Asset Managers' Margins Back to Pre-Crisis Levels
March 7, 2011
Rising markets and belt tightening boosted asset managers' net margins to 23.4% in the fourth quarter, up from 21.1% in the third quarter, Kasina reported. This puts margins back to the level they were at before the credit crisis of 2008.
"Firms are above pre-crisis profit margin levels, supported by a combination of surging markets and some belt tightening," said Eric Daugherty, director of research and principal at Kasina. "From an operational perspective, many firms are actually in a better position than they were in 2007 and 2008. Margins are back to attractive levels-but the market is still substantially below its high."
Among large asset managers with strong margins, Franklin Templeton and BlackRock stood out, Kasina said, while among smaller asset managers, Pzena and Calamos were leaders.
Daugherty said it now remains critical for fund firms to keep their costs low as they delicately balance investments in technology and innovation to compete in the long term.
Kasina recommends that firms continue to focus on their core competencies, leverage the power of the web to distribute cost effectively, build strong national accounts teams and focus their distribution efforts on the most profitable market segments and advisers.
One in Three Expect Economy to Improve
Thirty-four percent of the 3,171 adults that The Harris Poll surveyed in February expect the economy to improve in the coming year, 42% expect it to stay the same and 25% think it could get worse.
Those who are hopeful about the economy rose five percentage points from 29% in December. At that time, 45% thought it would remain the same and 26% thought it could get worse.
While Americans continue to have a negative outlook on the job market, they are not quite as pessimistic as they were two months ago; 61% say the job market in their region of the nation is bad, down from 65% in December. Currently, 24% rate it as neutral, and 15% say it is good.
Looking ahead, 51% expect the job market in their region to remain the same, 31% expect some improvement and 18% think it could get worse.
By region, those in the East are the most optimistic, with 24% rating the job market as good. However, only 17% of Southerners, 13% of Midwesterners and 7% of Westerners say it is good.
The Harris Poll said it will take time for people to feel good about the economy, even though it is improving, because "perceptions on the economy always lag behind reality. People wait until they feel more secure about their job, or the prospect of finding a new one, before they say the job market is solid again.
Fund Managers Bullish on Equities, Emerging Markets
Fund managers are bullish on the prospects for equities and emerging markets in 2011, but have bearish views on government bonds, a survey of 141 fund managers at the end of 2010 by Towers Watson found.
The managers expect the economy to grow in the coming year and to avoid a double dip recession due to low central bank rates and mild inflation. MME
Quote of the Week
â€œThe higher the oil price goes and the longer it stays higher, the more it has a direct impact on growth by curtailing it to some degree.â€
- Wasif Latif
VP of Equity Investments, USAA Investment Management