The recent shakiness in stock markets around the world has led to a fall-out amongst a number of financial service firms which are highly leveraged to market levels.
For example, Magellan Financial Group Ltd (ASX: MFG) is down 9.4% over the past three months, compared with a decline of 3.5% in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
It’s an even more serious situation for Perpetual Limited (ASX: PPT) whose share price has slumped 21.9% over the same time period. However if you think that’s bad, take a look at the newly beef-up Treasury Group Limited (ASX: TRG) which has experienced a 27.6% fall in its share price since the end of April.
In contrast, the share price of leading insurer, financial advisor and fund manager AMP Limited (ASX: AMP) is actually higher over the last three months having gained 0.8%.
The share price outperformance of AMP is interesting when compared against peers and highlights the lower leverage the group has to overall stock market levels. In this regard, AMP could indeed be a lower risk way for conservative investors to gain exposure to the financial services sector.
This lower leverage is thanks to a diversified portfolio of businesses which range from wealth management to retail banking and wealth protection insurance. According to Morningstar data, AMP should pay an increasing stream of dividends and achieve higher earnings over the next two years which could help to support the current share price.
Over at Treasury Group the global fund manager this week announced a $2.7 billion fall in funds under management (FUM) which represented a 5.2% decline over the prior quarter. While a detailed explanation was lacking, the major factor was a net outflow of funds.
A second interesting development at Treasury Group which was also announced this week was the sale of RARE Infrastructure for approximately $200 million. The sale price appears attractive and Treasury Group’s share of the proceeds will be used to pay down debt and fund new investments.
While AMP may be a decent blue-chip opportunity right now for conservative investors, the decline in Treasury Group’s share price could offer an appealing entry point for higher risk investors looking for exposure to a mid-tier funds management company.
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Motley Fool contributor Tim McArthur owns shares in Perpetual Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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