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Nick Train backs Rathbones on sharp rerating conviction

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Nick Train backs Rathbones on sharp rerating conviction

Citywire AA-rated manager Nick Train has congratulated Rathbone Brothers on striking such ‘an advantageous deal’ to acquire Jupiter’s private-client arm.

In April, Rathbones announced the purchase of £2.1 billion of assets from Jupiter and a further £0.7 billion from Tilney for up to a total of £57.4 million. Train (pictured) noted that this was equivalent to a price of less than 3% of funds under management.

‘Ostensibly this looks an attractive ratio because, before the deal was announced, Rathbones itself was being valued at circa 3.9% of its funds under management – implying the value of the funds acquired could double over time for Rathbones shareholders,’ said Train.

‘What’s more, we don’t think it too much of a stretch to argue that for a business of the calibre of Rathbones – a calibre strongly endorsed by the fact it was Rathbones that was able to close these deals at this price and not its rivals – that an appropriate rating for its funds under management might be closer to 5% of the total.’

As well as a share price rerating that would give it a market capitalisation in excess of £1.2 billion compared with today's £890 million, Train contended that Rathbones could equally continue to grow its funds under management further.

Last month’s deals took Rathbones to £24.8 billion of funds under management, a ‘praiseworthy achievement’ for Train but still 10 times smaller than another of his holdings, Schroders with £268 billion.

‘There is every reason to expect Rathbones to continue to grow, organically and by acquisition; its relative scale, credibility in consolidating complementary businesses and its nicely rising long-term share price all making it an attractive partner,’ Train added.

Over the past three years, Train's CF Lindsell Train UK Equity fund has returned 57.7% compared with an average of 32.5% from his peer group, according to Citywire data.

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