In this article, we’ll explore 10 best asset management stocks to buy according to hedge funds.
It will go down in history as one of the best years for companies engaged in asset management. Their stocks are up by double-digit percentage points in response to one of the best investment environments. Central bank’s push for lower interest rates has bolstered investor sentiments and contributed to the market rally.
In return, asset management companies have enjoyed significant capital inflows and increased fee generation. Similarly, the companies have rewarded investors with buybacks and high dividend yields.
Due to strong market performance and healthier net flows, the value of assets under management (AUM) reached a record $132 trillion as of June 2024. Amid the significant net inflows, a global report by PricewaterhouseCoopers indicates asset management firms that deliver returns on both social and financial fronts stand to be clear winners.
“While financial return will always be important, increasingly investors are deciding that social return is just as important. What we’re seeing is asset and wealth management firms that deliver standout returns on both the social and financial fronts will be the clear winners over the coming decade — magnets for investment and able to sustain superior returns for shareholders and partners.”
The report also indicates that the asset management industry is poised to grow by up to 5.6% per annum to US$147.4 trillion by 2025. The growth is poised to come as the industry undergoes a substantial shift in managing investments. Technological advancements, changing investor preferences, and increased focus on sustainability should significantly impact growth rates.
In response to changing investor preferences, asset managers are increasingly coming up with customized investment products. Asset management product customization also seeks to align with specific financial goals, risk tolerance, and values.
Matt Ford, Co-founder and CEO at Sidekick explains: “We expect the shift to a more client-centric approach in the asset management industry to continue in 2025 and beyond, as high net worth and mass affluent individuals increasingly demand more than off-the-shelf products.”
Advancements in technology are also enabling the customization drive. Asset managers increasingly use artificial intelligence and machine learning to source wider information. In return, they can invest much earlier in successful companies and leave companies or investments facing challenges.
Passive investment products offered by asset management companies are becoming increasingly popular as opposed to active investment products. Their popularity stems from their solid performance as they track market indexes such as the S&P 500, Dow Jones Industrial Average and Nasdaq Composite. Passive Investment products have generated strong returns, given that the market indexes have been trending up. The S&P 500 which most track is already up by 26% in 2024 after gaining 24% in 2023.
Likewise, environmental, social, and governance considerations are gaining prominence in the asset management sector. Consequently, managers are under immense pressure to integrate these factors into their investment processes.
“ESG will increasingly become an important part of the due diligence process, which is where active managers like ourselves can make a difference not only by delivering alpha but also by identifying those companies that are set to contribute the most to a sustainable future,” said Mr. Ford.
Asset management stocks are crucial in the financial sector, earning revenue through advisory and management fees. They offer stability and diversification for investors, despite operating in a highly regulated environment.
Source: Pexels
Our Methodology
To make our list of best asset management stocks to buy according to hedge funds, we scanned the US markets for the biggest asset managers by market cap. We settled on asset managers with solid underlying fundamentals and tremendous upside potential. Finally, we ranked the stocks in ascending order based on the number of hedge funds that hold stakes in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Asset Management Stocks to Buy According to Hedge Funds
10. Artisan Partners Asset Management Inc. (NYSE:APAM)
Number of Hedge Fund Holders as of Q3 2024: 22
Artisan Partners Asset Management Inc. (NYSE:APAM) is an asset manager that provides services to pension and profit-sharing plans, trusts, endowments, foundations, charitable organizations and government entities. It manages separate client-focused equity and fixed-income portfolios. It boasts an impressive 5.77% dividend yield and has paid dividends for 12 consecutive years.
In addition, Artisan Partners Asset Management Inc. (NYSE:APAM) has registered decent organic growth. Its net revenue has increased at a compound annual growth rate of 3.3% over the last five years. Its revenue for the first nine months was up 12.2% compared to the previous year’s period. The robust growth stems from a diverse product offering and investment strategy, which allows the company to generate significant client fees.
Artisan Partners Asset Management Inc. (NYSE:APAM) delivered solid third-quarter results on October 30, 2024. Revenues logged in at $279.6 million, up 12.4% year-over-year. The increase can be attributed to an 11.7% increase in management fees, totaling $174.7 million. Artisan Partners demonstrates its steady growth and strategic expansion through strong financial results despite difficulties in the fixed-income market. Delivering long-term shareholder value remains the company’s top priority, with a focus on financial stability and shareholder commitment.
9. T. Rowe Price Group Inc. (NASDAQ:TROW)
Number of Hedge Fund Holders as of Q3 2024: 26
T. Rowe Price Group, Inc. (NASDAQ:TROW) is an asset management firm that provides services to individuals, institutional investors, retirement plans, financial intermediaries, and institutions. It launches and manages equity and fixed-income mutual funds. It also invests in public equity and fixed-income markets across the globe.
