We recently published a list of 10 Cheap Asset Management Stocks to Buy Now. In this article, we are going to take a look at where The Carlyle Group Inc. (NASDAQ:CG) stands against other cheap asset management stocks to buy now.
The asset management industry plays a crucial role in global financial markets by managing investments for individuals, institutions, and corporations. Asset managers strategically allocate capital across equities, fixed income, real estate, and alternative investments, seeking to optimize returns while managing risk. The industry encompasses various segments, including mutual funds, hedge funds, private equity firms, and wealth management companies, each catering to different investor needs.
Recent research highlights the industry’s robust growth trajectory. According to PwC’s November 2024 Asset & Wealth Management Report, global assets under management (AUM) are expected to reach $171 trillion by 2028, reflecting a 5.9% compound annual growth rate (CAGR). Alternative assets, including private equity, hedge funds, and real estate, are projected to expand at an even faster 6.7% CAGR, reaching $27.6 trillion over the same period. As asset managers seek new growth avenues, tokenization is emerging as a transformative trend. PwC anticipates tokenized products will surge from $40 billion to over $317 billion by 2028, a 51% CAGR, as asset managers—particularly in private equity (53%), equity (46%), and hedge funds (44%)—embrace this innovation to democratize finance and lower investment barriers.
Amid these structural shifts, Deloitte’s 2025 Investment Management Outlook underscores the challenges firms face despite rising AUM in 2023. Revenue growth and profit margins remain under pressure, pushing firms to refine their product diversification strategies and distribution models. Key growth drivers include alternative investments like private credit and hybrid fund structures, as well as AI-driven sales and distribution technologies. Deloitte emphasizes that firms effectively implementing these initiatives will likely outperform competitors, while those failing to adapt may struggle to maintain their market position.
Another notable industry trend, according to Deloitte’s report, is the continued rise of exchange-traded funds (ETFs). Over the past five years, ETFs have attracted over $3 trillion in net inflows in the U.S., reflecting investors’ preference for low-cost, transparent investment vehicles. The majority of AUM in mutual funds and ETFs is concentrated in funds with lower expense ratios, contributing to ETFs’ growing market share at the expense of mutual funds. In 2023, active equity and bond ETFs maintained lower average expense ratios than their actively managed mutual fund counterparts, solidifying their appeal as cost-effective investment options.
In summary, the asset management industry is undergoing a period of transformation, driven by technological advancements, evolving investor preferences, and a shift toward alternative investments. While rising AUM signals strong long-term growth prospects, firms must adapt to shifting market dynamics by embracing diversified product strategies, AI integration, and tokenization.
Our Methodology
To determine the 10 cheap asset management stocks to buy now, we first compiled a list of asset management companies using online screeners and financial media reports. We then narrowed down the selection to stocks trading at a forward price-to-earnings (P/E) ratio below 15 and offering at least 10% upside potential. From this refined list, we further narrowed down 10 top stocks with the highest hedge fund ownership, utilizing data from Insider Monkey’s Q4 2024 hedge fund database. Finally, we ranked the selected stocks in ascending order of their forward P/E ratios, placing those with the lowest valuations at the top.
Note: All pricing data is as of market close on March 19.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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The Carlyle Group Inc. (NASDAQ:CG)
Forward P/E: 10.4
Upside Potential: 27%
Number of Hedge Fund Holders: 32
The Carlyle Group Inc. (NASDAQ:CG) is a global investment firm that focuses on private equity, credit, and real assets. Managing over $440 billion in assets under management (AUM), the company invests across various industries, including technology, healthcare, infrastructure, and financial services.
Renowned for its strong track record of value creation within portfolio companies, The Carlyle Group Inc. (NASDAQ:CG) benefits from long-term capital commitments that provide visibility into its earnings. In FY 2024, the firm deployed $43 billion in funds, marking a 48% increase from the $29 billion deployed in 2023. With rising investor interest in alternative investments, the company is well-positioned to capitalize on robust fundraising and capital deployment opportunities.
In their Q4 2024 Investor Letter, Portfolio Managers of Oakmark Fund (Harris Associates) commended The Carlyle Group Inc. (NASDAQ:CG)’s new leadership for taking effective measures to expand the firm’s focus beyond its private equity roots, paving the way for stronger organic growth. The company’s established brand and extensive distribution network further equip it to seize the increasing demand for alternative investment opportunities in the retail sector. Despite these promising developments and a positive growth trajectory, the portfolio managers noted that the company continues to trade at less than half the P/E multiple of its peers, presenting a notable discount compared to other financial services firms with similar growth potential.
Following the Q4 2024 results on February 11, a Barclays analyst reduced The Carlyle Group Inc. (NASDAQ:CG) price target from $60 to $55, while maintaining an Overweight rating on the stock. The analyst noted that the company’s fiscal 2025 performance was slightly softer than expected.
Overall, CG ranks 7th on our list of cheap asset management stocks to buy now. While we acknowledge the potential of CG to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
