Prudential Financial’s (PRU) assets under management (or AUM) grew consistently over the last few years. The growth rate, which clocked ~13% year-over-year, was driven by growth in third-party retail assets. As mentioned earlier, Prudential is among the top asset managers competing with industry leaders like Blackrock (BLK), Vanguard Group, State Street (STT), BNY Mellon Asset Management (BK), and other asset managers in the Financial Select Sector SPDR ETF (XLF).
Net flows and AUM
In Prudential’s Asset Management business, net flows equal total new money that is coming into the business, minus the amount of money going out of the business due to redemption. This remains an indicator of the sentiment of investors toward the business.
When net flows are positive, it indicates more money coming in than going out of the fund, resulting in an increase in investable assets, or assets under management. A higher asset base also leads to higher fee income, as in the case of Prudential that we discussed in the previous article.
Retail business growth
The growth in retail business was driven by positive net flows of assets. Although Prudential saw a drop in the institutional net flows in 2014, the retail business experienced robust growth due to improved distribution capabilities and product lines, coupled with strong investment performance.
Prudential’s third-party assets managed on behalf of its customers increased by $35 billion, out of which $5 billion resulted from positive net inflows. The rising financial markets contributed significantly to these assets, as well as to the remaining ~$30 billion asset growth.
In the following section, we will look at Prudential’s Individual Life segment.