Asia And Digital Transformation Will Redefine Fund Distribution

Key Takeaways

• Rapid growth in alternatives, ETPs, and emerging markets positions Allfunds for accelerated revenue and market share gains, outperforming current industry expectations.
  
• Automation, operational leverage, and global outsourcing trends are set to enhance margins, recurring revenue durability, and support long-term scalable profitability.
  
• Delayed pivot to new investment products, shrinking margins, regional reliance, lagging subscription growth, and digital disintermediation threaten Allfunds' revenue growth and business sustainability.

Catalysts

Operates as a B2B WealthTech company that connects fund houses and distributors in the United Kingdom and internationally.

• Analysts broadly agree on the growth potential in alternatives and ETPs, yet the scale and velocity may be underestimated; the platform's 38% annual growth in alternative assets and emerging client wins in Asia suggest Allfunds is positioned for hypergrowth in alternatives and ETPs, which could drive accelerated double-digit revenue growth and sustained upward pressure on margins as adoption of new high-fee products outpaces expectations.
  
• Analyst consensus sees migration and pipeline conversion as a steady revenue contributor, but this likely understates Allfunds' potential to capitalize on the open-architecture surge; with a consistently replenished €250 billion pipeline and rapid market share gains globally, conversion rates could exceed historic norms, unlocking step-function increases in assets under administration and fee revenues far higher than currently modeled.
  
• Allfunds is uniquely positioned to benefit from the ongoing global shift as financial institutions outsource operations due to regulatory complexity and digitization, driving persistent inflows from larger in-house platforms and smaller, underserved distributors-this operational displacement will structurally lift recurring platform and subscription revenues, improving top-line durability and scalability.
  
• The accelerating expansion into emerging markets, especially in Asia where distributor numbers have grown 50% in three years, exposes Allfunds to a new wave of cross-border wealth creation and platform adoption; this tailwind dramatically boosts long-term asset growth, fee pool expansion, and ultimately, earnings growth.
  
• Underappreciated operational leverage is set to amplify future profitability as Allfunds continues automating platform processes and scaling its digital infrastructure, resulting in faster EBITDA margin expansion and enhanced free cash flow conversion, which, when coupled with a robust capital base, supports further capital return and reinvestment in high-return growth initiatives.

Allfunds Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Allfunds Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Allfunds Group's revenue will grow by 11.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -23.4% today to 34.2% in 3 years time.
• The bullish analysts expect earnings to reach €312.7 million (and earnings per share of €0.65) by about September 2028, up from €-156.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 27.1x on those 2028 earnings, up from -22.6x today. This future PE is greater than the current PE for the NL Capital Markets industry at 15.9x.
• Analysts expect the number of shares outstanding to decline by 0.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.45%, as per the Simply Wall St company report.

Allfunds Group Future Earnings Per Share Growth

Risks

• The ongoing shift towards passive products like ETFs and direct indexing is increasing, with Allfunds only in the pilot phase of launching its ETP platform and no client commitments disclosed, which could cap future revenue growth if the firm misses this secular transition and continues to rely on mutual fund flows for the bulk of commission and transaction income.
  
• Margin pressure is emerging from a number of angles: new client migrations are coming onboard at lower average revenue margins, a shift in asset mix toward fixed income and money market funds is driving down overall platform margins, and rising competition from both alternative platforms and in-house solutions by asset managers is likely to further compress net margins and profitability.
  
• Allfunds' continued reliance on the European fund platform market exposes it to region-specific regulatory and economic risks, especially as management notes that new distributor additions and net flows remain skewed toward continental Europe, risking top-line stagnation or contraction if European wealth growth underperforms.
  
• Growth in higher value, differentiated subscription services is showing signs of softness: mid-single-digit subscription revenue growth replaces previous double-digit targets, with ESG offerings lagging and sales cycles elongated, indicating difficulty in making these services a meaningful earnings lever and jeopardizing medium-term earnings growth expectations.
  
• The broader trend toward digital disintermediation-where large asset managers, financial advisors, and distributors build proprietary onboarding and digital distribution capabilities-undermines Allfunds' open-architecture model and core business moat, which could lower future client retention rates, shrink commission fee pools and diminish structural revenue and cash flow.

Valuation

• The assumed bullish price target for Allfunds Group is €11.34, which represents two standard deviations above the consensus price target of €8.18. This valuation is based on what can be assumed as the expectations of Allfunds Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €12.86, and the most bearish reporting a price target of just €5.7.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €913.2 million, earnings will come to €312.7 million, and it would be trading on a PE ratio of 27.1x, assuming you use a discount rate of 7.4%.
• Given the current share price of €5.81, the bullish analyst price target of €11.34 is 48.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.