NEW YORK, NY – FEBRUARY 22, 2018 – DST Systems, Inc. (NYSE: DST), a leading global strategic advisory, technology, and operations outsourcing company today released the results of its Asset Manager Composite for the fourth quarter of 2017.
DST's Research, Analytics, and Consulting analysis of 15 public-traded firms that comprise its Asset Manager Composite1 leads to three high-level takeaways:
"Operating margins for the public asset management firms matched an all-time high of 35.1% for the fourth quarter of 2017, once again catalyzed by record revenues from asset-generated fees," said Michael Andrews, CFA, Head of Investment Products Research and Consulting at DST. "The globally synchronized "Goldilocks economy2" continued to drive record AUM, asset-generated fees, and thus margins. The intriguing question going forward is whether 2017 – overall – was indeed the peak of profitability for the asset management industry?"
Operating margins rose by 66 basis points in the fourth quarter of 2017 to 35.1% compared to the third quarter for the DST Composite group of companies. The operating margin for the Composite matched the record level achieved for the second quarter of 2015, as shown in the following graphic. Cumulative assets under management increased 4.2% quarter-over-quarter, and over 4.0% for all of 2017. The AUM level of $12.575 trillion represented the fourth consecutive quarterly all-time high for the Composite group.
Following is DST's analysis of the key fourth quarter operating metrics for the Composite group:
The fourth quarter of 2017 was a culmination of the broad-based capital markets and macroeconomic momentum that seemed to build throughout the calendar year.
The combined effect of the sizable gains – quantified above – resulted in continued market appreciation for the assets under management at most asset management firms. Key performance metrics for assets under management (AUM) and asset flows for the DST Composite companies were:
"The fourth quarter of 2017 put a bold exclamation point on what was a quarterly improving, record-breaking year for the asset management business across most metrics," said Erach Desai, senior business research analyst with DST Research, Analytics, and Consulting. "Nonetheless, we continue to see some divergence on fund flows between the "haves" and the "wanna haves." With rising interest rates and new-found volatility in the capital markets, it will be interesting to see if macroeconomic growth and a fiscal policy tailwind can enable the asset management industry to match what was achieved during 2017."
DST Research, Analytics, and Consulting Asset Manager Composite includes: Affiliated Managers Group (AMG), Alliance Bernstein (AB), Artisan Partners (APAM), BlackRock (BLK), Cohen & Steers (CNS), Federated Investors (FII), Franklin Templeton (BEN), GAMCO (GBL), Invesco (IVZ), Janus Henderson Group (JHG), Legg Mason (LM), Pzena Investment Management (PZN), SEI (SEIC), T. Rowe Price (TROW), and Waddell & Reed (WDR).
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 assist clients in transforming complexity into strategic advantage by providing tools and services to help them stay ahead of and capitalize on ever-changing customer, business, and regulatory requirements in the world's most demanding industries.
Laura M. Parsons
DST Global Public Relations
1 The complete list of 15 firms included in the DST Research, Analytics and Consulting Asset Manager Composite is provided at the end of this press release.
2 The term "Goldilocks Economy" may have been coined by David Shulman, senior economist at the UCLA Anderson Forecast, who wrote an article in 1992 titled <em>The Goldilocks Economy: Keeping the Bears at Bay</em>.
3 In Q4 2017, BlackRock crossed over to account for 50.0% of the DST Research, Analytics, and Consulting Asset Manager Composite group's overall assets (while representing 28% to 30% of revenues, depending on asset-management fees and overall revenues). Thus, it behooves us to continue to analyze some of the quarterly results by looking at the group excluding BlackRock.
4 SEI Investment is the only asset manager in our Composite that does not report net flows as an ongoing communications practice. Thus, only 14 of the 15 asset managers in our Composite report net flows.