Asset managers are often seen as a geared play on stock market performance, as investors expect them to rise and fall with the major indices, but at an accelerated pace in both directions. Yet the link appears to have been broken over the past year. While the FTSE 100 is up almost 20% over the past 12 months, fund managers have lagged embarrassingly. However, they may be about to play catch-up.
Aberdeen’s Anguish
Aberdeen Asset Management has been hit hard by its narrow focus on emerging markets and trades 40% lower than two years ago, which partially triggered today’s merger announcement with insurer Standard Life. The two stock-picks below have done better, although they haven’t exactly been flying.
With a name like Jupiter Fund Management (LSE: JUP) investors should expect a star performer but it hasn’t turned out that way. The stock is up just 2% over the last year, and lost some shine after last month’s results, which saw 2016 profit before tax increase 4% to £171.4m, while net inflows nearly halved to £1bn.
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Dark star
Jupiter put this down to a challenging market environment for funds, with “a backdrop of variable markets and dampened investor sentiment.” There is some truth in that statement, given the turbulent start to 2016, and last year’s worst ever season for stocks and shares ISA sales. However, if you cannot encourage people to invest with the FTSE 100 flying to 7,400, when can you?
The Trumpflation surge came too late for last year’s results but may drive higher net inflows in 2017. FTSE 250-listed Jupiter can boast the performance to attract investors, with assets under management up 13% last year to £40.5bn, while net management fees jumped 10% to £330.2m. The firm declared a total dividend of 27.2p, up 7%.
Jupiter’s share price has been brighter over five years, rising 66% in that time, against 28% on the FTSE 100. Trading at 13.49 times earnings and yielding 3.4%, it looks a tempting buy.
Shrewd Schroders
Schroders (LSE: SDR) has been my favoured asset manager for some time and has easily outperformed both Jupiter and Aberdeen lately. Although it still trails the FTSE 100 over 12 months, growing 12% in that time, it is up a whopping 93% over five years.
Schroders didn’t find 2016 as challenging as Jupiter, with an impressive 27% rise in assets under management to £397.1bn, according to last Thursday’s results. It got a big helping hand from sterling weakness, which added an incredible £42bn to that total. With the pound apparently finding a floor lately it cannot rely on this headwind again, and the trend could even reverse. 2016 net inflows increased £1.1bn while profits rose 6% to £644.7m.
Schroders is nicely diversified the cross the UK, Asia Pacific, Europe, Middle East, Africa and increasingly the Americas, following its acquisition of a securitised credit business in the US. It isn’t cheap at 16.48 times earnings and the 3% yield looks so-so but is progressive, with management recently increasing it 7% to 93p per share. Both asset managers look tempting for investors of a bullish disposition, but Schroders edges it for me.
