Asset Managers Prepare For Staff Reductions & Streamlined Offerings
Update
Asset managers have continued to record outflows, underperformance, and declining revenues in the opening weeks of 2023, continuing the trend set in motion during Q4 2022 results season.
With another challenging year ahead experts are anticipating significant cost cutting, while firms themselves are looking to refine their product offering to ensure it is fit for purpose.
Bank of America heralded the beginning of the year by downgrading its outlook for UK asset managers, such as Schroders or Ninety One, due to their higher sensitivity to recessionary risks, near-term flow headwinds, and premium valuations.
In mid-January, BlackRock revealed the sheer impact of last year's markets, as it reported that $1.4trn of its assets had been wiped out and profits took a hit.
In a memo seen by the Financial Times, chief executive Larry Fink said the environment was "unlike anything we have seen in decades".
If his prose were not enough to cause a disturbance in the industry, the news that it would cut 500 jobs worldwide - a 2.5% reduction in its workforce - did.
As the largest fund manager in the world, BlackRock is often used as a comparator for the industry and other firms' fourth-quarter results have indeed revealed similar challenges.
Liontrust reported net outflows of £632m for the three months in its Q4 results, and while Rathbones had net inflows, these were offset by negative market movement meaning its total funds under management and advice still declined to £60.1bn at the end of 2022, compared to £68.2bn at the end of 2021.
Polar Capital also reported a decline with its AUM dropping to £18.5bn at the end of 2022, compared to £22.1bn at the end of March 2022.
"2022 has been a challenging year for asset managers with high geopolitical and macroeconomic uncertainty," said Markus Habbel, partner at Bain & Company. "The resulted adverse impact on AUM with additional continued fee compression exposed the economics of the asset managers".