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

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: In your Waddell & Reed report, you mentioned a potential industry migration from fixed income to equities. Over what time frame do you expect that migration to occur? And who other than Waddell & Reed could benefit?

Mr. Sykes: BlackRock for instance, because it has such an enormous complex, and to the extent that it can shift some of its fixed income, money-market assets into its higher-yielding equity products, that would benefit them.

Again, it would be the fund complexes with strong relative investment performance, and I highlight the Ivy Asset Fund, Waddell & Reed's (WDR) flagship product, which had a strong year in 2012. And I think because of its place in the global allocation space, it is likely to remain competitive on a relative basis for investment performance, because a lot of its competitors rely on fixed income returns to generate performance due to the nature of their asset-allocation parameters.

TWST: Even with presumably improving market and economic conditions, what are the significant headwinds on the horizon for asset managers in 2013? Which firms do you believe are most and least exposed to those headwinds?

Mr. Sykes: I think there are a number of ones. The obvious one is certainly regulatory. Companies have complained about the higher cost of regulation and that should continue in the post-financial-crisis world.

You also have, for the mutual fund industry, fee pressure both from a competitive aspect and also by the consolidation of the major platforms. And secondarily, you have a tremendous competitive impact from movement to passive investing, which usually have lower fees. Just see the growing presence and flow of funds into Vanguard. And then there is just a challenging investment environment globally, given the political risk and the challenges for finding growth...

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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