Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
August 07, 2006 01:00 AM

Interest rate, market concerns subdue asset gains for firms

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Money management firms saw mediocre asset gains during the second quarter as choppy equity markets and uncertainty over interest rates had investors seeking the security of cash.

    Money managers are "doing pretty well if they kept (assets under management) flat," said Robert Lee, managing director of equity research at Keefe, Bruyette & Woods Inc., an investment bank in New York.

    "If the markets stay weak, that puts some pressure on asset levels, and translates into pressure on revenue and operating margins."

    "After a couple years of strong market appreciation … investors are facing losses and going back to cash for a while," said Matt Snowling, senior analyst at Friedman, Billings Ramsey, an investment bank in Arlington, Va. "Although (managers) can tread water for a while, it's hard to continue in a choppy market."

    A few managers reported profitability declines in the quarter ended June 30 — Janus Capital Group, Denver, for example, dropped 12%, while Waddell & Reed Financial Inc., Overland Park, Kan., posted a $33 million loss driven partly by a market-timing settlement charge. But most saw nominal growth in assets under management, increases that generally ranged anywhere from 0.03% at T. Rowe Price Group Inc., Baltimore, to 3% at Nuveen Investments Inc., Chicago.

    Small firm with big gain

    The largest reported asset gain among publicly traded companies came from one of the smallest managers in the bunch. Officials at The Phoenix Cos. Inc., Hartford, Conn., said assets under management jumped nearly 17% quarter over quarter to $43.3 billion as of June 30, thanks to improved performance.

    Among other managers, Barclays Global Investors, San Francisco, saw its profit leap nearly 50% for the 12 months ended June 30, thanks to strength in its active and iShares exchange-traded fund businesses. The manager had $1.6 trillion in assets under management as of June 30, up 7% from Dec. 31.

    "Our strategy of carefully building selected business is paying off," Robert Diamond Jr., president of parent Barclays PLC, London, said in an earnings statement.

    Not all executives were as upbeat. Raymond A. "Chip" Mason, Legg Mason Inc.'s chairman and chief executive officer, bemoaned current conditions during a news conference, noting the latest quarter was "one of the more challenging we've seen." Legg Mason's assets under management were $854.7 billion as of June 30, sliding 1.5% from the previous quarter.

    Federated Investors Inc., Pittsburgh, is one manager that could fight off pressure if the Federal Reserve takes a breather from interest rate hikes, analysts said. Money market assets made up 75% of Federated's $210.5 billion in assets under management as of June 30.

    "We continue to expect that a Fed pause and rate increases will be beneficial to our money market business," said Christopher Donahue, Federated's president and CEO, during a second-quarter earnings conference call.

    Issues at hand

    Aside from the volatile equity markets interest-rate uncertainty, asset managers are dealing with a variety of issues that put dents in their quarterly earnings stat ements.

    For example, Legg Mason and BlackRock Inc., New York, are working to soak up their respective acquisitions of Citigroup Asset Management and Merrill Lynch Investment Managers. But until transitions are complete, clients are "nervous" about committing money to the firms, said Rachel Barnard, an analyst at Morningstar Inc., Chicago.

    For its part, Legg Mason bled out some $6.5 billion in client assets. BlackRock's assets came in at $464.1 billion, up $1 billion from the prior quarter. But the fixed-income firm had $447 million in net outflows after search activity slowed and four clients made policy and investment strategy changes.

    Meanwhile, a damaged brand plagued at least one firm. Janus has toiled since its growth equity-investing style lost favor during the 2000-2002 bear market, and it got caught in the market-timing scandals. Assets under management at the firm were $154 billion as of June 30, down 3% from the previous quarter and 61% from the height of the bull market in 2000. Excluding Janus' subsidiary Enhanced Investment Technologies Inc., or INTECH, Janus' long-term net outflows totaled $3 billion in the second quarter, thanks partly to a client exodus from the firm's small-cap value products.

    Also frustrating for the firm is that improving performance is not helping to curb outflows. About 64% of all Janus funds are beating their peers on a five-year total return basis as of June 30, up from 33% last year, based on Lipper rankings.

    Signs of improvement

    On the upside, analysts said AMVESCAP PLC, London, is showing signs of improvement under President and CEO Martin Flanagan, who has been in command for about nine months. Assets under management grew 0.7% in the second quarter to $413.8 billion, helping to reaffirm analysts' confidence. The recent acquisitions of financial restructuring group W.L. Ross & Co. as well as exchange-traded fund operator PowerShares Capital Management LLC broaden the company's business and give it more clout as a leading global asset management firm, analysts said.

    "(Mr.) Flanagan seems to be digging in his heels and getting some traction on changes" at the firm, which has suffered significant outflows in previous years, Ms. Barnard said .

    "All-weather" managers such as Nuveen Investments, T. Rowe Price and Franklin Resources Inc., the San Mateo, Calif-based parent of asset manager Franklin Templeton Investors, are well positioned too, given their diverse base of offerings, Ms. Barnard said.

    For example, Franklin Resources' $490.1 billion in assets under management as of June 30 is made up of equities, fixed-income, hybrid and money market assets. It also has developed a strong international business, with global and international equity assets accounting for 43% of total assets under management, according to a news release. That is up from nearly 40% last year.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Private Markets
    Sponsored Content: Private Markets

    Reader Poll

    August 10, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Gaining Momentum: Where Next for Trend-Following?
    The market opportunity in U.S. residential mortgage-backed securities
    Credit Indices Evolve with Enhanced Data Inputs
    Hedge Funds 2.0: Back to the future
    How Has 2022's Carnage Reshaped Global Stock and Bond Markets?
    Crossroads: Politics, Inflation, & Bonds
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    August 1, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit