Moody's downgraded Waddell & Reed Financial Inc.'s issuer rating to Ba1 from Baa3 and changed the outlook to stable from negative.
The rating agency concurrently assigned a Ba1 corporate family rating to the company.
The downgrade reflects Moody's view that Waddell & Reed's competitive position within the industry has been negatively affected by sustained net outflows and inconsistent investment performance. The Ba1 rating recognizes the company's moderate scale, weak assets under management stability, modest leverage and solid pretax income margins.
The change in outlook reflects early signs of a trough in revenue, potential for slight margin improvement, and a view that changes to the company will lead to more economic diversification of its fundamental business model.