This entire sector looks pricey

Forget the recent run up – and corresponding fall – in bank shares. Some of the biggest success stories among ASX shares over the last 12 months have been those of asset managers and investment service companies.

Credit is in large part due to low term deposit rates favouring fund inflows, the overall market rise, and a bounce off lingering GFC lows.

Consider Magellan Financial Group (ASX: MFG), with its shares climbing over 330% versus a 16% return in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) over the same period.

The company has seen massive expansion in funds under management. In the most recent half-year report, Magellan saw revenue jump 112% — management fee revenue alone rose to $25 million from $14 million in the first half of 2011. Today, as funds under management keep growing, Magellan shares are trading for about 65 times trailing earnings.

In a similar trend, Perpetual Limited (ASX: PPT) shares are up 61% in the last 12 months and shares now trade for 61 times earnings. Platinum Asset Management (ASX: PTM) shares, despite the underperformance of some of the company’s fund products, have climbed nearly 37% and are now trading for over 25 times earnings.

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Motley Fool contributor Catherine Baab-Muguira owns no shares in any company mentioned in this article.

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