Fund Management
Interest in UK Asset Manager Cools as Buyers Re-Assess Market

Initial interest in the sale the UK arm of Gartmore, the fund management group owned by Nationwide Mutual of the US, has cooled after first-...
Initial interest in the sale the UK arm of Gartmore, the fund management group owned by Nationwide Mutual of the US, has cooled after first-round bids were due in yesterday, according to a report in the Financial Times. The deal is hard to value because of the dramatic re-rating of fund management shares in the last year. Analysts are now asking whether the re-rating hs gone too far and whether the market has overheated. One indication of valuations in the sector is Morgan Stanley's global index of asset managers. This currently stands at 22 times prospective earnings, compared with the boom of 2000 when the index peaked at 20 times. Individual shares too have seen large rises during last year. Aberdeen Asset Management, which bought Deutsche Asset Management's UK arm, has seen its shares rise by 128 per cent. At the other end of the scale, F&C Asset Management, has underperformed the sector by over 40 per cent last year, but has still seen a rise of 12 per cent last month, according to the FT.. New Star Asset Management, Amvescap, Legg Mason and Black Rock have all done well recently. But it is not just rising stock and asset prices that have helped these managers. Client numbers have been swelled recently and the managers themselves have cut costs and streamlined operations. This asset management boom has prompted owners of asset managers, such as Nationwide Mutual, to consider realising value. For instance, Citigroup sold its asset management business to Legg Mason last year in return for Legg Mason's brokerage business. Italian bank, San Paolo IMI, is floating off its asset management business in Milan. The sector is experiencing diverse of valuations, though. Hedge funds and fund of hedge funds presently have particularly high valuations. UK-based Man Group is currently valued at more than 18 per cent of funds under management and Aim-listed RAB Capital at more than 13 per cent. Both reflect the high fees that superior performance in the sector has hitherto demanded.