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Asset managers hostage to fortune

Asset management companies are, broadly speaking, hostage to the swings in financial markets and the ability of managers to anticipate and profit from those swings. During 2010, the drive for greater returns served them well, as investors allowed their risk appetite to broaden to take advantage of the higher returns on offer in emerging markets.

True, financial markets in the world's developed economies have performed well, too. But the big question for the year ahead is whether the embryonic signs of recovery seen so far will continue to develop, or whether the economies of the major western nations will do little more than bump along the bottom. Up until now, investors have been content to pile into most investments on the back of a recovery that must happen at some point. There has, therefore, been a premium build-up as investors anticipate better times ahead.

For this momentum to continue, and to be justified, means that there must be no more skeletons in the cupboard - and yet the potential for significant slip-ups is considerable. So far, however, investors have elected to ignore the threat from such big issues as sovereign debt defaults, preferring instead to assume that central bankers would never allow such situations to develop. There is also the risk that major differences in the eurozone could lead to some member states giving up on the euro as a currency altogether. But, ultimately, it will be the direction of the US economy and, to a growing degree, the Chinese economy that will define the outcome for financial markets this year.

As for the asset managers themselves, individual performance rests heavily with the ability of the fund managers, while the consolidation process started last year looks set to continue as well. A stunning performance from Bluebay Asset Management no doubt helped to justify the premium paid by Royal Bank of Canada to buy it, Gartmore's disastrous first quoted year ended with the exit of star fund manager, Roger Guy, and a discounted offer from rival, Henderson Group.

COMPANYPRICE (p)MARKET CAP (£m)PE RATIOYIELD (%)1 YEAR PRICE CHANGE (%)LAST IC VIEW
ABERDEEN ASSET MAN.2192,50315.53.262.8
ASHMORE GROUP3592,52215.03.646.1
BREWIN DOLPHIN17640614.14.024.0
F&C ASSET MANAGEMENT9148319.85.521.7
GARTMORE GROUP1023714.70.0-53.3
HARGREAVES LANSDOWN5582,64439.81.589.0
HENDERSON GROUP1511,25716.24.017.0
JUPITER FUND MANAGEMENT3091,4140.0
MAN GROUP3065,73911.79.6-2.1
RATHBONE BROTHERS1,14049520.53.734.9
SCHRODERS1,8954,28335.11.741.4
SCHRODERS NV1,48388930.12.139.1No IC View

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