Operating margins of publicly traded asset managers ticked down to 30.5% in the first quarter of 2011, down from 31.4% in the previous quarter, Kasina said. Net margins decreased from 23.4% to 22.1%.
“Firm profits are slightly off a three-year high reached in the fourth quarter of 2010,” said Steven Miyao, chief executive officer and founding principal of Kasina. “However, this is consistent with what we saw in the first quarter of 2010, as well, where assets grew but margins did not keep page. This year, firm operating margins are down from their fourth quarter peaks despite overall asset growth of 3%.”
Among large asset managers, those with the strongest margins are Franklin Templeton, BlackRock and T. Rowe Price. Among small asset managers, Pzena and Calamos have strong margins, Kasina said.
With price-to-earnings ratios at historical fair market values, asset managers cannot count on robust markets to drive asset growth, Kasina said. Instead, the research and distribution consultancy recommends that asset managers concentrate on ways to serve the retirement income needs of Baby Boomers, who command more than $8.5 trillion in investable assets.
In addition, Kasina recommends that asset managers leverage the power of the Internet, social media and mobile to distribute cost effectively, and direct the firm’s most valuable resources on high-value advisers.