Moody's Investors Service revised its outlook for the asset management industry to stable from negative on the strength of the sector's “significantly improved earnings capacity” and enhanced balance sheet strength.
The ratings agency had had a negative outlook on the industry since April 2008.
In a report issued March 23, Moody's noted that for the quarter ended Dec. 31, aggregate quarterly earnings for asset managers rated by Moody's surpassed the previous peak seen in the fourth quarter 2007. And while the pace of profit growth should slow, “we expect Moody's-rated asset managers' earnings to continue to grow in 2011,” the report said.
That earnings growth should lead to continued improvement in the ratio of debt to earnings before interest, taxes, depreciation and amortization, the report predicted. The balance sheet strength of the managers Moody's rates “appears to be at or near an all-time high.”
Still, the report said the industry will continue to face headwinds, including sluggish macroeconomic growth and weak organic growth.