This hasn't been the easiest of years for asset managers, with most suffering from a fall in share values much as a result of heavy pressure exerted on the financial sector. But some have done better than others.
Aberdeen Asset Management, for example, has had little trouble boosting its assets under management to over £100bn, helped by acquisitions and also by holding onto its customers. But the coming year is likely to be much tougher all round. And there are already signs of how trading conditions are likely to deteriorate. Falling commercial property values led to a 17.8 per cent fall in New Star Asset Management's flagship property fund, while Close Investment, part of Close Brothers, pulled the launch of a soft commodities fund because of insufficient investor demand. For the likes of F&C Asset Management, the going has already been pretty tough as the fund manager struggles to stem a steady outflow of funds. In the first six months of 2007, it saw an outflow of £4.7bn of funds although this was reduced in the third quarter to £754m.
None of this is really surprising, as many investors feel happier keeping their money in cash, where relatively high returns are on offer. And this is likely to remain the case until the so called liquidity crunch is unwound. For fund managers the key will be retaining their asset base. This will help to maintain management fee income at a time when performance fees come under increasing pressure.
Meanwhile, moneybroker ICAP has benefited from uncertainty in financial markets which has boosted turnover in financial instruments dramatically. Indeed, as early as last March, ICAP saw business handled on a daily basis exceed the $1,000bn mark. And while the current uncertainty in financial markets persists, ICAP should reap the benefits.
For the corporate finance groups with a broking arm there is likely to be more consolidation, especially as costs are expected to rise with the introduction of new trading initiatives such as Mifid. Close Brothers has already turned down an offer from rival Cenkos, while Collins Stewart has admitted its willingness to open its books to any serious bidder.
