viewJupiter Fund Management PLC

Low interest rates will drive continued strong fund inflows, UBS analysts predict

Analysts said retail inflows are positive for asset managers as they boost earnings and are positively correlated to the valuation multiples that the market applies

Schroders -
The Federal Reserve's zoom meetings led to zero interest rates

UBS has upgraded Jupiter Fund Management PLC (JUP:LON) and upped its price targets for other asset managers as analysts thinks the zero interest rate policy adopted by the US Federal Reserve will be “very conducive for further flows” into funds.

The Swiss bank upgraded its flow expectations for Jupiter, Standard Life Aberdeen (LON:STA), Schroders (LON:SDR) and some European peers, driving earnings forecasts for 2021 and 2022 and share price targets.  

For Jupiter, EPS estimates were lifted 6% and 11% by the analysts, which drove a target for the group as it merges with Merian Global Investors up 10% to 285p and leading to an upgrade to a ‘buy’ recommendation from ‘neutral’.

Estimates for Standard Aberdeen and Schroders were lifted by an average 4% in 2021 and 6% in 2022, leading to price targets being upped to 270p from 255p and to 3,175p from 2,950p, respectively. 

After March was the worst month for global fund flows since the 2008 financial crisis, the strong central bank monetary responses, spearheaded by the Fed interest rate cut to zero and expansion of its QE programs, has resulted in three consecutive months of strong fund flows and the UBS analysts think the historic lows of fixed income rates around the globe will drive higher allocations into riskier assets, “particularly into higher margin equity funds in the coming quarters”.

Analysts added that more flows are positive for the asset managers as not only do they boost earnings but retail flows particularly in high margin products are positively correlated to the valuation multiple the market has applied to the groups over at least the past decade. 

Quick facts: Jupiter Fund Management PLC

Price: 215 GBX

Market: LSE
Market Cap: £1.19 billion

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