INVESTMENT: Asset Managers Report Sustained Strong Confidence
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Asset manager confidence fell from 85 index points in the first quarter to 77 points in the second quarter of 2011.
This is the 34th quarterly survey conducted to measure confidence in the asset management industry, and the research is conducted by the Bureau for Economic Research in Stellenbosch.
A breakdown between large and small managers indicates that large managers (those with assets in excess of R20 billion in funds under management) once again reported weaker confidence, falling from 86 index points in the first quarter to its current reading of 73 index points. Small manager confidence on the other hand, continued to rise, from 81 index points to 88, indicating that close on nine out often small managers are satisfied with current business conditions.
Comments Chris Sickle, the lead Asset Management director at Ernst and Young, ‘Similar to Q1, large and small managers showed different experiences. The most significant being institutional net inflows, which declined for large managers and increased for small managers.’
He continues, ‘Since the beginning of the year, asset management confidence has remained more or less in sync with equity markets, with an ongoing correlation between the JSE ALSI index and asset manager confidence. However, in the current quarter we note that asset manager confidence has tapered far more than what the JSE ALSI index has since the beginning of 2011. Again, it would appear that this decline in confidence can be attributed to a considerable drop in institutional net inflows, which is a key measure for asset managers’
Sickle comments, ‘Small manager confidence levels continue to rise even though their profits are shrinking, whilst large manager confidence is falling, despite them remaining broadly profitable, which is largely attributed to an increase in total expenses by small managers.’
He adds, ‘Asset managers are mostly on the lookout for new growth opportunities and new assets under management, and that in turn requires continued investment in different markets and products. This is particularly true for the small managers, who are aiming to boost their presence and awareness in their core or niche markets. In addition, the regulatory and compliance needs also place upward pressure on costs, and that is not something that will dissipate going forwards.’
Other survey findings highlight a decrease in the average asset management fees, especially in the performance fees for the quarter for both large and small managers alike. The product demand for balanced funds and offshore exposure continues to remain high.
Sickle concludes: ‘Despite the weaker confidence registered in the second quarter of 2011, overall confidence levels are only slightly behind long-term averages.’
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