Macros Impact Bankers’ Asset Management


Dec. 4 2020, Updated 10:53 a.m. ET

Asset management trends

Higher valuations and the expectation of faster rate hikes led to withdrawals from equities and debt securities in recent quarters. Withdrawals from debt offerings increased in February and March 2018 due to the expectations of faster and higher rate hikes. Broad markets are facing the second leg of declines since February 2018.

Asset managers and banks (XLF) garnered strong long-term inflows in 2017 across active and passive offerings. The pace of inflows is expected to decline at least in debt offerings for 1Q18. If equity markets are expected to remain subdued over the next few quarters, then funds will likely slowly shift towards debt offerings.

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Inflows and a net rise

Among major bankers, Bank of America’s (BAC) Asset Management segment garnered 17% net income growth to $742 million. The growth was due to an increase in holdings’ valuations, a higher performance income, and lower spending. Bank of America is managing assets of ~$2.8 trillion as of December 31, 2017—a rise of 10% on a YoY (year-over-year) basis.

JPMorgan Chase’s (JPM) Asset Management segment saw inflows of $40 billion in 4Q17 with assets under management rising 15% on a Y0Y basis to $2 trillion. Out of the total inflows, $30 billion went into long-term products and $10 billion went into liquidity products. The segment saw a net income of $654 million in 4Q17—12% growth due to holdings’ higher valuations and new inflows.

Traditional managers like BlackRock (BLK) and State Street (STT) are receiving huge inflows towards passive offerings or ETFs across the region and product categories. The trend is expected to continue in 2018.


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