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Financials Sector Note – UK Alternative Asset Managers

Positive Sector Outlook and Outstanding Recovery Provide Opportunities

Attractive risk/return profiles that have rendered the alternative asset management sector increasingly attractive for both institutional and retail investors, with strong asset inflows expected to persist going forward. In contrast to their more traditional peers, the alternatives benefit from high recurring fee margins and scalability embedded in the underlying business models is driving further operating margin accretion. Earnings are high quality, derived from long-term capital (often underpinned by long lock-up periods) and more insulation vs. underlying market movements.

Most businesses offer exposure to attractive investment performances via balance sheet performances and/or carried interest participation, too. The sector has been impacted by the COVID-19 pandemic as well as more recent geopolitical uncertainty, despite more insulated underlying earnings, which points to attractive opportunities for equity investors.

Stocks mentioned in the note include:

Augmentum Fintech (AUGM), Bridgepoint Group (BPT), Foresight Group Holdings (FSG), Gresham House (GHE), Intermediate Capital Group (ICP) and Mercia Asset Management (MERC).

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Jens Ehrenberg

Senior Research Analyst – General Financials

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