The company charges fees for providing financial services to customers who buy its mutual funds, exchange-traded funds (ETFs), and other investment products. T. Rowe Price Group, Inc. (NASDAQ:TROW) is up by about 14% year to date.
The outperformance comes from the company delivering strong financial results that underscore strong demand for its services and products. It reported strong third-quarter results on November 3, 2024. Its assets under management were up 3.9% year-over-year to $1.63 trillion. Even as net outflow increased by 18%, T. Rowe Price Group, Inc. (NASDAQ:TROW) delivered an 18% increase in adjusted earnings per share to $2.57.
Furthermore, TROW reported strong net inflows of $3.6 billion in the target date franchise and inflows of almost $1 billion in the ETF business. T. Rowe Price Group, Inc. (NASDAQ:TROW)’s outlook remains upbeat, with positive trends in active stocks and mutual funds anticipated and more advancement expected in 2025. The company has returned over $1.1 billion to shareholders in the first nine months of the year, affirming its ability to generate shareholder value.
8. Janus Henderson Group plc (NYSE:JHG)
Number of Hedge Fund Holders as of Q3 2024: 29
Janus Henderson Group plc (NYSE:JHG) is an asset management firm providing services to institutional, retail, and high-net-worth clients. It manages separate client-focused equity and fixed-income portfolios. Its stock has outperformed the market so far this year, going by a 48% year-to-date gain. The stellar performance stems from impressive growth and strategic expansion that have strengthened its growth metrics.
Third quarter results delivered on October 30, 2024, showcased a 6% increase in assets under management. The increase was the catalyst behind the asset manager posting a 42% year-over-year increase in adjusted earnings per share of $0.91. In addition, Janus Henderson Group plc (NYSE:JHG) is benefiting from strong investment performance and strategic investments such as the acquisition of Victory Park Capital. The acquisition is helping bolster private credit offerings.
While the asset manager posted net outflows of $500 million in the quarter, it continues rebuilding its institutional pipeline while executing strategic objectives. Net inflows in the third quarter totaled $400 million, marking a third consecutive quarter of inflows. Janus Henderson Group plc (NYSE:JHG) expects a significant increase in the fourth quarter due to improved mutual fund performance.
7. Northern Trust Corporation (NASDAQ:NTRS)
Number of Hedge Fund Holders as of Q3 2024: 33
Northern Trust Corporation (NASDAQ:NTRS) is an asset management firm that provides wealth management, asset servicing, asset management, and banking solutions. It offers its services to corporations, institutions, families, and individuals worldwide. Its stock is up by about 29% year to date, outperforming the S&P 500, which is up by about 26%.
The year-to-date rally underlines investor confidence about the company’s long-term prospects. It also comes against strong financial performance as the asset manager navigates complexities in the landscape. On October 23, 2024, Northern Trust Corporation (NASDAQ:NTRS) delivered strong quarterly results. Its net profit was up 42% year-over-year, driven by an 8% increase in investment and servicing fees.
Net income in the quarter totaled $464.9 million, up from $327.8 million delivered the same quarter last year. Increases in fee income from managing and servicing clients’ assets boosted Northern Trust Corporation’s (NASDAQ:NTRS) strong performance. The company’s assets under management were also up 23% year-over-year to $17.4 trillion. In addition, the company rewards income-focused investors with a 2.74% dividend yield.
6. Brookfield Asset Management Inc. (NYSE:BAM)
Number of Hedge Fund Holders as of Q3 2024: 37
Brookfield Asset Management Inc. (NYSE:BAM) is an asset management company focused on real estate, renewable power, infrastructure venture capital and private equity assets. It manages a range of public and private investment products and services for institutional and retail clients. It has produced average compound annual returns of 18% over the past 30 years.
The impressive track record persisted in the third quarter, and the company delivered remarkable results on November 14, 2024. Record cash earnings from base businesses were characterized by a 19% increase in distributable earnings at $1.3 billion or $0.80 a share. The growth was attributable to a 14% growth in fee-related earnings in the asset management business. The acquisition of American Equity Life, higher annuity sales, and solid investment performance helped Wealth Solutions’ earnings double from the same quarter last year.
Brookfield Asset Management Inc. (NYSE:BAM)’s growth metrics and long-term prospects are solid. Over the next five years, the company anticipates increasing its earnings per share by more than 20% annually. The increase should stem from sustained growth in the wealth solutions and asset management divisions,
Brookfield Asset Management Inc. (NYSE:BAM) also anticipates generating a total of $47 billion in free cash flow, or $30 per share, over the next five years. The increase should provide it with ample funds to invest in increasing shareholder value.
