Jefferies upgrades Schroders, downgrades Ashmore

The bank highlighted its preference for asset managers diversified by assets and client type, with strong cores of more persistent institutional funds.

“We see attractions in the diversity of Schroders’ model, by asset and client type, which outweighs a lack of operational gearing in 2016,” Jefferies said.

It noted that Schroders has indicated it has continued to see institutional inflow in the first two months of 2016 against a difficult market background.

The bank cut its target price on the stock to 3,103p from 3,296p as it downgraded estimates to reflect its cost assumptions.

Jefferies downgraded Ashmore to ‘hold’ from ‘buy’ noting the stock is up 12% year-to-date and 24% over the last month, eating the upside to its 261p price target.

“As with EM equity markets, EM debt markets have performed well in 2016. EM debt markets appear to have navigated the first Fed rise and, like equity markets, are benefiting from the Fed’s dovish tone and firming commodity prices.”

Jefferies said a number of senior buy-side strategists and CIOs have been making public statements on the attractiveness of emerging market debt.

“All of this, together with decent fund performance YTD, has reduced the headwinds faced by Ashmore. However, the fact remains that outside of some ‘early adopters’, a lag remains between improving performance and sentiment and a return to net flows.”

At 0908 BST, Schroders shares were up 0.2% to 2,506p and Ashmore was down 0.8% to 288.20p.