Valuations of money management firms are determined by new money under management, says John Keefe, president of Keefe Worldwide Information Services, an investment research firm. In an analysis for Grant's Interest Rate Observer, Mr. Keefe said net new monthly flows into long-term mutual funds show significant statistical correlation with the action in the shares of T. Rowe Price or Franklin Resources.
Valuations are not outlandish, he added. Mr. Keefe said the median price paid for a U.S. money manager has been between six and 10 times pre-tax earnings since 1989. Mutual fund companies command prices that are, on average, one percentage point higher than those of institutional money managers.