Several publicly traded money managers experienced either a decline in assets under management or flat growth during the third quarter, due to weak equity markets.
Plus, investors continued to move to passive from active strategies during the quarter.
“It was a pretty tumultuous quarter,” said Joseph Sullivan, CEO of Legg Mason Inc., Baltimore. “There was quite a bit of volatility in the quarter attributed to geopolitical events. Throw in Ebola for good measure, and you've got a lot of cross-currents going on that didn't necessarily inspire confidence among investors, so you saw them moving money into cash and into passive.”
Among the “hot political events” he cited were the crisis in Ukraine, protests in Hong Kong and turmoil in the Middle East.
Legg Mason reported $707.8 billion in assets as of Sept. 30, up 0.5% from the previous quarter and up 8% from a year earlier. The firm experienced net inflows of $13.4 billion for the quarter, compared with net outflows of $8.2 billion in the quarter ended June 30, and net outflows of $1.4 billion during the third quarter of 2013.
“September was a fairly tough month. A lot of managers' AUM came down because market returns were weaker,” which threw off the entire quarter, said analyst Robert Lee, a managing director at Keefe, Bruyette & Woods Inc. in New York, who follows publicly traded money managers.
Despite this, Mr. Lee pointed out “most managers are still pretty healthy,” so he doesn't believe the decline in asset growth is a major concern. He also noted that margins are still very strong.
“There was a lackluster demand for traditional domestic equity strategies and a little bit better demand for non-traditional strategies. Global strategies were one place where there had been continued demand,” he said.