Newspaper article THE JOURNAL RECORD

U.S. Fund Manager Stocks Ride on Wave of Higher Earnings

Newspaper article THE JOURNAL RECORD

U.S. Fund Manager Stocks Ride on Wave of Higher Earnings

Article excerpt

BOSTON -- U.S. fund manager stocks are soaring amid expectations earnings gains will stay robust as assets keep increasing.

Shares of Franklin Resources, Alliance Capital Management and New England Investment are up between 8.7 percent and 12.9 percent this year, compared with the 4.3 percent advance of the Standard & Poor's 500 Index.

"The economics of the industry are very simple -- as assets rise, so do profits -- and we've seen a big increase in assets under management the past few weeks as markets rallied in the U.S., Europe and Asia," said Franklin Morton, director of research at Chicago- based Ariel Capital Management, which manages about $2.1 billion of assets and owns about 500,000 shares of Baltimore-based T. Rowe Price Associates. The recent advance in money manager stocks follows big market gains in 1997, and some investors and analysts warn that the rise in these shares may be more limited in the months ahead, though the companies' earnings should continue to increase at double-digit rates. As a result, Ariel Capital reduced its holdings of T. Rowe Price recently as the stock advanced, Morton said. While money manager stocks will have periods when they do worse than the overall market, the long-term outlook is still bullish, he said. "Money manager stocks will continue to perform well because earnings will keep going higher as individual investors continue to put money in financial assets," said John Dale, money manager at Peregrine Capital Management, which oversees about $5.5 billion of assets and owns shares of T. Rowe Price, Franklin and Charles Schwab. Just a few of the biggest U.S. fund groups are publicly traded since most are closely held, including industry giants Fidelity Investments and Vanguard Group. Some medium-sized companies such as Eaton Vance do offer publicly traded shares and the returns of their stocks are as big as those of Franklin and T. …

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