Casey Quirk: Both Assets and Revenue Under Pressure at Publicly Traded Asset Managers in Q1 2022

NEW YORK and STAMFORD, Conn., May 24, 2022 /PRNewswire/ -- Publicly traded asset managers experienced a challenging first quarter of 2022 as both revenue and assets under management declined along with broad selloffs in the bond and equities markets, according to research from global asset management strategy consultant Casey Quirk, a Deloitte business.

According to Casey Quirk's analysis of 18 listed asset managers in North America with a combined $20 trillion in assets under management (AUM) as of March 31, 2022, the median traditional manager saw a -6% AUM and -7% revenue drop versus the fourth quarter of 2021, although assets are still up 4% and revenues are flat versus the same period in 2021. This decline is due to capital markets and tepid flows, with margins coming under pressure for the first time in seven quarters.

Management fee revenue for the seven listed alternative asset managers tracked by Casey Quirk declined by 2%. "For the first time since Q2 2020, revenues, assets and profits are all down for asset managers," said Scott Gockowski, senior manager at Casey Quirk. "However, it's important to note that the headwinds in Q1 are in stark contrast to the fourth quarter of 2021, where many of the measures we track related to these businesses were at historic highs."

Operating expenses for the median traditional manager contracted -2% from their high watermark in the fourth quarter of 2021. Q4 2021 was also a record quarter for compensation, but Casey Quirk expects 2022 to be more modest should current market volatility continue, even though several firms expect to spend down profits to retain top talent.

Median traditional managers also saw -7% declines in non-compensation costs realized by trimming expenses in response to the revenue and asset declines. These expenses are higher, though, than the first quarter of 2021, driven by a range of factors including increasing technology and data costs; travel and entertainment spending; and marketing and promotional costs.

Flows remained tepid in Q1 2022 at just under 1% of assets from the beginning of the period, with passive products and non-mutual fund vehicles such as ETFs and SMAs being most favored by investors. Fund flows for traditional managers were just 1% on average for each quarter in 2021 — despite positive capital market performance, many firms are still struggling to "move the needle" with organic growth.

"We are watching market performance for the remainder of the year closely, as it will be a key determinant of both revenue and expense growth for the sector," said Amanda Walters, a principal at Casey Quirk. "If current performance headwinds persist, 2022 could be one of the most challenging years we've seen since the financial crisis and we could experience a reversal in asset management growth trends."

Casey Quirk, a business of Deloitte Consulting LLP, is a leading management consultancy that focuses solely on advising asset management firms. Casey Quirk was established in 2002 and acquired by Deloitte in 2016. The organization has advised a majority of the 50 largest asset management organizations worldwide, including eight of the top 10. Casey Quirk provides senior leadership teams with broad business strategy reviews; investment positioning and strategy consulting; market opportunity evaluations; organizational design; ownership and incentive structuring; and transaction due diligence. For more information, please visit www.caseyquirk.com.

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SOURCE Casey Quirk