Ratings agency Moody's Investors Service upgraded its outlook for global money managers to stable from negative, thanks to a "clear improvement" in operating conditions, a sustained rally in financial markets and increasing investor risk appetite.
A negative outlook had been in place since March 23, 2020 — the point at which the coronavirus pandemic's effects on stock markets were at their most negative.
Industry AUM has returned to and surpassed pre-pandemic highs, at $14.89 trillion as of year-end 2020 vs. $13.19 trillion at the end of 2019 according to Moody’s analysis of 14 managers it tracks. In March 2020, assets under management of these managers dropped to $11.15 trillion.
Higher AUMs are likely to support money manager credit strength in the next year to 18 months, despite competitive factors that have at the same time intensified as a result of the pandemic, a Moody's report said. Registration is required.
The year 2020 "ended surprisingly well for asset managers," with the initial and extreme market shock in March quickly reversing thanks to swift action be central banks and governments. A faster than expected recovery and rollout of vaccines added strength to the "reopening rally," which drove further management fee revenue growth in the first quarter of 2021, the report added.
Industry inflows also returned, with institutional and high-net-worth investors adding to alternatives strategies in the second half of 2020 and early in 2021. Capital raising — one of the key metrics used by Moody's to asses the growth outlook — for four of the largest publicly listed alternative managers was a total $67.3 billion in the first quarter of 2021, up 22% vs. the first quarter of 2020; and $307.2 billion for the year ended March 31, up 45.6% vs. the previous annual period.