AMs' Profits Fall 21 Percent, But ...
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Tuesday, September 19, 2023

AMs' Profits Fall 21 Percent, But ...

Traditional asset managers' growth appears to be slowing, even as alternatives asset managers' growth is accelerating, at least on average among publicly traded firms, according to the latest data from a key consulting ally to the industry. Yet the picture improved a bit last quarter.

Amanda Walters
Deloitte Consulting
Principal, Casey Quirk Practice
Publicly traded, traditional asset managers saw their median profits fall 21 percent from Q2 2022 to Q2 2023, Deloitte's Casey Quirk team revealed last week. Such firms also saw their median revenue fall three percent year-over-year.

On the flip side, alternatives asset managers fared better as a group over that same period. They had median profit growth of 17 percent between Q2 2022 and Q3 2023, and they had median revenue growth of 14 percent.

"We continue to see a strong divergence in the profitability and revenue growth of alternatives firms versus their more traditional counterparts," states Amanda Nelson, principal at Casey Quirk. She adds that the divergence is "contributing to the uptick in M&A activity ... with traditional firms buying private equity or private debt shops, lifting out teams, or seeking partnerships, for instance."

Yet the alternatives-traditional comparison is less clear when looking solely at last quarter. Traditional asset managers saw median profit growth of 12 percent in Q2 2023 (versus Q1 2023) and median revenue growth of 3 percent, compared to 10 percent median profit growth and 7 percent median revenue growth for alts firms that quarter. Scott Gockowski, senior manager at Casey Quirk, credits the Q2 2023 improvement to the rising stock market tide.

"But cost growth, including compensation, continues to tick up as managers increase human capital and technology spending," Gockowski states. "Managing these cost increases wisely will be a key strategy for managers that want to be most successful."

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