Asset management is meant to be a game of steady accumulation and loyal client bases. But, with every passing year, it is increasingly apparent that the lure of passive investing strategies is weighing on the fund flows and fees of even the biggest-name brand franchises.
That’s particularly true of firms with a bias to stocks, such as Jupiter Fund Management (JUP), whose reliance on star fund managers was highlighted by the outsized impact on flows of a handful of leadership changes in 2019. But beyond personnel, the pressure on active management means providers need to articulate a revamped strategy, and soon. This year, analysts at broker Numis expect Jupiter’s net flows to boost managed assets by just 1 per cent, and a pre-tax profit margin of just 40.3 per cent – a fall of 350 basis points from 2018.
Fortunately, some sector constituents have found their own answers. Intermediate Capital’s (ICP) focus on credit and alternative assets – as well as the private equity-like structure of its fundraising – mean it is insulated from fickle clients and short-termism. If you believe the passive revolution has essentially removed price discovery from developed markets, then Ashmore’s (ASHM) focus on the developing world – where indexation remains in its infancy – makes sense. Listed hedge fund Man Group (EMG) is another member of this sub-category, although its track record and corporate targets again leave us unconvinced of the prospects for its shares in 2020.