Publicly traded money managers typically fared better in the first quarter of 2017 than the previous quarter, but managers are having a difficult time generating organic growth as flows into equity strategies falter.
Although actively managed fixed income, multiasset and alternatives strategies saw inflows during the first quarter, active U.S. equities had a rough time.
“Generally, Q1 was better than a difficult Q4, but many firms still faced challenges” in generating growth from existing lines of business, said Robert Lee, a managing director and analyst at Keefe, Bruyette & Woods Inc. in New York in a phone interview. “Fixed income did well, as did alternatives and multiasset class solutions. But active U.S. equities continued to struggle, no surprise there.”
Glenn Schorr, a senior managing director and a senior research analyst at Evercore Group LLC, New York, said something similar in a separate phone interview.
“Fixed income is still in inflow, as are multiasset and unconstrained products,” he said. However, “core U.S. equity products are still in a tough spot.”
The Evercore analyst added: “Active has done better since the election; 2015, 2016 were tough years.”
Of the 25 public money managers whose earnings Pensions & Investments tracked as of May 11, 19 experienced increases in assets under management in the three months ended March 31, while three — Federated Investors Inc., Affiliated Managers Group Inc. and Och-Ziff Capital Management Group LLC — suffered declines in AUM during the quarter.
AUM for three firms — Goldman Sachs Asset Management, The Blackstone Group LP, Oaktree Capital Management LP — remained flat for the period.
Jeffrey Levi, a principal at Casey Quirk, a practice of Deloitte Consulting LLP in Darien, Conn., said results for the first quarter were up “largely because of capital markets.”
KBW's Mr. Lee said, “Nothing in the quarter has eased investor concerns about industry growth.”
“No one had a 'wow' quarter,” he added.
BlackRock Inc.'s AUM as of March 31 was $5.42 trillion, up 5% from three months earlier — the largest quarterly increase among the firms tracked by P&I — and up 14% from a year earlier.
The world's largest money manager generated $80 billion in long-term net inflows in the first quarter, representing a 7% annualized organic growth.
“We believe that levering our global scale and technology, we can drive better outcomes for our clients and future growth for BlackRock,” said BlackRock Chairman and CEO Laurence D. Fink in an earnings call to investors on April 19.
Mr. Fink added in the call: “We're using our scale to build ... technology to optimize investment performance and outcomes for our clients.”
Mr. Fink also noted New York-based BlackRock plans to make some acquisitions “to further add opportunities that we have in technology,” but did not disclose details.