Money Managers Are Losing Faith in Money Managers

(Bloomberg Opinion) -- A bad year for Britain’s fund managers has taken a turn for the worse, with lackluster asset growth prompting investors to look askance at the outlook for money management. And it’s getting increasingly hard to see what, if anything, could stop the rot.

The value destruction being inflicted on the industry is getting spectacular. Those losses in market value compare with a decline this year of less than 10 percent for the wider U.K. stock market, as measured by the FTSE 350 index.

Jupiter Fund Management Plc, for example, just recorded nine consecutive days of declines, its longest losing streak in seven years. The stock is now at its lowest in more than two years. Man Group Plc is near a 20-month low, while Standard Life Aberdeen Plc has lost 40 percent in the past year and is at its weakest since July 2016.

The catalyst for the latest downturn in the share prices of U.K. money managers is their inability to weather the oft-discussed pressure on fees by increasing in size.

With global investors wary of the economic outlook, gloomy about the prospects for corporate earnings and increasing their cash allocations accordingly, according to the latest Bank of America Merrill Lynch survey, there’s little prospect investment firms will enjoy a spurt of asset growth in the final three months of the year.

What’s odd, though, is the persistent faith of the analyst community that covers the industry.

While Jupiter has five sell recommendations, 12 analysts are advising investors to either buy or hold the shares. And SLA, Man Group and Schroders don’t have a single negative recommendation between them.

It’s become traditional in any article on the fund management industry to discuss the prospect of mergers and acquisitions as a potential lifeline for investors. And U.K. firms are certainly looking cheap at current valuations.

SLA, with a market value of almost 8 billion pounds ($11 billion), is in the midst of a complicated sale of its insurance business, and probably too much of a mouthful. So is Schroders, at about 7.6 billion pounds even before adding any takeover premium.

But Man Group, the world’s biggest publicly traded hedge fund, would deliver $114 billion of assets and has a market value of less than 2.2 billion pounds; Jupiter manages almost 48 billion pounds and is worth less than 1.6 billion pounds.

Beleaguered Swiss investment firm GAM Holding AG is in play after losing more than half of its market value this year, Bloomberg News reported earlier this month. If the bankers acting as midwives for that sale can get an auction going, an unsuccessful bidder might just be willing to consider a U.K. firm as a consolation prize — especially given how cheap they are.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."

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