NEW YORK, Dec. 19, 2017 /PRNewswire/
-- DST Research, Analytics and Consulting (DST), a provider of
business intelligence that helps transform the distribution,
marketing and product strategy for asset managers, today released
the results of its Asset Manager Composite for the third quarter of
2017.
"Operating margins for the public asset management firms rose
significantly sequentially to 34.2% for the third quarter of 2017,
fueled by record revenues from asset-generated fees coupled with
tightly managed expenses," said Michael
Andrews, CFA, Head of Investment Products Research and
Consulting at DST. "Synchronized global growth and market
valuations – "Goldilocks"1 going global – continue to
drive record AUM for the industry, which in turn drives higher
asset-generated fees, mitigating the secular pressures being faced
by the industry."
DST highlighted three important takeaways from the third quarter
operating results for the 15 public-traded firms that comprise its
Asset Manager Composite2:
- Cumulative assets under management (AUM) accelerated by 13.2%
year-over-year to a record of over $12
trillion, as all 15 asset management firms experienced
sequential growth in AUM – the first time this has occurred in
nearly two years.
- Asset-generated fee revenues grew 3.5% sequentially for the
Composite group and achieved a new all-time high of $9.3 billion, driving operating margins higher.
Operating expenses rose only 0.9% sequentially, suggesting that
despite increases in revenues, asset management firms remain
cautious about spending.
- Excluding BlackRock, net flows turned positive for the 14
other3 asset management firms for the first time in nine
quarters. On the flip side, for the third quarter of 2017 BlackRock
represented more than 81% of the positive flows for the Composite
group, and the top three firms accounted for more than 91% of the
inflows.
Operating margins rose by 182 basis points in the third quarter
of 2017 to 34.2% compared to the second quarter of 2017 for the DST
Composite group of companies. Cumulative assets under management
increased 4.4% quarter-over-quarter, and 13.2% year-over-year. The
AUM level of $12.072 trillion
represented the third consecutive quarterly all-time high for the
Composite group.
Following is our analysis of the key third quarter operating
metrics for the Composite group:
- Overall operating margin of 34.2% was the best level achieved
in the past eight quarters (since Q2 2015).
- Only four of the 15 asset management firms experienced a
quarter-over-quarter decline in operating margin, compared
to three of the 15 firms for the second quarter of 2017.
- Operating margins for the Composite group – excluding
BlackRock4 – rose 180 basis points sequentially, and the
30.7% weighted operating margin for the 14 other asset managers was
the best in three quarters.
- The third quarter represented the widest gap in operating
margin (349 basis points) between that of the Composite group
vs. that of the 14 other asset managers (excluding BlackRock).
- Revenues from asset-generated fees for the Composite group of
$9.346 billion (up 8.3%
year-over-year, up 3.5% sequentially) represented the third
consecutive quarterly all-time high. Excluding BlackRock,
asset-generated fees for the 14 other asset managers were
$6.544 billion (up 7.7%
year-over-year, up 3.1% sequentially), representing an all-time
high.
- Operating expenses for the Composite group rose only 0.9%
sequentially from the second quarter. Thus, the combination of
strong sequential growth in asset-generated fees and continued
expense management resulted in the 182 basis point improvement in
margins.
- Operating expenses for the 14 other asset managers
(excluding BlackRock) declined sequentially by 0.8%. Despite
strong revenues, firms appear to remain cautious on spending.
On a broader market and macroeconomic level, the third quarter
of 2017 built on the momentum experienced in the first half of
2017. Third quarter U.S. Gross Domestic Product of 3.3% represents
the best quarterly U.S. GDP in three years, and accelerated from
the 3.0% growth notched in Q2. U.S. equities gained 3.96% in Q3, as
measured by the S&P 500 Index. The equity market momentum
continued in the third quarter due to expanding economic growth and
despite natural disasters and the political climate in Washington. The Bloomberg Barclays U.S.
