Scuttled SEC vote could boost Federated, Citi says
NEW YORK (AP) — The likely decision by the Securities and Exchange Commission not to pursue new rules to govern market funds anytime soon is a "major structural positive" for Federated Investors and other money managers, according to Citigroup.
William Katz, Citigroup's brokerage and asset managers analyst, lifted his rating on Federated Investors Inc. to a "buy" on Friday. He also raised his price targets for four other fund managers: Charles Schwab Corp., Legg Mason Inc., Invesco Ltd. and BlackRock Inc.
SEC Chairwoman, Mary Schapiro, wanted new regulations for money market funds, which hold a variety of short-term debt sold by companies, banks and governments. During the financial crisis in 2008, frightened investors pulled more than $300 billion from so-called "prime" money market funds, according to the SEC. As a result, short-term credit markets dried up, squeezing businesses and consumers.
Schapiro acknowledged this week that she lacked the support of three other SEC commissioners, the number required to pass new rules, and called off a vote.
The news sent Federated's stock up by 4 percent Wednesday to close at $21.51. Shares are up 7 percent for the week.
Federated's fate is more connected to money market funds than the typical fund manager's. Citigroup's analysts say money market funds make up 75 percent of Federated's assets under management and account for 47 percent of revenue.
Katz raised his price target on Federated by $3 to $25.
In Friday afternoon trading, Federated rose seven cents to $21.56.
Schwab added 12 cents to $13.12. Blackrock rose 61 cents to $177.91. Invesco gained two cents to $23.68, while Legg Mason added two cents to $25.26.