In a briefing note issued this afternoon, Jefferies said the current operating margin gives little room for further improvement and said it sees better value elsewhere.
It listed the potential further departures of key staff as a worry, especially those who joined with the New Star acquisition. It said further substantial fund outflows are also a possibility.
But the analyst said Henderson’s recent acquisition of New Star brings in some experienced fund managers which offers hope that flows will pick up.
The cultural differences between New Star and Henderson were off concern because staff may depart, therefore reducing the value of the company
The briefing note says: “This may mean having to pay up to retain staff and attract in new talent – with the operating margin already over 30% this may limit the cost cutting ambitions of management. The company are keen to make further acquisitions and there is a worry that this may not be the right time to do so.”
In a separate note, Jefferies said F&C was its top pick for 2010 and said the placing of the Friends Provident stake has given F&C its first chance for years of seriously building funds and value.