Why St James’s Place and Britain’s troubled wealth managers could be a savvy bet for investors
The UK’s wealth managers and investment platforms could be a lucrative bet for investors this year after a sell-off that has wiped billions of pounds from the valuation of firms like St James’s Place and Hargreaves Lansdown, analysts have said.
Listed money managers and DIY investment firms have seen their market capitalisations crater over the past 10 months as Brits tighten their purse strings and the flow of cash onto platforms slows.
The UK’s biggest wealth manager St James’s Place has seen its value fall by more than 42 per cent this year, while rival Quilter has fallen by more than 15 per cent.
Retail investment platforms like Hargreaves Lansdown, AJ Bell and Integrafin, which owns investment firm Transact, have also suffered sharp falls in their value, falling over 18 per cent, 30 per cent and 27 per cent respectively.
The slowdown has marked a sharp return to earth for the retail investment and savings firms which rocketed in value through the pandemic as savers and investors put spare cash to use.
However, analysts say the stocks could be a shrewd buy as demand for money management platforms picks up and Brits increasingly squirrel away cash for retirement.
“Overall, the government isn’t going to be able to afford to support us in our retirement. And so in the long term, people are going to have to rely on themselves more,” Julian Roberts, an analyst at Jefferies told City PM
“And they’re going to want advice – someone to look after their assets and make sure they can live comfortably after they stopped working.
“These are the firms who enable that and there’s going to be, in the long term, more demand.”
City analyst Michael Hewson added that the slump in value at wealth managers had been driven by a cocktail of short term economic pressures, with “rising economic uncertainty, pressure on fees”, client outflows as and weakness in the UK stock market all dragging down valuations.
However, retail flows in the UK began to tick up over the summer with net retail sales topping £1bn and £354m in August, according to data from the Investment Association.
St James’s Place and Quilter’s unlisted peer Evelyn Partners also revealed a boost in flows yesterday morning, with total assets ticking up 6.9 per cent to £55.6bn, and net new inflows came in at £545m, up 2.6 per cent on the same period last year.
Evelyn’s new Paul Geddes said the firm had managed to pull in new cash despite a “challenging market backdrop”.
City analysts have predicted listed money managers and investment firms could now be reaching a nadir in valuations as economic conditions improve, presenting an opportunity for buyers.
Jefferies has doubled down on a buy rating for St James’s Place, while UBS upgraded the firm to a buy recommendation last week, writing “the stock screens cheap relative to its current valuation.”
St James’s Place’s outgoing chief Andrew Croft also appeared to jump at the opportunity to buy yesterday as he snapped up £248,000 worth of shares in the company.
Barclays analyst Alex Medhurst wrote earlier this month that AJ Bell, Hargreaves Lansdown, Quilter and investment platform Integrafin were all “trading at or near trough multiples” and over the longer term could make a shrewd buy for investors.
“While the subsector lacks a short-term catalyst with investor confidence remaining low, we believe these multiples offer attractive medium-term risk/reward as headwinds including rising rates and inflation begin to ease,” he said.
Barlcays reiterated its overweight ratings on Hargreaves and Integrafin, meaning it backs the firms to outperform peers, but said it was equal weight and underweight on Quilter.