Publicly traded traditional North American-based asset management firms suffered sharp declines in assets under management and revenue in the third quarter, said money manager consultant Casey Quirk, a Deloitte business, in a news release Thursday.
The third straight quarter of declines coincided with equity markets reaching their lowest levels since November 2020, while "rising costs which continue to drag down (traditional asset managers') earnings," Casey Quirk said in the news release.
Casey Quirk's analysis looked at 18 publicly traded traditional and alternative asset managers with an aggregate $17 trillion in assets under management as of Sept. 30. The 18 firms comprised seven alternative asset management firms and 11 traditional money management firms, a Casey Quirk spokeswoman said in an email.
Specifically, revenues at the traditional asset managers declined by 5% in the third quarter from the second quarter, and fell 18% year to date. Over those same periods, the S&P 500 index dropped 6% and 25%, respectively.
Meanwhile, AUM at traditional asset managers declined by 6% in the third quarter from the second quarter and dropped by 20% year to date.
Flows for the traditional asset managers slipped 0.5% in the third quarter from the second quarter, but were up a modest 0.8% year to date. Still, year-to-date inflows at traditional managers were "insufficient to offset losses driven by declining capital markets" and the majority of year-to-date inflows have been concentrated in money markets, alternative investments and passive strategies. The spokeswoman noted that those three capabilities "are not offered by the majority of active asset managers."
Publicly traded alternative asset managers generally fared far better than the traditional asset managers in the survey. Alternative firms saw 4% median revenue growth and 2.2% net flows in the third quarter from the second.
Costs are also rising at 65% of the asset managers in the sample, with the median manager seeing a 7% year-over-year increase in general and administration costs from the third quarter of 2021. Casey Quirk's research suggested that rising costs are "particularly acute" in the technology, market data and marketing expenses.
Also, compensation expenses rose slightly for 60% of the managers in the survey, with the median firm seeing compensation stay flat in the third quarter from the second quarter, but slipping 2% on a year-over-year basis, suggesting that firms are "taking action to keep compensation costs in check."
Moreover, some 22% of traditional asset managers in the survey have already announced formal hiring freezes.
"We expect persistent declining revenues in the first three-quarters of the year to put pressure on asset managers' 2022 year-end bonuses and full-year profits," said Scott Gockowski, senior manager at Casey Quirk, in the release. "However, the recent rebound in markets should buoy asset manager financials for the year."
