FTSE 350: Asset managers need answers

That’s particularly true of firms with a bias to stocks, such as Jupiter Fund Management (JUP), whose reliance on star fund managers was highlighted by the outsized impact on flows of a handful of leadership changes in 2019. But beyond personnel, the pressure on active management means providers need to articulate a revamped strategy, and soon. This year, analysts at broker Numis expect Jupiter’s net flows to boost managed assets by just 1 per cent, and a pre-tax profit margin of just 40.3 per cent – a fall of 350 basis points from 2018.

Fortunately, some sector constituents have found their own answers. Intermediate Capital’s (ICP) focus on credit and alternative assets – as well as the private equity-like structure of its fundraising – mean it is insulated from fickle clients and short-termism.  If you believe the passive revolution has essentially removed price discovery from developed markets, then Ashmore’s (ASHM) focus on the developing world – where indexation remains in its infancy – makes sense. Listed hedge fund Man Group (EMG) is another member of this sub-category, although its track record and corporate targets again leave us unconvinced of the prospects for its shares in 2020.

The investment platforms – with their generally agnostic approach to fund style – are also in a comparatively safe position. Backed by a strong product offering and predictable flows from DIY retail investors, there are good reasons why AJ Bell (AJB) commands one of the richest ratings in the FTSE 350. While we do not expect the company’s shares to repeat their strong run in 2020, the longer-term challenge platforms and the next generation of robo-advisers present to wealth managers – Brewin Dolphin (BRW) and St James’ Place (STJ) among them – looks sizeable.