Money manager earnings results for the quarter ended March 31 — the fourth in a row of strong recovery — mostly failed to keep pace with market expectations, even as a chorus of high-profile executives predicted better times ahead.
Investor expectations were fairly high coming into the latest earnings season, and firms that fell short saw their stocks manhandled, noted Robert Lee, an analyst with New York-based investment bank Keefe, Bruyette & Woods.
For example, Waddell & Reed Financial Inc.'s stock tumbled 7.3% to $36.19 on April 27, after a strong first-quarter report by the Overland Park, Kan.-based manager nonetheless fell 1 cent short of the market's 43-cent consensus earnings-per-share estimate.
The day before, BlackRock Inc.'s stock slumped 8.6% when the giant New York-based firm reported earnings per share of $2.40 — a nickel below consensus.
The latest quarter offered hints of a continued — but stubbornly tentative — rebound in investors' appetite for risk that worked to the disadvantage of a number of firms.
Managers with substantial money-market businesses suffered heavy outflows, without a corresponding, offsetting flow into their higher-margin strategies, such as actively managed equities.
That mix left Federated Investors Inc., Pittsburgh, a leading money-market manager, sustaining one of the industry's biggest hits in the first quarter. Its $350 billion in assets under management fell 14% from the previous quarter, and 10% from a year earlier.
Those results were the veritable “morning after” for Federated, which had been buoyed by safe-haven flows into money-market funds in 2008 and early 2009, as the rest of the industry was being pummeled.
BlackRock reported $40 billion of first quarter money market outflows, more than offsetting $8.9 billion of inflows for long-term equity and bond strategies. The result: net outflows of more than $30 billion.
Still, counting market-related gains, the world's biggest manager's assets increased $17.6 billion, or 0.5%, to $3.36 trillion under management.
In a conference call with investors, Laurence D. Fink, BlackRock's chairman and CEO, said a big chunk of those money-market outflows appeared to be moving into bank deposits — a trend that could continue until the U.S. Federal Reserve begins boosting short-term interest rates, possibly later this year.
Nonetheless, Mr. Fink remained optimistic that more money would soon begin flowing to active equity and fixed-income managers, citing the growing number of clients expressing an interest in such shifts as the latest quarter drew to a close.