A Tale of Two Years in Asset Management — And What It Tells About 2023

The differences between traditional and alternatives firms are dramatic — both in terms of revenues and profits, according to Casey Quirk.

Illustration by II

Illustration by II

Publicly traded asset managers — and their income statements — have been on a markets roller coaster the past two years and that does not bode well for them in 2023, according to asset management strategy consultant Casey Quirk.

As markets rose in 2021, so did asset management businesses. Public managers grew organically, with median assets under management increasing 14 percent. In turn, median revenue and profits grew 20 percent 33 percent, respectively. Both reached all-time highs, according to Casey Quirk, which reviewed 17 publicly traded traditional and alternatives asset managers in North America with a combined $17.6 trillion in assets.

Last year was a different story. As the value of stocks and bonds simultaneously plummeted, traditional asset managers were hit hard. In 2022, organic growth fell 1 percent and median assets under management shrunk 16 percent, dragging down revenue 4 percent and profit down 6 percent.

Traditional managers deserve the blame for pulling down the group. Alternatives managers flourished.


Large private equity firms and other alternative asset managers had median AUM growth of 11 percent and median revenue growth of 20 percent. The profits of the group grew by 27 percent, according to Casey Quirk, which is owned by Deloitte. The group’s growth comes on the back of strong capital raising; institutional investors more than doubled their hedge fund allocations in 2022. Alternatives firms also successfully expanded into new and affiliated market segments. Among other reasons, private equity has a history of outperforming stocks in inflationary environments.

Meanwhile, volatile publicly traded equity and debt markets in 2022 helped push down traditional asset managers’ AUM (declined 17 percent), median revenue (declined 9 percent), and profits (declined 17 percent).

“The bifurcation between traditional and alternatives firms became even more stark in 2022. From a financial perspective, the differences are dramatic, both in terms of revenues and profits as many alts firms had strong flows from both the retail and insurance channels as investors sought yield and excess returns,” said Amanda Walters, principal at Casey Quirk.

The median profit margin across all the asset managers Casey Quirk researched was still 34 percent in both 2021 and 2022. But in the second half of the past year, firms began “failing to match operating expense adjustments to revenue declines, exacerbating profit pressures for traditional managers,” the consultant said.

Headcount growth throughout was “surprisingly strong” from 2021 to 2022, at 8 percent. But again, traditional managers and alternative asset managers had a different experience. Traditional managers increased headcount by 1 percent while alternatives managers increased headcount by 14 percent, according to Casey Quirk.

Costs for the industry rose about 1 percent year-over-year, a result of higher compensation, inflation-related non-compensation expenses, a tight labor market, and strategic investments in new capabilities and technologies. Expenses are also becoming less flexible. “In past periods of market decline, managers were able to quickly adjust variable compensation to prevent severe margin compression. In this environment, asset managers have articulated a range of cost containment initiatives including reductions in discretionary spending, hiring freezes and decreases in headcount,” Casey Quirk said.

Market uncertainty and volatility in 2022 have carried into 2023, which spells bad news for traditional managers. But despite their relative performance last year, alternative managers should be careful too, Scott Gockowski, senior manager at Casey Quirk, said.

“Given the dependence of the industry’s economics on markets, we expect 2023 will continue to be a period where asset managers will need to carefully consider their investments in talent and technology. And alternatives firms in particular, who continued investing in their businesses at a very strong pace in 2022, may face more pressure as top line pressure increases,” Gockowski said.