KBW Q4 Preview of Asset Managers Sees Overall Positive Performance

Highlights from KBW's Q4 earnings preview of asset managers:

• The fourth quarter was "somewhat of a transition quarter," with equity outflows moderating and fixed income inflows slowing, but overall flows should be positive."We expect outflows from retail equity products moderated as the quarter progressed, as did inflows to fixed income, driven in large part by muni fund outflows. Nevertheless, overall flows should be positive at many managers thanks to continued flows to taxable fixed income strategies, global and alternative products and flows from institutional investors," the KBW analysts wrote.
• KBW expects margins will be somewhat higher than its prior forecast thanks to somewhat better revenue growth."Higher than previously forecast average and ending AUM could result in incrementally better margins relative to our prior forecast. To some extent, the better revenue growth will be absorbed by distribution expenses as well as potentially higher compensation accruals," according to the analysts.
• Stocks have moved but KBW still sees some value."We believe selected asset management stocks are relatively cheaper than they were a year ago, although the valuation gap has narrowed over the past month as investors have bid up some stocks in expectation of improved equity fund flows. Some of our top picks among traditional asset managers include Calamos, Franklin Resources, and Invesco, among others," the KBW analysts said.

Read about KBW's 2011 outlook for the finance sector at AdvisorOne.com.