Positive domestic equity market returns in 2014 should lead to traditional money managers seeing modest revenue momentum heading into 2015, said an outlook report on publicly traded money managers released by Keefe, Bruyette & Woods.
While analysts at KBW see room for improvement in the first quarter of 2015, they think it will be a long shot that traditional active strategies will reverse the trend of investors shifting toward passive strategies over the near term. They expect alternatives, tactical asset allocation, global and less duration-sensitive fixed-income strategies to see the majority of inflows throughout 2015.
The report suggests that managers with a global and/or institutional bent to their business should benefit the most from this potential revenue momentum.
“Stock selection should be all about quality earnings growth that can be driven by factors that are more within management’s control,” the report said “We think investors remain best served by focusing on managers that can generate better earnings growth by hitting on as many of the following key factors: above-average revenue growth, above-average margin improvement per unit of revenue growth, active capital management that accrues to shareholders’ benefit and an attractive or at least reasonable valuation.”
The report cited Invesco as a stock that hits on all four of these factors. It also sees value in AllianceBernstein, OM Asset Management and Affiliated Managers Group.
