Core Viewpoint - The Zacks Investment Management industry is poised for growth due to a shift towards higher-yielding investment vehicles, despite challenges from tighter regulations and rising compliance costs [2][3][10]. Industry Overview - The Zacks Investment Management industry includes companies managing securities and funds to meet client investment goals, earning revenue through service fees and commissions [4]. - Investment managers provide diversification options, helping to reduce volatility and ensure steady returns over time [5]. Major Themes Affecting the Industry - Rising Assets Inflow: Global equity markets have shown strong performance, leading to significant AUM growth. Investors are expected to move from low-yield money market funds to higher-yield assets like equity funds and long-term bonds [6][7]. - Shift Toward Passive Investing: There is a continued trend of investors favoring low-cost passive investment options, although demand for active ETFs and private credit funds is increasing [8][9][10]. - Mounting Expenses: Compliance costs are rising due to tighter regulations, and technology upgrades are necessary to meet evolving customer needs, which may increase short-term expenses but support long-term margins [11]. Industry Performance - The Zacks Investment Management industry has outperformed the S&P 500 and the broader finance sector over the past two years, with a collective stock increase of 65.9% compared to 52.5% for the S&P 500 and 41.4% for the Zacks Finance Sector [16]. - The industry currently has a trailing 12-month price-to-tangible book (P/TB) ratio of 5.18X, significantly lower than the S&P 500's 14.79X, indicating a potential valuation opportunity [18][19]. Promising Companies - SEI Investments: With a market cap of $11.1 billion and AUM of $493.9 billion, SEI is expected to benefit from revenue growth driven by strategic buyouts and technological innovations. The stock has increased by 28.3% over the past three months [20][21][23]. - Invesco: Operating with a market cap of $8.3 billion and AUM of $1.8 trillion, Invesco's financials are supported by strategic expansion and operational efficiency improvements. The stock has gained 15% in the last three months [24][25]. - Artisan Partners: With AUM of $167.8 billion, Artisan focuses on high-value-added active investment strategies. The company has seen an 18% increase in stock price over the past three months [26][27].
Zacks Industry Outlook SEI Investments, Invesco and Artisan Partners Asset Management