Report
Jason Streets

Hardman & Co Insight - Asset managers had a poor 2022

Asset managers had a poor 2022: the S&P Composite 1500 Asset Management Index was down 22% and, according to the Investment Company Institute (ICI), worldwide mutual funds fell by 20%, from $76tr to $60tr. When bond and equity markets fall, the results are unlikely to be pretty: with revenues trending down and multiples contracting, there is a double whammy to contend with.

So how do valuations shape up now, after a bullish start to the new year? The first chart is my favourite chart of asset manager valuations – it has so much information in it. The x-axis is the EBITDA as a percentage of assets under management (AuM), and the y-axis is the market cap as a percentage of AuM. Thus, a line drawn from the intercept out is the market cap/EBITDA ratio.

There are 20 companies represented on the chart, which we can group into three categories: asset managers, platforms and wealth managers. But even as one group, the line of best fit has a correlation coefficient of 0.92, and its gradient is a market cap/EBITDA of 10.8x.

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Underlyings
Ashmore Group plc

Ashmore Group is engaged in the provision of investment management services.

Brooks Macdonald Group PLC

Brooks MacDonald Group is an independent investment management firm. Co. has four segments: Investment Management, which provides discretionary investment management to private investors, pension funds, charities and trusts through Bespoke Portfolio Service and Managed Portfolio Service; Financial Planning, which delivers both fee based financial advice to high net-worth families, and employee benefit consultancy to small and medium sized employers throughout the U.K.; Funds and Property Management, which engages in new investment across the range of funds with the Defensive Capital Fund; and International, which includes the Channel Islands business discretionary funds under management.

City Of London Investment Group

City of London Investment Group is the holding company for a number of subsidiaries. The principal operating subsidiary is City of London Investment Management Company Limited, which acts as an investment manager on 38 accounts with a total of £3.58 billion under management as at June 30 2017. Co. is an asset management group with an institutional client focus specializing in Emerging Market closed-end fund investments. Co.'s range also include Developed, Frontier and Global Tactical Asset Allocation closed-end fund strategies.

Frenkel Topping Group PLC

Frenkel Topping is engaged in the provision of financial advice and wealth management focused on asset protection for clients.

Hargreaves Lansdown plc

Hargreaves Lansdown is a direct to investor investment service administering investments for clients. Co. provides a platform through which clients can buy, hold and sell their investments within tax efficient wrappers such as individual savings accounts and self-invested personal pensions, or fund and share accounts. Co. acts as an intermediary between its clients and the fund managers or registrars of investments and can also provide advice.

Impax Asset Management Group plc

Impax Asset Management Group is an investment firm, providing listed and private equity strategies primarily to institutional clients. As of Sep 30 2017, Co. has total assets under management and advice of £7.30 billion.

Integrafin Holdings

Integrafin Holdings PLC offers a differentiated, premium platform service focused on financial advisers servicing affluent clients with investable assets of sufficient scale to warrant more complex service provision. Co. seeks to differentiate its proposition by focusing both on comprehensive platform functionality and high touch, cost-efficient “human” client service with a long term, falling operating cost ratio measured against funds under direction (FUD).

Jupiter Fund Management plc

Jupiter Fund Management is a holding company for a group of investment management companies. Co. is a fund manager, focused on delivering value to clients through investment outperformance after fees. Co. enables individuals and institutions to access this outperformance through a variety of savings products.

Liontrust Asset Management PLC

Liontrust Asset Management is a holding company. Through its subsidiaries, Co. is a fund management company. Co. provides fund products through distribution channels. Co. has three operating subsidiaries: Liontrust Fund Partners LLP, which is a financial services organization managing unit trusts; Liontrust Investment Partners LLP, which is a financial services organization providing investment management services to investors directly, through investment consultants and through other advisers; and Liontrust Investment Solutions Limited, which is a financial services organization providing discretionary fund management services to the advisory intermediary market in the U.K.

Man Group PLC

Man Group is a global investment management firm. Co. has five specialist investment units, or engines: Man AHL, which employs diversified quantitative techniques to provide a range of strategies which encompass traditional momentum, non-traditional momentum, multi-strategy and sector-based approaches; Man Numeric, which is a quantitative equity manager; Man GLG, which is a discretionary investment engine, providing a range of alternative and long only investment strategies; Man FRM, which is an alternatives investment specialist; and Man GPM, which focuses on investments in private markets, including real and corporate assets across the capital structure.

Mattioli Woods

Mattioli Woods provides pension consulting and administration, wealth management, asset management and employee benefits consultancy. Co.'s operating segments comprise:Pension consultancy and administration, which include setting up and administering pension schemes, as well as providing consultancy services for one-off activities; Investment and asset management, which manages and placing of investments on behalf of clients; Property management, which manages collective property investment vehicles, facilitates direct commercial property investments on behalf of clients; and Employee benefits, which assists its corporate clients with employee engagement.

Polar Capital Global Financials Trust

Polar Capital Global Financials Trust is an investment trust company. Co. invests primarily in a portfolio consisting of listed or quoted securities issued by companies in the financial sector operating in the banking, insurance, property and other sub-sectors. Co. has contracted Polar Capital LLP to act as the Alternative Investment Fund Manager.

Rathbone Brothers PLC

Rathbone Brothers, through its subsidiaries, is a provider of personalized investment and wealth management services for private clients, charities and trustees. Co.'s services include discretionary investment management, unit trusts, banking and loan services, financial planning, unitised portfolio services and U.K. trust, legal, estate and tax advice. Co.'s investment management services provides personal discretionary investment management solutions to private clients with investible assets of £100,000 upwards. Co.'s unit trusts services provides a range of actively managed and multi asset unit trusts that are designed to meet core investment needs in the retail client market.

Schroders PLC

Schroders is a global asset and wealth manager. Co. manages assets on behalf of institutional and retail investors, financial institutions and individuals. Co. has three business segments: Asset Management, which comprises investment management including advisory services, equity products, fixed income securities, multi-asset investments, real estate and alternative asset classes; Wealth Management, which comprises investment management, wealth planning and banking services provided to individuals and charities; and Group, which comprises Co.'s investment capital and treasury management activities. As of Dec 31 2016, Co. had a total of £386.00 billion of assets under management.

Tatton Asset Management

Tatton Asset Management is engaged in providing a range of services to the Financial Conduct Authority ("FCA") directly authorized financial adviser ("DA IFA") marketplace encompassing discretionary fund management, regulatory and compliance services and mortgage services. Co.'s discretionary portfolio management ("DFM") service operates on ten United Kingdom adviser WRAP platforms and can be integrated into the growing number of adviser WRAP platforms in the market. Co. provides support services to independent financial advisors ("IFA"s), enabling DA IFA firms to provide compliant and effective investment portfolio management for their platform based clients.

Provider
Hardman & Co
Hardman & Co

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Analysts
Jason Streets

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