Waddell & Reed Financial Shares Plunge
03 February 2016 - 8:10AM
Dow Jones News
Shares of asset management firm Waddell & Reed Financial
Inc. fell 14% in heavy trading Tuesday after the investment firm
announced the retirement of Michael L. Avery, president and
co-portfolio manager of its largest mutual fund, the Ivy Asset
Strategy Fund.
The move is the latest setback for the fund, whose assets under
management hit $36 billion at its peak two years ago but has since
dropped to $15 billion, according to Morningstar. Ivy Asset
Strategy was a strong performer in the years immediately following
the financial crisis, bringing in large investor flows, but in
recent years it has taken heavy losses from bets on gold and
Chinese stocks, among others.
Waddell shares tumbled $3.65 to $22.85, putting them within a
dollar and change of their 52-week low. The shares have lost more
than a third of their value since the asset-management industry was
hit by a post-Thanksgiving selloff that was punctuated by news that
Third Avenue Management LLC, a unit of Affiliated Managers Group
Inc., had halted redemptions at a fund that had made large
investments in low-rated, hard-to-sell securities.
The decline is the latest signs of the problems facing smaller
asset managers that specialize in active investing as investors
migrate to larger firms that offer low-cost funds tracking market
indexes.
Firms like Waddell & Reed that specialized in high-yielding
funds invested in risky securities have suffered more than most as
market turmoil and the Federal Reserve's first interest rate
increase in nine years spurred investors to move into safer asset
classes.
Other asset managers were hit hard Tuesday on a day in which the
Dow industrials slumped as much as 300 points and the KBW Nasdaq
Banks index of large commercial lenders declined more than 3%.
BlackRock Inc., the largest U.S. asset manager, fell 4%, while
AllianceBernstein Holdings LP dropped 4.6% and Legg Mason Inc. slid
6% and T. Rowe Price Group Inc. slipped 3%.
Affiliated Managers shares fell 7.2% to $122.68 after the firm,
also called AMG, reported a 12% decline in net income for 2015.
Waddell on Tuesday also posted a decline in fourth-quarter
earnings and set plans to cut expenses. Trading volume Tuesday was
triple the daily average.
"Heightened market volatility has been a consistent theme
throughout 2015, challenging performance and causing anxiety with
investors," said Chief Executive Hank Herrmann. "In addition to
market challenges, we have had to manage increased redemption
pressure and weaker sales in some of our key strategies due in part
to underperformance in these funds."
The Ivy Asset Strategy Fund managed about $10 billion in 2009,
then grew quickly under Mr. Avery, whose high-risk and high-return
strategy developed a strong following among individual investors
hungry for yield. The fund returned 24% in 2013 thanks to Mr.
Avery's large, concentrated bets but has lagged behind since then,
losing 5% in 2014 and 8.4% last year, according to Morningstar.
Write to Matt Wirz at matthieu.wirz@wsj.com and Sarah Krouse at
sarah.krouse@wsj.com
(END) Dow Jones Newswires
February 02, 2016 15:55 ET (20:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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