After years of outflows from equity funds should investors finally invest in the asset managers as the money starts flowing back? One key to the equation is that most of the money flowed into bond funds that have low average fees placing an importance on finding the asset managers with the least exposure to bond funds. Or at least the ones that will see those funds rotate into equity funds.
According to TrimTabs, January had a record $77B flow into U.S.-listed equity funds (mutual funds and ETFs). While investors can debate whether these flows will continue, it is clearly worth reviewing the stocks that will benefit from a growth in equity investments that typically have higher fees than fixed income funds and especially money market funds. The real question is whether investors should move into fund managers or brokerage services. This article will focus on some of the leading asset managers.
Every asset manager is not alike. A vast difference exists between the focus on equity funds versus fixed income and global versus domestic. The below highlights a cross section of four different managers:
Mega-cap international flavor
Franklin Resources, Inc. (NYSE:BEN) has long been a respected global investment manager. The company has a market cap of nearly $30B and forecasted 2013 revenue of nearly $8B. The stock trades at a reasonable forward PE of 12.5 and so far analysts have only increased earnings estimates around 1% in the last 90 days. Franklin has over $4B in net cash that the company can use to increase dividends with the comfort of a stronger end market.
The company reported AUM grew to $809.8B in January compared to $7818B at the end of December. It also reported assets had seen a strong increase of $105B or nearly 15% over last year with the vast majority of the gains in the last 6 months alone. The increases were led by global equity and taxable fixed income funds. The US fixed income funds actually managed to maintain balances during January.
Domestic fund giant
T. Rowe Price Group, Inc. (NASDAQ:TROW)
reported Q4 AUM that were up an average of 18% over last year. The total assets were $576.8B and increased over $86B from $489.5B last year. The majority of the assets are in T. Rowe Price mutual funds distributed in the United States. The company is a leader in retirement funds and has over $89B in target-date retirement funds.