07.19.2017

Buy Side Reap Rewards of Calm Markets

Volatility may be in the doldrums, but asset managers are enjoying the calm far more than their trading colleagues, reports Bloomberg.

The moribund volatility led the asset and wealth management arms of the largest US banks to generate $18.4 billion in their second quarter earning, which offset the shrunken revenues experienced by the trading businesses of firms like J.P. Morgan, Citi, and Bank of America.

Today’s environment is a flash back to after the 2008 financial crisis, where regular management fees counterbalanced the dearth of trading revenues for many firms.

“It’s really transformed our results in terms of the stability and return,” Morgan Stanley Chief Financial Officer Jonathan Pruzan said in a telephone interview with Bloomberg after a 29 percent jump in wealth-management profit helped the firm top estimates. “It’s an extraordinarily important contributor for us.”

Nothing could be more telling regarding this new reality than the construction of Goldman Sachs’ new trading floor in the company’s headquarters, which it built earlier this year. The new real estate was not for the firm’s investment bank business, but its asset management division, which posted a $1.28 billion from management and other fees last quarter.

However, not all is gloomy in the investment banking businesses. Although trading revenues may be down, revenue from bond issuance as well as merger and acquisitions advisory services were up among four of the five largest investment banks over the same period, Bloomberg also reports.

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