Transcript of "Mercer Capital's Asset Management Industry Newsletter | Q1 2013 | Focus: Mutual Fund Companies"
Asset Management IndustrySegment FocusMutual Fund CompaniesDespite varied results, most publicly traded mutual fundsoutperformed the broader indices over the last year in a favorablemarket environment and long-awaited return of asset ﬂows intoequity products. According to Morningstar, open-end US stock fundsbrought in $12 billion in the first three months of 2013, marking thefirst positive quarter for domestic equity funds since the beginningof 2011 and the best quarter overall since 2004. In spite of this trendreversal, taxable bonds led all other asset classes in fund inﬂows forthe 19th consecutive month at the expense of money market funds,which tallied a $93 billion outﬂow for the quarter. These dynamicssuggest that retail investors are willing to stomach some credit riskfor higher yields and are more comfortable committing cash toequity funds as market conditions continue to improve.Most notably on the upside, Alliance Bernstein and Eaton Vanceeach gained over 50% in the last year as AB regained its profitabilityfollowing a $540 million loss in the fourth quarter of 2011 whileEV continued its share buy-back program amidst surging AUMbalances. Still, not all publicly traded mutual fund providers fared sowell – US Global investors lost nearly half its market capitalizationover this period on client redemptions and analyst downgradessighting debilitated margins relative to its peers.As always, the outlook for these businesses hinges on marketperformance and asset ﬂows. Any continuation of the recentmomentum on both these fronts would certainly be a boon formutual fund providers who are just now starting to regain favor withretail investors. Another market downturn, on the other hand, wouldlikely precipitate asset ﬂows out of equities and into fixed income ormoney market funds with lower fees to their sponsors. Independentof market conditions, ETFs continue to pose both a threat and anopportunity to mutual fund providers while the Financial StabilityOversight Council’s recent proposal on MMF reform offers additionalchallenges for these businesses moving forward.Value FocusTotal Returnsfor 12 Months Ended 3/31/2013-60.0%!-40.0%!-20.0%!0.0%!20.0%!40.0%!60.0%!AB! BEN! CLMS! CNS! DHIL! EV! FII! GBL! GROW! IVZ! JNS! TROW! WDR!Mutual Funds! S&P 500!First Quarter 2013Mercer Capital | 5100 Poplar Avenue, Suite 2600, Memphis, Tennessee 38137 » 901.685.2120 (P) » 901.685.2199 (F) » www.mercercapital.com