Recent market calamities will continue to put a damper on asset growth and margins, as investors are likely to continue to embrace more conservative, lower-fee investment choices, Kasina predicts.
In light of the 10% market correction this quarter, Kasina analyzed the operating profits of 17 publicly traded asset managers, and found that operating margins have already decreased from 31.3% to 29.7%. Conversely, in the second quarter, operating margins rose from 30.4% to 31.3% from the previous quarter.
However, rather than meekly watching customers move into fixed income and money market funds, asset managers can attract investors’, brokers’ and financial advisers’ money by offering alternative, hedge-like products, Kasina suggests.
Surprisingly, only eight ’40 Act alternative funds were launched last year, noted Kasina CEO Steven Miyao. “Broker/dealers are asking for these products and paying a premium for them, but there just aren’t a lot of products out there that truly mitigate risk,” Miyao said.
The most profitable large firms in the second quarter, Kasina reported, were T. Rowe Price, BlackRock and Franklin Templeton. Among small firms, the most profitable were Calamos, Pzena Investments and GAMCO.