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
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 email@example.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.