Subprime aftermath seen weighing on fee revenues

Increasing demand for less risky liquidity and passive strategies resulting from the subprime mortgage crisis could depress the fee revenues of asset management firms for the next two or three years, according to a report by the TowerGroup. In a telephone interview, Dushyant Shahrawat, a research director and author of the report, predicted that the portion of overall institutional assets in traditional active strategies could plummet to 52% by 2009, from 66% in 2005 and 72% in 2001. While the long-term earnings outlook for asset managers remains bright, brokerage houses, which have announced billions of dollars of write-offs over the past year, could emerge with far brighter prospects in 2009 than asset managers, he said, as the brokers have taken the hit and are ready to move ahead, while the pain for asset managers, though less severe, could drag on. Mr. Shahrawat declined to make specific earnings forecasts.