I work at a active management FI heavy Asset Management firm and things are looking pretty bad. Based on the email updates that have been going out across the firm. I think things may get worse even if the economy isn't slowing down.
Even if the market is flat or up a bit for the year I think the outflows will hurt us a lot especially with such systemic under performance as of late.
I am trying to look at this positively if I survive there may be more opportunity, but I don't have the pedigree to fall back on if things go south.
How are other actively managed firms doing? Is anyone growing or expanding?
My firm is doing ok. AuM is down due to the markets, but our funds have generally performed in line or above their various indices. Most of our funds still look significantly better than our value peers. We mostly cater to institutional clients, which seem to have a steadier hand than retail.
Overall, I think there is a big shakeout coming in the industry. Most of the smaller firms will get squeezed out unless they have niche products that consistently outperform. With management fees declining for the past decade, most of the small firms have to be near the breaking point. The IM business has a lot of operating leverage and realistically many of these firms are on the wrong side of that equation.
In the institutional space, I see a lot of business migrating to the biggest active players. I don't see a movement en masse to passive yet. However, on the retail side, active funds will continue to lose a lot of client AuM to passive funds. I don't see that trend changing anytime soon. Investors younger than 40 are well attuned to the advantages of passive and aren't interested in paying for active management.
The biggest losers will be the smaller firms focused on retail clients. A lot of these firms' bread and butter is charging 1.25%+ on mutual funds sold to retail clients via brokers and financial advisers. That business is going away in my opinion, especially with the new fiduciary duty standard in the U.S..
Thanks for the update.
The retail side has been hurting us the most, however the institutional investors haven't been as quick to leave. My concern is we wiped out years worth of alpha in 2015, so our long term performance isn't as rosy a picture as it used to be.
Even if I make it thru this, the rebound won't be as fast as others. That means no meaningful bonuses and this could lead to an exodus of talent and of course the money will follow.
Then it wasn't alpha.
Yeah, it was just the illusion of alpha.
If your firm is well run you shouldn't see a precipitous decline in bonuses due to one year of bad performance, especially at the more junior levels. The last firm I was at managed to keep comp high for years despite poor performance because they had a strong financial position.
Same here, had 2 rounds of layoffs in Q4 2015 and one more coming shortly in Q1 2016. Thinking if I should move to a smaller fund.
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