Record profits for listed fund managers

Listed fund managers racked up record profits of $40bn last year as operating margins hit a seven-year high of 33 per cent.

According to global analysis by Casey, Quirk & Associates, an industry consultant, average profit margins are now just one percentage point below their 2007 pre-crisis peak of 34 per cent, having hit a low of 26 per cent in 2009.

The improved profitability was largely driven by a median 13 per cent rise in revenues in 2014 as capital markets pushed ever higher.

Jeffrey Levi, a partner at Casey Quirk believed asset managers would struggle to push margins higher still.

"Over the past three to four years, capital markets have been so strong that it has allowed firms to expand margins, but I would be surprised if capital markets can continue to generate these returns," he said.

Net inflows as a proportion of existing assets under management have slowed from around 5 per cent before the crisis to just 1-2 per cent, Mr Levi added. A core of 11 houses, likely to include BlackRock, Schroders, Affiliated Managers Group, Franklin Templeton, Henderson, Fortress and KKR, grabbed the bulk of the flows last year.

The analysis is based on 62 listed groups with combined assets under management of $14.3tn, most of them in North America, Europe and Australia.

Among a subset of 42 houses that have been listed since 2007, Casey Quirk found aggregate profits fell from $18.3bn in 2007 to $8.8bn in 2009. Since then they have risen at an annualised rate of 18.6 per cent to $20.6bn, despite earnings growth slowing to 5.6 per cent last year.

UK-listed firms lagged behind the broader industry in 2014, with median revenue growth of just 3 per cent and four of the 10 houses experiencing declining revenues.

For the fifth year running, the 12 listed alternative investment managers garnered higher inflows than their mainstream rivals.

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