Goldman Sachs analysts in a report Monday downgraded their view on the U.S. money management industry to “neutral” from “attractive,” citing a recent rise in market volatility that could lead to lower assets under management as well as a reduction of flows into higher-margin equity strategies, especially among retail investors.
Analysts Marc Irizarry, Alexander Blostein and Neha Killa cut their earnings-per-share estimate for the 20 listed money managers in their coverage universe by an average of 7% to 8% for the coming three years.
However, the analysts lifted their call on BlackRock to “conviction list buy” from “buy,” citing that firm's broad exposure to the institutional market, where signs of demand have remained strong. They raised their call on Federated Investors to “sell” from “conviction list sell,” in part because higher volatility could ease investor outflows from that firm's money market strategies, while an uptick in the London interbank offered rate could lessen the fee reductions Federated has had to offer in a near-zero interest-rate environment to ensure positive returns for those strategies.
The analysts lowered Goldman's rating on some equity- and retail-focused firms, with both Janus Capital Group and Calamos Asset Management dropping to “sell” from “neutral,” and Artio Global Investors slipping to “neutral” from “buy.”