MORGAN STANLEY: Big asset managers saw shares take a hit in 2018, and the pain is only beginning

General view of Morgan Stanley’s UK headquarters, in Canary Wharf, London. The bank is one of several rumoured to be planning a move to Frankfurt after the UK’s decision to leave the European Union. PRESS ASSOCIATION Photo. Picture date: Wednesday November 23rd, 2016. Photo credit should read: Matt Crossick/PA Wire (Photo by Matt Crossick/PA Images via Getty Images)

  • Traditional asset managers’ stocks struggled in 2018, falling 20% through the end of November.
  • A new report from Morgan Stanley said this year’s pressures could worsen in 2019.
  • One firm, however, stands out for its long-term growth potential.

Asset managers’ stock tumbled this year, and 2019 doesn’t look much better, a new report from Morgan Stanley said.

A group of 11 traditional asset managers’ share prices fell 20% through November 30. Hamilton Lane was the only manager out of its peers to show positive performance, with its stock up 7%. Fund managers Invesco and Wisdom Tree Investments took the biggest hit, with stock down 44% this year for both companies.

While BlackRock’s stock was down this year, Morgan Stanley is still bullish on the world’s largest asset manager, writing that the firm “is best positioned among peers for long-term growth.”

With markets poised for more volatility, 2019 will see many of the traditional asset managers’ pressures “persist and perhaps intensify.” The firms rely on market-sensitive revenue – the management fees they earn on assets under management – which is threatened by poor returns and a lack of net new capital.

Fee rates are also under pressure, with capital flowing out of active funds in favour of lower-fee passive products. Morgan Stanley cautions that there are no signs “that passive threats are slowing.”


See more:
Investors are fleeing active funds in the worst month for managers in nearly 2 years

“Market uncertainty and volatility should continue to dampen net flows, and operating margin pressure will further weigh on valuation multiples,” the firm wrote.

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