Bear market roils asset managers

Negative operating leverage will have a big impact on near-term profitability.

Greggory Warren, CFA 22 January, 2009 | 1:10PM
Given the unprecedented decline in the global equity markets over the last six months, it was not too surprising to see the stocks of asset management firms fall apart during the last half of 2008. With assets under management (AUM) significantly below year-ago levels, we expect to see some significant changes in the industry as revenues decline dramatically, forcing companies to cut costs wherever they can. With investors shell-shocked, it may take some time for the markets to work their way back, leaving the asset managers struggling to improve their sales and profitability in the near term. Given this environment, we expect to see competition for assets heat up, with the advantage going to those firms that have had stronger relative fund performance, can offer a broad array of products

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About Author

Greggory Warren, CFA  Greggory Warren, CFA, is a senior stock analyst with Morningstar.

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