In a recent note, Morningstar flagged that its covered firms – including GQG, Perpetual, Magellan, and Platinum – are “likely” to see a gradual decline in earnings as the cyclical tailwinds from rate cuts diminish and volatility intensifies under the influence of US tariffs introduced by the Trump administration.
“The earnings impact from tariff uncertainties should be bearable this fiscal year, but fully felt in fiscal 2026,” said Shaun Ler, equity analyst.
“As rate cuts are priced in and volatility rises, we expect business wins to slow down, with fee compression and growth investment restraining earnings growth.”
Morningstar also noted that its covered firms, as a group, are continuing to lose market share in terms of net flows.
“We expect this trend to persist over the next five years,” it said.
However, Ler emphasised that while tariffs pose downside risks to near-term earnings, Morningstar has made no changes to its fair value estimates for Challenger, GQG, Insignia, Magellan, Perpetual, Pinnacle or Platinum.
“Our forecasts allow for weaker market returns and flows in the near term,” Ler said. “However, fiscal 2020–24 showed that investor pessimism is usually followed by a rebound in risk appetite when uncertainty and volatility subside.”
He noted that Perpetual and Insignia offer the best value at current price.
Beyond current market pressures, Ler highlighted the need for asset managers to strengthen fund flows and improve operating margins to support share price recovery.
“Most firms face competitive pressures and must improve performance, adjust remuneration structures, diversity their offering, or increase distribution spending to defend their market position,” he said, adding that Morningstar expects firms to prioritise product expansion via partnerships in the current environment.
“Cost management is also likely to be a key focus in 2025, such as aligning remuneration with business size and consolidating underperforming funds.”
