Three traditional index managers are finding a shift into more high-octane strategies is boosting their revenue. In some cases, the increase is more than 20%.
Officials at Barclays Global Investors Inc. and Mellon Capital Management Corp., both of San Francisco, as well as State Street Global Advisors, Boston, said growing interest by clients in overlays, long-short mandates and other alternative strategies is helping fuel revenue growth. These strategies command higher fees, frequently based on performance.
BGI, with $1.4 trillion in assets under management, reported a 23% jump in net fee and commission income in the first half of 2005 — the highest level the money manager has ever experienced. The spike was attributed to a sharp rise in management and incentive fees across all areas.
The company's exchange-traded fund family, marketed under the iShares brand, is the biggest contributor.
BGI is seeing a "real move by clients to look at more alternative strategies, and a continued transformation from index mandates to long-only or long-short strategies," said Matthew Scanlan, managing director and head of the Americas institutional business.
SSgA's investment management fees totaled $173 million in the quarter ended June 30, up 13% from $153 million a year earlier. Management fees reflect "continued new business and an increase in average month-end equity valuations," according to a news release. Total assets under management were $1.4 trillion as of June 30, up from $1.2 trillion a year earlier.