BrightSphere reports assets down 2.4% in quarter and 9.5% for year

BrightSphere Investment Group reported $234.3 billion in assets under management as of June 30, down 2.4% from the quarter ended March 31 and down 9.5% from a year earlier, in its earnings statement released Thursday.

The decrease in assets under management year-over-year reflects the divestment of $32.4 billion of AUM managed by real estate manager Heitman as of June 30, 2017, the earnings statement said. Heitman executives acquired BrightSphere's interest in the firm last year.

BrightSphere had net outflows of $4.1 billion in the quarter ended June 30 compared to net inflows of $1.9 billion in the prior quarter and net outflows of $300 million in second quarter of 2017.

Net outflows continued for BrightSphere's U.S. equity strategies, with net outflows of $3.9 billion in the three months ended June 30, following net outflows of $1.6 billion in the first quarter and net outflows of $2.8 billion a year earlier.

On a conference call with analysts Thursday, Aidan J. Riordan, BrightSphere's executive vice president and head of affiliate management, noted net outflows from U.S. equity strategies managed by the firm's investment affiliates, particularly from passive and large-cap value strategies, were the result of "secular trends."

Those trends include redemptions by institutional investors such as corporate pension funds derisking their portfolios, regular rebalancing activity and reaction to performance challenges, Mr. Riordan specified, adding "we regard these flows as normal."

In other asset classes, BrightSphere experienced $500 million of net outflows from its global equities strategies in the three months ended June 30 compared to $100 million of net inflows in the previous quarter and net inflows of $1 billion in the second quarter 2017.

Fixed-income net inflows were $100 million in the second quarter of 2018, compared with net inflows of $700 million in the prior quarter and net outflows of $400 million the year earlier.

Alternative investment strategies had net inflows of $200 million in the quarter ended June 30, net inflows of $2.7 billion in the previous quarter and net inflows of $1.9 billion in the second quarter of 2017.

Steven H. Belgrad, BrightSphere's president and CEO, told analysts during the earnings call that the firm is in active discussions with money managers about potential acquisitions. He said the firm is on the lookout for alternative investment managers, including credit and real estate specialists, and has set aside up to $400 million for dealmaking through the end of the year.

Assets under management in U.S. equities totaled $74.8 billion as of June 30, down 2.3% from the prior quarter and down 8% from the prior year.

Global equity AUM was $122.3 billion at the end of the second quarter 2018, down 3.2% from the prior quarter but up 8.3% from a year earlier.

Fixed-income assets of $13.8 billion as of June 30 were down 0.7% compared to the quarter ended March 31 and up 4.5% from the year-prior quarter.

Alternative investments totaled $23.4 billion as of June 30, up a slight 0.4% from the prior quarter. Alternative assets as of June 30 were down 54.5% compared to the year earlier, reflecting the divestment of Heitman's assets in the second half of 2017.

Revenue on a U.S. GAAP basis was $233.9 million for the quarter ended June 30, down 6.3% from the previous quarter and up 6.9% from the year-earlier period.

Net income was $2.1 million in the three months ended June 30 vs. a net income of $57.3 million for the prior quarter and net income of $12.9 million for the second quarter 2017.