FMX | Connect – www.fmxconnect.com - (Reported 5/25/2010)
Asset managers were down -10.8%, discount brokers were down -9.4% and Swiss private bankers were down -15.5% during the past four weeks. YTD asset managers are underperforming the S&P 500 by -5.6%; discount brokers by -8.5%; while Swiss private bankers are outperforming the index by +1.9%.
Asset Managers:
Flows continued to relocation from bond funds into equity funds as investors began to shift their flows back into equities. The increased volatility experienced during the recent weeks temporarily reversed this process which we expect to resume as volatility subdues (see page 10).
Man Group acquired GLG Partners for $4.50 in cash per share, a 55% premium to last Friday’s close (valuing the company at $1.6 bn); with GLG partners (holding about 50% of the company’s shares) receiving $3.50 per share (a 20% premium). With AUM of $23.7 bn man paid 6% of AUM to acquire the company, marking a continued increase in valuations in the Asset management sector as M&A activity picks up. During 1Q10 acquirers spent $10.5 bn to acquire $669.7 bn in AUM, paying 1.57% of AUM to buy the assets (in 1Q06, the average valuation was 1.50% of AUM). The increase in valuations is not only due to improvements in market sentiment, but also to an increase in transactions involving alternative asset managers (such as was the case of GLG) which merit higher valuations, and an increase in international deals.
Discount Brokers:
The increased volatility experienced over the past weeks will fuel retail traded volumes as investors seek short term gains, close-out positions and open new ones. We expect DARTs to increase +16% Q/Q in 2Q10 (see page 13).
The uptick in volatility will also boost IBKR options market makers’ revenues as it is long volatility, increasing 93% its gain per volume and boosting IBKR’s EPS to around $0.26 from $0.09 in 1Q10 (see page 14).
Swiss Private Bankers:
Swiss franc denominated accounts have been capturing significant inflows over the past month as Europeans fear more predatory regulations in the EU. When Germany’s BaFin banned naked short sales last week, EUR9.5 bn flowed into Swiss accounts during the first hours after the announcement, forcing the Swiss Central Bank to intervene the FX market to hold down the franc.
Source: ERDESK
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