Monday, August 20, 2012

Asset Manager’s IPO Struggles Out of the Gate

Shares of asset manager Manning & Napier (NYSE:MN) went public last Friday, pricing at $12 each. Unfortunately, it wasn�t an easy deal to pull off, as the expected range on the transaction was $15-$17 a share. What�s more, the stock was unchanged on its debut.

Despite all this, Manning & Napier is a solid company. Founded in 1970, the firm is now a broad-based provider of managed accounts, mutual funds and collective investment trust funds. It�s also a leader in �life cycle� funds, which have become quite popular for retirement planning.

The company takes a team-based approach to investment management, which is meant to achieve absolute returns (with an emphasis on value plays), meaning a portfolio should be positive in any environment. In light of the market volatility and global uncertainty, this approach has certainly been attractive to clients.

As of this year, 10 of the 20 funds eligible for Morningstar ratings — accounting for 71% of assets under management — had four or five stars. For example, its Long-Term Growth Portfolio, which has a mix of stocks and bonds, outperformed the S&P 500 Index by 356.13% from 1973 to 2011.� Then there is the Core Non-U.S. Equity portfolio. Since 1996, it has exceeded the MSCI All Country World Index by 120.28%

With such returns, Manning & Napier has been picking up large amounts of assets, climbing to $38.8 billion in 2011 from $6.9 billion in 1999, which translates to a 15.8% compound annual growth rate.

And this has meant a nice ramp in revenue. For the first nine months of this year, the top line jumped to $249.6 million from $182 million in the same period a year ago. Pretax operating income was a juicy $117.7 million.

With the continued wide swings in the market, it is understandable why the Manning & Napier IPO didn�t get much traction. But the firm has a strong platform and should continue to grow because of its absolute-return strategy. And as a sign of the confidence, the firm�s employee-owners still own nearly 87% of the stock.

1 comment:

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