Asset Managers Migrate from Fixed Income to Equities: A Wall Street Transcript Interview with Macrae Sykes, Research Analyst at Gabelli & Company, Inc.

Wall Street Transcript

67 WALL STREET, New York - April 1, 2013 - The Wall Street Transcript has just published its Investment Banks and Asset Management Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Consistent BDC Dividend Yield - Private Middle Market Funding - Decreased Bank Loan Competition - Exchanges Trading Volumes and Cash Flow - Increase In Investor Risk Tolerance - Asset Growth - Capital Flow Into Equities - Fixed Income Bonds

Companies include: BlackRock, Inc. (BLK), Waddell & Reed Financial Inc. (WDR), Janus Capital Group Inc. (JNS), Epoch Holding Corporation (EPHC), Franklin Resources Inc. (BEN), Legg Mason Inc. (LM), T. Rowe Price Group, Inc. (TROW) and many more.

In the following excerpt from the Investment Banks and Asset Management Report, an expert analyst discusses the outlook for the sector for investors:

TWST: As Q4 results have been reported in recent weeks, what have been the key takeaways from this earnings season? What have been some notable surprises?

Mr. Sykes: I think the biggest surprise was the strength in ETF flows, which affected just a few of my companies - BlackRock (BLK), which is the largest ETF provider, and secondarily WisdomTree (WETF), which is a pure play.

And BlackRock highlighted what it sees as a structural change in the industry. It has seen an acceleration of ETF inflows both into equities and fixed income globally, so there was a significant step to passive ETF investing in the fourth quarter. And that's significant for BlackRock, because the incremental margins on those flows are very high, despite average fees being lower than traditional mutual funds, so that was a positive for BlackRock. WisdomTree also benefited from increased flows, and is the only pure publicly traded ETF provider.

On the calls from the fourth quarter, with some visibility in the first quarter, there was some reluctant optimism about flows based on industry trends year to date and that investor appetite might be shifting more toward equities and active management than over the last few years, which has been dominated by fixed income.

Management teams were cautiously optimistic about that trend, and at the same time you also had a continuation of the strong flows to ETFs, especially equities, so even though we saw an investor appetite shift and the industry flows reflect that, in terms of the top active managers it was not as pronounced.

One other thing about the fourth quarter: Strong 2012 market performance drove both an increase in equity AUM for asset managers and also helped boost performance fees, so for the most part there was some positive operating leverage...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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