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Money Management

Money managers increase AUM, profit margins on back of strong market performance

Assets under management by 44 pure-play publicly traded money managers worldwide studied by Casey Quirk, a practice of Deloitte Consulting, rose 16% in 2017 to an estimated $14.3 trillion.

The asset increase helped increase operating margins, or profit as a share of manager revenue, by 2 percentage points to a median 31% in 2017, said Amanda Walters, senior manager at Casey Quirk, in an interview. However, revenues only grew by a median 11% during the year, mostly the result of fee compression in the money management industry.

The study did not include manager subsidiaries of banks and insurance companies.

The increase in operating margin in 2017 is the result of capital markets performance, Ms. Walters said. "The same challenges to managers are still playing out — lower organic growth, fee compression and rising costs," she said. "There are some firms that have adjusted what they've done, but most firms are still seeing the same issues."

Median operating margins, which were in the high 30% range before the 2008-'09 financial crisis, have generally been in decline since then with exceptions for years with high capital markets performance, Ms. Walters said. She said she expects that trend to continue.

Fourteen percent of the firms analyzed by Casey Quirk had negative revenue growth in 2017, down from 52% in 2016 and 45% in 2015.

Data on the managers analyzed by Casey Quirk was derived from S&P Capital IQ and firm 10-K filings. Not all were clients of Casey Quirk. Ms. Walters would not identify any of the managers analyzed by the firm.