Fitch Ratings: Investment managers with mass retail focus suffer weaker flows
Pressure has remained on fees as competition increases, regulation tightens and value for money assessment require firms to demonstrate their prices are fair.
According to the ratings agency, companies with a mass retail focus — such as Jupiter Asset Management and Anima — have seen weaker net flows compared to those targeting institutional and high-net-worth clients.
This was because investors within the latter category tended to be «more stable...sticky» clients, whereas predominantly mass retail client bases «are more prone to net outflows due to customer risk aversion in uncertain financial markets».
Fitch also found that offering more in-demand strategies, such as passives and private assets funds, had generally resulted in net inflows, something institutional fund houses had been focused on.
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The agency added that it expected fixed income-focused mangers to attract higher inflows once interest rates stabilise.
Money market funds have also seen higher inflows due to higher yields, Fitch noted, but the spotlight will be on their ability to retain and convert those flows into longer-term assets, as it will be key for the companies' resilience.
Despite differing levels of flows, investment managers' profitability has remained robust, the ratings agency found, with (F)EBITDA margins still mostly above 20%, despite market declines in 2022 impacting assets under management-related fees.
Fitch recognised the continued profitability was largely due to companies' flexible cost bases with variable distribution and compensation costs. Yet fee pressure has remained as competition increases, regulation tightens and value for money assessments require firms to demonstrate
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