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Our Top Stock Picks Among Asset Managers

Our Top Stock Picks Among Asset Managers

Gregg Warren: We believe it will be prudent to stay cautious on the traditional asset managers as we move forward. The group has rallied strongly post the election in a lot of ways on the belief that regulations are going to be less onerous than they have been in the past and that corporate tax reform will give an added boost to their bottom lines.

As we look at regulation, we expect there to be an easing, but even if the DOL, the Department of Labor's fiduciary rule gets eliminated, the damage has already been done. Fees and performance are already under greater pressure than they ever had been before, and we expect this to be problematic for the asset managers as we move forward.

Active continues to lose share to passive. We expect this to be a dominant trend for the industry as we move through the next three to five years, and that's why BlackRock remains our top pick within the group. The company is the largest ETF provider both domestically and globally, does a lot of institutional business, and tends to have much less volatility in their results than the rest of the asset managers.

From the active side of the equation, we still like T. Rowe Price. We think the firm has the best long-term investment performance track record of any of the companies we cover. They have generally not done a lot of business on the retail side, preferring to do retirement-based operations. We think with the pressure there on the 401(k) side of the business as baby boomers start to roll over assets, the firm has opportunities to move out and branch into the retail side of the business.

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About the Author

Greggory Warren

Strategist
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Greggory Warren, CFA, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the traditional U.S.-and Canadian-based asset managers, as well as Berkshire Hathaway.

Before assuming his current role in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies. Before joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than seven years, covering consumer staples and consumer cyclicals.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago. During 2014-19, Warren was selected to participate on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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