Strong 4Q for Money Management Firms

The fourth quarter of 2010 witnessed a healthy rebound in asset manager margins, according to kasina.

The strong showing was supported by an 11% gain in The Dow Jones Total Stock Market Index, kasina found. Quarter over quarter, industry operating margins increased from 27.5% to 31.4%, and net margins increased from 21.2% to 23.4%. Firm-to-firm variations remain, but overall, margin compression pressures and worries that were prevalent in early 2010 have eased.

“Firms are above pre-crisis profit margin levels, supported by a combination of surging markets and some belt-tightening,” said Eric Daugherty, Director of Research and Principal. “From an operational perspective, many firms are actually in a better position than they were in 2007 and 2008. Margins are back to attractive levels, but the market is still substantially below its high.”

Although firms tend to cluster in a pack, the results highlight the opportunities for both large scale players and small, niche asset management firms. Leading the large firms were Franklin Templeton and Blackrock, while Pzena and Calamos continue to lead the smaller firms in operating margins, kasina reported.

The company said asset managers continue balancing gains in short-term profits, with investing adequately in technology and innovation, to build industry leading organizations for the long term.