Money managers with high leverage and outsized exposure to equity-oriented strategies will come under the most pressure from market impacts caused by the coronavirus pandemic, Fitch Ratings warned.
The assets under management, earnings before interest, tax, depreciation and amortization and cash flow leverage of these managers will be hit most by increased volatility and market sell-offs, the agency said.
Most traditional money managers continue to generate positive cash flows in times of market stress, but those with higher leverage are likely to have less flexibility to combat the effects of further market sell-offs.
Fitch in a commentary published Wednesday said these issues "have already translated into negative rating actions," highlighting Invesco Ltd.'s rating outlook downgrade to stable from positive and a downgrade for Lazard Group to BBB+ from stable.