Madison Investors Fund stated the following regarding Brookfield Asset Management Ltd. (NYSE:BAM) in its Q3 2024 investor letter:
“During the quarter, we sold our stake in Brookfield Asset Management Ltd. (NYSE:BAM), a leading alternative asset manager. In late 2022, we received shares in the company following its spin-off from Brookfield Corporation. We admire Brookfield Asset Management’s owner-operator culture and long-term track record of generating impressive investment performance. However, during the quarter, we sold our stake to fund other opportunities. We continue to be optimistic on the outlook for Brookfield Asset Management and have indirect exposure to the company though our stake in Brookfield Corporation, which remains Brookfield Asset Management’s largest shareholder.”
5. BlackRock Inc (NYSE:BLK)
Number of Hedge Fund Holders as of Q3 2024: 37
BlackRock Inc (NYSE:BLK) is one of the largest asset management firms that offers services to institutional, intermediary and individual investors. It launches equity, fixed-income, balanced, and real estate mutual funds. It also launches multi-asset exchange-traded funds. The stock is up by 29% year-to-date.
The outperformance comes against the backdrop of robust financial results. The asset manager has also benefited from strong asset under-management growth and strategic initiatives, including mergers and acquisitions. BlackRock Inc (NYSE:BLK) has already closed the Global Infrastructure Partners acquisition, which brought in $116 billion in client AUM. The asset manager is also expanding its footprint into private credit with the acquisition of HPS Investment Partners for $12 billion.
Year to date, the asset manager has recorded $360 billion in total net inflows, affirming the continued strength of the broad-based platform. In its third-quarter report on October 11, 2024, BlackRock Inc (NYSE:BLK) logged a 15% increase in revenues driven by the positive impact of markets on average AUM.
The strong financial position allows the company to shell a solid $5.1 a share dividend, translating to a dividend yield of 1.96%. BlackRock Inc (NYSE:BLK) has increased its dividend offering over the past five years, translating to an average annual increase of 10.67%. The dividend increase affirms strong earnings growth.
The London Company Large Cap Strategy stated the following regarding BlackRock, Inc. (NYSE:BLK) in its Q3 2024 investor letter:
“BlackRock, Inc. (NYSE:BLK) – Shares of BLK rallied during 3Q as organic growth improved sequentially. Our long-term view of BLK has not changed. In the near-term, strong equity market performance is supportive of AUM and fee growth, and, visibility on declining interest rates is a potential tailwind to the fixed income ETF business. We continue to view BLK as a long-term share gainer with a broad spectrum of solutions, and we appreciate the strong balance sheet and steady capital return.”
4. State Street Corporation (NYSE:STT)
Number of Hedge Fund Holders as of Q3 2024: 45
State Street Corporation (NYSE:STT) is an asset management company providing financial products and services to institutional investors worldwide. It offers investment servicing products and services, including custody, accounting, regulatory reporting, investor, and performance. The stock is up by about 25% for the year in response to resilient financial performance in the face of market volatility. With over $330 million in servicing fee wins in the last 12 months, State Street Corporation (NYSE:STT) has successfully obtained new mandates. This illustrates State Street’s capacity to draw in and hold on to customers in a cutthroat industry.
The asset manager delivered impressive third-quarter results on October 15, 2024. It logged a 21% increase in revenue to $3.2 billion as net income increased 3% to $730 million. State Street Corporation (NYSE:STT)’s Global Advisors division also reported record quarterly net flows of $100 billion. State Street wants to increase net interest income by 4% to 5% and total fee revenue by 4% to 5%. The introduction of 20 new ETFs and a collaboration with Apollo Global Management (NYSE:APO) for private market opportunities are two other recent initiatives that should support the expected growth.
State Street Corporation (NYSE:STT) remains focused on pursuing growth prospects while preserving a solid capital position. With its share buyback program, it has been cautious, repurchasing just $0.3 billion of a substantial $5 billion authorization in the first half of 2024.
3. Blackstone Inc. (NYSE:BX)
Number of Hedge Fund Holders as of Q3 2024: 50
Blackstone Inc. (NYSE:BX) is an alternative asset management company specializing in private equity, real estate, hedge fund solutions, and secondary funds. The firm typically invests in early-stage, seed, middle market, mature, late venture and later-stage companies. The stock is up by 45% year-to-date.
The rally comes from investors reacting to the company’s strategic initiative and strong performance across its asset management portfolio. One of the strategic moves includes the $4 billion acquisition of Retail Opportunity Investments. The asset management firm is also in the process of expanding its footprint into Europe as part of a push to attract funds from wealthy clients. The move will also allow it to diversify beyond the traditional institutional investor base and strengthen its revenue base.
Blackstone Inc. (NYSE:BX) delivered solid third-quarter results on October 17, 2024, that showed robust top-line growth. Revenues in the quarter were up 5% year-over-year to $2.43 billion, attributed to $40 billion in capital deployment. The asset management company’s distributable earnings per share were also up by 7% to $1.01 as assets under management hit record highs of $1.11 trillion.
