Traditional asset managers see 3% decline in Q3 AUM, though profits rise – Casey Quirk

Traditional asset managers witnessed a 3% decline in assets under management from the end of the second quarter to the end of the third quarter, while median revenue climbed by 2% and median profit grew by 4% over that period, according to a survey released Dec. 5 by consulting firm Casey Quirk, a Deloitte business.

Meanwhile, for alternative managers, AUM edged up 1% in the third quarter, while revenue was flat and median profit growth was 1%, a slowdown from stronger quarter-over-quarter growth numbers reported earlier in 2023.

The data suggests that alternative managers are now facing some of the same obstacles to growth that traditional managers have already encountered, Casey Quirk said in the survey.

The survey evaluated trends as 18 publicly traded asset managers with a total of $18 trillion in AUM. Of those 18 firms, six are alternative managers and 12 are traditional asset managers, a spokesperson for Casey Quirk said.

"Alternatives managers have outperformed their more traditional counterparts in revenue growth and profitability since (the first quarter of 2021), but alternatives managers are now beginning to experience some of the same pain that their traditional counterparts have been feeling for some time now," said Amanda Nelson, principal at Casey Quirk, in a release issued in conjunction with the survey. "Alternatives managers have described a significantly more challenging environment in 2023 than in previous years."

Casey Quirk also noted in the survey that alternative managers, with "more robust" private credit platforms tended to outperform their peers lacking such capabilities.

"Within the alternatives space, managers that saw the healthiest financial performance and fastest fundraising were those with strong private credit capabilities," Nelson added.

On the whole, over the third quarter, all 18 of the surveyed managers saw only 1% median revenue growth, while AUM contracted by 3%. However, on a year-over-year basis, these asset managers saw 5% median revenue growth and 9% median AUM growth.

Still, net new flows to all 18 asset managers were flat on both quarter-over-quarter and year-over-year periods.

In addition, overall operating expenses edged up by 1% quarter-over-quarter and increased 5% year-over-year.

Casey Quirk is however optimistic about the remainder of the year.

"The slowdown in the markets has created a difficult (third quarter 2023) for managers across asset classes, but the modest growth from the same quarter last year suggests a broad recovery from a challenging 2022," said Scott Gockowski, senior manager at Casey Quirk, in the release. "Still, net new flows were flat for most firms, and it's become clear that many investors may continue to hold cash on the sidelines until interest rates begin to taper and fears of a looming recession subside."