Asset managers are suffering from lower asset values, fund outflows and falling fee revenues, research by Moody’s Investor Services suggests.
A group of seven European firms that Moody’s studied saw a 5% decline in fee revenue in the second half of 2018, while assets under management (AUM) fell by €400 billion to €9.2 trillion.
Firms within the group saw varying degrees of success between them and included Ashmore, Jupiter Asset Management and Schroders.
In aggregate, positive sales momentum seen in the first half of 2018 came to an end, resulting in €52 billion of net outflows for the seven firms.
However, Moody’s said margins remained resilient and operating costs were kept under control, which contributed to Moody’s giving asset management a “stable” outlook for 2019.
Moody’s noted pressure on costs due to greater transparency requirements in the EU to eliminate the possibility of “greenwashing” by asset managers surrounding sustainable investing, but also said the industry’s “new service model” – which is emerging as firms transition from a product-led model to a service-based model – was taking shape.
Emerging market specialist Ashmore stood out positively in the Moody’s report (called ‘Asset Managers – Europe’) for attracting $2.4 billion inflows in the second half of 2018 (and €9 billion in the previous half) as institutions diversified investments. This was equivalent to 16% of Ashmore’s AUM at the start of the second half.
However, Moody’s highlighted Jupiter for seeing £2.4 billion of net outflows in the second half and because its average AUM became “highly weighted to the lower margin fixed income product range, reflecting sizeable gross outflows from higher margin funds”. Jupiter’s net management fee margin fell to 83 basis points in 2018, from 85 basis points the year before.
Schroders incurred higher operating and compensation costs owing to investment in technology to improve efficiencies. But the firm also sustained its management fee margin at 45 basis points as Schroders’ business mix changed towards higher margin private and alternative asset classes.
Earlier this week, a wider report into UK plc profitability described the country’s asset management sector as being amongst the sectors “notably hit hardest” by falling profits.
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