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Stock Strategist Industry Reports

Market Volatility for Asset Managers Creates Opportunities

The difference between traditional and alternative managers affects how we treat them in a downturn.

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In volatile market conditions, the shares of both traditional and alternative asset managers tend to move substantially, reflecting investor uncertainty over the impact that the market's movement will ultimately have on earnings. We think it is worth noting the differences between the traditional asset managers, where the impact of market volatility is more observable and immediate, and the alternative asset managers, where the impact of market volatility tends to be less observable and, in our view, the managers tend to be less sensitive to it than most investors believe. In the current environment, we consider  BlackRock (BLK),  Blackstone (BX), and  Apollo Global Management (APO) to be our top ideas.

This difference between the two groups has an impact on how we treat them in a market downturn similar to the one we've seen since the middle of August. We have taken down our fair value estimates of most of the traditional asset managers, including BlackRock. We have not, however, changed our moat ratings for these firms, as these are normal mark-to-market adjustments that we make from time to time (which happen to have a larger impact on our estimates during market rallies or downturns that take place in a short period).

Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.