GMP Securities has chopped price targets on three fund companies after assets tumbled in the May and June stock market downturn.
"We are lowering earnings forecasts to account for assets ending the quarter below our estimate," analyst Stephen Boland said Monday. "Our new estimates are based on a stable growing market and offer an average 40-per-cent return with a 4.8-per-cent dividend yield."
CI Financial Corp. and DundeeWealth Inc. are his top picks because they have been able to generate net sales to mitigate the effects of a market downturn.
However, he reduced his one-year target on CI Financial to $25 a share from $27, and on DundeeWealth to $18 a share from $19.
IGM Financial Inc. is also a "buy," but Mr. Boland cut his one-year target to $46 a share from $48.
"If investors believe that markets are stable and have normalized, we believe that the asset managers are poised for strong returns with healthy yields," Mr. Boland said. "For those with a more bearish outlook, we would advise caution when considering an investment in the asset managers at this time...During a market downturn, the performance of shares of the asset managers tend to mirror the index."
Excluding bond and money market funds, AGF Management Ltd. and IGM Financial have the highest equity exposure in their largest funds, he wrote.
DundeeWealth remains overweight in resources and energy, while CI Financial is overweight in financials and AGF is underweight in energy, he added.