Wall Street’s view
Trade wars and a global reversal of monetary policy led to an expectation of weaker returns for equities. The fund flows toward equities are expected to decline in the second half of 2018, mostly due to growth and valuation concerns. Asset managers (XLF) are expected to garner lower performance fees due to weaker alpha generation.
Among the major asset managers, BlackRock (BLK) commands 12 “buy” or “strong buy” ratings out of 15 in July. The remaining three analysts recommended a “hold.” These ratings have improved since May, reflecting an expectation of organic growth through iShares and retail asset management.
Analysts gave BlackRock a price target of $613.15 on an NTM (next-12-months) basis. This estimate reflects an implied upside of 23.8% against its year-to-date return of -2.7% in 2018.
Rating other managers
Among BlackRock’s competitors, mutual fund provider T. Rowe Price Group (TROW) garnered four “buy” or “strong buy” ratings out of 16 analysts. Nine have recommended “hold” ratings. The remaining analysts issued “underperform” ratings, reflecting average to weak performance.
State Street (STT), another ETF provider, has seven of 20 “buy” or “strong buy” recommendations in July. Thirteen analysts gave STT “hold” ratings. The stock has a price target of $115.86, compared to the current price of $92.22.
Among banks with asset management capabilities, Bank of New York Mellon (BK) has six out of 20 “buy” or “strong buy” recommendations. Twelve analysts gave “hold” recommendations, and two analysts gave “underperform” ratings. The stock has a price target of $60.97.