TSX runs higher on rate cut expectations
Investing.com - Bank of America (NYSE:BAC) analysts believe the recent 20% year-to-date rally in U.K. asset management stocks is premature, as the sector faces continued outflow pressures and limited earnings growth potential.
The U.K. asset management sector now trades at approximately 13 times 2026 price-to-earnings, about 5% above its long-term average, according to a BofA report on Monday.
While rising markets and hopes for European asset rotation have fueled optimism, analysts remain skeptical about a sustained recovery in investor risk appetite.
BofA maintains Underperform ratings on traditional U.K. managers including Schroders (LON:SDR), Ashmore (LON:ASHM), Ninety One, Aberdeen Group PLC (LON:ABDN) and Jupiter Fund Management Plc (LON:JUP).
The firm notes that while sector outflows are improving to an estimated average of -1% annually in Q2 2025 from -5% in the previous quarter, this improvement is largely driven by low-margin mandates at Schroders and abrdn.
Despite positive market performance, BofA has trimmed earnings estimates by an average of 1% across the sector (excluding Jupiter), as currency headwinds from a weaker U.S. dollar offset market gains.
The firm also highlights ongoing margin pressure as investors shift toward fixed income and lower-margin products.
Bank of America identifies ICG as its top U.K. pick with a Buy rating, citing attractive valuation at 11 times FY27 price-to-earnings and strong fundraising potential, while maintaining a Neutral stance on Man Group (LON:EMG) despite weakness in its trend-following funds.