With the equity markets showing some life and enough pundits calling for a big correction, perhaps the inevitable move down will be milder than forecasted.
Money may be moving into equities. That is the impression I am getting by the release from the Investment Company Institute (a lobbying organization for the Mutual Fund Com pies).
Total money market mutual fund assets decreased by $11.34 billion to $3.806 trillion for the week ended Wednesday, April 22, the Investment Company Institute reported today. Taxable government funds decreased by $7.77 billion, taxable non-government funds increased by $2.08 billion, and tax-exempt funds decreased by $5.66 billion.
During these past two weeks in previous years, the cash probably would have gone to pay taxes, but this is not a year people are writing big checks to Uncle Sam. Markets rising, money flowing out of money markets may bode well for Mutual Fund companies. These firms have been fighting outflows for over a year along with a falling market. The environment is evolving. I have added three firms to three of the portfolios I manage. It is earnings season and we are beginning to see what Q1 looked like for these firms and where the subsector may be headed.
As MarketWatch reported, three asset managers reported today with mixed results.
Three asset managers that announced their results before Thursday's trading saw different moves in their stocks during the day. Shares of Invesco Ltd. (NYSE: IVZ) and AllianceBernstein (NYSE: AB) were down about 8% and 15% respectively by midday, while Janus Capital Group's (NYSE: JNS) stock was up roughly 6%. Profit plunged at all three firms, but while Janus reported quarterly net outflows of $900 million and said the situation had stabilized, AllianceBernstein saw net outflows of $20 billion. Invesco saw net inflows of $9.3 billion, but fees earned from investment management fell 41%.
I do not hold any of these stocks but I do hold Federated Investors, Inc. (NYSE: FII) which reported mixed results this evening. FII actually saw net inflows. They do not trade after hours and I am curious what the market reaction to their report will hold (the report also from MarketWatch).
Federated Investors, Inc. (NYSE: FII) first-quarter net income attributed to Federated was $35.1 million, or 34 cents a share, down from $55.8 million, or 54 cents a share, in the year-ago period. Total revenue at the investment management firm rose to $310.6 million from $305.7 million last year. Total managed assets were $409.2 billion, up 21% from the same period a year ago. Average managed assets were $411.7 billion, up 28% from quarter ended in March 2008.
I also hold Eaton Vance Corp. (NYSE: EV) which reports next 5/29, and Franklin Resources Inc. (NYSE: BEN) which reports next week. Each of these firms has differentiating attributes.
Today’s results demonstrate that the market perceives these firms uniquely based on the reaction to each firm’s results. Each firm has its focused asset class and distribution channels.
The macro view is positive for the industry. Will the stocks rise? Did all that cash flowing out of money funds find its way into equities? Has recent market gains translated into better earnings? The answers will be in the reports and forecast for the rest of 2009.
Disclosure: Mr. Corn is Chief Investment Officer – Equities of Beacon Trust Company. Through various equity strategies under his supervision he is long Eaton Vance, Franklin Resources and Federated Investors.
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