Rising equity markets helped boost assets under management for publicly traded money managers in the second quarter, countering industry trends such as continuing outflows from active U.S. equity strategies and pressure from investors to reduce fees.
The Russell 3000 index tracking domestic equities rose 3.02% in the second quarter while the MSCI All Country World index was up 4.8%. But over the first six months of the year, the Russell index was up 8.93% and the MSCI index was up 12.36%
The results are part of a continuing buildup of managers' assets since the November election of President Donald Trump. As of June 30, equity analysts who follow publicly traded managers say things are better than originally thought.
"Heading into the year, we all thought 2017 was going to be to be a really bad year," said Craig Siegenthaler, a managing director and equity analyst at Credit Suisse, New York.
Mr. Siegenthaler said not only have equity markets helped AUM growth, but most firms also experienced overall inflows in the latest quarter. "There's a been a stronger demand for active than we thought," he said.
"BlackRock, positive flows; T. Rowe Price, positive flows; Legg Mason, positive flows; Invesco, positive flows — they actually haven't been doing that bad." He said the impact of the Department of Labor fiduciary rule, while resulting in some outflows, did not have as large an impact as originally thought on redemptions from active strategies.
Of the 28 asset managers reporting as of Aug. 4, 22 reported an overall increase in AUM, according to Pensions & Investments' earnings tracker. Most managers also had net inflows.
The leader was BlackRock Inc., which reported net inflows of $93.5 billion in the quarter, the third straight quarter with inflows of more than $80 billion. Net exchange-traded fund inflows from the company's iShares group were particularly strong at $76 billion, higher than the record $65 billion in the previous quarter.
Overall assets under management at BlackRock of $5.69 trillion were up 5% from three months earlier and up 16% from a year earlier. Despite the latest bump, BlackRock was one of several asset managers that saw their stock price drop.
BlackRock was trading at $438.34 per share on July 14. After the July 17 earnings release, the stock closed at $424.63, a 3.1% drop. It closed Aug. 4 at $426.51.
"BlackRock had a really strong first half of the year but the stock didn't have the best reaction," Mr. Siegenthaler said. "Their AUM growth had been strong but their revenue growth and the earnings growth have been slower because you've seen their fee rate come down."
BlackRock's revenue was $2.97 billion in the second quarter, up 5% from the previous quarter and up 6% from the second quarter of 2016. Net income was $857 million in the second quarter, down 1% from the prior quarter but up 9% from the same period a year ago.
Despite any blips, analysts remained overall bullish on BlackRock. Greggory Warren, senior stock analyst at Chicago-based Morningstar Inc., noted in a July 17 report that BlackRock has key advantages over other asset managers.
"The size and scale of its operations, the strength of its brands and the diversity of its AUM by asset class, distribution channel, and geographical reach provide it with a leg up over competitors," he said.
Mr. Warren noted that BlackRock was in a good position to capture flows into passive strategies and ETFs. He said passive strategies accounted for two-thirds of the firm's AUM, and iShares had the largest ETF market share in the U.S. and the world at 38% and 37%, respectively.