Most publicly traded money managers reported higher earnings in the second quarter, as rising equity markets increased overall assets.
Still, net inflows into active U.S. equity strategies were tepid.
“If you look at broad industry data, one of the things that jumps out is that despite the fact that equities are setting records, flows to equity strategies have been kind of crummy,“ said analyst Robert Lee, a managing director at Keefe, Bruyette & Woods Inc. in New York, who follows publicly traded money managers.
Mr. Lee and other analysts said the concern among investors is whether the day is coming soon when the market changes course from its upward momentum. But weak flows, particularly into active domestic equity strategies, are part of a longer-term trend toward investments in alternatives, as well as into lower-fee passive strategies and exchange-traded funds, they said.
“This is a trend that has been going on for several years,” said Christopher Shutler, an analyst with William Blair & Co. in Chicago.
The trends could create longer-term problems for managers with large active equity franchises, said Morningstar Inc. analyst Greggory Warren, pointing to San Mateo, Calif.-based Franklin Resources Inc., whose institutional investment arm is Franklin Templeton Investments.
Franklin's net income rose 3% to $578.9 million for the three months ended June 30, and was up 5% from the quarter ended June 30, 2013, company data show. The rising stock market saw Franklin's total equity AUM rise to $388.3 billion, up 4% from the previous quarter and up 24% from June 30, 2013.