Tipped in Investors Chronicle12 Jun 2020 17:55
The reality for non-specialist active investment managers remains chal- lenging. The unwavering allure of cheaper passive funds will continue to pile pressure on margins and the need to cut costs, which explains why the group wants to reduce total staff costs by 10 per cent in 2020. Acquisitions – such as the recent purchase of digital wrap and wealth management platform Ascentric
– offer another opportunity to hold back margin erosion and pivot into stickier invest- ment management models.
In sticking to its £2.2bn capital genera- tion target for the three years to December 2022, M&G has flagged the resilience of its largest source of cash flows. After corpo- rate tax, investors can expect cumulative profits of £1.9bn over this period, or around half the current market capitalisation. On 6.5 times forward consensus earnings, the shares trade around a third below life insur- ance run-off peer Phoenix (PHNX), and less than half the similarly margin-challenged Schroders (SDR). Led by a chunky dividend policy, we see value. Buy. A