BlackRock Continues to Lose Ground on the ETF Flow Front Despite Improving Equity and Credit Markets

For much of the past decade, we've bemoaned the fortunes of the traditional US-based asset managers, noting that they would face significant secular headwinds (from aging baby boomers to the growth of passive investing) and cyclical headwinds (leading to more-volatile equity and credit markets) that would pressure their top and bottom lines. Our thesis for the group has expected regulatory changes around the globe aimed at increasing transparency around fees and performance, as well as pushing for a greater degree of fiduciary responsibility in retail-advised relationships, to raise the hurdles for the more traditional US-based asset managers we cover. With the gatekeepers for retail intermediary platforms also becoming much more focused on fees and performance when deciding what products to place on their platforms, the industry will face fee and margin compression as active asset managers are expected to not only narrow the spread between the management fees charged for their funds and the fees attached to index-based products but spend more heavily to improve investment performance and enhance product distribution.