How to Pick Asset Management Stocks to Invest in

If you’re looking to diversify your portfolio, asset management stocks are worth a look. Here’s how to pick the right asset management stock to invest in.

Ben Hartwig - Author

Nov. 20 2020, Updated 3:36 p.m. ET

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If you’re looking to diversify your portfolio, asset management stocks are worth a look. First, let’s start with a quick refresher on asset management.

An asset management firm’s role is to manage funds for companies and individuals. Clients pay these firms to make the best investment decisions on their behalf. And in the investment game, timing is everything. Asset management firms know how to make well-timed investments to grow their clients’ portfolios and finances.

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How asset management works

Asset management firms work with a cadre of investors to diversify their clients’ portfolios. This working relationship gives firms access to higher-value options while mitigating risks, and these high-value options also deliver better capital appreciation prospects.

The pooled funds are then directed into a plethora of assets, depending on their client’s financial objectives. These assets may include all or a combination of the following:

  • Shares.
  • Property.
  • Bonds.

A client’s financial objectives may vary. For instance, property is a long-term investment while the stock market delivers fast returns.

The surging asset management industry

Asset management stocks had always been leaders on Wall Street—until recently. The Dow Jones U.S. Asset Managers Index (DJUSAG) slumped 27% in 2018, underperforming the S&P 500 by about 20%. This plunge was due to many factors, including:

  • Increased compliance costs.
  • Capital expenditure on technology.
  • A continuing shift toward passive products.
  • Managers failing to beat the market.

Despite the asset management industry falling out of favor last year, the projections for a breakout this year are compelling. Audit and assurance consulting company PricewaterhouseCoopers (or PWC) has pretty solid forecasts for 2020–25. According to PWC, global assets under management (or AUM) are set to reach $112.2 trillion by 2020 and $145.5 trillion by 2025.

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The numbers are up from $84.9 trillion in 2016, largely because of the flourishing wealth of affluent and high-net-worth individuals. Consolidation within the industry also allows large players to expand their product offerings. The expected merger should bring in profitability and growth across the board.

The case for asset management stocks

The current market is strong, and stocks associated with asset management thriving like no other. When suitable for investors, asset managers can increase earnings. And you don’t need to start your asset management firm or have millions of dollars to get a slice of the action.

All you need to do is look for funds in the financial sector engaged in asset management. A lot of these trade publicly as dividend stocks. Owning a few shares will allow you to tap into the success of these high-priced investment funds with little effort and risk. Speaking of risk, not all asset management stocks are the same.

You need to do your due diligence on each one, much like doing an online asset search on someone you’re about to do business with. If you’re considering asset management stocks, here are three names that look poised for a breakout.

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T. Rowe Price Group, Inc. (TROW)

  • Stock: $107.77 (as of August 28).
  • Market cap: $22.96 billion.
  • Assets under management: $962 billion.
  • Revenue: $4.2 billion (2018).
  • CEO: William J. Stromberg (January 1, 2016–present).
  • Number of employees: 7,022 (2018).
  • Headquarters: Baltimore, Maryland.

T. Rowe Price Group, Inc. (TROW) is an American global asset management firm based out of Baltimore, Maryland. The publicly owned company offers institutions, financial intermediaries, and individuals the following:

  1. Advisory services.
  2. Funds.
  3. Account management.
  4. Retirement plans.

State Street Corporation (STT)

  • Stock: $49.81 (as of August 28).
  • Market cap: $27.44 billion.
  • Assets under management: $2.511 trillion.
  • Revenue: $11.98 billion (2018). 
  • CEO: Ronald P. O’Hanley (January 1, 2019–present).
  • Number of employees: 40,142 (2018).
  • Headquarters: Boston, Massachusetts. 

State Street Corporation (STT) is an American bank holding and financial services company based out of Boston, MA. Operating in over 100 countries, State Street is also listed as one of the oldest banks in continuous operation in the United States. Union Bank, the firm’s predecessor, was doing business as early as 1792.

STT provides institutional investors with the following financial products and services:

  1. Investment management.
  2. Investment servicing.
  3. Investment research.
  4. Securities trading.

Jefferies Financial Group, Inc. (JEF)

  • Stock: $18.19 (as of August 28).
  • Market cap: $6.13 billion.
  • Assets under management: $47.2 billion.
  • Revenue: $11.436 billion (2017). 
  • CEO: Richard B. Handler.
  • Number of employees: 12,700.
  • Headquarters: New York City, New York.

Jefferies Financial Group (JEF) is a diversified, American financial services company with global operations. Founded in 1968 and headquartered out of New York City, the company engages in investment banking and asset management. Jefferies Financial Group (JEF) also offers a full range of wealth management products and services, including:

  1. Direct investing.
  2. Capital markets.
  3. Investment banking.
  4. Commercial mortgage banking.
  5. Equities.
  6. Fixed-income management.

As of the time of this writing, Ben Hartwig does not own shares in the securities discussed above.


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