U.S. asset managers are expected to report higher profits for the March quarter after investors looking to take more risk poured money into stock and bond funds.
U.S. stock market gains early in the quarter encouraged investors to buy equity funds, which charge relatively high fees compared with bond funds. Events like Japan's March 11 earthquake and unrest in the Middle East did make some investors more cautious, but markets kept most of their gains.
When you have good markets, it tends have be a very profitable source of growth, said KBW analyst Rob Lee.
The first major earnings test comes on April 21 with reports due from three big firms: T. Rowe Price Group , BlackRock Inc and Janus Capital Group.
Overall, international stock funds took in $5.9 billion in March, according to Chicago researcher Morningstar Inc, and $14.1 billion for the first three months of 2011. Flows to U.S. stock funds stood at $25.2 billion for the first three months of the year, despite a net outflow of $934 million in March.
Taxable bond funds took in $41 billion in the first three months of the year, while municipal bond funds reported an outflow of $19.5 billion in the same period.
Just in March, Franklin Resources Inc's Templeton Global Bond Fund led all funds with an estimated inflow of $1.9 billion in March. This shows investors' interest in finding a hot hand, but also in diversifying out of the crumbling dollar, Morningstar wrote in a report.
BlackRock, the world's largest money manager, ended 2010 with $3.6 trillion in total assets under management, mostly from institutional investors. The company wants to double its $300 billion U.S. retail fund business by the end of 2014, Managing Director Frank Porcelli told Reuters earlier this month, and could give more strategy details on earnings day.
Analysts polled by Thomson Reuters I/B/E/S expect BlackRock to earn an adjusted $2.75 per share in the first quarter, excluding some compensation, acquisition and other costs, up from an adjusted $2.40 per share a year earlier.
T Rowe Price, meanwhile, is expected to earn 75 cents a share, up from 57 cents a share a year earlier. The company has been expanding overseas.
The cooling of interest in equities in recent years has hurt some companies like Janus, which also has posted mixed performance and a string of net outflows from its funds. Analysts expect Janus to earn 20 cents per share in the first quarter, up from a profit of 17 cents per share, in the same period a year ago, with market gains driving the increase.
Two other rivals have also been reporting outflows: Legg Mason Inc of Baltimore and AllianceBernstein Holding LP of New York. Shares of Legg Mason have risen 1 percent so far this year, in line with a Dow Jones index of US asset managers, <.DJUSAG> on hopes the flow picture is improving.
On April 12, Legg Mason reported total fixed income assets of $356.6 billion as of March 31, up from $355.8 billion at the end of December and likely reflecting inflows to its Western Asset Management bond unit. Stop the Presses; WAMCO Turns positive, was the headline on a report by Citigroup analyst William Katz. He affirmed his Buy on the stock.
Shares in AllianceBernstein have fallen 7 percent so far this year, the worst in the field. AllianceBernstein remains the only sell rating by Sandler O'Neill analyst Michael Kim.
Whereas once most asset manager stocks were driven by broader market trends, Kim said investors now are looking deeper and bidding up those like Franklin that have differentiated themselves. (Franklin is up 11 percent for the year to date, among the highest in the sector).
The winners and losers are starting to be more clearly defined, Kim said.
(Reporting by Ross Kerber, editing by Bernard Orr)