Aggregate Index, a broad measure of the bond markets, rose by 0.85%
in Q3, compared to an increase of 1.5% in Q2, even as the Federal
Reserve initiated its plan to reduce its balance sheet.
Non-U.S. stocks continued to lead the global stock market rally in
Q3, again led by emerging markets China, Brazil
and Russia. For the third
consecutive quarter, the combination of continued strength in
equities and bonds resulted in sizable gains across a broad swath
of asset classes on a global scale.
Based on this capital markets momentum fueled by synchronized
global economic growth, the third quarter performance for assets
under management (AUM) and asset flows for the DST Composite
companies showed continued strength along most metrics that we
follow:
- Cumulative assets under management (AUM) rose by 4.4%
quarter-over-quarter and 13.2% year-over-year.
- The $12.072 trillion in AUM
established yet another peak level for the Composite group. All
15 asset management firms saw their overall AUM increase
sequentially for the first time since Q4 2015.
- While 81.5% of the AUM increase was attributable to market
appreciation in the third quarter, net flows continued to improve
contribution.
- Net flows of $105.9 billion
improved from the $90.1 billion of
in-flows in the second quarter. Excluding BlackRock, net
flows reversed course to an in-flow of $9.8 billion compared to outflows of $13.5 billion in the second quarter. This was the
first time in nine quarters for net flows to turn positive
for the 14 other asset management firms.
- This was the 8th consecutive quarter of positive appreciation
and flows for the overall Composite group.
- Only six of the 14 firms that report net flows experienced a
net out-flow on a quarter-over-quarter basis, compared to eight of
the 14 firms experiencing such outflows in the second quarter.
"The third quarter of 2017 was remarkably strong across almost
all metrics," said Erach Desai,
senior research analyst with DST Research, Analytics and
Consulting. "Despite this strength, the data on flows continue to
illustrate a proverbial tale of two cities: the top three firms
accounted for more than 91% of overall inflows, and six of
the 14 public asset management firms continued to see
outflows even in this global Goldilocks macroeconomic
backdrop."
DST Research, Analytics and Consulting Asset Manager
Composite includes: Affiliated Managers Group (AMG), Alliance
Bernstein (AB), Artisan Partners (APAM), BlackRock (BLK), Cohen
& Steers (CNS), Federated Investors (FII), Franklin Templeton (BEN), GAMCO (GBL), Invesco
(IVZ), Janus Henderson Group (JHG), Legg
Mason (LM), Pzena Investment Management (PZN), SEI (SEIC),
T. Rowe Price (TROW) and Waddell
& Reed (WDR).
About DST
DST Systems, Inc. (NYSE: DST) is a leading
provider of specialized technology, strategic advisory, and
business operations outsourcing to the financial and healthcare
industries. We assist clients in transforming complexity into
strategic advantage by providing tools and services to help them
stay ahead of and capitalize on ever-changing customer, business
and regulatory requirements in the world's most demanding
industries. For more information, visit the DST website at
www.dstsystems.com.
Media Contact:
Laura M.
Parsons
DST Global Public Relations
+ 1 816 843
9087
mediarelations@dstsystems.com
1 The term "Goldilocks Economy" may have been
coined by David Shulman, senior
economist at the UCLA Anderson Forecast, who wrote an article in
1992 titled The Goldilocks Economy: Keeping the Bears at
Bay.
2 The complete list of 15 firms included in the DST
Research, Analytics and Consulting Asset Manager Composite is
provided at the end of this press release.
3 SEI Investment is the only asset manager in our
Composite that does not report net flows as an ongoing
communications practice. Thus, only 14 of the 15 asset managers in
our Composite report net flows.
4 BlackRock now represents 49.5% of the DST Research,
Analytics, and Consulting Asset Manager Composite group's overall
assets (while representing 28% to 30% of revenues, depending on
asset-management fees and overall revenues). Therefore, it
behooves us to analyze some of the quarterly results by looking at
the group excluding BlackRock.
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SOURCE DST Systems, Inc.