Significant company-specific differences in the development of asset managers in the early part of the year

Translation: Original published in Finnish on 06/27/2025 at 07:00 am EEST

The early part of the year has been moderate for asset management companies. Although stock prices are near their all-time highs in many places and interest rates have been in clear decline, market sentiment has been cautious, especially due to geopolitical tensions. Companies in the sector describe the early-year sentiment as mostly expectant. At the same time, however, the general tone of the comments has been cautiously positive.

In this article, we have reviewed the development of asset managers for the entire beginning of the year, based on reported Q1 results, general market data (e.g., fund reports and companies' releases), as well as discussions we have had with listed and unlisted companies during spring and summer. We note that many of the companies we cover only report semi-annually. In addition, we emphasize that this review focuses solely on the development of asset management businesses.

Investors are cautious despite the share price rally

The market situation in the investment services sector has been reasonable in the early part of the year. Share returns have been positive across the board, and the April market decline has already been recovered. Returns have also been positive in the interest rate market, although the rise in market rates has eaten into part of the profits. However, market sentiment has been cautious since the outbreak of the trade war at the end of March, and investors are in a wait-and-see mode. The situation is quite peculiar in this sense, as usually when stock indices hit new records, the market celebrates and there are no worries about tomorrow. However, current market sentiment is far from this, and it has been reflected, e.g., in net subscriptions of funds, which, according to the Fund Report, are only 500 MEUR in the black in Finland for the first five months of the year (AUM ~183 BNEUR). 

High market uncertainty and the sharp volatility in March-April have likely supported the revenue of, e.g., structured products and brokerage. Similarly, for investment banks, the transaction market has inevitably slowed down due to increased uncertainty. However, in the sector context, these are relatively small revenue items.

The situation is still difficult for alternatives

Alternative products remain a key challenge in the sector. Selling alternatives is currently very difficult, and we feel the situation has even become more difficult during the start of the year. For institutions, the situation has been exacerbated by the fact that funds have not been able to return capital as promised. This has, in turn, led to liquidity challenges for clients and to so-called over-allocation in alternative investments. For retail investors, the situation has been exacerbated by the closures or postponements of redemptions of several significant real estate funds (a key single product category in alternative products offered to retail investors) and the related extensive media coverage. Finnish open-ended real estate funds currently have a significant amount of pending redemptions, and in our view, new sales to open-ended real estate funds will be challenging for a long time. As a whole, we believe that the new sales of alternative products have remained at a low level throughout H1 for the companies in the sector

Although capital market development has been largely positive and key stock indices are hovering at all-time highs, the accrual of performance fees in the sector will remain modest in H1. This is explained in particular by the difficult situation in alternatives, as alternatives have been a key source of performance fees for the sector in recent years.

Although investor sentiment has been cautious during the early part of the year, we would emphasize that investors have not dug in, and new sales activity in the market is still moderate. We believe it is clear that, with the exception of real estate fund managers, solely blaming the challenging market environment for sluggish new sales is shirking responsibility. As proof of this, several companies we cover in the sector have been very successful in their new sales during the start of the year.

Many ongoing discussions behind the scenes in the M&A market

Based on our assessment and market rumors, M&A discussions are clearly more active in the sector than ,e.g., three years ago. We find this somewhat logical, as a significant fundamental change has occurred in the market with the end of the zero-interest rate era. The end of the zero-interest rate era has forced many companies to rethink their strategy. Of the companies we cover, e.g., eQ, Titanium and Taaleri need major changes, and for all of these, M&As could be a logical path to move to the next stage in the strategy. CapMan has stepped up its M&A activity and completed two transactions this year (the acquisition of Midstar's hotel portfolio and the acquisition of a majority stake in Caerus debt investment AG completed a week ago).

Significant company-specific differences

There have been even exceptionally large differences in the performance of domestic asset managers in the early part of the year. The key explanatory factors are business priorities. In traditional asset management, and especially in fixed income, strong players have performed well in the early part of the year, whereas real estate-dependent companies have struggled. Of course, the focus on business operations alone doesn't explain everything; instead, there are significant differences in companies' sales success in a more challenging market environment. We note that in company-specific comments, we focus mainly on new sales, as it is the single most important earnings driver for the companies in the sector in the long term.

