Markets this month are "brutal," and the next quarter could bring even more pain for asset managers, Evercore ISI analyst Glenn Schorr wrote in a research note Thursday.
The industry has seen "rough" flows on the heels of declines in international and US growth stocks, high-yield bonds and floating-rate loans.
Firms' lower ending balances will depress average assets under management in the first quarter, and investors are likely to pull money, Schorr said.
"Historically, the effects on the heels of big market drops have been worse than expectations as it’s too hard and not smart to cut costs as quickly as revenues fall," he wrote. "Plus, now more than ever managers need to be investing to evolve."
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This environment favors "more stable names with big institutional pipelines," namely Legg Mason and Cohen & Steers, Schorr said.
Meanwhile, asset managers at risk include Franklin Templeton, Eaton Vance, Invesco, T. Rowe Price, and Waddell & Reed.
However, Schorr noted that for companies with cash, their buybacks will go a longer way in this market. He pointed to T. Rowe Price, which spent $575 million on stock buybacks in the first three quarters of the year, as one firm that could be more aggressive. Others include BrightSphere Investment, Franklin Templeton, Invesco, and Waddell & Reed.
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