Last week we looked at a sorry little group of struggling European banks. This week we'll have a stab at something a bit perkier: fund managers. A loosely based term more often than not focusing on firms that invest in company shares on behalf of institutional and private investors. However, they may also buy bonds and commodities, real estate, derivatives and alternative investments. Their corporate structure varies, from partnerships and private equity to hedge funds and listed companies. We look at four of the biggest London main-market ones.
The reason we've picked UK managers is because, with data provided by the Investment Association Annual Survey 2015-16 and its 200 members, we learn that it is second only in size to the US asset management industry, has a total £6.9 trillion under management, of which 40 per cent is for overseas clients (the bulk of these Europeans). It is worth 320 per cent of UK GDP - while Europe's managers control about 114 per cent of their joint GDP. All firms are being scrutinised for the fees charged, hidden commissions and performance. They also face issues with the unbundling of research and costs, and have already seen margins trimmed sharply as, in a zero interest rate world, fat cats and hefty charges are harder to hide.
St James's Place (STJ) has seen its share price rise fivefold since the trough in 2008. Not bad for a relatively new kid on the block managing £53.8bn and listed in 1990 at 29p a share. The chart is punchy, dynamic and suffers from large price swings - losing 50 per cent of face value in the first two quarters of 2016. However, the speed of the subsequent recovery is really rather remarkable and this year's break above the psychological £1,000 level important. Certainly, the chart has a spring in its step and the outlook is for further, hopefully sustainable, gains.
Standard Life (SL.) is a name many will know well, the holding group of a series of finance and insurance businesses. Its share price is up fourfold since 2009's low and it also suffered a dramatic 50 per cent fall between the middle of 2015 and the summer of 2016. The recovery has been slower, mirroring the decline that took a year, indicating that this chart is not as dynamic as the first one; it's possibly a more mature company, too. We favour a rally back up to the 450p-500p area.
Schroders (SDR) at number eight of the top 10, with £36.8bn under management, has a track record going back to 1984 (historical data is great for perspective) and rallied almost sixfold from 2008's low. The price drop to the second quarter of 2016 was roughly 40 per cent - less than the previous one, denoting resilience. The underlying tone therefore remains well bid and we would expect it to achieve a new record high within the next year.
Henderson (HGG) scrapes in at number 10 with chart and price action that at first glance looks steadier than the others. Expect a lot more work between 200p and 300p.
