Asset managers face weakening flows

Several of the largest US asset managers delivered stronger-than-expected quarterly earnings on Thursday, helped by rising stock markets, but weaker net sales suggested that investors remain risk-averse.

While earnings for the December quarter were healthy in many ways for the asset managers, sales -- or flows -- remain their key metric, and the figures showed the uncertainties facing the industry.

On a conference call with analysts, Invesco Ltd Chief Executive Officer Martin Flanagan described the current market as challenging for equity mutual funds.

Flows at the Atlanta company slowed dramatically from the third quarter, when investors added a net USD 4.9 billion to stock and bond funds.

In the fourth quarter, one major customer withdrew USD 18.6 billion from an indexed equity account, as the company had previously disclosed. But even excluding that withdrawal, Invesco's inflows came to just USD 1.6 billion.

Net outflows of USD 5.6 billion from stock funds partly offset USD 4.4 billion going into bond funds, USD 2.2 billion into alternative assets and USD 600 million into balanced funds.

Invesco still posted a 60% jump in profit before some items because of market appreciation and its USD 1.5 billion purchase of Morgan Stanley's retail fund unit in June.

At Janus Capital Group, investors pulled USD 4.8 billion from its funds in the quarter, more than the USD 2.9 billion taken out in the previous quarter.

The Denver company's revenue and profit rose, however, as it was able to earn more fees on its products. But outflows have been a lingering problem for Janus -- particularly in traditional areas of strength for the company like growth and quantitative funds.

On Wednesday, rival Legg Mason Inc also reported widening outflows.

Also reporting on Thursday morning was Franklin Resources. Like Janus, its quarterly profit jumped as it earned more in fees on its popular funds like the Franklin Income Fund and Templeton Global Bond Fund.

But investors put just USD 3.2 billion in new money into the company's funds, down dramatically from the USD 19.4 billion they added in the previous quarter and USD 14.3 billion a year earlier.

Shares of Invesco were up 2.1% at USD 24.27 in morning trading, while Franklin gained 2.6% to USD 123.52, and Janus fell 1.9% to USD 12.75.