The total assets under management (AUM) of 20 European fund managers surveyed by Moody's grew to a record high last year thanks to favourable markets and positive net flows.
The group of asset managers – which includes Allianz and Schroders – saw its combined AUM hit €12.8trn (£10.8) in the second half of 2021, which represents a 9% year-on-year increase.
Positive net flows characterised the period, with sustainable funds attracting most of the net new money, and investor demand for private assets, alternatives and multi-assets remaining strong.
However, the analysis by Moody's, published in a new report, also suggests that the war in Ukraine and rising inflationary pressures will exacerbate market volatility in the months ahead, weighing on asset managers’ revenue and profitability.
“2021 was a very strong year for European asset managers, underpinned by improving macroeconomic environment, favourable markets and increasing investor confidence,” the report states.
“Since the beginning of 2022, the operating environment has deteriorated as a result of a worsening macroeconomic outlook, geopolitical tensions, the ongoing Russia-Ukraine military conflict and tightening financial conditions aimed at tackling inflation.
“All of these have increased market volatility and eroded investor confidence, weighing on asset managers' AUM, flows and revenue.”
The findings also show that the combined fee revenue for the asset managers studied rose 5% from the first half of 2021, supported by an increase in both management and performance fees.
For a subgroup of managers that report profitability data, the aggregate EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin improved slightly to 32.1% in the second half of 2021, up from 30.2% in the first six months.
The increase reflected improvements in underlying profitability, as revenue growth outpaced growth in operating and sales costs. Leverage improved, and liquidity remained strong.
Moody's said that European asset managers have taken a number of measures to boost top line growth, from growing their ESG capabilities to making selective acquisitions to strengthen their offering in areas of interest to investors.
However, the report adds: “We do not expect a repeat of 2021's strong results in H1 2022, as market volatility will weigh heavily on the group's results.”
The asset managers studied include: Allianz Global Investors, Amundi Group, Anima Holding, Ashmore Group, Aviva Investors, AXA Investment Managers, Azimut Group, Credit Suisse Asset Management, Deutsche Asset Management, Eurizon Capital, FIL Limited, GAM, Janus Henderson Group plc, Jupiter, Legal & General Investment Management, M&G, Natixis Asset Management, Schroders, and UBS Asset Management.
Image credit: iStock
Author: Chris Seekings