This earnings season has not been a joyous one for asset management companies watching their profits plummet thanks to investor skittishness, rock-bottom interest rates, and a generally inert economy. Things are getting so tough, in fact, that some of these companies are actually trimming costs to try to make up some of the difference.
Other big firms released bleak reports, as well. Janus Capital Group
It seems as if the troubles that these firms are experiencing are not due to individual ineptitude -- which is a good thing -- but are a byproduct of the general malaise afflicting the sector. The kinds of activity that brought in the big bucks before the crash have been curtailed, and it is hurting these firms where it counts. Even Lazard's CEO notes that a "magical recovery of times past," is probably not in the cards.
Where, in this new investment world, do asset management companies fit in? The sad truth is that some may not survive the tough times. There are a plethora of asset management firms in existence, which probably means that there could be more than a handful of buyouts in the next few years. The companies that remain will hopefully be stronger, and more able to withstand future recessions and episodes of investor anxiety.
That means that investors in this sector need to pay attention, monitoring the health of the various players in order to get the best returns. Meantime, the cost cutting will make these firms leaner, and either more robust or more attractive takeover targets. For investors, it sounds like a win-win.
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