DBRS Morningstar Releases Commentary on Impact of Coronavirus Disease (COVID-19) on Asset Managers

DBRS Limited (DBRS Morningstar) released a commentary entitled “Coronavirus Crisis: An Additional Headwind for the Asset Management Industry” that discusses the major ways the Coronavirus Disease (COVID-19) can be expected to affect the asset management industry.

Key highlights include the following:

(1) The uncertainty and volatility in financial markets resulting from the ongoing coronavirus pandemic is negatively affecting the amount of management fees earned by investment management companies (IMCs) on their assets under management (AUM).

(2) During a market downturn, AUM can be adversely affected by an increase in redemptions and from a decline in market valuations.

(3) The degree to which an IMC is affected depends partially on the stability, or "stickiness," of their AUM. Factors that may affect the redemption rate include the mix of the IMC’s client base (institutional versus retail), product suite diversity, the type of fund (open versus closed end), and the depth of the IMC’s relationships with its customers.

(4) While unlikely in the near term, a sustained period of materially lower revenues could pose a challenge for more levered IMCs. With limited financial flexibility, such IMCs may be less able to weather a sustained period of reduced earnings.

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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