10 to shareholders of record as of Aug. 20.

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