U.S. institutional tax-exempt assets of the 500 largest money managers declined 5.3% in 2011, the first slip after two years of rebounds from the global financial crisis, Pensions & Investments' latest annual money manager survey shows.
Assets under management for the group totaled $10.83 trillion as of Dec. 31, down from $11.42 trillion at year-end 2010.
Their AUM had grown 11.2% in 2010, off a half-percentage point from the previous year.
U.S. institutional tax-exempt assets of the top 500 managers still have yet to regain the pre-crisis asset high at the end of 2007.
Exacerbating overall asset declines in 2011 was that international equity markets did poorly, at the same time money was flowing into the asset class, said Kevin Quirk, a partner with money manager consultant Casey, Quirk & Associates LLC, Darien, Conn.
The Morgan Stanley Capital International All Country World returned -7.35% for the year, and the MSCI EAFE returned -11.3%. That compares with the domestic Russell 3000 benchmark, up just 1.03% in 2011.
On the fixed-income side, the Barclays Capital Aggregate bond index was up 7.84% and the Barclays Capital Global Aggregate Total Return index was up 5.64%.
But an even more powerful reason for the drop, Mr. Quirk asserted, is a maturing of the institutional money management industry because of a confluence of events.
An increase in frozen pension plans among U.S. corporations has meant shrinking investment capital among that group, while the poor economy has left foundations and endowments with lower contributions, he said.
“You don't have that big net flow tailwind happening anymore,” Mr. Quirk said.
The largest managers of U.S. institutional tax-exempt assets in P&I's survey — BlackRock Inc. and State Street Global Advisors — both were down from their year-earlier totals. (P&I will take a look at the managers' worldwide assets in the June 11 issue.)
BlackRock's $831.74 billion declined 10.5% during 2011, SSgA's total $694.51 billion fell more than 18%.
The biggest decline among the leaders, however, was suffered by Legg Mason Inc., whose assets fell 41.4% to $203.48 billion during 2011. The drop knocked Legg Mason out of the top 10 and into 11th place.
Mary Athridge, a spokesman for Baltimore-based Legg Mason, said in a statement that $102 billion of the asset drop was due to legacy money market assets being classified as taxable. Excluding the reclassified assets, Legg Mason's assets dropped 12.1%.