(April 3) – “Not surprisingly, the bear market in stocks is taking its toll on asset management firms,” writes Allison Krampf in this week’s issue of Barron’s.

“As of the end of February, total assets in mutual funds fell 4.7% from the end of December, according to the Investment Company Institute, a mutual fund trade group.”

“Stock funds have lost $403.5 billion, or 9.9% of their total assets, since January.”

“But while that trend has caused several sell-side analysts to lower their price targets on asset management firms, other pros argue that Wall Street is overreacting and that some fund managers will be well-positioned over the long-term.”

“The reasons they cite are the usual suspects: the need for aging baby boomers to save and invest for retirement (especially after many of them saw their portfolios plunge in the bear market), and growing interest in fixed income investments, even as equity markets remain stalled.”

“Falling rates also are expected eventually to perk up investors’ psychology toward asset managers and the whole financial sector.”

” ‘Companies that do not solely rely on equity markets are well-positioned due to the shift toward fixed income and alternative products,’ says Patricia Ouimet, analyst with Putnam, Lovell Securities.”

“One asset manager that’s getting some notice is Affiliated Managers Group. The Boston-based firm, which has a market capitalization of about $1.05 billion, holds interests in 15 asset management firms with a total of about $90 billion in assets under management.”

“Robert J. Mancuso, portfolio manager with Glenmede Trust Company, likes Affiliated Managers’ high growth rate and low P/E.”

“Though some on Wall Street are wary of active acquirers like Affiliated, he says the company could continue to pick up asset management firms cheaply, which would help it gain market share — and ultimately boost its stock price. (Mancuso owns about 150,000 shares of AMG stock.)”

” ‘We see little slowdown in merger activity for asset managers in 2001, and the unstable markets should benefit AMG in this regard,’ adds Putnam, Lovell Securities analyst Bruce Brewington in a recent report.”