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FTSE 350: Asset managers' cushion removed

The end of quantitative easing and slowing global growth means asset managers look set for a bumpy ride this year
January 24, 2019

Asset managers are at the mercy of markets, arguably more than any other FTSE 350 sector. The gradual unwinding of US and European quantitative easing programmes – which has buoyed asset prices and management fees post-crisis – was always likely to spell trouble for the industry.

However, trade tensions and fears of slowing global growth have also weighed on equity markets – bad news for the management fees charged by asset managers, which are calculated as a percentage of assets under management. The sector’s FTSE 350 constituents, including Jupiter Fund Management (JUP) and Ashmore (ASHM) unsurprisingly reported negative market movements during the final three months of 2018. Admittedly, the FTSE 100 90-day volatility index – which measures expected volatility over the next three months – has reduced sizeably since reaching its highest point in more than two years in December, which could point to some respite for markets ahead.  

Retail assets are generally flightier in times of market tumult, but wealth managers such as Brewin Dolphin (BRW) and Rathbone Brothers (RAT) have benefited from shifting their focus to discretionary management, which has grown in demand thanks to self-directed investment and pension freedom changes. Rathbones may have suffered £3.4bn in negative market movements during the final quarter of 2018, but organic net inflows of £574m show client demand remained intact.     

Similarly, platform providers are more defensive than pure-play asset managers; they don't just sell sharedealing services and most assets are held on the platform in a form of tax wrapper, increasing their 'stickiness'. That said, groups such as Hargreaves Lansdown (HL.) and IntegraFin (IHP) are not immune to market ructions, with fees for holding money on the platforms the largest contributor to income. Therefore, a substantial reduction in assets under administration could erode revenues.  

 

NamePrice (p)Market cap (£m)12-month change (%)Trailing PEForward PEDividend Yield (%)Last IC View
Ashmore 371.62648.54-11.3515.714.14.48Hold, 352p, 7 Sep 2018
Brewin Dolphin316.6897.41-16.6413.712.25.18Buy, 315p, 29 Nov 2018
Hargreaves Lansdown17728404.93-3.732.7291.82Hold, 2,046p, 7 Aug 2018
Integrafin 318.51055.26 27.923.90n/a
Intermediate Capital992.52881.74-12.4810.412.63.12Buy, 1,009p, 5 Nov 2018
Jupiter Fund Management311.91427.57-46.879.911.45.84Hold, 442p, 30 Jul 2018
Man Group142.52211.98-33.1129.66.36Hold,177p, 1 Aug 2018
Quilter1272415.86 12.111.80Hold,149p,10 Aug 2018
Rathbone Brothers23741310.61-10.8916.8162.65Hold, 2,398p, 25 Jul 2018
Schroders25585781.65-30.3911.711.94.46Buy at 3,077p, 6 Sep 2018
Standard Life Aberdeen262.46610.31-39.111.511.69.34Hold, 266p, 8 Nov 2018