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Financial Services equity research analysts Rae Maile and Phil Dobbin recently initiated coverage of the UK Asset Manager sector with an overview of trends and a close look at 10 listed companies.
The sector faces numerous headwinds including revenue pressure from pricing and indexation, while costs are under pressure from regulation, product diversification and internalising costs previously taken on by clients. These headwinds are not going away, but the note says there are still opportunities for active fund managers. Strong client relationships with longevity and persistent AUM is the best defence against industry headwinds.
Coverage of companies includes Intermediate Capital, Standard Life Aberdeen, Record and Liontrust (all Buy), Ashmore Group, Gresham House, Jupiter Fund Management, Man Group and Schroders (all Hold) and Hargreaves Lansdown (Sell).
Intermediate Capital is the team’s top pick given it is at the right end of institutional allocations, runs strategies difficult to replicate on a passive basis with AUM predominately in closed-end funds. Its fundraising is growing over time with scope for further operational gearing. SLA is the teams ‘value play’ with the underlying asset management business currently valued at less than three times estimated earnings. Liontrust is the ‘best for growth’ with its simple operationally geared model.