Assets are on the rise at a Des Moines, Iowa-based insurer's asset management arm, even as flows swing negative and as earnings slip. Two senior leaders say the units is off to a good start in the third quarter of 2023.

Patrick G. "Pat" Halter Principal Asset Management President, CEO

Last week, the Principal Financial Group team released their Q2 2023 earnings report. For their Principal Global Investors (PGI) [profile] unit, they reported pre-tax operating earnings of $125 million in Q2 2023, down 31 percent from $180 million in Q2 2022. Also, per the 43-page financial supplement released last Thursday alongside Principal's Q2 2023 earnings report, PGI had an operating margin of 35.2 percent in Q2 2023, down year-over-year from 41.8 percent in the second quarter of 2022.

PGI's total AUM on June 30, 2023 was $485.8 billion, more than three percent higher than the $469.8 billion it had on June 30, 2022. The fund firm suffered $3.6 billion in net outflows in Q2 2023, down from $400 million in Q1 2023 inflows and $1.4 billion in Q2 2022 inflows.

"The third quarter is off to a good start for global asset management, as we are seeing momentum build across high yield and core fixed income, specialty equity strategies, local solutions in our international markets and select real estate property types such as data centers," said Dan Houston, chairman, president, and CEO of Principal, during Principal's Q2 2023 earnings call.

Suneet Kamath, analyst at Jefferies, asked the Principal staff on confidence "in terms of flows improving" in the second half of this year. Houston responded in the affirmative that the Principal team feels "really good about the second half of the year."

Pat Halter, president and CEO of Principal Asset Management, added to the response, saying, "The market tone has very much improved. We're starting to see momentum in terms of capital raising."

In response to Autonomous Research partner Erik Bass' question about money "coming back to the market," Halter said, "I think the passive sort of the share of the marketplace continues to increase."

Halter also revealed that the company intends to continue to grow in SMAs and is looking to grow again in CITs as well.

Jimmy Bhullar, analyst at J.P. Morgan, asked whether or not the optimism stems from clients' actual commitments. Halter says the optimism is based on conversations with clients and "with the markets themselves."  

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