Asset management firms experienced a decrease in their assets under management (AUM) in Q1 2018, according to research conducted by SS&C Technologies Holdings, Inc. a provider of financial services software and software-enabled services.
The research analyses 15 publicly traded asset management firms and found that in Q1 their cumulative AUM decreased to $12.568 trillion, which is $10 billion less than the last quarter of 2017’s record high figure. 12 of the 15 firms had a decline in AUM. This was the first quarter since 2015 that experienced an overall decline in asset flows in the firms studied.
In addition, lower AUM resulted in lower asset-generated fee revenues, leading to lower operating margins. Despite this, the 26 percent net income posted by the firms was the best level seen in four years, as projected tax-rates reflected the new corporate tax reform legislation.
One of the asset management firms in the study saw their overall AUM decrease sequentially, while three firms, T. Rowe Price, BlackRock and Janus Henderson, managed a sequential gain.
BlackRock represented nearly 83 percent of the positive flows for the Composite group during the first quarter and the three firms that managed to achieve gains accounted for over 99.6 percent of the inflows.
Michael Andrews, CFA, head of investment products research and consulting at SS&C, said: "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."
The first quarter of 2018 started off with a continuation of strong economic momentum from the second half of 2017. However, in February equity prices fell due to concerns over inflation and increased market volatility. Fears of a global trade war further destabilized financial markets with proposals for stiff tariffs on steel and aluminium products sparking trade disputes with China.
Erach Desai, senior business research analyst at SS&C, said: "With secular challenges such as fee pressure and industry consolidation facing the asset management industry, it seems likely that many firms will face choppy waters as they navigate the remainder of 2018."
The SS&C Research, Analytics, and Consulting Group (formerly DST) aims to help organisations manage data and make changes. Since 2009, the group has performed consolidated financial statement analysis using the public quarterly earnings of 15 asset management firms.
The firms included are: Affiliated Managers Group, Alliance Bernstein, Artisan Partners, BlackRock, Cohen & Steers, Federated Investors, Franklin Templeton, GAMCO, Invesco, Janus Henderson Group, Legg Mason, Pzena Investment Management, SEI, T. Rowe Price and Waddell.