Investment bankers at Putnam Lovell Securities expect gloomy third-quarter earnings announcements by most publicly held asset management companies. Their overall earnings have experienced declines each quarter since the second quarter of 2000, and that trend likely will be perpetuated, said Michael S. Kim, equity research analyst. Some companies, however, such as BlackRock, have been relatively strong because of their fixed-income focus or a diverse mix of investment strategies. Profit margins in the third quarter likely will be narrowed by pressure to lower management fee revenues and discretionary costs and to increase salaries and compensation.
Putnam Lovell analysts estimate equity mutual funds will record a net quarterly outflow of more than $12 billion, the industrys first net outflow since 1990. Many public asset managers rely on their mutual fund businesses, which have been badly hit by poor long-term sales of $20 billion total in July and August, which is below the average monthly sales levels in the first six months of this year. Sales of equity mutual funds were $42.8 billion year-to-date as of Sept. 30, less than 20% of the total for the first three quarters last year.