Goldman Sachs analysts today cut their earnings-per-share estimates for 15 asset management firms by 26% and their price targets by 25%.
However, only one manager’s rating was downgraded by analysts. Affiliated Managers Group’s rating was downgraded to “neutral” from “buy.” “Although we continue to think AMG is uniquely positioned to capture share via acquisitions, market volatility poses challenges to pursue deals, while many of the firm’s existing affiliates are facing headwinds,” according to a note to clients by analysts Mark Irizarry and Alexander Blostein. AMG spokeswoman Brett Perryman declined to comment.
The analysts also upgraded Invesco’s rating to “buy” from “neutral.” “Invesco is one of the best diversified asset managers in the space, with balanced exposure throughout asset classes, distribution channels and geographies. We believe this combination will allow (Invesco) to weather the current market turmoil,” according to the report.
“In light of unprecedented volatility and global market deterioration, the group is expected to start 2009 with (assets under management) down 15% year over year, which will clearly weigh on earnings,” Mr. Irizarry wrote. “In addition, the rapid pace of (assets under management deterioration leaves little time for the group to reposition resources, which could lead to a cumulative ’08/’09 operating margin decline of 250 (basis points) on average — akin to the 2001 recession.”
Messrs. Irizarry and Blostein believe flows could remain negative for another year after the market bottoms, similar to what happened with flows after the 1987 crash.
