Is it time to sit tight or take profits on listed fund groups?

Listed asset managers have been among the top performing equities over the past year, with returns in many cases far outstripping those achieved by any of the underlying funds they run.

Liontrust has led the way, with its share price up 80.62% over the past 12 months, closely followed by Aberdeen, up 79.35%. As fears of a global recession recede in many investors’ eyes, the appeal of fund groups as a geared play on stock markets continuing to trend higher is apparent. But with virtually every group trading at or close to a 12-month high, is there really any value left in the sector?

A number of analysts believe the answer is yes as a long-term investment, but investors who have enjoyed their recent strong run should consider locking in some of those gains.

Jupiter is a case in point, up 53.82% over 12 months to 17 January and by 33% since the start of the fourth quarter. It is trading at a significant premium to its peer group on a price/earnings ratio (P/E) of 24.8x and despite better than expected asset growth in a trading update last week, Jupiter shed 4% on the day.

RBC analyst Peter Lenardos said the round of profit taking was no great surprise given Jupiter’s valuation is ‘generous’ in his view, and although he is neutral on the stock, he says the mini sell-off was overdone.

‘We believe that profit-taking rather than anything negative and company-specific was the main cause of Jupiter’s share price reaction,’ he said. ‘We believe that Jupiter will likely achieve our forecasts when it reports results on 28 February.’

However, he warns if the company delivers a strong set of results next month, there is a risk that its private equity backer TA Associates, which owns 19% of Jupiter, could be tempted into a share placing at a discount to the market.

Upgrades expected

Lenardos is more bullish on Aberdeen Asset Management, which he rates ‘outperform’, saying ‘consensus forecasts are too light in our opinion and we expect upgrades.’

The fund group last week reported £10.8 billion of new business wins with its asset mix continuing to see strong flows into higher margin equity products.

As with Jupiter, this prompted a near 2% sell-off in its shares, which had risen by just over 80% in the preceding 12 months.