Asset-Manager Flows and Profits
As recruiters we work both sides of the investment-management street: serving for-profit money managers and not-for-profits like foundations and endowments.
Fee-based publicly listed asset managers, especially the big ones, are newsworthy because they invest a lot of money for a lot of customers, including non-profits investors. There's plenty in the media about these firms, but it's often piecemeal commentary on quarterly results. It's newsworthy because it drives markets. But our perspective is different.
Ultimately we want to make judgments about the success or failure of leadership: who is outperforming or underperforming their peers? Who is earning his or her pay? Who isn't?
We’ve created our own list of 37 publicly-traded U.S. asset managers. It’s Skorina’s Listed Asset Managers: the SLAM 37.
We've restricted our list to (relatively) "pure" asset managers (excluding investment banking, lending, insurance, etc.). But, we use a broad definition which includes listed private equity and hedge funds.
If you're a public company charging a fee for managing customer money, and that fee income is your primary revenue source, then you're eligible for our SLAM list.
We contend that our SLAM37, in aggregate, is large and diverse enough to be a roughly representative sample of the whole global industry. At the same time, it's small enough to let us focus on notable people and events in individual firms.
The International Monetary Fund says global AUM is about $76 trillion. And, we think AUM held by U.S.-domiciled firms is a little over half that: about $41 trillion. See IMF study (page 94), The Asset Management Industry and Financial Stability
Our SLAM37 as of December, 2015, totals a little over $18 trillion. That's about 24 percent of global AUM, or about 44 percent of U.S.-managed AUM.
We decided that the key metrics in our study should all be expressed in terms of AUM (assets under management). AUM will, literally, be our common denominator.
We are especially interested in period-to-period growth (or shrinkage) in customer money - usually referred to as AUM "flow."
Higher flow in a period (as percentage of beginning AUM) is better. Big firms may run a lot of money, but are they growing that number fast enough to retain their market share? Newer, smaller firms may have modest AUM today, but they may be growing it very fast and positioning themselves to be the big guns of the next generation.
The Asset Management Commandments:
We think of the AM leader's task as a three-step process which can be summarized as the (strictly non-denominational)
Three Commandments of Asset Management:
- First, thou must gather assets to manage.
- Second, thou must charge such fees as the traffic will bear.
- Third, thou must run a tight ship, such that a goodly portion of that revenue reaches the bottom line as profit.