When guys with money are sitting on their hands, guys who make money from their money feel the pain. That looks to be the case with a couple of asset managers who saw the upside for their stocks trimmed by Bay Street analysts Monday - Gluskin Sheff + Associates Inc. and Brookfield Asset Management Inc.
TD Newcrest analyst Doug Young slashed its 12-month price target on Gluskin Sheff - a wealth management firm that invests on behalf of institutional investors and high-net-worth clients - to $26 from $37, citing the impact of slumping equity markets on its business. (Gluskin Sheff's stock was sitting at $20.76 on the Toronto Stock Exchange Monday.) It said that while Gluskin Sheff's clients are sophisticated enough that the stock-market slump isn't likely to scare them into mass redemptions, Gluskin management said on its Friday earnings conference call that its clients are "on strike," sitting on the sidelines until they see some market improvement. That should cut into growth of assets under management. Meanwhile, some of the company's management fees are performance-linked, so the weak markets could result in lower fee revenues.
BMO Nesbitt Burns analyst Atul Shah trimmed his target on Gluskin Sheff to $25, down from $27 previously, also expressing concerns about the impact of volatile equity markets on the company's asset and earnings growth.
Meanwhile, another BMO analyst, Peter Sklar, cut his 12-month price target on Brookfield Asset Management to $40 from $50 (the stock was trading at $31.81 on the TSX Monday). He said that the shaky credit markets have put the brakes on the private equity business, slowing growth in third-party assets under management. However, he retained an "outperform" recommendation on the stock.
"BAM could be on the cusp of attracting significant amounts of new third-party assets as it closes the capital commitmenhts on funds that it will be marketing throughout 2008," he wrote.
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