Why the BTT Investment Management Ltd share price is going nuts today

Shares in equities manager BTT Investment Management Ltd (ASX: BTT) have rocketed 8.5% higher to $9.60 this afternoon after the group updated the market that its funds under management  (FUM) grew by a bumper $4.3 billion for the quarter ending 30 September 2016.

The big growth driver was $1.9 billion in institutional net fund inflows that were thanks to investor demand for fixed interest strategies. The total effect of the strong FUM growth is estimated to be a $4.5 million lift in annualised fee income.

As at September 30 2016 the BT Investment Management Group had $84 billion in funds under management roughly split in half between its UK-based JO Hambro asset management business and BT Investments as its Australia-based asset management business.

The group has a strong track record of revenue and earnings growth over the past few years as its globally diversified business enjoys the tailwinds of the ever-growing global asset management markets. Around two thirds of assets under management are equities, with fixed-income, property, cash and multi-asset classes evenly splitting the remaining mix of FUM.

For global asset managers investment performance alongside sales and distribution efforts are the key controllable growth levers, while the overall performance of capital markets remains an unknown that asset managers are heavily leveraged to.

In that sense BT’s diversification by currency, asset class, and geography means it’s a marginally more defensive investment than asset managers aligned to particular regions such as Platinum Asset Management Limited (ASX: PTM) for example.

BT delivered cash earnings per share of 29.1 cents for the first half of its financial year, which means it trades on 16.5x annualised earnings when selling for $9.60 per share. This looks reasonable value given it could be expected to marginally lift earnings in the second half of its financial year that ended on September 30 2016.

Recently its rival UK/ Australia hybrid international equities manger Henderson Group (ASX: HGG) announced a proposed $6 billion merger with US asset manager Janus Group.

The combined group planning to retain its ASX listing in a sign that its ambitions to aggressively move into the Australian equities space remain and are only likely to ramp up. This is an intention that means Australian asset manager Perpetual Limited (ASX: PPT) could prove a tempting takeover target for the combined Henderson and Janus Group.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

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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