Market appreciation led to strong revenue and healthy asset growth for most public money managers during the fourth quarter.
Despite this appreciation, however, some managers still experienced weak or negative net flows.
"Revenue growth and fee growth is still healthy, attributable to rising AUM," said Andrew Disdier, director, equity research at Sandler O'Neill + Partners LP, New York. "Yet we're still seeing net redemptions. It's an interesting dynamic."
Mr. Disdier attributed this dynamic to "a function of the market backdrop." In other words, from a mathematical standpoint, performance of the underlying assets are "more than making up" for the outflows, he said.
During BlackRock Inc.'s Jan. 12 earnings call, Chairman and CEO Laurence D. Fink said: "Equity markets reached an all-time high in 2017, driven by synchronized economic growth around the world."
Still, Mr. Fink noted: "We are seeing a paradox of high returns, and yet we still see high anxiety," with the investment industry maintaining "a continued focus on downside risk, putting a premium on lower-risk bonds, anchoring interest rates at historical low levels and driving many investors to overallocate to cash and to other safe havens."
All 16 publicly traded asset managers reporting as of Feb. 1 showed an overall increase in assets under management for the quarter. Twelve out of 15 managers experienced net inflows for the three months ended Dec. 31. (Northern Trust Corp., Chicago, does not report net inflows for its asset management business.)
"The biggest story was the massive equity market tailwinds that all these companies experienced," said Christopher Shutler, an equity analyst at William Blair & Co., Chicago. "The market appreciation flows to the bottom line, so it's been a good year for these companies on a revenue growth perspective."
Mr. Shutler also noted that during the quarter, net flows were more mixed among firms that had passive exposure. For example, New York-based BlackRock saw "tremendous inflows," while firms that didn't have passive or rules-based exposures were more challenged, he said. BlackRock's long-term strategies experienced $80.6 billion in net inflows for the quarter.
"But the (overall) flow trajectory saw improvement in the fourth quarter and all of 2017," Mr. Shutler added.