It’s been a big few days for results this week. Companies all across the market have reported results, and the one sector that has stood out to me is wealth management.
Indeed, City stalwart St. James’s Place (LSE: STJ) reported its third quarter results earlier this week, and Henderson Group (LSE: HGG) has published its Q3 figures today.
Barometer of sentiment
The results of money managers can be highly informative as they’re considered to be a barometer of wider market sentiment. Henderson, which is in the process of merging with US asset manager Janus Capital, reported today that the group had experienced heavy retail outflows since the EU referendum at the end of June. During the third quarter, £1bn of assets tied to investors falling into the retail classification left the company’s funds and 70% of this outflow occurred in June in the immediate aftermath of the referendum. The company reports that retail sentiment has remained cautious ever since. On the institutional side, net inflows of £0.4bn were reported for the period.
The evidence that retail investors left Henderson’s funds after the Brexit vote, and haven’t come back, is telling. Henderson is one of the UK’s most successful UK fund managers and 77% of the group’s funds have outperformed their benchmarks over the past three years.
However, it seems investors are leaving the group for reasons other than Brexit as St. James’s Place reported strong inflows for its third quarter.
Specifically, for the three months ending 30 September 2016 fund inflows for the company rose 21% year-on-year to £2.8bn. After deducting client outflows during the period, net inflows came in at £1.7bn. Group funds under management are £12.8bn higher than at the beginning of the year at £71.4bn, a record for the group.
Plenty of demand
St. James’s results make it clear that there’s a demand from investors out there for money managers, but it’s apparent from the figures above that Henderson isn’t offering what its customers want. With this being the case, St. James’s Place looks to be the better wealth manager for your portfolio.
Unfortunately, the company’s shares don’t come cheap. The shares currently trade at a forward P/E of 28.7 and support a dividend yield of 2.9%. City analysts are forecasting that the company’s earnings per share will fall 9% this year before rebounding by 28% for 2017. If the company meets this target, between 2011 and 2017 earnings per share will have risen by 110% — that’s growth worth paying for.
On the other hand, Henderson has floundered over the past five years. The company’s revenue has increased by a disappointing 10% for the period, and earnings per share are up by around a third.
So, if you’re looking for a wealth manager for your portfolio, St. James’s Place seems to be the best bet although the company’s premium valuation may be too much for some investors.