US-Based Traditional Asset Managers: Tariff-Induced Market Uncertainty Drives Shares Lower
Asset manager stocks are more reasonably valued, but we remain cautious.
Share prices of US-based traditional asset managers like BlackRock BLK and T. Rowe Price TROW are down more than 6% on average on April 3 as the markets react negatively to the Trump administration’s global tariffs. While this has made some of the names we cover more approachable, we remain cautious.
Why it matters: With short-term rate cuts likely on pause in the near term and the equity markets baking in an economic slowdown—if not recession—due to tariffs as well as cuts to US government spending and jobs, the US equity markets are already down more than 6% year to date.
- The US-based traditional asset managers we cover not only are tethered to the performance of the equity markets but also have an average beta of 1.3 times. The group is down 13% on average since the start of the year, similar to the 15% decline for the Dow Jones U.S. Asset Managers index.
- With adjusted revenue and operating margins for most of the traditional asset managers we cover still below 2021 levels at the end of 2024, a downturn in the US economy and equity markets in the near term would be a major setback for the group.
The bottom line: At midday April 3, the traditional asset managers we cover were trading at an average price/fair value multiple of 0.84, making them modestly undervalued. But we’d still prefer to see a slightly wider margin of safety before recommending some of the higher-quality names.
- Wide-moat BlackRock remains our top pick for long-term investors, given its higher concentration in passive products. Currently trading 18% below our fair value estimate, it is more approachable than it has been in a while, although we’d prefer to see that discount exceed 20%.
- Narrow-moat T. Rowe Price also looks attractive, trading at a 30% discount to our fair value estimate. While its valuation is likely to shift slightly downward in the near term given its heavier exposure to growth equities, long-term investors will still have enough of a margin of safety.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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