The company prioritizes increasing retail investor engagement and strategic diversification, expecting these efforts to support growth in several verticals. Blackstone Inc. (NYSE:BX) also adapts to changing market conditions as it seizes new opportunities by utilizing substantial scale and effective fee structures.
Ithaka US Growth Strategy stated the following regarding Blackstone Inc. (NYSE:BX) in its Q3 2024 investor letter:
“Blackstone Inc. (NYSE:BX) is one of the world’s leading alternative asset management firms with total assets under management (“AUM”) now in excess of $1 trillion. Over the past few decades Blackstone has evolved into one of the financial service industry’s largest asset gatherers, managing money on behalf of pension funds, insurance companies, and individual investors. The company remains at the forefront of financial innovation, steadily broadening its product offering over time. Today, Blackstone invests clients’ capital across four business segments: (a) Real Estate, (b) Private Equity, (c) Hedge Fund Solutions, and (d) Credit & Insurance. The stock’s relative outperformance in the quarter was mainly due to investor expectations that the private markets are beginning to un-freeze, which should lead to a step up in deal crystallizations (sales) for the company.”
2. KKR & Co. Inc. (NYSE:KKR)
Number of Hedge Fund Holders as of Q3 2024: 66
KKR & Co. Inc. (NYSE:KKR) is a private equity and real estate investment firm. It specializes in acquisitions, leveraged buyouts, management buyouts, and special credit situations. The global asset management firm has demonstrated strong performance and strategic growth initiatives. Consequently, the stock is up by 94% year to date, outperforming the overall market.
KKR & Co. Inc. (NYSE:KKR)’s financial performance has been robust, with the company reporting strong earnings for the third quarter on October 24, 2024. Adjusted net income grew more than 50% on record fees-related earnings and total operating income. Revenues came in at $4.79 billion compared to $3.3 billion generated in the same quarter last year.
In an effort to boost growth and increase its market share, KKR has been aggressively pursuing strategic initiatives. The $2.1 billion purchase of a high-rise apartment portfolio from Lennar/Quarterra, at an estimated 5.3% cap rate, was a noteworthy step in this direction. KKR has also made a calculated move in the Japanese tech industry by acquiring more than one-third of the shares in Fuji Soft Inc., a software developer based in Japan.
As the British utility Thames Water looks to recapitalize in the face of difficulties, KKR & Co. Inc. (NYSE:KKR) is also in talks about a potential share sale. A $50 billion partnership has also been established between KKR and Energy Capital Partners to accelerate the construction of infrastructure for the expanding cloud computing and artificial intelligence industries. This partnership addresses the growing demand for data centers amid the artificial intelligence race.
1. Apollo Global Management, Inc. (NYSE:APO)
Number of Hedge Fund Holders as of Q3 2024: 82
Apollo Global Management, Inc. (NYSE:APO) is an asset management firm specializing in investments in credit, private equity, infrastructure, secondary and real estate markets. The firm’s private equity investments include traditional buyouts, recapitalization, distressed buyouts and debt investments. Apollo Global Management, Inc. (NYSE:APO) is up by 89% year to date on the back of strong financial results that underscore robust underlying growth. In addition, investors have reacted to the company’s ambitious growth targets, including a 20% increase in fee-related earnings and a 10% growth in spread-related earnings.
Apollo Global Management, Inc. (NYSE:APO) is on track to meet its growth goals after reporting strong third-quarter results on November 6, 2024. Strong growth in fee-related revenues and disciplined expenses enabled the asset manager to deliver record fee-related earnings of $531 million. Due to robust organic growth, it also marked the second-highest quarter of spread-related earnings, totaling $856 million.
Apollo Global Management, Inc. (NYSE:APO) has inked strategic partnerships as it looks to unlock new opportunities. It has partnered with BNP Paribas to strengthen its capital markets and financing prospects. Additionally, it has partnered with Citigroup Inc. (NYSE:C) to create a $25 billion private credit and direct lending program. These changes demonstrate Apollo Global Management’s continued financial success and strategic initiatives.
Baron FinTech Fund stated the following regarding Apollo Global Management, Inc. (NYSE:APO) in its Q2 2024 investor letter:
“Strength in Tech-Enabled Financials was broad based, led by gains from alternative asset manager Apollo Global Management, Inc. (NYSE:APO) and specialty insurer Arch Capital Group Ltd. Apollo continues to benefit from disruptive trends in financial services, most notably the shift of retirement assets into higher-yielding private credit given the company’s dual role as an asset manager and an annuity provider. “
While we acknowledge the potential of Apollo Global Management, Inc. (NYSE:APO) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than APO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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