If you're looking to buy a mutual fund shop, public or private, now might be the time to strike.
Andrew Bary of Barron's highlights
the currently-below-market P/E multiples for some big, publicly-traded asset managers like BlackRock
], Franklin Templeton
], and T. Rowe Price
is making the case for investors to buy shares of such firms now, while their valuations are "at multiyear lows". Yet the logic might apply to acquirers, too.
| Gregory E. Johnson|
Chief Executive Officer
"Investors are looking at the industry's favorable characteristics, including modest capital requirements, high profit margins, and strong cash returns to shareholders through dividends and stock buybacks," Bary writes. "There is also room to cut expenses, as compensation levels remain generous. Barring a sharp selloff in global equity markets, the stocks could be near a bottom."
If current market turmoil, rocky fund performance, and outflows are overly pummeling the valuations of publicly-traded asset managers in individual investors' eyes, perhaps companies or private equity looking to buy in the space might find the current market environment tempting. Indeed, a Japanese multinational is about to buy
a big minority stake in American Century, and Manning & Napier
and Victory Capital
both just revealed plans to buy smaller fund firms.
Or perhaps mutual fund firms' low capital needs and other strong points mean that owners of privately-held fund firms will be able to weather the current storm with a more long-term view than their publicly-traded peers. Publicly-traded asset managers' shares are taking a hit right now, but privately-held fund firms might just be able to wait it out and stick to their higher valuations. If so, the current market environment might actually delay new sales for sellers that have the luxury of a little time.
Neil Anderson, Managing Editor
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