MJ Hudson Group: the one-stop-shop for alternative asset management

Alternative asset manager MJ Hudson Group is worth a look as it seeks to scale up its business, writes Mark Watson-Mitchell. 

Last Wednesday saw the end of the 2020/2021 financial year for MJ Hudson Group (LON:MJH), the alternative asset management consultancy and infrastructure provider which helps fund managers and investors operate more efficiently and invest more successfully.

Alternative investments in this context takes in private equity, private credit, real estate, hedge funds and venture capital.

Brokers estimate that the year will have seen the group’s net revenue rise strongly from £20.3m to some £27m, while pre-tax profits could have increased more than 145% from £1.1m to £2.6m. 

And that was despite of the impact of Covid-19 upon the group’s business.

In 2010, just as the country was coming out of the credit crisis, lawyer and former alternative assets manager Matthew Hudson set up his company in Jersey in the Channel Islands as a specialist legal firm providing advice to asset managers, aimed at helping fund managers to manage their own businesses. 

As the Alternatives sector expanded and the regulatory environment faced by its clients became increasingly complex, the group diversified its business to offer a broad range of specialist asset management consultancy services to fund managers and investors. 

Since 2010 it has expanded considerably both organically and by acquisition.

It went public in mid-December 2019 valued at £97.6m when it raised £31.4m through the Placing and Subscription of 55m @ 57p each.

Today it operates as a financial services support provider for the fund managers and asset owners in the UK, the Channel Islands, Switzerland, Netherlands, Luxembourg, the rest of Europe, North America, the Cayman Islands, and internationally. 

The group has grown to now support more than 1,000 clients, including 18 of the FTSE 100. 

Its business is transatlantic, with clients clustered around the major asset management centres of Europe and North America. The MJ Hudson team of some 230 specialists works out of 11 offices in those centres.

The company operates through three segments: Advisory, Business Outsourcing, and Data & Analytics. 

The Advisory segment offers legal and consultancy services to alternative asset managers, corporate entities, and institutional investors, as well as provision of individual independent investment advising and professional trustees services to corporate pension schemes, local government pension schemes, and charitable organisations. 

The Business Outsourcing segment, a multi-service platform, provides various management, operations and marketing support services to asset managers and advisers. It offers ongoing business support services for fund managers and funds. Its services include front, middle, and back-office functions comprising investor relations, portfolio management, risk management, fund and corporate administration, accounting, and fiduciary services. 

The Data & Analytics segment provides research, consulting, and benchmarking services, as well as tools to support investment and tax-advantaged investing. 

The group is a financial services support provider, capitalising on the investment management industry’s shift to investing in Alternatives and the outsourcing of non-core services. 

The global Alternatives market is expected to grow to $21.1 trillion by 2025. The MJ Hudson group seeks to be a leading services and infrastructure provider for Alternative fund managers and asset owners, servicing clients at key stages of their development.

The group seeks to scale up its business through four key routes – organic growth, acquisitions, investing activities and franchise opportunities. 

The latest deal was announced on 25 June when it acquired Clarus Risk for up to £3.5m. 

Similar to MJ Hudson, Clarus’ clients are European and North American alternative asset fund managers, investors and service providers in the asset management industry. The current assets under management (AUM) of clients on Clarus’ system totals c. £10bn. Clarus offers its clients risk and regulatory risk reporting either as managed service, or via software as a service (SaaS). 

The MJ Hudson group has 172.6m shares in issue.

Significant shareholders include Matthew Hudson (22.5%), Canaccord Genuity (11.3%), Somers Ltd (9.6%), Danske Bank (6.6%), Katherine Hudson (4.9%), Capital Research & Management (4.7%), Emily Devlin (4.1%) and Polygon Group (4.1%). The other directors own some 3%.

Going forward in financial terms analyst Peter Renton at Cenkos Securities, broker to the group, estimates net revenues for the current year to end-June 2022 of £31m, with £4m of profits and 2.2p of earnings per share.

We should be getting a full year trading update announcement in the next few weeks, with a comment on current year prospects.

Despite the apparently high price-earnings ratio, currently 23.75 times with its shares at 52.25p each, I am not dissuaded from viewing the MJ Hudson Group as a real growth story.

From the base that it has built up to date it will be comparatively easy to add on earnings accretive acquisitions as it both broadens and deepens its global offering to the fast-expanding Alternatives sector.

I now set a 66p target price