Runners in Pamplona’s famed encierro sprint for their lives for a few minutes. The UK stock market bull run has gone on rather longer: eight years. One way to ride the beast has been to buy into listed fund management groups. In the UK, there are several strains: organically grown beef (Schroders and Jupiter), steroidal acquirers (Henderson and Aberdeen) and rare breeds (Ashmore). Acquirers have been the worst option of the three.
Aberdeen and Henderson have pumped themselves up over the years by buying other asset managers and integrating them as painlessly as possible. Schroders and Jupiter have preferred to hire individual managers more slowly. So far the latter strategy is showing more pedigree. Shares in both Aberdeen and Henderson have trailed their peers for the past year, not to mention in this entire bull market.
Aberdeen has struggled because of its concentration of emerging equity market funds. These have been out to pasture since 2011. Its acquisitions have done little to change that focus.
Henderson, which reported results on Thursday, had some performance issues in key regions. Henderson notes that even top-quartile managers trailed their benchmarks last year, for the first time since the late-1990s. Lower performance fees also hurt. They averaged 17 per cent of revenues in the three years to the end of 2015, but more than halved last year. Uncertainty over its latest acquisition, Janus Capital, and a London delisting later this year, does not help.
Niche managers will land on their feet at times, but foreseeing these moments is tricky. Ashmore, another emerging markets specialist, has struggled. Despite surprisingly good results this week, its shares have gone nowhere for five years.
Homegrown longhorns such as Schroders may not be able to turn on a sixpence like Pamplona’s toros bravos. But while they lack attack and have full valuations, they have staying power. They remain the best option for long-term investors.
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