RBC starts M&G at 'sector perform' in anticipation of fund outflows
Analysts at RBC started coverage of asset management and insurance group M&G 's shares at 'sector perform', telling clients that they were less optimistic than the consensus when it came to the outlook for outflows from the group's funds, although its heritage business was expected to see a bigger-than-expected uplift from mortality releases.
Whereas consensus had penciled-in net inflows into its asset management arm of £0.7bn and £3.2bn over 2020 and 2021, respectively, the broker was anticipating outflows of £6.2bn and £5.7bn.
Over the past three years, only 15.0% of pooled equity funds that RBC could track were outpacing their benchmark - and performance was often a "strong" lead indicator of flows - they noted.
On the flip-side, M&G's PruFund had outperformed since 2006, but nonetheless.
M&G's heritage business on the other hand was highly cash-generative, RBC said, supporting the shares' 7.7% dividend yield.
Furthermore, RBC was anticipating £178.0m of aggregate reserve relases in 2020 and 2021, versus the £147.0m expected by the consensus.
RBC had a 240.0p target price for M&G shares.