Asset Managers: Signs of Hope

S&P Ratings says the recent recovery in equity markets leaves room for cautious optimism on the sector

By Diane Hinton From Standard & Poor's RatingsDirect

Amid continued volatility in equity markets, the performance of the global asset managers rated by Standard & Poor's Ratings Services weakened in First Quarter 2009, as assets under management (AUM) continued to decline, hurting top-line revenues in the process. As in the two previous quarters, market depreciation largely caused the drop in AUM, but net outflows were a substantially greater contributor to AUM declines than they had been in previous quarters.

In this context, a handful of rated asset managers' performance in first-quarter 2009 was harder hit, and we took negative rating actions on these because of their weakened debt-servicing ability. Overall, however, the industry remained profitable, as cost-cutting measures began to produce positive effects on operating margins. Individually, most of the rated asset managers also performed within the parameters of our stress test, although the performance was weaker than we expected for some.

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