Times are getting tougher for asset managers. Sector-wide, earnings for FY2022 are forecast to fall 15.6 per cent, according to FactSet consensus figures. Analysts have also pencilled in a minor contraction for the following year. Fund flows and margins, already under pressure from passive products and difficult markets, now have a recession to deal with
Mitigating these trends is not easy. Schroders, which has expanded into alternative assets in a bid to diversify and bolster those margins, has nonetheless been labelled by Bank of America analysts as the most sensitive to a downturn in the UK economy.
This backdrop might suggest a further acceleration in merger and acquisition activity. Top of the waiting list remains Jupiter (JUP), a perennial 'target' that has stayed stubbornly free from acquirer interest so far. It is at least now home to a new chief executive trying to tidy up some of his predecessor's mess.
Wealth managers have proved more susceptible to overseas appetite: see RBC's deal for Brewin Dolphin last year. Rathbones (RAT) shares, in particular, have incorporated a takeover premium since then. But it and FTSE 350 peer Quilter (QLT) will be under pressure this year to show they can deliver the operational improvements that look increasingly urgent.
It isn't all doom and gloom: wealth and savings remain a structural growth opportunity. St James’s Place (SJP), for all its sins, can still be relied on to post healthy asset flows in good times and bad. And in the world of investment platforms, AJ Bell (AJB) and financial adviser-focused Integrafin (IHP) both proved capable of growing market share again in 2022.
Things can change quickly in a sector that is still more or less a levered play on the market. The likes of Ashmore (ASHM), Abrdn (ADN) and Jupiter have seen share prices rise by 50 per cent since the October lows. That means valuations aren’t quite as cheap as they were, but this remains a sector in which momentum can do a lot of the heavy lifting.
| FTSE 350 Asset Managers | ||||||
|---|---|---|---|---|---|---|
| Price | Market | 12-month | Fwd | Dividend | ||
| Company | (p) | cap (£mn) | change (%) | PE | yield (%) | Last IC view |
| Abrdn | 211 | 4,216 | -12.6 | 20 | 6.1 | Sell, 166p, 9 Aug 2022 |
| AJ Bell | 334 | 1,374 | -0.7 | 23 | 2.7 | Hold, 368p, 1 Dec 2022 |
| Ashmore | 269 | 1,919 | -4.5 | 19 | 7.6 | Buy, 204p, 8 Sep 2022 |
| Hargreaves Lansdown | 884 | 4,191 | -34.1 | 16 | 5 | Hold, 873p, 5 Aug 2022 |
| IntegraFin | 329 | 1,089 | -33 | 25 | 4.6 | Hold, 312p, 15 Dec 2022 |
| Intermediate Capital | 1,385 | 3,969 | -27.3 | 12 | 4.3 | Buy, 1,174p, 17 Nov 2022 |
| Jupiter Fund Management | 147 | 799 | -36.1 | 13 | 6.7 | Hold, 123p, 30 Jul 2022 |
| Liontrust | 1,166 | 757 | -27.1 | 12 | 5.7 | Buy, 1,166p, 18 Nov 2022 |
| M&G | 208 | 4,884 | -3 | 11 | 9.2 | Buy, 222p, 11 Aug 2022 |
| Man Group | 248 | 3,110 | 20.8 | 10 | 4.7 | Hold, 252p, 2 Aug 2022 |
| Ninety One | 201 | 1,250 | -22 | 13 | 5.7 | Hold, 230p, 19 May 2022 |
| Quilter | 99 | 1,384 | -22.4 | 15 | 3.8 | Hold, 118p, 10 Aug 2022 |
| Rathbone Brothers | 2,115 | 1,341 | 14.3 | 17 | 4.1 | Hold, 1,840p, 29 Jul 2022 |
| Schroders | 486 | 7,830 | -14.4 | 14 | 3.4 | Hold, 2,830p, 28 Jul 2022 |
| St. James’s Place | 1,217 | 6,623 | -20.5 | 17 | 3.1 | Hold, 1,217p, 29 Jul 2022 |
| Source: FactSet | ||||||
