LONDON Emerging market-focused asset managers hit by investor flight from riskier debt and equity in June, are dragging on a year-to-date rally in the broader sector.
The move out of emerging market assets - prompted by uncertainty over the outlook for U.S. monetary stimulus - has already hit Ashmore and Aberdeen Asset Management and thrown the spotlight on firms still to report earnings.
A basket including Ashmore, Aberdeen, Schroders, Man Group, Henderson, GAM Holding and Jupiter is up 17 percent this year, while the broader FTSEurofirst 300 index has gained 6.5 percent.
The basket fell around 25 percent between May highs and June lows - twice as much as the broader market. That prompted analysts to downgrade earnings estimates but did not stop the basket outpacing the market by a third since then.
Seventy percent of analysts covering the basket have cut full-year earnings estimates over the last month by an average of 1.5 percent, Thomson Reuters StarMine data showed, even though the most accurate still expect its constituents to slightly beat forecasts.
"Asset managers have done well on the back of the broad market gains since the June low, but those with a heavier emerging markets exposure have lagged," said Keith Baird, analyst at Panmure Gordon.
Aberdeen and Ashmore rebounded 11 percent and 14 percent, respectively, from June lows to the present, while Jupiter and Henderson, which have more exposure to developed markets, have each risen 19 percent over the same period.
Of those still to announce earnings, Schroders - due on August 8 - and struggling hedge fund Man Group, due to report half-year results on August 2, both have around 30 percent exposure to emerging markets.
"In general, the numbers are going to be lower than what people were expecting based on the last quarter's results," Jonathan Goslin, financials analyst at Edison, said.
"April and May were good but June had that risk-off trade, so how much that is going to affect asset flows is going to be interesting. Those exposed most to emerging markets are expected to endure bigger hits to fund flows," Goslin said.
Aberdeen has around 20 percent exposure to emerging markets and saw outflows of $5.2 billion in the three months to end-June, pushing its shares down 5.3 percent.
Ashmore Group, with 50 percent emerging market exposure, said in mid-July the sell-off in those markets had seen money leave its funds. It releases preliminary results in September.
PLACE TO HIDE
Investors looking for a place to hide in the current season could try Jupiter, due to report on July 31, which is roughly 90 percent exposed to the UK market. Henderson, with 69 percent exposure to the UK, is the only asset manager to have its 2013 earnings upgraded in the last 30 days.
Investor appetite for asset managers will be further tested in September, when some expect the Federal Reserve to begin winding down its stimulus program.
"In order for current share price trends to continue, flows and investment performance needs to be more positive than the market is expecting in order to justify current share prices," Peter Lenardos, analyst, RBC Capital Markets, said.
He still still sees value in Aberdeen, Jupiter and GAM Holding.
(Editing by Nigel Stephenson)