Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Affiliated Managers Group Popped on Friday

By Matthew Frankel, CFP® - Mar 15, 2020 at 2:48AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The asset manager rebounded to end a rough week

What happened

The recent stock market downturn has been rough on most sectors, but the financial sector has been one of the worst performers. However, as the stock market rallied on Friday, with the Dow Jones Industrial Average and S&P 500 both higher by 9%, many financial stocks performed extremely well.

Wealth management company Affiliated Managers Group (AMG 1.04%) was one of the standouts, finishing the day up nearly 14%.

Couple meeting with financial advisor.

Image source: Getty Images.

So what

Asset managers stand to lose quite a bit of revenue in a sustained market downturn. For one thing, asset management fees are generally based on a percentage of client assets. If the value of client assets gets significantly lower -- as it would after a stock market crash -- it would translate to lower fee income. For example, a client account with $800,000 would generate 20% less fee income than one with $1 million under most common fee structures. 

In a sustained downturn, especially one accompanied by a recession, it's also not unusual for asset managers to see client outflows, meaning that people will pull more money out of their accounts than they're putting in.

Now what

As the overall stock market spiked higher on Friday afternoon, Affiliated Managers Group shareholders breathed a sigh of relief that the downturn might not be as deep and long-lasting as originally feared. While it remains to be seen if that's ultimately going to be the case, it's reasonable to expect the stock to be highly reactive to market moves as the coronavirus pandemic unfolds.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Affiliated Managers Group, Inc. Stock Quote
Affiliated Managers Group, Inc.
$117.81 (1.04%) $1.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.