Stocks of active managers outperform

The gains have come amid a broader rotation into financial stocks — and despite the recent popularity of passive strategies.
JUN 21, 2017
By  Bloomberg

They're beating the benchmark! Or at least, they've caught up with broader market. Shares of asset managers have been staging their own little bull market over the last few weeks, with an index of 18 stocks in the S&P 1500 advancing in nine of the past 12 days. The rally has been enough to erase losses for the year and push the gauge past the S&P 500 based on 2017 returns. Before you burn your ETF prospectuses, recall that the gains are coming amid a broader rotation into financial stocks that has coincided with a hammering in technology companies since June 9. "It's a push-and-pull game. Asset managers, like financial stocks in general, went from investors' love to negligence, and now they are loved again," said Ilya Feygin, senior strategist at WallachBeth Capital. "There is an expectation that milder rules for the financial industry will benefit them and there is some optimism about proposed corporate tax cuts." Sentiment toward the larger financial sector has been improving since the Treasury Department issued a report on overhauling banking regulations, including dialing back the Volcker Rule, something that asset managers like BlackRock Inc. had called for. /assets/docs src="/wp-content/uploads2017/06/CI110884621.PNG" It's not inconceivable the rally reflects a pickup in active funds' performance. More than half of active equity products have beaten their benchmark indexes in the first quarter, according to JPMorgan Chase & Co. data. But passive strategies keep gaining market share. Index funds including ETFs swelled by $104 billion in the first quarter as investors pulled $37 billion from active stock pickers. U.S. investors moved $429 billion to passive while pulling $326 billion from active funds last year. The rally in asset managers simply reflects optimism inspired by the broader advance in the S&P 500, which on Monday reached an all-time high for the 25th time this year, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. "You could easily argue that investors anticipating a broader market advance will want to get into asset manager shares as they should benefit from higher fees, but the series is more of a coincident indicator than a leading indicator," Mr. Jacobsen said. "The sub-index amplifies moves in the broader market, but it doesn't do a good job predicting where the market will go."

Latest News

JPMorgan tells fintech firms to start paying for customer data
JPMorgan tells fintech firms to start paying for customer data

The move to charge data aggregators fees totaling hundreds of millions of dollars threatens to upend business models across the industry.

FINRA snapshot shows concentration in largest firms, coastal states
FINRA snapshot shows concentration in largest firms, coastal states

The latest snapshot report reveals large firms overwhelmingly account for branches and registrants as trend of net exits from FINRA continues.

Why advisors to divorcing couples shouldn't bet on who'll stay
Why advisors to divorcing couples shouldn't bet on who'll stay

Siding with the primary contact in a marriage might make sense at first, but having both parties' interests at heart could open a better way forward.

SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives
SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives

With more than $13 billion in assets, American Portfolios Advisors closed last October.

William Blair taps former Raymond James executive to lead investment management business
William Blair taps former Raymond James executive to lead investment management business

Robert D. Kendall brings decades of experience, including roles at DWS Americas and a former investment unit within Morgan Stanley, as he steps into a global leadership position.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.