Three managers buck downward profit trend

Profits growthLegal & General Investment Management, Allianz Global Investors and T Rowe Price posted a rise in profits in their most recent financial statements.

Legal & General Investment Management said its operating profit for the first half of the year was £119 million (€150 million), a rise of 2% compared with the same period of 2011, while assets under management grew 3%.

Allianz had the highest rise. It reported an operating profit in its asset management division of €635 million in the second quarter - a rise of 20% compared with the corresponding quarter in 2011. Assets under management rose 16% and the firm said it was benefiting from a “flight to quality”.

T Rowe Price also had a positive result, with net income for the second quarter rising 1% year-on-year to $207 million (€167 million).

The results are encouraging given that many other firms have struggled with declining profits this year.

BlackRock, the world's biggest manager by assets, announced net income of $554 million in the second quarter – more than 10% less than in the same period in 2011.

JP Morgan Chase announced net income for its asset management division of $391 million for the second quarter, a decline of 11% year on year.

Meanwhile, Prudential's asset management division had profits of $48 million in the second quarter, a decline of 79% compared with the same quarter in 2011. The company blamed the result on its “incentive, transaction, strategic investing and commercial mortgage activities”, including a $75 million impairment charge.

Asset managers are struggling in the current environment because their profits and revenues are linked to the assets they manage. When markets drop, the value of these assets drop, and so does fee revenue.

Asset managers have also been hit by a trend among investors to switch their money into low-risk assets, which tend to command lower fees.

In this climate, merely maintaining profit levels is difficult, so companies that accomplish profit growth will be celebrating their achievement.

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