This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Like with any business, owning a stake in an investment manager has its risks and opportunities. However, like many of the tech titans that have come to dominate equity indices (particularly in the US), investment management businesses are hugely scalable. Once a fund management business has got to critical mass – assuming its products continue to be in demand – as the AUM grows the operating margins become hugely attractive. Nevertheless in a hugely competitive landscape maintaining a lead can be hard. Investment managers have suffered over the past decade or so from a continuous pressure on fees, as well as larger and larger regulatory costs.
However, over the medium to long term, active management can be a highly attractive investment for those who own the equity in the business – when done well. Within the investment trust universe there are a handful of trusts that offer exposure to unlisted asset management businesses.
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