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Money Management

BNY Mellon reports slip in AUM for quarter, but gain for year

Bank of New York Mellon (BK)'s investment management and wealth management businesses reported $1.805 trillion in assets under management as of June 30, down 3.4% from the end of the last quarter and up 1.9% from a year earlier, according to parent BNY Mellon's quarterly earnings release Thursday.

The decline in assets in the second quarter of 2018 was the result of net outflows in both long-term and cash management assets, said Michael P. Santomassimo, BNY Mellon's chief financial officer, in the firm's earnings conference call Thursday.

Asset classes managed by BNY Mellon Investment Management, including long-term, index and cash, experienced total net outflows of $26 billion in the quarter ended June 30, compared to net outflows of $10 billion in the previous quarter and net inflows of $14 billion a year earlier.

Net outflows in the second quarter were mitigated by positive market gains of $17 billion, the firm's earnings report showed.

Mr. Santomassimo stressed to analysts on the call that the firm's investment clients primarily are institutional with "very little retail." He noted redemptions from indexed strategies were "idiosyncratic" and largely the result of institutional investors making asset allocation changes.

Outflows from active equity strategies were "in line with what you're seeing in the rest of the industry," Mr. Santomassimo said, adding the large outflows from cash strategies were mostly the result of corporations for merger and acquisition activity.

Among asset classes managed by BNY Mellon Investment Management, cash strategies had the largest net outflow — $11 billion — in the three months ended June 30, less than the $14 billion of net outflows in the first quarter 2018. Liquidity strategies had net inflows of $11 billion in the second quarter 2017.

Index strategies also had high net outflows of $7 billion in the second quarter 2018, but less than the $13 billion in net outflows in both the prior quarter and year-earlier period.

Equity net outflows were $3 billion in the quarter ended June 30. Flows were flat in the quarter ended March 31. Net outflows in the second quarter 2017 were $2 billion.

Fixed-income net outflows were $4 billion in the three-month period ended June 30, compared to net inflows of $7 billion in the prior quarter and net inflows of $2 billion a year earlier.

Multiasset-class and alternative investment strategies saw net outflows of $3 billion in both the quarter ended June 30 and the prior quarter vs. inflows of $1 billion in the three months ended June 30, 2017.

The only category managed by the bank's investment unit with positive net inflows in the second quarter was liability-driven investments, including currency overlay: Net inflows were $2 billion in the most recent quarter, compared with $13 billion in the prior quarter and $15 billion a year earlier.

Assets under management in equity strategies were down 0.6% in the second quarter to $160 billion compared to the prior quarter and down 1.8% compared to a year earlier.

Fixed-income assets were $197 billion, down 4.4% compared to the quarter ended March 31 and down 0.5% from the second quarter 2017.

Multiasset class and alternatives AUM was $181 billion, a decline of 2.2% from the previous quarter and down 5.7% from a year earlier.

Assets managed in LDI and currency overlay strategies fell 5.3% to $663 billion in the three months ended June 30 but were up 9.2% vs. the second quarter a year earlier.

BNY Mellon's indexed assets under management rose 0.3% to $334 billion in the quarter ended June 30 and were up 3.1% year-over-year.

Cash assets were $270 billion as of June 30, down 4.5% compared to the previous quarter and down 5.9% from a year earlier.

Assets under custody and administration at parent BNY Mellon were $33.6 trillion as of June 30, a new record, said Charles W. Scharf, BNY Mellon's chairman and CEO, during the earnings call.

Growth of custody/administration assets was a positive 0.3% compared to the prior quarter and up 8% from second quarter 2017.

Investment management and performance fees in the latest quarter were down 5.2% in the second quarter to $910 million compared to the last quarter but up 3.5% from the quarter ended June 30, 2017.

Bank of New York Mellon (BK) corporate revenue totaled $4.138 billion, down 1% from the previous quarter and but up 4.5 % from the end of the second quarter of 2017.

Asset management revenue was $702 million in the quarter ended June 30, down 8.8% from the previous quarter and up 2.8% from a year earlier.

Mr. Santomassimo explained on the earnings call that some of the asset management unit's decline in net revenue was the result of lost income from the bank's sale of real estate manager CenterSquare Investment Management.

Net income for the parent company was $1.108 billion for the quarter, down 4.6% than the previous quarter but up a significant 13.5% in a year-over-year comparison with the second quarter 2017.