Casey Quirk: Listed Alternatives Managers Outperform Traditional Firms on Financial Metrics, Organic Growth in Q3

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Dec 08, 2021, 09:45 ET

NEW YORK and STAMFORD, Conn., Dec. 8, 2021 /PRNewswire/ -- Sustained investor demand for alternatives helped publicly traded alternatives managers increase assets under management (AUM) by 2% even as global capital markets delivered flat or negative returns in the third quarter of 2021. AUM at listed traditional asset managers, by contrast, declined 1% over the same period, according to global asset management strategy consultant Casey Quirk, a Deloitte business.

Casey Quirk analyzed 24 listed asset managers based in the U.S. and Canada with a combined $32 trillion in AUM as of Sept. 30, 2021. Aggregate revenue increased 22% in the third quarter of 2021 compared with the year-earlier period, according to the analysis. Total AUM was up 20% from the year-earlier period. Organic growth for the majority of the firms in the Casey Quirk sample was less than 1%.

Profits, as measured by EBITDA (earnings before interest, taxes, depreciation and amortization) for the 24 listed asset managers in aggregate reached a high of $7.9 billion in the third quarter of 2021, up from $6.1 billion in the same period a year ago.

Alternatives managers, or those primarily focused on private markets, consistently generate higher profit margins than traditional firms, or those investing mainly in publicly traded stocks and bonds, even as operating expense has increased at a faster rate, according to Casey Quirk. Median operating margin was 46% for alternatives managers in the third quarter and 31% for traditional managers, compared with 41% and 26%, respectively, in the year-ago period.

Operating expense rose 7% in the third quarter for listed alternatives managers and was flat for publicly traded traditional managers. Compensation and non-compensation expense rose 6% and 8%, respectively, for listed alternatives managers and was flat for publicly traded traditional firms. For all firms in the Casey Quirk sample, costs stabilized in Q3 compared with Q2, though up 19% for the median firm from the year-earlier period.

"It is abundantly clear that listed alternatives managers are outperforming their traditional peers on key financial metrics, driven by investor demand and their ability so far to resist fee pressure," said Amanda Walters, a principal at Casey Quirk. "In turn, that has provided alternatives firms more flexibility than traditional asset managers to reinvest and spend on growth initiatives."

"We expect the persistent financial success of alternatives managers will continue to attract increasing attention from traditional asset managers and result in more M&A activity," said Scott Gockowski, senior manager at Casey Quirk.

Casey Quirk, a business of Deloitte Consulting LLP, is a leading management consultancy that focuses solely on advising asset management firms. Casey Quirk was established in 2002 and acquired by Deloitte in 2016. The organization has advised a majority of the 50 largest asset management organizations worldwide, including eight of the top 10. Casey Quirk provides senior leadership teams with broad business strategy reviews; investment positioning and strategy consulting; market opportunity evaluations; organizational design; ownership and incentive structuring; and transaction due diligence. For more information, please visit www.caseyquirk.com.

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SOURCE Casey Quirk