A Comparison Between Active and Passive Asset Management: A Wall Street Transcript Interview with Lucas Montgomery, Research Analyst at Sanford C. Bernstein & Co.

Wall Street Transcript

67 WALL STREET, New York - April 3, 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: T. Rowe Price Group, Inc. (TROW), BlackRock, Inc. (BLK), Franklin Resources Inc. (BEN), Invesco Ltd. (IVZ), State Street Corp. (STT), The Bank of New York Mellon Co (BK), Northern Trust Corporation (NTRS), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), TD AMERITRADE Holding Corporat (AMTD), Charles Schwab Corp. (SCHW), IntercontinentalExchange, Inc. (ICE), CME Group Inc. (CME), Wells Fargo & Company (WFC), Bank of America Corporation (BAC), UBS AG (UBS) 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 companies have released fourth-quarter results in recent weeks, what have been some of the key takeaways and most important emerging trends for your group? And, what have been the most notable surprises from this earnings season?

Mr. Montgomery: Fourth quarter was not a very good quarter. Market participants and consumers had a lot of concern around the fiscal cliff, and so the results were actually fairly dour, with weak flows at the asset managers and sluggish revenue at the trust banks. Obviously within that some companies did better than others.

But I think in a sense, Q4 is already old news because it is not particularly indicative of what's been going on the last few months. By the time the earnings results were issued in mid-January, investors had already begun to feel a little bit more optimistic about some of the data points being released. Some positive trends were emerging, with a modest shift, I think, in retail investors' mindsets towards riskier assets. And since the beginning of the year, we've seen a slight reversal in the challenging trends over the last few years, at least for those of us in the equity business.

So I'm talking about the growth of fixed income and deposits at the expense of equity funds. On the topic, we've tried to illustrate the fairly high correlation between equity flows and consumer confidence, of which employment is a big part.

You're seeing flashes of improvement in consumer confidence, although with the fiscal cliff in there and some of the other uncertainties related to the sequester, it's been choppy and not always easy to discern the signal from the noise. But generally it feels like people have gotten a little bit more positive, and recent equity flows support that view.

One of the more positive trends from the perspective of the asset managers that emerged in January was that, for the first time...

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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