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Money Management

BrightSphere Investment Group’s AUM down for quarter, year

BrightSphere Investment Group reported $206.3 billion in assets under management as of Dec. 31, down 13.2% from three months earlier and 15.1% lower than a year earlier, the company's earnings statement Thursday showed.

The decrease in AUM in the quarter ended Dec. 31 was the result of market depreciation of $25.6 billion and net outflows of $5.7 billion.

By comparison, the firm experienced net outflows of $2.6 billion in the third quarter and net outflows of $3.7 billion in the fourth quarter of 2017.

Net outflows in the fourth quarter were impacted by outflows from the firm's lower-fee subadvisory products for other money managers, said Daniel K. Mahoney, senior vice president, head of finance and principal accounting officer, during a conference call with analysts Thursday.

By asset class, U.S. equity had the largest net outflows — $3.3 billion — in the fourth quarter, compared with net outflows of $2.9 billion in the previous quarter and net outflows of $3.4 billion in the year-earlier quarter.

BSIG's global and non-U.S. equity strategies had combined net outflows of $2.4 billion in the quarter; net inflows of $700 million in the third quarter; and net outflows of $1.7 billion in the fourth quarter of 2017.

Fixed income had net outflows of $100 million in the fourth quarter, net outflows of $700 million in the prior quarter and net outflows of $100 million in the year-earlier quarter.

Alternative investment strategies were BSIG's only source of net inflows in the quarter with $100 million and net inflows of $300 million in the quarter ended Sept. 30 and $1.5 billion on net inflows in the quarter ended Dec. 31, 2017.

BSIG's breakdown of assets under management by asset class, all as of Dec. 31, was U.S. equity, $62.6 billion, down 17.6% from Sept. 30 and down 22.9% from Dec. 31, 2017; global and international equity, a combined $106.8 billion, down 14.4% from three months earlier and 15.4% lower than a year earlier; fixed income, $13.1 billion, down 0.8% from the end of the prior quarter and down 3% from the end of the year-earlier quarter; and alternatives were flat at $23.8 billion in the quarter ended Dec. 31 but up 7.7% year-over-year.

During the conference call, Guang Yang, president and CEO, described how BSIG is repositioning itself to create "a leaner and stronger organization that can respond quickly to opportunities in challenging markets."

Among the change to increase the firm's efficiency was a 20% reduction in employees within BrightSphere in the first quarter of 2019.

Mr. Yang stressed that the employee layoffs were only within the company's central administration and did not impact the firm's seven investment affiliates or their investment teams. He said compensation cost savings from the headcount reduction are expected to result in savings of between $8 million and $10 million in 2019.

"Delayering the hierarchy" at what the firm calls its "center" was part of downsizing BSIG to better serve its current affiliate pool of seven managers, said Suren S. Rana, chief financial officer, during the call.

Mr. Rana added that BSIG had "excess capacity" because it was "built for a much different structure" when the firm had 42 affiliates, adding that the center's leaner executive team will be able to work more closely with the investment affiliates.

BSIG also announced that it will reregister the company in the U.S. by the end of the second quarter to further increase operational efficiency. BDIG currently is domiciled in the U.K. BrightSphere's headquarters remain in Boston.

Mr. Yang said on the call that BrightSphere's other initiatives include a focus on organic growth, including a buildout of the firm's global distribution platform with a focus on expanding the company's relatively small presence in the Asia-Pacific region, specifically in mainland China, Japan, Australia and New Zealand.

"We are a little behind (in Asia)," Mr. Yang said, noting that regulatory changes in China will help the firm expand its presence in the region.

"The market still is new and everyone should have a pretty good shot at it," Mr. Yang added.

Management fee revenue totaled $204 million, down 11.1% for the quarter and down 12.8% for the year.

Revenue on a U.S. GAAP basis was $214.5 million for the fourth quarter, down 6.8% from the previous quarter and down 13.9% from the year-earlier period. Net income was $23 million in the current quarter vs. $54 million in the previous quarter. BrightSphere experienced a net loss of $48.8 million for the fourth quarter of 2017.