Mandatum’s new sales were very successful in Q1, and the company continued its excellent, long-standing development. International sales in particular have been a major success for the company. Although Mandatum undeniably benefits from the current market situation as an interest-rate-focused asset manager, the company's own sales machine is currently in excellent shape. We suspect Mandatum's new sales have continued on a strong trajectory also in Q2, and the company can already be counted among the sector's top performers during the first half of the year.

Evli's new sales also performed very well in Q1, and the company successfully attracted net subscriptions not only in traditional asset management but also in alternative products. In addition, international sales continued the positive trend that started during H2’24. While Evli is also a clear beneficiary of the current market situation due to its broad product offering and interest rate expertise, its sales have worked well in the early part of the year. We believe Q2 sales have not been quite as strong as in Q1, but as a whole, the company is undeniably among the winners in the sector during the start of the year.

For Alexandria the start of the year has been very good in terms of new sales. Although net subscriptions to funds have remained weak, sales of structured products have been very strong, and the company has issued a record number of products in H1. In addition, the company's CEO stated at our May investor event that the new asset management service had finally gained momentum. In terms of new sales, the company is one of the sector’s success stories during the start of the year.

United Bankers’ new sales have been slow in the first part of the year. Subscriptions to open-ended funds are slightly negative, and in our view, fundraising for limited partnership funds has continued to be sluggish. In asset management, we believe the company has continued its good development seen in H2’24, but it is not sufficient to offset the weakness in fund sales. While UB, as an alternative-focused player, is undeniably suffering from the current market situation, the company cannot be satisfied with its sales performance in H1.

CapMan's start to the year has been mixed. New sales have remained sluggish due to challenges in the alternative market. At the same time, however, the company has made two significant transactions (the acquisition of the Midstar hotel portfolio in Q1 and the acquisition of a majority stake in Caerus AG in Q2). The acquisition of Caerus in particular is strategically significant, and we view both transactions as shareholder value-creating. Despite successful arrangements, CapMan is also under significant pressure to improve new sales in H2, as several spearhead funds are raising capital simultaneously. 

The start of the year was difficult for Titanium. New sales have been weak and net subscriptions are close to zero. In January, the company announced that it would postpone redemptions from the Hoiva and Asunto funds, and in our view, the company has significant redemptions pending. Considering this, net sales would be clearly negative. The company's strategy, published in November, has progressed more slowly than we expected, but the new PE fund launched at the end of June is the first concrete step in the new strategy. The company urgently needs new sales to fill the gap left by real estate funds, and key to this are the previously mentioned new products and the shift towards asset management. 

Aktia’s asset management business has had a weak start to the year, and net subscriptions are clearly negative. In our opinion, Aktia's product offering is an excellent fit for the current market situation, which favors traditional and especially fixed income asset management, and considering this, the performance is very weak. Redemptions have been seen especially among institutional customers.

eQ’s start to the year has continued in challenging circumstances. The company still suffers significantly from the challenges of real estate funds, and this weighs on the company’s revenue. The biggest challenge is the significant redemptions from open-ended real estate funds. New sales have also clearly become more difficult in PE, although new sales are still performing reasonably well there. eQ urgently needs new growth drivers, as we believe that growing with the current product range is difficult. The company is currently conducting a strategic review, which is intended to be completed under the leadership of the CEO starting in September.

New sales in Taaleri's private equity funds were subdued in Q1, as sales of the flagship fund SolarWind3 remained close to zero. Taaleri has announced that the fundraising for the SolarWind3 fund will conclude at the end of June, and it still has several discussions ongoing with potential investors. The company has openly flagged that the fund's size will likely fall short of the target size of 600 MEUR (Q1’25:  481 MEUR), and the question is how much more the fund will grow from its current size The final size of the fund will largely determine the success of Taaleri’s private equity fund business in H1. If the fund size were to approach its target size, H1 would have gone well, whereas if the fund remained close to its current size, the early part of the year would have been weak in terms of sales. Taaleri is updating its strategy in the fall, and the strategy should provide clearer steps to grow the asset management business to the next level. A preview of these changes was provided when Taaleri terminated its distribution agreement with Aktia.