BofA reiterates 'underperform' rating on UK asset managers amid subdued flows
Heading into Q2 and H1 2023 results, the Bank of America has cut the sector’s annual earnings per share (EPS) by 2-3%.
In a research note today (10 July), analysts Alexandre Tissieres and Hubert Lam explained they remain cautious on the asset management sector, with Schroders, abrdn, Jupiter, Ninety One and Ashmore unlikely to re-rate higher until flows improve.
«Given continued macro uncertainty from rising rates, high inflation and geopolitical risks, we do not see an imminent turnaround,» they added.
Although markets stabilised in equities and fixed income in the second quarter of the year, risk appetite is subdued given concerns about inflation, rates, and economic growth, which has resulted in sector outflows quarter-on-quarter, the analysts argued.
BofA downgrades UK asset managers over recession risks and weak flows
Following a positive start to fund flows in January due to optimism from accelerating US GDP growth, the Euro area avoiding an energy crisis and China-reopening, flow momentum has faded and has turned negative again in the second quarter of the year.
Heading into Q2 and H1 2023 results, BofA has cut the sector's annual earnings per share (EPS) by 2-3% as a result of weaker markets, GBP strength and greater outflow assumptions given continued client risk aversion.
EPS estimated cuts are even larger for Jupiter and Schroders, at 5-6%. The analysts no longer assume buybacks at Jupiter, while they reduced their flow forecasts for Schroders in its traditional businesses of mutual funds and institutional.
abrdn begins £150m share buyback programme
However, Schroders is expected to be the most resilient of the traditional asset managers, given its diversification into structurally growing areas such as
Read more on investmentweek.co.uk
