(Finance) – The financial market volatility is putting assets under management (AUM) under pressureor the market value of all managed funds, of European investment managers. This was stated by Fitch Ratings in a new report on the subject, underlining that this is also threatening to weaken the profitability of the sector.
This will not result in downgrades in the short term, as most of the European asset management giants have low leverage and large and diverse franchises, factors that help support financial metrics, including generally large EBITDA margins. “However, investment managers with higher leverage or smaller, more concentrated franchises could face profitability challenges if equity and bond markets remain volatile,” the research reads.
Movements in financial markets had a negative effect on the AUM of investment managers followed by Fitch in the first quarter of 2022, accelerating in the second quarter as investors became more troubled by recessive fears and high inflation. However, the Most companies experienced new positive net cash flows in the first six months of the year, which partially offset the negative market effect on the AUM.
L’Average AUM decreased by 2% in the first half of 2022. The research, which analyzes a limited number of players in the sector, shows that the decrease in assets under management due to market volatility was almost 5% for Amundi in the second quarter, more than 7% per Soulover 4% for Azimuthover 8% for Jupiter and about 6% for Man.
According to the rating agency, in the current climate the traditional ones actively managed long only products they have become less popular due to investors’ risk aversion. “Investment managers with diversified franchises may be able to mitigate the negative impact on AUM and profitability by attracting investors in passive products – says the study – They can also try to attract investors to alternative strategies which may require higher commissions, with less competition from passive products. “
Analyzing the evolution of the sector, Fitch states that the industry consolidation will increase in the second half of 2022 and 2023, as players with solid balance sheets will seek to improve their scale and diversification to counter difficult market conditions.