March 5, 2009 / 4:03 PM / 10 years ago

UPDATE 1-Citigroup cautious about U.S. asset managers

March 5 (Reuters) - Citigroup began coverage of U.S. asset managers, and said it is cautious on the overall industry as market uncertainty continues to pressure assets under management.

“We see no reason to step into this group aggressively until markets stabilize and EPS revisions bottom out,” analyst Keith Walsh wrote in a note to clients.

The analyst recommended investors to sell Legg Mason Inc (LM.N), saying the company faces significant challenges across the board, with each of its three asset classes under pressure.

He, however, recommended buying BlackRock Inc (BLK.N), the largest publicly traded U.S. asset manager, citing its strong relative positioning by distribution, asset mix, performance and geography.

“Performance drives flows, the institutional channel is stickier than retail, and diversity by product and geography add stability through different cycles. BlackRock is the only name to fit this criteria,” Walsh said.

He also began coverage of U.S. mutual fund company Franklin Resources Inc (BEN.N) with a “sell” rating, citing its relatively weaker performance and slowing global markets.

The analyst also initiated Invesco Ltd (IVZ.N), AllianceBernstein Holding LP (AB.N), Federated Investors Inc (FII.N), T Rowe Price Group Inc (TROW.O) and Waddell & Reed Financial Inc (WDR.N) with a “hold” rating. (Reporting by Anurag Kotoky in Bangalore; Editing by Deepak Kannan)

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