Capital markets recovering, but asset managers still stunned in Q2

Analysis finds median revenue fell amid investor rush to lower-fee investments amid market uncertainty

Capital markets recovering, but asset managers still stunned in Q2

While capital markets are starting to return to pre-pandemic crisis levels, asset managers are still feeling the impact of the COVID-19 crisis in their financial statements, according to a new analysis by Casey Quirk.

Looking at Q2 2020 financial results of 19 asset managers around the world with a combined US$16 trillion in AUM, the strategic consulting firm found that median revenue at traditional publicly traded asset managers declined by 6.4% quarter-on-quarter.

That came as market uncertainty pushed investors to move assets into lower-fee bond and cash funds. Average realized fees declined by 2.2%, partly due to an ongoing trend of fee discounting; operating expenses, meanwhile, were 2.4% lower compared to Q1 2020. Casey Quirk said that while AUM at the firms rose 12% from March 31 to June 30, average AUM fell 6.2%, and median net flows weakened by 0.3%.

Year-on-year, media revenue for managers in the Casey Quirk universe fell 7.1%; both average realized fees and operating expense dipped 3.7%. Average AUM and AUM at the end of June were 5.4% and 4.4% lower, respectively, while median net flows declined marginally by 0.6% compared with the second quarter of 2019.

The mostly downward trend in median operating margins among publicly traded asset managers persisted, clocking in at 27% in the second quarter of 2020 compared to 29% for all of 2019.

“Large, diversified publicly traded managers are faring best, while firms primarily dependent on specific asset classes and client segments produced more mixed results,” Amanda Walters, a Casey Quirk principal, said in a statement. “Multi-affiliate firms remain under the most pressure as their economics are challenged by complex cost structures and positive results from only select affiliates.”

Walters also pointed out that continued market uncertainty owing to the pandemic, coupled with underlying financial trends, has underscored a growing disparity between “asset managers that are willing to challenge their legacy businesses and those hoping higher market levels will bail them out of current difficulties.”


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