Publicly-Traded Asset Managers Outshine Those Inside Conglomerates
Reported by Neil Anderson, Managing Editor
Asset manager margins remained flat last year, with publicly-traded firms outshining those who are part of larger conglomerates. That's one tidbit of data released today by the fundster management consultants at Darien, Connecticut-based Casey, Quirk & Associates.
The Casey Quirk team analyzed 21 publicly-traded U.S. asset managers and 12 publicly-traded U.S. financial conglomerates' asset management subsidiaries. They found that the median margin stayed at 27 percent from 2010 through 2011, despite substantial market volatility.
The independent asset managers had median margins of 35 percent and revenue growth of 15 percent in 2011, compared to 25 percent margins and six percent revenue growth at the conglomerates' asset management subsidiaries.
"Independent asset managers, whether publicly traded or employee-owned, usually generate stronger cash flow than subsidiaries of larger financial firms," stated Jeb Doggett, a Casey Quirk partner. "Because independent firms often can offer to share the asset management economics more directly with their employees, they can compete more aggressively for key industry talent."
Company Press Release
ASSET MANAGEMENT PROFITABILITY STABLE; REVENUE GROWTH DOWN IN 2011, ACCORDING TO CASEY QUIRK
DARIEN, Connecticut, March 8, 2012 – Profitability among 21 publicly traded U.S.-based asset management firms, along with the asset management subsidiaries of 12 quoted U.S. financial institutions, remained flat during 2011, with the median operating profit margin hovering around 27 percent for both 2010 and 2011, according to recent analysis from Casey, Quirk & Associates LLC, a leading management consultant to the global asset management industry. Median annual revenue growth among the 33 firms analyzed rose only 8 percent in 2011, compared with the 22 percent increase in 2010, reflecting volatile capital markets.
Importantly, America’s quoted investment firms continue to outperform asset management subsidiaries of larger financial conglomerates. Publicly traded asset managers posted median profitability of 35 percent last year, compared to 25 percent for subsidiaries, and grew revenues 15 percent during 2011, compared to similar metrics of 6 percent for subsidiaries.
Metrics from the 21 listed U.S. managers and 12 subsidiaries analyzed tend to reflect the entire industry, comprised mostly of privately held firms. Asset managers participating in Performance Intelligence, a financial benchmarking initiative that includes private companies, and is conducted in concert with Institutional Investor, Casey Quirk and compensation consultants McLagan, reported median operating profit margins of 28 percent in 2010, similar to the quoted sample, while the median annual revenue growth in 2010 was 18 percent, slightly trailing the quoted sample’s 22 percent expansion. Preliminary Performance Intelligence numbers for 2011 will be available in the second quarter.
"Independent asset managers, whether publicly traded or employee-owned, usually generate stronger cash flow than subsidiaries of larger financial firms," said Jeb B. Doggett, a Casey Quirk partner who oversees the Performance Intelligence initiative. "Because independent firms often can offer to share the asset management economics more directly with their employees, they can compete more aggressively for key industry talent."
Consistently growing and profitable asset managers among the quoted sample include firms with strong investment leadership, a wide range of innovative products, efficient retail distribution and a global client base, said Doggett, adding that specialist firms emphasizing a single investment or distribution skill also perform well.
"While cost-cutting and M&A can have a positive short-term impact on revenue growth and margins, they’re blunt and often unreliable instruments for the long term," said Casey Quirk partner Kevin P. Quirk. "True revenue growth and profitability in fund management only stem from sustainable competitive advantages in investments, distribution and talent retention."
About Casey, Quirk & Associates LLC
Casey Quirk is a management consultant that focuses solely on advising investment management firms. Casey Quirk’s work with senior leadership teams includes broad business strategy reviews, investments/product positioning and strategy, market opportunity evaluations, organizational design, ownership and incentive structuring, and transaction due diligence. In the past five years, Casey Quirk has advised a majority of the top 25 investment management organizations worldwide. For more information please visit www.caseyquirk.com.