Asset Manager Revenue And Operating Margins Recover Solidly In Second Quarter

For the 16 asset management firms that comprise the DST kasina Asset Manager Composite, almost all pertinent metrics improved sequentially from calendar Q1 2016, while it was a more mixed picture on a year-over-year basis (compared to calendar Q2 2015). Lawrence Petrone, Director of Product Research & Consulting at DST kasina, stated: "We were very pleased with the year-over-year recovery in the Composite group margins towards the trend line despite revenues being nearly 8% lower relative to calendar 2Q 2015. The sequential improvement in operating and net margins was also commendable."

Operating results: Solid execution
Composite results for calendar 2Q 2016 recovered strongly from calendar 1Q 2016. Revenues, which are largely comprised of asset management fees, rose 3.8% sequentially. Operating margins for the 16 asset management firms that comprise the DST kasina Asset Manager Composite recovered by 240 basis points to 32.7% on a weighted basis. On a simple average basis, the Composite improved modestly by 140 basis points to 29.7%. Sequential improvement in operating and net margins was driven by top-line growth and a continued focus on expense management.

There was sequential improvement in revenues and margins in 13 of the 16 asset management firms. The asset management firms that experienced a sequential revenue decline were, not surprisingly, the same firms that saw operating and net margins decline.

Despite the sequential improvement, the year-over-year results for the composite group did not achieve the record levels achieved in 2Q 2015. Revenues of $10.3 billion in 2Q 2016 declined 3.8% from the year-ago peak level of $11.2 billion. The most recent quarter's operating margin of 32.7% was 220 basis points below the peak operating margin of 34.9% achieved last year, on a weighted basis. However, on a trend-line basis, as depicted in the margins chart, operating margins recovered nicely. The bias is still suggesting a gradual upward trend.

AUM and asset flows: A more nuanced picture
Overall assets under management for the DST kasina Asset Manager Composite rose sequentially for the fourth consecutive quarter. At the $10.214 trillion level, overall assets were just shy of the $10.234 trillion peak reached in 1Q 2015. The sequential decline in assets seen in six of the 16 asset managers was due to a variety of company-specific factors, not merely a function of firm size.

Net change in assets was largely impacted by market appreciation, net inflows, and foreign currency impact. Currency exchange rates provided a positive impact on calendar 2Q 2016 cash flows, they were  a head-wind in 1Q 2016. As seen in the flow breakout of the quarterly changes in assets 15 of the 16 asset managers provide, one of the more interesting underlying trends last quarter was continued evidence of outflows from actively-managed products to passively-managed investment vehicles.

Note: DST kasina's asset manager composite includes: BlackRock, Franklin Templeton, Invesco, Legg Mason, T. Rowe Price, Affiliated Managers Group, Alliance Bernstein, Federated Investors, SEI, Janus Capital Group, Waddell & Reed, Artisan Partners, Cohen & Steers, GAMCO, Calamos, Pzena Investment Management

About DST kasina
DST kasina LLC provides business intelligence services to the asset management industry. Led by industry experts, DST kasina's consulting engagements cover distribution strategies, marketing plans, audits, and educational seminars, each designed to help financial service firms stay ahead of the forces driving the industry while boosting their effectiveness and profitability. With DST kasina WalletShare®, clients are able to integrate marketing automation, predictive analytics, third-party data, and proprietary firm information into one powerful, easy-to-use platform. For more information on how to leverage DST kasina's business solutions, visit www.kasina.com

About DST
DST Systems, Inc. (NYSE: DST) is a leading provider of specialized technology, strategic advisory, and business operations outsourcing to the financial and healthcare industries. We enable clients to transform complexity into strategic advantage by helping them continually stay ahead of and capitalize on ever-changing customer, business and regulatory requirements in the world's most demanding industries. For more information, visit the DST website at www.dstsystems.com.

Media Contact:

Laura M. Parsons
DST Global Public Relations
+ 1 816 843 9087
[email protected]

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SOURCE DST kasina LLC

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