NEW YORK (S&P Global Ratings) Jan. 19, 2023--Our view on the traditional asset management sector has turned negative, and we maintain our stable sector views for both alternative asset management and wealth management for 2023, said S&P Global Ratings in "Asset Management Sector View Is Mixed As Conditions Turn Choppy"
Current ratings and outlooks incorporate our expectation for rising interest rates, heightened inflation, continued market volatility, and a shallow recession to continue to pressure debt and equity markets in 2023.
Of the three subsectors, traditional managers are the most exposed to market volatility, which we expect to weigh on credit metrics in 2023. This pressure may be compounded by net outflows for some managers.
While wealth managers are similarly vulnerable to market movements, their asset base is stickier, resulting in more stable earnings.
Alternative asset managers are the best positioned of the three, considering the locked-up nature of their assets under management (AUM) base, solid records of performance and fundraising, diversified platforms, and dry powder available to be deployed during market dislocation.
Many companies issued debt opportunistically over the last couple of years, supported by low capital costs and buoyant asset valuations. Higher gross debt in combination with EBITDA declines may pressure credit metrics for some issuers in 2023. From a liquidity perspective, most issuers remain well positioned, with few having to address near-term maturities. Those with significant variable rate debt exposure, however, will see interest coverage metrics compress.
Despite the challenging macroeconomy, most asset managers we rate remain positioned to withstand continued volatility over the short term. We expect rating actions to continue to be idiosyncratic in 2023, though there could be further downside across the sector if the market downturn is more severe or protracted than in our base-case scenario, with traditional managers most at risk.
This report does not constitute a rating action.
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| Primary Credit Analyst: | Elizabeth A Campbell, New York + 1 (212) 438 2415; elizabeth.campbell@spglobal.com |
| Secondary Contacts: | Philippe Raposo, Paris + 33 14 420 7377; philippe.raposo@spglobal.com |
| Yiran Zhong, Hong Kong 25333582; yiran.zhong@spglobal.com | |
| Jennifer Panger, New York + 1 (212) 438 2276; Jennifer.Panger@spglobal.com | |
| Shravya Kandra, New York 2124380985; shravya.kandra@spglobal.com | |
| William Wootton, Toronto +1 4165072553; william.wootton@spglobal.com | |
| Media Contact: | Jeff Sexton, New York + 1 (212) 438 3448; jeff.sexton@spglobal.com |
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