With the UK equity markets enjoying an extended bull run, it makes sense that UK-listed asset managers – highly geared to the market’s fortunes – have also put in a stellar performance, at least in relative terms, as it was partly a reflection of the losses suffered during 2016. Some of these were the result of sector-wide factors such as the investor jitters that followed the EU referendum, others were idiosyncratic. Man Group (EMG) generated the largest share price gains last year – up almost three-quarters – after its discretionary long-only strategies started to recover.
The persistent challenge to UK-listed asset managers is that posed by the growing popularity of passive funds. Judging by a flurry of updates that have been released so far during 2018, active managers seem to be holding their own. IC buy tip Jupiter Fund Management (JUP) – whose shares have risen by more than a third during the past 12 months – gained net inflows of £0.6bn during the final quarter of 2017. Diversifying its assets by geography and class (away from equities in favour of multi-asset and fixed income), as well as its client base, has helped keep the cash flowing in. Given the uncertainty around the level and ease of access that UK financial services will have to European markets (post Brexit), diversification will likely continue to be the buzzword for most UK asset managers this year.
In the case of wealth managers such as Rathbone Brothers (RAT) and Brewin Dolphin (BRW), the growth in demand for discretionary management looks unlikely to abate during 2018, given the growth in self-directed investment and pension freedom changes.
However, as their share price performance is highly correlated to the UK equity market, it means asset managers are particularly vulnerable to a correction in prices, something many market watchers reckon could occur in the near term given valuations of UK equities. That could result in a flight to value, particularly if long-dated bond yields start to creep up, leaving risk assets looking less attractive in relative terms.
Standard Life took another big step towards becoming a fully-fledged asset manager during 2017, following its merger with Aberdeen Asset Management to form Standard Life Aberdeen (SLA). Shares in the combined entity have performed well since the merger completed, despite it reporting £23bn in net outflows during the first nine months of the year. Unsurprisingly, Standard Life pensions and savings provided the lion’s share of new business, while institutional outflows from both its mature and growth investments channels – an inevitability given the overlap between some mandates of Aberdeen and Standard Life.
| Company | Price(p) | Market value (£m) | PE Ratio | Yield (%) | 1-year change (%) | Last IC view |
| Ashmore Group | 419 | 2,965 | 15.5 | 4.0 | 38.6 | Hold, 380p, 18 Oct 2017 |
| Brewin Dolphin | 380 | 1,076 | 21.5 | 4.0 | 23.9 | Buy, 351.7p, 30 Nov 2017 |
| Hargreaves Lansdown | 1,840 | 8,727 | 44.3 | 1.6 | 38.5 | Hold, 1,358p, 15 Aug 2017 |
| Jupiter Fund Management | 587 | 2,687 | 20.0 | 2.9 | 42.0 | Buy, 552p, 27 Jul 2017 |
| Man Group | 213 | 3,498 | 20.1 | 3.5 | 71.4 | Hold, 167.3p, 02 Aug 2017 |
| Rathbone Brothers | 2,664 | 1,367 | 33.8 | 2.2 | 30.1 | Hold, 2,777p, 23 Aug 2017 |
| Schroders | 3,675 | 8,306 | 19.7 | 2.7 | 21.2 | Buy, 3,480p, 19 Oct 2017 |
| Standard Life Aberdeen | 434 | 12,929 | 6.2 | 4.7 | 23.5 | Buy, 387.2p, 09 Mar 2017 |
