Invest in Your Asset Manager


The stocks of firms handling your money are soaring. Is it too late to get in?

THE STOCK MARKET’S RALLY might have done great things for your personal portfolio, but it has been even better for the firms that invest your money. At Janus Capital, which runs the popular Janus Twenty and other mutual funds, the amount of money managed has increased by $41 billion since March, a 37 percent jump. As these “assets under management” rise, higher sales and profits tend to follow, since an overwhelming amount of these firms’ revenue comes from the fees they charge customers for investing their cash.

Naturally, this hasn’t gone unnoticed—stocks of money-managing firms have soared since the spring (Janus has tripled). But some investment pros say a number of select firms have room to grow, thanks to another effect of the market rally: People are starting to invest again. Recently, investors have stopped parking cash in money-market accounts, which typically have very low fees, and are putting it into stock and bond funds, which command higher fees. In September alone, money-market funds shed more than $ 131 billion in assets, while stock and bond mutual funds got $48 billion in net new money, according to the Investment Company Institute, a mutual fund trade organization. The rally has given some investors confidence to get back into the markets again, says Greggory Warren, an analyst at Morningstar.

That change in sentiment could bode well for money-managing firms.

Many analysts believe the asset-managing firms with a diversified product offering are the ones to invest in now. BlackRock (BLK), which will become the biggest money-managing firm after it completes its acquisition of Barclays Global Investors, has been adept at getting its customers to use Black- Rock stock and bond funds when the customers want to switch out of BiackRock’s money-market funds. Some firms are buying up funds as well. Toronto-based Invesco (IVZ) plans to take over Morgan Stanley’s Van Kampen fund family in a deal that fills some holes in Invesco’s product offerings, says D.J. Neiman, an analyst at William Blair & Co. T. Rowe Price Group (TROW) is traveling further to buy up assets, taking a stake in an Indian money manager. Of course, another market meltdown easily could take all these assets away from the money-managing firms. But many analysts think that barring another 2008-style market collapse, investors are willing to give stocks and bonds—and by extension, asset-managing firms—another chance. -Jason Kephart

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