COMPANIES 

FTSE 350: M&A driving asset and wealth manager growth

FTSE 350: M&A driving asset and wealth manager growth

Weaker markets, the rise of index funds and intense competition on fees create a potent mix for UK asset and wealth managers. The threat of inflation, war and market volatility led to savers and investors pulling £2.5bn from UK-domiciled retail funds in February, on top of outflows of £1.2bn in January. The share prices of several listed fund managers have suffered considerably, too. 

However, this has led to a number of high-margin businesses trading at relatively low multiples. Add to that the possibility of further consolidation in the industry, and analysts at Panmure Gordon are bullish, with ‘Buy’ ratings on Abrdn (ABDN), Jupiter Fund Management (JUP) and Liontrust Asset Management (LIO), despite net outflows across all three companies in recent months – or years in some cases.  

But while most asset managers are now trading on price/earnings ratios below their 10-year averages, according to Numis, it is not clear what events might trigger a share price surge.

Abrdn is hoping that its acquisition of private investor platform interactive investor and content platform Finimize will help it reap rewards from the private investor market, while Schroders (SDR) has been building up its alternative assets business, where profit margins are higher. Emerging markets specialist Ashmore (ASHM) has had a particularly torrid year, which could present an attractive entry point, but persistent inflation and geopolitical tensions are unlikely to favour the regions in which it invests.

In the wealth market, RBC’s knockout bid for Brewin Dolphin (BRW) has bumped up the share prices of rivals that could also be seen as potential targets. Rathbones (RAT) looks the most obvious but, given recent performance, any takeover attempt is unlikely to be as generous as that of its rival.

Do-it-yourself investing platforms Hargreaves Lansdown (HL) and AJ Bell (AJB) have been feeling the heat from rising competition and a slowdown in growth following the pandemic trading boom and may struggle to return to the high valuations they previously commanded. 

 

NAMEPrice (p)Market cap (£mn)12-month (%)Fwd PEYield (%)Last IC View
Abrdn2004,361-27.0%167.4Hold, 200p, 1 Mar 2022
AJ Bell2841,168-39.0%282.4Hold, 387p, 2 Dec 2022
Ashmore Group2381,695-39.0%117.3Buy, 282p, 10 Feb 2022
Brewin Dolphin5121,55551.0%213.2Hold, 348p, 24 Nov 2021
Hargreaves Lansdown9864,678-41.0%204.1Hold, 1,138p, 22 Feb 2022
IntegraFin3891,288-31.0%222.8Hold, 518p, 16 Dec 2022
Intermediate Capital Group1,6774,871-16.0%124.0Buy, 2,404p, 16 Nov 2022
Jupiter Fund Management2031,124-23.0%118.5Hold, 203p, 25 Feb 2022
Liontrust1,246809-20.0%105.6Buy, 2,075p, 1 Dec 2022
M&G2175,6343.0%109.3Buy, 203p, 8 Mar 2022
Man Group2383,19847.0%104.6Hold, 192p, 28 Jul 2021
Ninety One2621,6306.0%145.3N/A
Quilter1382,256-15.0%183.3Hold, 127p, 9 Mar 2022
Rathbone Brothers2,0851,29916.0%134.0Buy, 2050p, 12 Jan 2022
Sanne Group9051,46846.0%271.7Accept takeover bid, 910p, 1 Apr, 2022
Schroders3,1628,254-10.0%133.9Hold, 3,047p, 3 Mar 2022
St. James's Place1,3687,4235.0%174.3Hold, 1,376p, 25 Feb 2022
Source: FactSet      

 

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