Management fee revenues by European asset managers climbed by 10% during the second half of 2020 thanks to an increase in assets under management and stronger fund inflows, according to research by Moody’s Investor Service.
Fee income in the second half of 2020 was similar to the pre-pandemic H2 2019 period (see chart). Fund flows also gained momentum over the period, with European fund managers reporting total net inflows of €156 billion, as investor confidence improved thanks to central bank and government support, and optimism over coronavirus vaccine roll-out. Meanwhile, helped by a strong rebound in stock markets European fund managers’ assets surged to a record €11.3 trillion.
Independent asset managers’ EBITDA margins rose to 32% compared with 29% in the first half of the year due to higher management fees, lower operating expenses and stable distribution costs. The pandemic has also cut travel and marketing costs.
Though the European asset manager industry recovered strongly overall in H2 2020, some mainly UK-based asset managers continued to struggle. Aberdeen Standard Investments (ASI), Janus Henderson, M&G and Jupiter all continued to see net outflows in H2 2020. The same goes for Switzerland’s long-time problem child GAM. All five asset managers have bled assets continuously for at least the past five semesters, with Jupiter, GAM and ASI all losing close to a fifth or more of their assets over the period.
Negative outlook
Despite the bumper second half of the year, Moody’s outlook for the global asset management industry remains negative, as the coronavirus crisis will intensify long-term challenges. “Financial markets and investor flows remain at risk from the uneven global economic recovery. Trends such as a deteriorating operating environment, changing investor preferences, and a highly competitive market have also intensified during the pandemic,” said Marina Cremonese, Vice President – Senior Analyst at Moody’s Investors Service.
Despite these negative macro trends, EBITDA margins could remain near current levels, however, because the transition to remote working in light of the coronavirus pandemic ‘could lead to permanently lower office-related costs and travel expenses’, according to Cremonese.