Paul Bryant, financials analyst at Equity Development discusses the key developments in Q3 for asset and wealth managers, market sweet spots, and some valuation points investors shouldn’t overlook.
Interest rates
High rates and ‘risk-off’ has led to retail investors selling out of equity funds, hurting asset managers. But wealth managers with ‘cash products’ have been benefitting.
Valuations
Sector valuations have been badly beaten up. PE ratios have halved since the end of the bull market. Has the fall been overdone? Profitability, growth prospects, and balance sheets suggest it might be.
Pockets of strength and weakness
Companies with cash products, model portfolio services, ‘risk-off’ products, and areas of sustainable investing have shown relative strength. Companies with a retail investor client base have hurt more than those with an institutional client base.
Consolidation
M&A continues. The likelihood of more foreign buyers of UK companies is strong.
Sustainable investing 2.0
The bandwagon ESG phase is over. But, despite negative press of the sector, the most credible sustainable investment managers have attracted capital at higher rates than the broader market.
