The outlook for the money manager sector was kept at “stable” by ratings agency Moody's Investors Service, as a number of managers were able to limit the fallout from sharp equity market declines in a volatile third quarter.
In a quarterly report Thursday, Moody's noted that despite declines of between 15% and 26% for key equity indexes for the three months ended Sept. 30, overall leverage for the 13 money management firms it analyzed “remained steady … as debt outstanding and earnings before interest, taxes, depreciation and amortization both declined about 6%.”
Moody's latest analysis of those money management firms suggests they've become better able to respond quickly to ugly market conditions over the past three years or so, Neal M. Epstein, a vice president and senior credit officer with Moody's, said in a telephone interview.
For example, there's evidence that money managers have adopted more flexible compensation structures. Moody's noted that compensation as a share of revenue declined 0.6 percentage points in the latest quarter, and by 2.2 percentage points on a weighted average basis over the past year.
Despite an 8.9% drop in assets under management for the 13 managers as a whole,EBITDA declined by a smaller 6.6%.
“Our sector outlook for the asset managers remains stable, given manageable debt burdens and stable fundamentals for the group as a whole,” the report said.
Among the firms making the most progress “deleveraging at a nice clip” was Nuveen, with strong growth helping that firm lower its debt-to-EBITDA ratio, as calculated by Moody's, to 7.84 times from 11.38 times over the 12 months ended Sept. 30, Mr. Epstein noted.