Mercer Capital’s Asset Management Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to asset managers, trust companies, and investment consultants. Each issue includes a segment focus, market overview, mergers and acquisitions review, and more. Segments covered are mutual fund companies (1st quarter), traditional asset mangers (2nd quarter), alternative asset managers (3rd quarter), and trust banks (4th quarter).
The Q1 2013 issue segment focus is Mutual Fund Companies. Excerpting from the discussion of trust banks in the newsletter:
Despite varied results, most publicly traded mutual funds outperformed the broader indices over the last year in a favorable market environment and long awaited return of asset flows into equity products. According to Morningstar, open-end US stock funds brought in $12 billion in the first three months of 2013, marking the first positive quarter for domestic equity funds since the beginning of 2011 and the best quarter overall since 2004. In spite of this trend reversal, taxable bonds led all other asset classes in fund inflows for the 19th consecutive month at the expense of money market funds, which tallied a $93 billion outflow for the quarter. These dynamics suggest that retail investors are willing to stomach some credit risk for higher yields and are more comfortable committing cash to equity funds as market conditions continue to improve….
As always, the outlook for these businesses hinges on market performance and asset flows. Any continuation of the recent momentum on both these fronts would certainly be a boon for mutual fund providers who are just now starting to regain favor with retail investors. Another market downturn, on the other hand, would likely precipitate asset flows out of equities and into fixed income or money market funds with lower fees to their sponsors. Independent of market conditions, ETFs continue to pose both a threat and an opportunity to mutual fund providers while the Financial Stability Oversight Council’s recent proposal on MMF reform offers additional challenges for these businesses moving forward.
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