A big market rebound in the first three months of 2019 produced a welcome lift in assets under management for most publicly traded money managers for the quarter ended March 31, Pensions & Investments' analysis of earnings reports showed.
All but one of the 23 managers that reported earnings by P&I's deadline had positive net AUM growth ranging from 2.3% to 12.4% in the three-month period, a sharp contrast to the prior quarter, when 20 of the 26 publicly traded managers experienced a decline in assets.
The Standard & Poor's 500 index returned 13.07% in the quarter ended March 31 compared to -13.97% in the prior quarter.
"The rebound in the first quarter helped most firms, and flow trends were relatively better than in the generally abysmal fourth quarter," said Robert Lee, executive director – equity research and analyst at Keefe, Bruyette & Woods Inc., New York.
P&I's analysis found that 14 of the 23 publicly traded managers had experienced AUM growth for the year ended March 31. Just seven of those managers produced higher growth in the year than in the quarter. Five of those were alternative investment managers.
"Given the harsh negativity in the fourth quarter, Q1 has been a kind of respite for managers but though it seems like overall growth is eking its way up, it is essentially flat. There's still long-term deterioration in margins, AUM and investment inflows," said Tyler Cloherty, senior manager and head of the knowledge center of Darien, Conn.-based consultant Casey Quirk, a practice of Deloitte Consulting LLP.
"Revenue increases bumped up margins a bit in the first quarter but it's not at a rate that's sustainable," Mr. Cloherty added.
KBW's Mr. Lee agreed, noting "revenue is volatile. When the market goes up, revenue goes up and when it goes down, so do revenues."
"After a tough quarter like the fourth quarter, it takes time for revenue levels to recover. Business pressure can diminish the impact of positive market," Mr. Lee said, adding that to reduce pressure, "many asset managers are trying to get their costs aligned with the reality of their revenue streams."