Asset managers in general have benefitted from an increase in operating margins in the final quarter of 2012, as asset balances increased and firms continued to constrain operating expenses — compensation costs in particular — according to data released by kasina.

The research firm looked at 17 asset managers, and found that their operating margins increased by 225 basis points to 31.2 percent. Not all firms saw an improvement though, with seven out of the 17 firms posting a decline of over 50 basis points. Margins for several firms also remained largely flat.

Moreover, slightly over half of the firms reported negative net flows in the quarter, both in their asset management (56 percent) and mutual fund/ETF businesses (64 percent). The overall increase in AUM for most firms was largely due to market appreciation, according to kasina. 

Here is the press release:

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Company Press Release

Margins Improved for Most Firms Due to Continued Expense Constraints and Higher Asset Balances

   NEW YORK, April 01, 2013 - Asset managers generally benefitted from an increase in operating margins in the final quarter of 2012, as asset balances increased and firms continued to constrain operating expenses - compensation costs in particular. Operating margins for kasina's composite of 17 asset managers increased by 225 basis points sequentially to 31.2%. However, not all companies saw an improvement, as seven of the seventeen firms posted a decline in operating margins of over 50 basis points, and margins for several firms remained largely flat q/q. In addition, slightly over half of the firms reported negative net flows in the quarter, both in their asset management (56%) and mutual fund/ETF businesses (64%). The overall increase in AUM for most firms was largely due to market appreciation. 

     Nevertheless, several firms posted significantly better results in Q4, including Alliance Bernstein and Cohen & Steers. Alliance Bernstein profited from strong gross sales of $24.1 billion in the quarter, positive net flows $5.0 billion, and a sharp reduction in compensation and other costs on both a y/y and q/q basis. The strong quarterly gross sales were primarily driven by fixed income sales in the company's retail channel.  Cohen & Steers generated an astounding 46% operating margin in Q4, up from 17% in the prior quarter and 38% in the year ago period. While the firm incurred negative net flows in the quarter, expenses fell by approximately 35% sequentially.

   Nevertheless, several firms posted significantly better results in Q4, including Alliance Bernstein and Cohen & Steers. Alliance Bernstein profited from strong gross sales of $24.1 billion in the quarter, positive net flows $5.0 billion, and a sharp reduction in compensation and other costs on both a y/y and q/q basis. The strong quarterly gross sales were primarily driven by fixed income sales in the company’s retail channel.  Cohen & Steers generated an astounding 46% operating margin in Q4, up from 17% in the prior quarter and 38% in the year ago period. While the firm incurred negative net flows in the quarter, expenses fell by approximately 35% sequentially.  

  ?Both operating margins and net margins improved for three of the four wirehouse distributors. Operating margins climbed by 313 basis points sequentially to 19.1%, while net margins increased from 11.2% in Q3 to 13.8% in the final quarter of 2012. Morgan Stanley Wealth Management’s business saw a significant improvement in both operating (17%) and net (17%) margins, largely due to higher revenue per representative and lower compensation expenses.   

 

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