A big acquisition rather than market returns and high net inflows propelled Victory Capital Management Inc., Cleveland, to the top spot by AUM growth.
Victory Capital Management's AUM rose 127.6% to $145.8 billion in the quarter ended Sept. 30, primarily due to reporting for the first time the approximately $83.1 billion it gained through the acquisition of USAA Asset Management Co. on July 1.
Victory Capital reported 10.3% net AUM growth to $64.1 billion in the quarter ended June 30.
David Brown, the firm's chairman and CEO, said in the firm's Nov. 4 earnings release that partially due to the USAA acquisition, Victory Capital's "revenue and adjusted net income more than doubled sequentially, and adjusted EBITDA margin expanded to a record 44.8%."
Victory Capital reported net revenue of $215 million in the third quarter, up 135.2% from $91.4 million in the previous quarter and up 98.9% from third quarter of 2018.
Based on organic growth and investment returns, Goldman Sachs Group Inc., New York, experienced the largest increase in AUM in the third quarter, up 6.1% to $1.76 trillion and a 13.7% increase compared to a year earlier.
Net inflows to the firm's asset management unit totaled $69 billion in the third quarter vs. $17 billion in the second quarter.
Goldman Sachs' net inflows in the third quarter were topped by the $84.2 billion in net inflows for New York-based BlackRock Inc., which increased the firm's AUM 1.8% in the quarter and 8.1% for the year ended Sept. 30 to $6.96 trillion. BlackRock's net flows totaled $125.4 billion in the prior quarter.
Among the 24 publicly traded managers tracked by P&I, Boston-based BrightSphere Investment Group Inc. saw the largest decline in AUM in the third quarter, down 3.6% to $216.8 billion and down 8.8% from Sept. 30, 2018.
CEO Guang Yang said net outflows of $6.2 billion were "largely concentrated in lower-fee subadvisory accounts with about $2 billion related to Victory Capital's acquisition of USAA and the related reallocations, and another $2 billion related to continued reallocation from specific clients in the U.S. large-cap equities subadvisory space," a transcript of the firm's Nov. 5 earnings call showed.
Brett Perryman, BrightSphere's head of corporate communications, clarified in an email that "a BrightSphere affiliate had a subadvisory relationship with USAA (Asset Management). As part of its acquisition of USAA funds … Victory Capital Holdings moved management of USAA funds to its in-house managers. The decision was not related to performance."
Casey Quirk's Mr. Cloherty singled out alternative asset managers as one pocket of the investment management industry that continues to steadily attract assets under management regardless of market conditions.
"Alternative managers have been beneficiaries of asset owners rebalancing their portfolios into illiquid strategies," Mr. Cloherty said, adding that the intensity of fee pressure exerted on traditional managers by investors is generally not being applied to the same extent for private equity, real estate, private credit and other non-traditional managers.