Managed Futures
March 2020 - Restaurants Are Being Destroyed. Money Managers Should Be Scared.
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Beware the parallels between smaller restaurants and asset managers.
The New York Times reports that “large chains and well-funded restaurant groups have the resources to ride out a protracted shutdown, but the independent restaurants that make up about two-thirds of the American dining landscape — noodle shops, diners, and that charming urban restaurant that always had a line out the door — may not survive. . . . 75 percent of the independent restaurants that have been closed to protect Americans from the coronavirus won’t make it.”
The pandemic will have a similar effect on the asset management business. As could be expected, large, established managers will weather the storm. Many independently owned active managers, however, will be forced out of business — some because of poor performance, but others who generate good returns will also shut their doors because of cash-flow problems.
Allocators are already saying that they are postponing fund decisions; the slurry in these managers’ sales pipelines is drying up. Despite having built solid businesses that put up good numbers, without new business and the associated revenues, they will have to cut their already lean staffs and, soon thereafter, close for business.