While the probe into whether Pimco juiced the returns of its Total Return ETF highlights the boosted regulatory scrutiny the entire asset management industry faces, it nevertheless offers an opportunity for Pimco's rivals to pick up market share, says Citi's William Katz.
"First order beneficiaries," says Katz, are BlackRock (BLK +0.6%), AllianceBernstein (AB -0.3%), and Legg Mason (LM -0.1%), followed by Franklin Resources (BEN +0.7%) and Invesco (IVZ). He's quick to point out the gains should be marginal and general industry pressure on fixed income likely looms more important. One who should escape heightened regulatory oversight is WisdomTree (WETF +0.2%) thanks to its minor fixed income business.
AllianceBernstein (AB +1%) bucks the early downtrend in the markets after Bank of America throws in the towel on its Underperform rating, upgrading the stock to Neutral with price target lifted to $29 from $27.
The latest data from Invesco (IVZ -2.1%) suggests U.K.-related attrition is manageable and no major increase in retail redemptions have taken place, says Citi's William Katz, maintaining his Buy rating and $47 price target.
At Artisan Partners Asset Mangement (APAM -8.1%), however, inflows appear to have disappeared, leaving the firm with small outflows. "We suspect the acceleration in U.S. Value outflows may be related to a lumpy mandate loss while we are encouraged by the initial disclosure of assets for High Yield," says Katz, maintaining his Buy rating and $72 price target.
Taken together, and adding in figures from Franklin Resources (BEN -2.2%), "point(s) to uninspiring equities flows, which likely suggest tough(er) flow backdrop for the industry at large." Standing out, says Katz, may be Waddell & Reed (WDR -3.7%) which announced $3.5B in inflows QTD back in early March.
AllianceBernstein (AB +3.6%) zips higher in early action after easily surpassing Q4 earnings estimates, with adjusted operating income of $185M (up 55% Y/Y) on revenue of $766M (up 9%). Operating margin of 29% gained 840 basis points from a year ago.
Revenues were driven higher by strong markets and resulting strong performance-based fees. Operating expenses of $571M fell 9% from a year ago thanks to lower G&A costs.
AUM of $450.4M gained 1.2% from the end of Q3 and 4.7% from a year ago. Net outflows of $10.3B during Q compares to outflows of $4.8B the previous quarter - with the increase related to AXA's sale of MONY Life Insurance and the resulting loss of $6.8B in fixed-income assets. As these are low-fee assets, the loss won't have a material impact on results. Retail net outflows of $3.9B compares to $600M in Q3.
AllianceBernstein Holding L.P., provides research and investment management services and related services, to a range of clients through institutions, retail and private client, and its sell-side business, Bernstein Research Services.