trending Market Intelligence /marketintelligence/en/news-insights/trending/Xcu8ETK1Y_oAaiKBgqCDQw2 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Riding equities' highs in '17, asset managers turn to diversification for growth

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them

Street Talk Episode 66 - Community banks tap the debt markets while the getting is good

Street Talk Episode 67 - Veteran investor tabs Mick Mulvaney to help with latest financial stock-focused fund

Street Talk Episode 65 - Deferral practices trap US bank portfolios in purgatory

Riding equities' highs in '17, asset managers turn to diversification for growth

Traditional asset managers were able to count on rising equity markets to grow in 2017, but many are looking to other avenues, such as more hybrid strategies and a new emphasis on alternatives, to sustain growth as 2018 approaches.

Three-quarters of the largest publicly traded asset managers saw their assets under management expand from the third quarter of 2016 to the 2017 third quarter, according to an S&P Global Market Intelligence analysis.

Altering their business models has given several companies a boost. Managers have incorporated passive strategies, such as exchange-traded fund platforms, to drive growth. The development of hybrid management models that combine passive products with some active management is one of the rationales Moody's cited for changing its outlook on the industry to "stable" from "negative" in a recent report.

"Key drivers of the stable outlook are the emergence of new products that blend features of active and passive management and the use of passive instruments as inputs in active disciplines," the rating agency said.

The industry continues to see declining fees as competition with low-cost passive investment strategies drives prices down, and from incorporating those products into their own suites. Companies will have additional headwinds from the January 2018 implementation of European regulations intended to encourage greater fee transparency, Moody's said.

SNL Image

One factor that helps larger asset managers sustain growth is scale, which lets them absorb extra expenses for compliance costs and technology investments. But diversification is another key attribute, Keefe Bruyette & Woods asset manager analyst Robert Lee said.

Diversified strategies within equities and a diversified business model that also offers investments in fixed income, alternatives and multi-asset classes also helps, Lee said in an interview.

"Done well, it makes for more sustainable growth, but it doesn't guarantee it," he said.

Companies can also diversify their businesses on the distribution side, by selling through more retail and institutional channels and mixing in non-U.S. channels with domestic ones, Lee said.

Invesco Ltd. has been looking for growth by shifting some investment products originally designed for institutional clients into retail channels, CFO Loren Starr said during a recent conference.

"I think we're still probably in the early innings in terms of what we can do there," Starr said, according to a transcript.

As traditional investment yields have tightened, asset managers can also develop products that meet the growing demand for alternative strategies, Lee said. Because alternatives tend to command higher fees, companies can scale that business line with fewer assets, he said.

BlackRock Inc. has been growing its alternative business under the radar, President Robert Kapito said at a conference. The company has gathered $100 billion in capital for alternative strategies, Kapito said, according to a transcript.

"So in a [stealthy] way, I guess, we are in alternatives, and that has become even more important as yields remain very low on fixed-income instruments," he said.

The newly signed tax reform law should give asset managers a one-time boost, but lower taxes would not be a driver of growth, Lee added.

"I don't know that it changes any managers' growth outlook or profitability outlook," he said.

SNL Image