US listed fund managers came back to earth last year as both profit and asset bases declined after hitting record highs in 2021, according to new Casey Quirk data.
The Deloitte-owned US consultancy firm found median revenue in the listed manager sector fell 4 per cent year-on-year while assets under management (AUM) sank 16 per cent.
By contrast, average listed fund manager revenue rose 20 per cent in 2021 with AUM spiking some 14 per cent over the 12-month period.
“Organic growth was down 1% in 2022 as compared with a positive 3% in 2021 and profit declined by 6% versus an increase of 33% for the year earlier,” the Casey Quirk release says. “Despite these challenges, operating margins remained healthy for the industry at 34% and revenues still surpassed 2020 levels at $63 billion.”
But the broad market figures obscure industry dynamics that saw listed alternative managers (private equity, for example) grow assets, revenue and profits by 11, 20 and 27 per cent, respectively.
Traditional fund managers, meanwhile, felt the brunt of the market downturn with collective AUM down 17 per cent as revenue (-9 per cent) and profits (-12 per cent) tumbled.
Amanda Walters, Casey Quirk principal, said in a statement that the split “between traditional and alternatives firms became even more stark in 2022”.
“From a financial perspective, the differences are dramatic, both in terms of revenues and profits as many alts firms had strong flows from both the retail and insurance channels as investors sought yield and excess returns,” Walters said.
Despite the downward pressure on margins mainstream fund managers kept recruiting over 2022, lifting the overall headcount for the sub-sector by 1 per cent; alternative counterparts saw employee numbers jump by 14 per cent year-on-year.
“Continued hiring increases in the current inflationary environment and growing technology expenses mean that cost structures are becoming less flexible,” Casey Quirk says. “In past periods of market decline, managers were able to quickly adjust variable compensation to prevent severe margin compression.”
The specialist consultancy business also warned the entire sector, including alternative managers, would face ongoing challenges in 2023 amid market volatility and macro-economic headwinds.
“In this environment, asset managers have articulated a range of cost containment initiatives including reductions in discretionary spending, hiring freezes and decreases in headcount,” the release says.
The study captured 17 North American-listed fund managers, reporting a total US$17.6 trillion under management as at the end of last year.
Casey Quirk consults exclusively to the funds management sector with a focus on the big end of town.