Market appreciation and seasonal performance fees combined to bolster earnings in the fourth quarter (Q4), says a new report from Moody’s Investors Service, even as U.S. asset managers faced flat growth for long-term assets under management.
The industry also continues to face pressure from the impact of a general shift toward passive funds.
“Outflows from actively managed funds continued in the fourth quarter as investors favored passive vehicles to gain equity market exposure during the post-election rally,” the report says.
This shift towards lower-cost passive funds is pressuring management fees, the Moody’s report notes, adding that management fees were down 1.2% sequentially. However, performance fees, “which are seasonal and generally highest in the fourth quarter,” helped provide some support for earnings, the report says.
Asset managers also controlled expenses, allowing margins to improve modestly during Q4, the report adds.