DST kasina, a provider of data-driven insights and distribution solutions to financial companies around the world, thasoday released its fourth quarter DST kasina Asset Manager Composite results.
According to the report, operating margins for the 16 asset management firms that comprise the Composite fell to 33.5 per cent on a weighted basis for the quarter, down by 131 basis points from the prior quarter and 114 basis points from Q3 2015.
On a simple average basis, operating margins fell by 118 basis points sequentially and 182 basis points year over year.
According to the report, operating margins for the 16 asset management firms that comprise the Composite fell to 33.5 per cent on a weighted basis for the quarter, down by 131 basis points from the prior quarter and 114 basis points from Q3 2015. On a simple average basis, operating margins fell by 118 basis points sequentially and 182 basis points year over year.
DST kasina's analysis indicates lower revenue and escalating operating costs – mostly from higher employee compensation, benefits, and marketing and advertising expenses – accounted for most of the decline. 11 firms in the Composite actually posted an increase in assets under management, due mostly to rising domestic and equity markets returns in the final quarter of 2015. Net flows for 10 firms were negative during the period, while flows for three other firms were essentially flat.
Firms that saw the steepest sequential decline in operating costs in the quarter involved some of the largest asset managers in the Composite, including BlackRock (down 228 bps), Affiliated Managers Group Inc. (down 234 bps), and Invesco Ltd (down 321). Other firms with a significant operating margin decline were Pzena Investment Management, Inc. (down 582 bps), Waddell & Reed Financial, Inc. (down 368 bps), and Cohen & Steers, Inc. (down 235 bps).
According to Larry Petrone, Director of Product Research & Consulting at DST kasina, the current quarter is likely to remain a challenging one for most of the firms.
"Returns through late February are largely negative across the equity markets, although domestic fixed income markets have been generally constructive," says Petrone. "Initial data through mid-February points toward net redemptions across the markets, particularly those that include active investment management strategies."
