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Most Asset Managers To Report Tepid February AUM: BAML

When asset managers report their assets under management numbers for February, they probably won’t look good. The reports start Tuesday evening. Equities had a horrible month in terms of volatility, which likely dragged AUM numbers down at most managers, although funds with higher exposure to fixed income probably did better than most other kinds of asset managers, believe analysts at Bank of America Merrill Lynch.

AUM at Franklin, Invesco, Legg Mason all to decline

In their March 7 report, analyst Michael Carrier and team gave their predictions for February assets under management at some of the most well-known asset managers. For Franklin, their forecasting a 2.1% month over month decline, which would bring the firm’s assets under management to $713 billion. They said negative market returns and outflows likely drove that decline, and they expect the firm’s outflows to remain close to where they have been lately with weights toward the Hybrid Franklin Income fund and the Fixed Income Global Bond Fund.

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They predict total assets under management of $739 billion for Invesco and long-term assets under management (excluding QQQ) of $634 billion, with both numbers representing month over month declines of less than 1%. They believe the modest market losses and net long term outflows will drive these small declines, and they expect long-term outflows, excluding QQQ, to be at around $1 billion as institutional fixed income offsets weakness in retail. Because of the latest EPFR data, they expect the asset manager’s money market inflows to be at around $3 billion and its QQQ outflows at around $1 billion for February.

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The BAML team is expecting Legg Mason to post AUM of $652.3 billion in assets under management for February and long-term AUM of $540.1 billion, representing an increase of 0.2% month over month. They said long term and liquidity outflows should offset positive market returns.

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Here’s a brief roundup of the other asset managers BAML gave estimates for: AB, -0.3% decline to $455 billion; Eaton Vance, 0.1% increase to $303 billion; Artisan, down 1.7% to $91 billion; Cohen & Steers, down 0.7% to $51 billion; Manning & Napier, down 1.3% to $33 billion; Calamos, down 2% to $20 billion.

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Active funds see slight losses

Overall, the BAML team noted that the volatile month ended roughly flat with only slight losses for active funds in both equity and fixed income. Active equity returns were down 0.6% in February, lagging the broader market on the back of weak growth. Value equity had positive returns, especially in midcaps at a 2.9% return and small caps at a 1.8% return. The RMZ saw modest pressure, and the S&P 500 had a horrible start to the year, falling 5.1% in January and February combined.

In fixed income, the BAML team noted positive category returns but believes asset managers posted mixed results. Public managers’ bond funds declined an average of 0.2% last month, lagging the Barclays Aggregate Index. Long-term government bonds climbed 1.1%, while investment-grade bonds edged higher by 0.8%, high-yield bonds climbed 0.6%, and municipal and short-term government bonds were only slightly on the positive side.

A “tepid” February for asset managers

The analysts said that overall, most public asset managers saw “tepid” performance in their active funds with an average decline of 0.5%. Equity and fixed income both saw negative returns, driving the weak performance, and relative performance rankings also took a tumble, hitting an average 55th percentile compared to the trailing three-year average 42nd percentile.

They added that relative performance drove asset managers’ blended returns. Quarter to date, they said asset managers’ long-term active funds are averaging a 4.4% decline, with the smallest decline at Federated Investors at 2.4%. Manning & Napier has continued to post solid results, however, at an average 25th percentile, they said.