Hi all,
I am going to build a model for an Asset Management company soon and this is my first time building a model for a FIG company and I was not in FIG during my banking days so would like to seek some help here:
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Assume company revenues only has two components: mgmt fee based on AUM and performance related fees
a) How to project the AUM going forward?
b) How to project the % mgmt fee charged going forward? Assume the fee charged will be different for different fund classes?
c) How to project the performance related fees? The fee will be based on the performace of the fund, but how the hell can I make any reasonable assumption on how much return the fund can make in the future??? -
Does anyone has a valuation model for an asset mgmt company that I can take a look? Believe DCF is probably not applicable here.
Please feel free to PM me if you do not feel like posting your answers here.
Thanks in advance guys.
Ukon, I have a few questions based around what you want, are we talking about a Mutual Fund company like Fidelity (for which AUM can grow or shrink on a daily basis) or a private hedge fund (ie Paulson and Co.)? Likewise, how are you calculating for performance, which will be a key driver of AUM growth if this is a private fund, or are we assuming that this is a mutual fund, for which performance is a secondary factor.
With respect to Management Fee, if it's a private fund, is there a reason for the firm to charge a 2&20 structure or are we talking about a firm that is willing to adjust fees and lower them because of poor performance? Are we talking about the performance fee structure being done on an absolute basis or a relative basis as well? If you are looking at a mutual fund company, I would just draw comparable data from various funds across all asset classes (ie HY and IG bond funds, equity funds across all domestic classes - large, medium and small cap funds, international funds, commodities funds, etc.) for the fee structure and withdrawal penalty if necessary.
As to performance, if I were you, I would look at the history of the benchmark index for a reasonable average rate for which performance is judged against. As to projecting returns, that, I'm not sure how to go forward on. I've got a few ideas, but I need to mull them over a bit more before suggesting them.
Thanks! I think some of the suggestions are helpful indeed. The company primarily runs a mutual fund business. Do let me know if you have any other thoughts though. Happy to chat offline through msg.
I would consider looking at Flow of Funds across the board and similar type funds as to the company in question. If you're talking mutual funds, there is the intrinsic value of partnership and fund permeation. I would look at what platforms (read: Back Offices) have deals with the fund company in question for clearing purposes. Even then, not all funds are supported. I mean, look at Pershing, for example. They do business with a shit ton of funds but really see major money come in from a select group of funds which means they may push their brokerage agents (ie CS Private Banking, Deutsche Bank Wealth Management, Etc. Etc.) to move more of the products that generate them the most revenue.
Your fee structure is pretty set in stone, btw. Mutual Funds won't up and change structure as they are regulated differently and can't do so on a whim.
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