13 December 2018

Market Volatility Concerns Push Down AUM

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Cumulative assets under management of 15 publicly traded asset managers was $12.57 billion at the end of the first quarter, a $10 billion – or 0.08% – decline from 2017's fourth quarter, according to the latest Asset Manager Composite from SS&C Technologies Holdings.

Of the 15 management firms analyzed, 12 experienced a drop in AUM, primarily due to market underperformance because of volatility. The three firms with AUM gains were T. Rowe Price, BlackRock (BLK) and Janus Henderson.

This was the first quarter of market depreciation for the composite group since the third quarter of 2015. Lower AUM also resulted in lower asset-generated fee revenue, leading to lower operating margins.

However, the 26% net income posted by the composite group was the best level seen in 16 quarters, as projected tax rates reflected the new corporate tax reform legislation, the report said.

"During the first quarter of 2018, operating margins for the public asset management firms declined from an all-time high achieved in the fourth quarter of 2017," Michael Andrews, head of investment products research and consulting at SS&C, said in a news release announcing the results. "While the globally synchronized 'Goldilocks economy' is likely not rolling over, market volatility ... sequentially drove down AUM, asset-generated fees and consequently impacted margins."

The first quarter of 2018 started off with strong economic momentum and stronger-than-expected fourth quarter earnings, according to SS&C. But by February, inflation and market volatility caused equity prices to decline.

Fears of a global trade war further destabilized financial markets and was another factor in the decline, with proposals for stiff tariffs on steel and aluminum products sparking trade disputes with China.

"While the asset management industry is still quite profitable, the lingering question going forward will be whether we have encountered a turning point in the trend line," Mr. Andrews said.

Click here for the original article from Pensions and Investments.

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