Company Press Release

Margins Improved for Most Firms Due to Continued Expense Constraints and Higher Asset Balances

   NEW YORK, April 01, 2013 - Asset managers generally benefitted from an increase in operating margins in the final quarter of 2012, as asset balances increased and firms continued to constrain operating expenses - compensation costs in particular. Operating margins for kasina's composite of 17 asset managers increased by 225 basis points sequentially to 31.2%. However, not all companies saw an improvement, as seven of the seventeen firms posted a decline in operating margins of over 50 basis points, and margins for several firms remained largely flat q/q. In addition, slightly over half of the firms reported negative net flows in the quarter, both in their asset management (56%) and mutual fund/ETF businesses (64%). The overall increase in AUM for most firms was largely due to market appreciation. 

     Nevertheless, several firms posted significantly better results in Q4, including Alliance Bernstein and Cohen & Steers. Alliance Bernstein profited from strong gross sales of $24.1 billion in the quarter, positive net flows $5.0 billion, and a sharp reduction in compensation and other costs on both a y/y and q/q basis. The strong quarterly gross sales were primarily driven by fixed income sales in the company's retail channel.  Cohen & Steers generated an astounding 46% operating margin in Q4, up from 17% in the prior quarter and 38% in the year ago period. While the firm incurred negative net flows in the quarter, expenses fell by approximately 35% sequentially.

   Nevertheless, several firms posted significantly better results in Q4, including Alliance Bernstein and Cohen & Steers. Alliance Bernstein profited from strong gross sales of $24.1 billion in the quarter, positive net flows $5.0 billion, and a sharp reduction in compensation and other costs on both a y/y and q/q basis. The strong quarterly gross sales were primarily driven by fixed income sales in the company’s retail channel.  Cohen & Steers generated an astounding 46% operating margin in Q4, up from 17% in the prior quarter and 38% in the year ago period. While the firm incurred negative net flows in the quarter, expenses fell by approximately 35% sequentially.  

  ?Both operating margins and net margins improved for three of the four wirehouse distributors. Operating margins climbed by 313 basis points sequentially to 19.1%, while net margins increased from 11.2% in Q3 to 13.8% in the final quarter of 2012. Morgan Stanley Wealth Management’s business saw a significant improvement in both operating (17%) and net (17%) margins, largely due to higher revenue per representative and lower compensation expenses.