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Fund Firms Outperformed S&P 500 Through 3Q

Shares of publicly traded mutual fund companies rose an average of 6.6% in the first nine months of the year, as opposed to 2.8% for the S&P 500, and one high-profile analyst expects firms to report strong earnings for the third quarter, it was reported last week.

Guy Moszkowski, an analyst at Merrill Lynch, raised his estimates for a number of fund companies for the quarter, citing strong stock returns and solid asset flows for companies with international funds. Companies Moszkowski is bullish on include T. Rowe Price, Affiliated Managers Group, Franklin Resources and Alliance Capital Management.

"Managers with large international, energy or growth funds showed the greatest gains," Moszkowski wrote in a report. "International funds performed strongly, and while this is recognized as a driver for Franklin Resources, which we expect to have very strong flows, it is increasingly a driver for Alliance as well."

Meanwhile, Moszkowski left his below-consensus estimates for Federated Investors unchanged, noting that the shop has a heavy concentration on bond funds, which are under pressure from rising interest rates and inflation concerns. In addition, Federated's stock funds have delivered lackluster performance, he added. "Federated could miss consensus by a penny because continued equity and fixed income outflows could pressure fees while expenses remain stable," he said.

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