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Ashmore and Man Group downgraded as fund underperformance expected to hit client flows

In the UK, the analysts like platform businesses such as Hargreaves Lansdown and St James's Place

Ashmore Group -

Ashmore Group PLC (LON:ASHM) funds have underperformed badly in recent weeks and analysts at Berenberg have downgraded the shares to ‘sell’ as they expect a tough 12 months for the company.

Ashmore's funds have recently delivered an underperformance that has been “broad-based and large in magnitude”, which the analysts inferred was a reflection of a number of separate investment decisions on geographical allocation, credit profile and instrument selection. 

A near-40% rally in the FTSE 250 group’s shares since early April “is hard to reconcile” with the analysts’ prediction that the weak relative fund performance will weigh on Ashmore’s client flows “for the next 12 months, at least”. 

With no change to Berenberg’s 331p price target, which implies around 25% potential downside from the last close price of 439p, the shares were downgrade. 

Man Group Ltd (LON:EMG) was also downgraded, with a previous ‘buy’ rating removed in favour of ‘hold’, after the hedge fund manager’s AHL quant funds fell slightly in value in the second quarter while financial markets experienced a broad-based recovery.

“Man Group remains an undervalued, cash-generative stock with a strong structural growth story, but in the absence of more distinctive fund performance it is not clear what the catalyst will be to drive the re-rating the stock deserves,” the analysts said.

Jupiter Fund Management PLC (LON:JUP) was kept on a ‘sell’ rating despit the increase in equity markets over the past three months leading to an increase in forecast earnings. 

“The fundamental challenges facing the group have not changed, however. The group is overly dependent of the performance of two fund strategies in the near term (the dynamic bond and European equity funds) and faces challenges of scale and distribution in the longer term.”

Not all asset management stocks live or die according to the short-term performance of their funds, the analysts noted, reiterating their support for distribution-focused asset managers like Amundi and Anima. 

In the UK, the analysts like platform businesses such as Hargreaves Lansdown (LON:HL.), with St. James's Place (LON:STJ) also classed as such a company, with both companies rated ‘hold’, the same as diversified fund management groups like Schroders (LON:SDR).

Quick facts: Ashmore Group

Price: 372.4 GBX

LSE:ASHM
Market: LSE
Market Cap: £2.65 billion
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