Backing the asset managers

FINANCIALS

With equity masset managers' earnings rising faster than equity markets, Will Riley, co-manager of the Guinness Global Money Managers fund, explains the risks and rewards of investing in asset managers.

Many believe asset management companies can grow their earnings faster than equity markets in the long term. Successful asset managers can grow rapidly, particularly in rising markets. Their risk-return characteristics are especially attractive from a shareholder’s point of view: they require relatively little capital to grow compared to other industries. Assets under management can be many times the capital employed to start that business. Even average companies in the sector tend to be very high return-on-capital businesses. Rapid growth Another characteristic of note is that i...