Are Asset Management Company Stocks a Good Buy Now?

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Stock markets worldwide have rallied strongly since the lows reached in March this year. In the U.S. the S&P 500 is up about 22% year-to-date. Despite many not trusting this rally, the market continues to defy gravity. As the market continues to go up or hold ground at current levels, some are convinced that the equity market is a leading indicator.

Retails investors who disappeared from the markets from the brutal market crash of the credit crisis are slowly trickling back into the markets. Investors are putting money back work via 401K retirement plans, their individual investment accounts, etc. As a result, asset management firms are seeing rise in the flow of assets.

Asset management companies make significant amount of profits from management fees. The average mutual fund fees in the US was over 1.5%.

“In 1940 there were only 68 funds and about 300,000 shareholder accounts. By 1990 there were 3,000 funds and 62 million accounts with a trillion dollars in assets. In 2008, 8,000 funds had 265 million shareholder accounts and almost $10 trillion in assets, down from $12 trillion in 2007. According to the Investment Company Institute, the trade association for the mutual fund industry, 45 percent of all American households owned mutual funds in 2008, up from 41 percent in 1998.”

As assets under management rise, fund companies stand to benefit.Despite the explosive growth the ETF industry, mutual funds still manage the largest amount of funds invested by retail investors.

One way to identify investment opportunities to analyze the top mutual fund companies that manage the most assets. The following table shows the Top 10 Mutual Fund Companies by Assets:

Top-10-US-mutual-funds

Some of the asset managers listed above are not publicly listed. The top mutual fund companies that are listed int he markets include: JP Morgan & Chase Co (JPM), BlackRock Funds (BLK), Federated Investors (FII), Bank of New York Mellon/Dreyfus Co(BK) and Goldman Sachs & Co (GS). Other large US asset management companies include Alliance Bernstein(AB), Eaton Vance(EV), Franklin Resources inc(BEN), Legg Mason(LM) and T. Rowe Price Group Inc(TROW).

The Top 10 Asia Banking Brands 2009

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Brand Finance has published the Top 500 Financial Brands for 2009.The table below lists the Top 10 Banking Brands in Asia based on their brand values at the end of 2008:

Asia-Top-Banking-Brands

“The methodology employed by Brand Finance in this Global Banking 500 listing uses a
discounted cash flow (DCF) technique to discount estimated future royalties, at an
appropriate discount rate, to arrive at a Net present value (NPV) of the trademark
and associated intellectual property:  the brand value.”

Banks from China and Japan dominate this list. Mizuho Financial Group, Inc(MFG) and HSBC (HBC) trade as ADRs on the NYSE.

Real Equity Market Returns Over 108 Years vs. Past 20 Years

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The chart below shows the performance of equity markets of select countries over the long-term and in the past 20 years:

World-Stock-Market-Returns-108-Years

Source: Credit Suisse via Equinox of South Africa

In the long-term (1900-2008) shown in red color bar, the stock market returns of the countries shown above ranged from 1.5% to 6.5%. The grey bar shows the return during the dot com/technology boom period from 1990 to 1999. During this bull market period, most markets outperformed their long-term averages and had returns that exceeded 15%.

The most recent period from 2000 to 2008 is denoted by the blue bar.During this period, only S had positive returns. South Africa was the top performer yielding over 7%. The worst performers in this timeline were Italy, Ireland, Japan, The Netherlands and the USA.

Source: Kokkie Kooyman: Now is the time to invest in developed-country banksÂ