How equities impact asset managers
The performances of State Street (STT) and other asset managers (XLF), including BlackRock (BLK), T. Rowe Price Group (TROW), and Invesco (IVZ), are heavily influenced by their total AUMs (assets under management). Their AUMs depend primarily on the performance of the equity markets as well as inflows and outflows.
The weaker performance of the equity markets in the first quarter negatively impacted asset managers’ total AUMs. Equity markets are affected by the global parameters impacting the economy. Total AUMs help asset managers generate base fees. The higher the AUM, the more the asset manager’s base fee.
State Street exceeded analysts’ expectations for EPS and revenues in the first quarter. Its revenues rose 13% year-over-year due to its net interest income. However, servicing fees were also a contributor. Management reflected positive views for this year’s financial objectives.
State Street’s performance is also impacted by interest rates since rising rates could improve its net interest income. Its trading services revenue also serves as a component of its total revenues, which are positively impacted by a boost in trading activities.