Fund managers have been tipped to emerge from the Covid-19 crisis in a better position than other financial services sub-sectors due to high recurring revenues and economies of scale, according to research.
A report from adviser and broker Finncap Group said fund managers would also likely benefit from increased interest in active management, which it predicted would become an important investor trend following the Q1 Covid-19 market crash.
The report added exchanges were also likely to emerge from the crisis in a stronger relative position. However, it predicted lenders would be at a disadvantage in the post-coronavirus environment.
The FTSE All-Share fell 26.6% in the first three months of the year and while wealth managers were the only financial services subsector to outperform the market (falling 24.9%), it was fund managers that experienced the most "robust bounce backs", gaining 41%.
Finncap screened a broad range of financial services companies with return of capital employed (ROCE) of 20% or higher and found almost half were fund managers.
Wealth managers, it said, were in a slightly weaker position because of the greater scalability of fund managers. Wealth managers have a higher requirement for face-to-face meetings, putting a slight drag on the scale benefits due to increased headcount costs, the report explained.
Exchanges could also emerge from the crisis in a strong position, according to the research.
It said exchanges - firms that are either a true exchange such as the London Stock Exchange, or otherwise offer a ‘go-between' model - fell by 28.7% to levels not seen since 2017, before recovering 20%.
However, lenders are probably most at risk post-coronavirus. They initially fell by 45.7%, recovering by only 17% subsequently.
It explained demand for credit to buy goods and services had decreased, an issue worsened by the fact that many borrowers are unable to pay back existing credit as a result of the economic slowdown.
Finncap equity research analyst Nik Lysiuk said: "Although we do not yet know the full economic impact Covid-19 will have, this report indicates that fund managers and exchanges will be the relative winners within financial services with the sector also well-positioned to bounce back.
"This is good news for companies throughout the wider UK economy, whether they are established large corporates or ambitious growth enterprises, which will all rely on access to funding and investment to accelerate their own recovery as well as that of the wider economy."
The report concluded the outlook for the sector was broadly promising despite "severe demand-side shock".
It said its top picks post-coronavirus crisis included Impax Asset Management), Liontrust, Premier Miton, Mortgage Advice Bureau, K3 Capital, Tatton Asset Management, Manolete Partners and Nucleus.