Stocks are doing OK. Asset managers' stocks? Not so much

Stocks are doing OK. Asset managers' stocks? Not so much
An index of asset managers and custody banks is down almost 11% this year, and some fund companies are off more than 25%.
SEP 14, 2018
By  Bloomberg

The U.S. stock market is having another solid year. You wouldn't know it by looking at the shares of companies that manage money. The S&P index of 18 asset managers and custody banks is down almost 11% this year, compared with a gain of more than 8% for the broad S&P 500 Index. Some fund companies, including Invesco Ltd.,Legg Mason Inc. and Franklin Resources Inc., have fallen more than 25%. "The degree of underperformance is particularly staggering," Goldman Sachs Group Inc. analysts led by Alexander Blostein said in a note to clients on June 19 — when the money-manager index was only down about 1%. Why the disconnect? Those who follow the industry cite three main reasons: an aging bull market, outflows from active stock pickers and increasing pressure on fees. "Investors seem to think these are the last days of disco for the asset managers," Benjamin Phillips, a consultant with Casey Quirk, said in an interview.http://www.investmentnews.com/wp-content/uploads/assets/graphics src="/wp-content/uploads2018/09/CI116967914.PNG"

Weary Bull

The run-up in stocks that began in March 2009 is by some measures the longest bull market ever. The U.S. market is in "a late-inning game," hedge fund star David Tepper said in a Sept. 13 interview with CNBC. Rising equity prices have boosted the assets and the earnings of money managers, but if the market stalls out or turn downward, that reliable source of growth would vanish. Even with tailwinds, it's getting difficult for active managers to attract money. Traditional managers, or those that focus on stocks and bonds, lost an average of 2% of their assets to outflows in the second quarter, according to Goldman's estimate. "The flow situation has gotten worse," said Michael Cyprys, an analyst with Morgan Stanley. Not everyone is bleeding cash. T. Rowe Price Group pulled in a net $7.6 billion last quarter, while BlackRock, whose iShares exchange-traded fund business tracks indexes, won $20 billion. Gabelli & Co. analyst Macrae Sykes still sees "compelling values" in some managers such as T. Rowe and Legg Mason. The pressure on fees, a result of money moving to low-cost passive funds, is intensifying. Closely held Fidelity Investments created two index mutual funds in August with no charge at all, then added two more this month. While rivals have yet to follow suit, Fidelity's gambit reinforced the view that fund companies will increasingly be forced to prove that customers are getting their money's worth. Average fees globally fell almost 20% from 2013 to 2017, data from Casey Quirk show — a trend the firm expects to continue. (More: Vanguard, Fidelity, Pimco are top three fund firms among RIAs)

Latest News

The fight over the CFPB is just beginning
The fight over the CFPB is just beginning

Locked out of their offices and told to stay home, employees at the Consumer Financial Protection Bureau have asked the courts to intervene as Elon Musk and Republican leaders move to shut down the agency that was established to protect people from predatory lending and financial scams.

Business-focused wealth tech RISR lands $8B Wealthcare Capital Management partnership
Business-focused wealth tech RISR lands $8B Wealthcare Capital Management partnership

Fintech platform interVal has also introduced a new feature to help advisors support entrepreneurial business owner clients better.

LPL boosts revenue potential with amped-up alts platform
LPL boosts revenue potential with amped-up alts platform

Along with greater revenue, alternative investments also carry risks, one industry lawyer noted.

How SageSpring Wealth Partners' next-gen strategy has fueled its success
How SageSpring Wealth Partners' next-gen strategy has fueled its success

President Jeff Dobyns unpacks the strategic power of mentorship, what makes an "ideal team player," and how the firm's 89 percent success rate has paid off for veteran advisors.

Powell heads for hot-seat hearings with ongoing pressure from Trump policies
Powell heads for hot-seat hearings with ongoing pressure from Trump policies

The Fed chair is in for some "hyper-charged" meetings, with legislators likely to raise questions on tariff threats and apparent steps to comply with anti-DEI orders.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.