TEXT-S&P: 2013 outlook for global asset managers is stable

Wed Dec 5, 2012 11:36am EST

Dec 5 - Our outlook for global traditional asset managers continues to be
stable, primarily as a result of manageable debt burdens, extended debt maturity
profiles, and generally sound financial profiles, said an article published
today by Standard & Poor's Ratings Services, titled "Sound Financial Profiles
And Adaptable Business Models Support A Stable Outlook For Global Asset
Managers."

This view assumes a base-case scenario of modest gains in global equity 
markets, continued low interest rates, and sluggish economic growth or 
recession in major developed markets. "Under our base-case scenario, 
governments and policymakers in the eurozone and the U.S. will manage risks to 
avert macroeconomic shocks and growth will slow but not stall in China," said 
Standard & Poor's credit analyst Dhruv Roy. "Under this scenario, we expect 
modest gains--albeit with some volatility--in global equity markets and 
investor sentiment. Nevertheless, we believe evolving macroeconomic and 
industry risks could weaken the creditworthiness of some asset managers we 
rate over the next year." 

Standard & Poor's Ratings Services' analysis of asset managers' credit risk 
focuses on their ability to meet financial obligations from recurring, 
predictable cash flows from ongoing operations. In this regard, asset 
managers' earnings and cash flow highly correlate with the performance of 
capital markets and overall investor sentiment. 

Although our ratings on asset managers assume a degree of market volatility 
and speak to franchise stability through market cycles, we could consider 
lowering ratings under some of our more pessimistic scenarios. In our view, 
the main sources of risk include the slow growth in the U.S. economy and 
fiscal adjustment, the continuation of the debt crisis in Europe, and the 
possibility of significantly declining growth in China. 

"In addition to economic factors, industrywide risks that could pressure 
profitability of asset managers over the course of 2013 and beyond include an 
increasing shift from active management to passive management and a consequent 
decline in fee income as a percentage of assets under management, declining 
retail investor confidence in equities, and the impact of an aging U.S. 
population," said Mr. Roy. 



The report is available to subscribers of RatingsDirect on the Global Credit 
Portal at www.globalcreditportal.com. If you are not a RatingsDirect 
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 
or sending an e-mail to research_request@standardandpoors.com. Ratings 
information can also be found on Standard & Poor's public Web site by using 
the Ratings search box located in the left column at www.standardandpoors.com.
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