A pair of big asset managers missed Wall Street's second-quarter profit expectations on Thursday as customers pulled out cash amid volatile markets.
Both Janus Capital Group Inc (JNS.N) and Invesco Ltd (IVZ.N) reported net outflows from their funds for the quarter, which dragged their earnings slightly below analysts' expectations.
But while Janus remained mired in a multiyear trend of customer withdrawals, Invesco said it was already seeing a "sharp turnaround" in flows in July.
Invesco shares rose 2.6 percent to $21.02 in morning New York Stock Exchange trading while Janus was down 3.4 percent at $6.75.
Also on Thursday, a third manager, Waddell & Reed Financial (WDR.N), reported a sharp decline of inflows to $376 million in the second quarter from $1.7 billion a year earlier. Its shares fell 2.6 percent $27.22.
Together, the results suggested investors had moved cash to the sidelines and out of vehicles like equity funds and ETFs that have been mainstays of all three companies.
"In this uncertain climate, investors naturally were seeking safe havens and acting defensively," Invesco Chief Executive Officer Martin Flanagan said on a call with analysts.
But in July, the company has had customer inflows at various funds, including real estate, bank loans and international growth equity products, he added.
"Frankly you can see the end of the tunnel and, looking out to next year, a pretty good outlook," he said.
Janus Chief Executive Officer Richard Weil struck a slightly more pessimistic note on his own call with analysts.
"With extreme market volatility and ... not such great results in equity markets more broadly, a lot of investors are scared, and they're either doing nothing, or pulling back from equities," Weil said.
The reports from Invesco and Janus were similar to competitor T. Rowe Price Group Inc's (TROW.O). On Wednesday, that company reported slightly lower-than-expected quarterly earnings as well as outflows from institutional investors, but it had a net inflow of $4.7 billion overall because retail customers put money into its funds.
The fund companies earn much of their fees as a percentage of assets under management, which are closely tied to markets. After rising steadily in the first three months of 2012, the MSCI All Country Index .MIWD00000PUS fell 6.4 percent in the second quarter while the Standard & Poor's 500 .SPX lost 2.8 percent.
For instance, the world's largest asset manager, BlackRock Inc (BLK.N), said last week that declining markets had cut $76.8 billion from the value of its assets in the second quarter. Still, BlackRock reported customers had added $3.8 billion to its funds.
Denver-based Janus reported net income of $23.4 million, or 13 cents per share, down from $41.9 million, or 23 cents per share, a year earlier. Analysts on average had expected 14 cents a share, according to Thomson Reuters I/B/E/S.
Revenue fell to $206 million from $264 million, and outflows were $3.9 billion.
"It looks pretty messy," said Sandler O'Neill analyst Michael Kim, who had expected outflows of about $2 billion.
At Atlanta-based Invesco, net income attributable to common shareholders declined to $153.9 million, or 34 cents per share, from $183 million, or 39 cents per share, a year earlier.
Excluding costs from acquisitions, third-party distribution arrangements and some other items, Invesco earned 41 cents per share. On that basis, analysts expected 43 cents.
During the quarter, customers yanked a total of $8.3 billion, including $4.9 billion from higher-fee, long-term funds, Invesco said.
Nomura analyst Glenn Schorr wrote in a note to investors that the challenging market had weighed on Invesco's flows and profit margins. But that was "not the end of the world given the company's solid and consistent performance records, resilient investment management fees," and growth in areas like asset allocation strategies, he added.
(Reporting by Ross Kerber and Aaron Pressman; Editing by Lisa Von Ahn)