Most publicly traded money management firms saw net outflows in the June 30 quarter, as concerns mount on a more clouded future and investors continue their shift from active equity strategies.
Data from Goldman Sachs Group Inc. show net outflows for publicly traded managers were around 2.9% in the June 30 quarter, higher than the 2.3% of the previous quarter.
The net outflows come as active equity strategies, the bread and butter of many traditional managers, remain under severe pressure. The asset management industry saw $131 billion flow out of active mutual funds in the first six months of 2016, the largest amount since Morningstar Inc. began recording the data in 1994.
Data from eVestment, which tracks institutional separate accounts, show net outflows from active equity strategies peaked at $123 billion in the fourth quarter of 2015. In the first quarter of 2016, net redemptions were a smaller but still significant $74.2 billion. eVestment has not compiled second-quarter 2016 data.
In the second quarter, even small active equity inflows were something for asset management executives to highlight. Janus Capital Group CEO Richard Weil said during the company's July 26 earnings call with analysts that the company's fundamental equity strategies had net inflows of $300 million, even though active equity industry flows are on pace this year to be the worst in 25 years. He noted the positive $300 million compared to $300 million in net outflows in the first quarter.
“Our fundamental equity business is growing at a time when the rest of the market is dramatically shrinking, and that for me is the real headline,” said Mr. Weil.
But the news wasn't entirely positive for Janus; its quantitative equities unit, INTECH, saw $700 million in net outflows in the quarter.
Janus reported total assets under management of $194.7 billion at the end of the June 30 quarter; INTECH's AUM as of June 30 was $49.1 billion.
Compounding the problem for money managers has been their active equity strategy performance. Only 23% of 6,858 active equity mutual funds beat their benchmarks in the first seven months of 2016, show Morningstar data.
One firm particularly hard hit in the quarter was Overland Park, Kan.-based Waddell & Reed Financial Inc., which has experienced performance problems in its largest active equity strategies. “We've certainly stubbed our toe and are accountable for our own performance,” said CEO and Chief Investment Officer Philip J. Sanders in a July 26 conference call with analysts. “But I would say the backdrop has been unusual for the active management world. It's been one of the toughest first halves in history with respect to the performance of active managers.
“The current global macroeconomic and geopolitical backdrop has resulted in heightened investor demand for stability, safety and yield, resulting in valuation anomalies across various sectors and markets,” Mr. Sanders said, but added those anomalies will be removed over time, creating a more favorable climate for active management.
“The recent performance challenges for active managers combined with an increased focus on fees has resulted in growing demand for passive products,” he said. “We understand that the landscape has changed, but believe that there is a role for both passive and active strategies in client portfolios.”
Waddell & Reed reported net outflows of $9.8 billion in the June 30 quarter, including $5.5 billion from institutional strategies. The company had $8.9 billion in institutional assets under management as of June 30, down 37.8% from the previous quarter. Total assets under management were $86.4 billion, down 9.2% from the previous three months.