The world's top asset managers list is seeing many familiar faces, some are pure/predominant asset managers while others are either banks - e.g. JPMorgan (JPM), Goldman Sachs (GS), Deutsche Bank (DB) - or insurers, such as Allianz (OTCPK:ALIZF), Axa (OTCQX:AXAHF, OTCQX:AXAHF), and Prudential Financial (PRU).
Asset-manager stocks were down, on average, 10.5% in October, after being down over as much as 15% earlier this week (till and including 10/29/2018).
As poor as the performance over the past month was, asset-manager stocks have underperformed long before Red October came into play.
They are now down about 20.3% YTD, on average.
|Asset Manager||TR-October||TR-YTD||Market Cap|
|Blackstone Group LP (BX)||-13.3%||+8.7%||38.94B|
Apollo Global Management LLC (APO)
|The Carlyle Group LP (CG)||-10.1%||-8.3%||6.79B|
|BlackRock Inc (BLK)||-12.7%||-18.5%||66.14B|
|Charles Schwab Corp. (SCHW)||-5.9%||-9.4%||62.47B|
Bank of New York Mellon Corp. (BK)
|T. Rowe Price Group Inc. (TROW)||-11.2%||-5.9%||23.34B|
|Eaton Vance Corp. (EV)||-13.6%||-18.1%||5.34B|
|Franklin Resources Inc. (BEN)||+0.3%||-21.9%||15.83B|
|State Street Corporation (STT)||-17.9%||-28.6%||26.09B|
|Federated Investors Inc. (FII)||+2.3%||-29.5%||2.48B|
|Invesco Ltd. (IVZ)||-5.1%||-38.7%||8.93B|
|Affiliated Managers Group Inc. (AMG)||-16.9%||-44.3%||6.07B|
|Och-Ziff Capital Management Group LLC (OZM)||-20.3%||-50.5%||584.4M|
With its October plunge, BlackRock is the main one to blame for the selloff we've witnessed in asset-manager stocks.
As we wrote earlier this month, it's Much More 'Black', Much Less 'Rock' for financials this year.
Asset managers are dealing with three main-burning issues. To wit:
1. AUM Outflows
The volatility of flows in and out of iShares iBoxx $ High Yield Corp Bd ETF (HYG), BlackRock's $14.4B US high-yield bond ETF, has been tremendous and accelerating. This suggests that there is a lot of institutional involvement here and a great deal of disagreement as to market direction.
2. Shift of focus (Abandoning the traditional profit drivers)
A big takeaway from BlackRock's earnings is the increasing focus on their technology unit, where revenue increased 18%. CEO Larry Fink said he hopes this unit will produce 30% of the firm's revenue by 2022.
It speaks volumes that the biggest ETF issuer in the world (and the only company who is even close to Vanguard, flow-wise) is aggressively diversifying away from fund management businesses.
I'm wondering whether BlackRock is looking ahead to a new model of fund management in a zero-fee era where tech support/applications/trading platforms are the revenue drivers and fund management is the enticement/public?...
3. Fierce competition that drives fees (too?) much lower.
Last week, Prudential (PRU) has quietly launched the cheapest active equity ETF, priced at only 0.17%* per annum. Unless I'm mistaken, this is the cheapest active equity and fixed income ETF in the market.
*Indeed, Vanguard's factor and iShares evolved ETFs are cheaper, but they are traditional-active, not pure active
BlackRock Germany's (EWG) Chairman of the Supervisory Board, Friedrich Merz, who is now running to succeed Angela Merkel as head of the CDU party, says he intends to counter the rise of populism with an emphasis on national identity.
I guess that when it comes to BlackRock's AuM - it's the exact opposite... The firm needs to increase populism (towards its products) with no emphasis on national identity at all...
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Disclosure: I am/we are long JPM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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