Asset managers' early-year results do not tell the whole story about market developments shown below

Translation: Original published in Finnish on 9/8/2025 at 8:04 am EEST.

Asset managers' results declined sharply during the first half of the year. However, underlying factors include challenges in the real estate market and a decline in performance fees, and the operational development shown below has been largely positive. The outlook for the sector is positive, and as long as geopolitical risks remain in the background, companies in the sector are poised for robust earnings growth in the second half of the year.

Market is rallying, but sentiment is cautious

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 stock indices are nearing their all-time highs once again. There have also been positive returns in the interest rate market. The situation remains difficult for alternatives, as new sales are sluggish due to the quiet transaction market. The hangover of Finnish open-ended real estate funds continues as well. Although index-level returns have been good, investor sentiment remains quite cautious. This is primarily due to geopolitical tensions. These tensions escalated into a trade war at the end of March, and although the situation has since eased significantly, investors remain on edge. 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, market sentiment is far from that now. Nevertheless, there have been signs of improvement in areas such as corporate acquisitions and real estate market activity, as well as growing net subscriptions to funds.

Results declined sharply in early part of the year

Examining the companies' figures, one might initially conclude that the sector is facing significant challenges. The asset managers we monitor saw an average decline of 26% (unweighted) in the first half of the year, with only one company achieving narrow positive earnings growth. However, upon closer examination of the trend, it becomes clear that the development shown below is not as weak as it seems. There are two clear common factors behind the decline in earnings: 1) problems in the real estate market and 2) low performance fees. These two factors are responsible for most of the drop in earnings. Additionally, Mandatum's result, for example, was damaged by deferred items in its investment portfolio.

Looking at new sales in the first half of the year, the trend is not so bleak, with several companies (especially Evli and Mandatum) achieving excellent new sales during that period. Overall, new sales in the sector have been moderate, though significant differences exist between companies and products. Interest rate products and traditional asset management perform well on average, but sales of alternatives are sluggish. Real estate sales, in particular, are currently toxic. The most important single indicator for asset managers, i.e., recurring fees, increased for the majority of companies during the first half of the year, indicating healthy underlying development. Assets under management reached an all-time high for most companies in Q2.

Outlook is good, except for real estate funds

In terms of outlook, the companies' comments were generally quite positive. Sentiment among customers has clearly improved since the panicky mood of March, and transaction activity has begun to pick up as well. A revival in the transaction market would be critical for several companies (e.g., CapMan and eQ), as growing transaction volumes would break the deadlock in alternative investments. There seemed to be a common perception that customer sentiment and the transaction market will continue to improve, provided there are no new negative geopolitical shocks.  With regard to the real estate market, practically everyone believed that the bottom was near, but opinions differed considerably on the rate of recovery.

We share the same view as the companies regarding the market situation and foresee positive prospects for an upturn in transaction activity and continued improvement in customer sentiment.  While the real estate market is likely close to bottoming out, we believe recovery will be very slow, particularly for Finnish open-ended real estate funds.

Earnings decline is over, and we expect brisk earnings growth for the rest of the year

We made only minor changes to our estimates based on the H1/Q2 results. We expect companies in the sector to see significant earnings growth across the board during H2’25-2026 due to a pick-up in new sales. Earnings levels will turn around during H2, resulting in an average decline in EBIT of only about 10% in 2025. In 2026, we expect earnings growth to remain strong, driven by new sales. The main uncertainty in the forecasts relates to alternative products and the recovery of their sales. A revival in sales of these alternatives would significantly support several companies we monitor (e.g., eQ, Titanium, CapMan, and UB). In addition to growth in recurring fees, the return of performance fees will also support earnings growth for many companies over the next 18 months. On the whole, we remain positive about the sector's outlook.