Trade tension’s effects
Donald Trump’s imposition of additional tariffs on $200 billion in Chinese imports has increased trade tension, which could impact the global economy and business. The asset management industry (XLF) could be impacted by allocations toward equities and investor confidence falling.
Aggressive monetary policies affect asset managers, as they prompt investors to deploy debt capital and liquidate their equity holdings, leading to markets correcting. Therefore, if T. Rowe Price’s (TROW) AUM (assets under management) fall, its investment advisory fees might follow, reducing its net revenue. In the first quarter, of T. Rowe Price’s total investment advisory fees of $1.18 billion, $832.9 million was collected from US mutual fund investors.
The Fed is expected to remain hawkish in H2 2018, with expectations for two rate hikes. However, if trade tension slows hikes, equities might see higher inflows, which could boost asset managers’ AUM.
Since trade tension can impact overall economic growth, asset managers BlackRock (BLK) and Invesco (IVZ) may also be affected because of their ETFs’ exposure in different industries. In June, asset manager Franklin Resources’ (BEN) AUM fell month-over-month to $724.1 billion.