Barclays Analysts Expand Asset Manager Coverage

Updated – August 27, 2024 8:07 AM EDT

Barclays analysts on Tuesday expanded their asset manager coverage, assigning an Overweight rating for BlackRock (NYSE:BLK).

Meanwhile, three Equal Weight ratings were assigned for AllianceBernstein (NYSE:AB), Invesco (IVZ), and Victory Capital (VCTR). Three Underweight ratings were given for Franklin Resources (NYSE:BEN), T. Rowe Price (TROW), and Virtus Investment Partners (NYSE:VRTS).

Analysts commented, “Asset managers tend to be robust cash flow generators and generous capital returners. But while market growth and/or outperformance can lead to rapid AUM growth, competitive pressures and mix shift make organic revenue growth hard to come by.”

They added, “Flows are facing headwinds, so there is no easy fix to turn this around.”

Barclays notes that the asset management industry increasingly focuses on secular growth areas like passive strategies, exchange-traded funds (ETFs), alternatives, and SMAs. They view these as higher quality drivers of medium- to long-term growth.

Although BLK ranks lower in AUM as a percentage of total, its mix provides alternatives with a significant share of revenues. The scale and integration of its private markets operations present a considerable advantage, according to the investment bank.

In contrast, BEN has a relatively high percentage of alternatives AUM, yet overall AUM has remained flat for the past six quarters, with net flow rates lower than many publicly traded alternative asset managers.

IVZ has seen ETF inflows, but its organic revenue growth has been limited by its mix, especially from the QQQ ETF, which generates no management fees.

In summary, the key factors analysts are considering include: mix of alternatives, ETFs, flow profile, and fee pressure – all translating to organic growth.