As investors withdraw cash from investment funds like billy-o due to the coronavirus pandemic, analysts also rushed to revalue the UK asset management sector, which one said was akin to being at a fairground and “trying to shoot ducks on a conveyor belt”.
Pointing to a 25-35% decline in key global equity markets and a deluge of investor outflows, UBS slashed its earnings estimates for European asset managers by 20-43% for the coming three years.
UBS’s base case is for equity markets end June down 30% and then rise by 8% in the second half.
With the share prices of the sector down by between 28% and 55% since the starts of 2020, the UBS analysts reassessed the companies’ target prices and their recommendations for each share.
Ashmore Group PLC (LON:ASHM) and Man Group PLC (LON:EMG) were both upgraded to ‘buy’ from ‘neutral’, with share price targets cut to 435p and 145p respectively; and Jupiter Fund Management PLC (LON:JUP) was upgraded to ‘neutral’ from ‘sell’ with its target slashed to 180p.
Standard Life Aberdeen PLC (LON:SLA) was downgraded to ‘neutral’ from ‘buy’ with its price target slashed to 185p.
Analysts at Shore Capital, while feeling like they were aiming at rubber ducks at the fairground, said this was because meaningful mark-to-market forecast changes could be made around twice a day in the current circumstances.
“As such, the one thing we can pretty much guarantee about all the company forecasts in this report is that they’ll be wrong, in some cases materially so.”
But the main conclusion for ShoreCap was that Man Group “stands out as the top pick in the sector”, with blowout 2019 results understandably overlooked in the coronavirus meltdown.
“The quant strategies that generated strong performance fees in 2019 have so far held up well in 2020.”
ShoreCap however reversed its ‘sell’ recommendation on Ashmore to ‘buy’ given the big share price fall.
Polar Capital Holdings PLC (LON:POLR) was downgraded to ‘hold’ on material mark-to-market revisions and some reservations around an evolution of the business model, while the ShoreCap number crunchers were “unenthused” by the Jupiter’s proposed merger with Merian and “still struggle to find the circumstances” that would see Schroders PLC (LON:SDR) offer value.
Elsewhere, analysts at Jefferies upgraded Rathbone Brothers PLC (LON:RAT) to ‘hold’ from ‘underperform’ though it cut the price target to 1,430p from 1,710p
Jefferies also cut its price targets, with Standard Aberdeen’s snipped to 300p from 400p but kept on a ‘buy’ rating, while Brewin Dolphin Holdings PLC (LON:BRW) and Man Group were both kept at ‘buy’ but the price targets cut to 300p from 425p, and to 150p from 185p respectively.
Ratings were kept at ‘hold’ for Ashmore, Jupiter and Schroders, though price targets were slashed; to 390p from 520p for Ashmore, to 160p from 350p for Jupiter, and to 2,210p from 3,100p for Schroders.
Hargreaves Lansdown PLC (LON:HL.) was kept at ‘underperform’ by Jefferies, with its price target cut to 1,140p from 1,255p.