Morningstar: Asset Managers Need These 4 Traits for Success

Morningstar’s Greggory Warren writes that asset managers that adopt certain important traits can thrive in this challenging environment. “We believe that asset managers with a level of differentiation in their operations, a stable of cost-competitive funds, repeatable investment processes that generate consistent returns, and adaptable business models are more likely to survive the disruption that has affected the industry the past several years as well as thrive over the next decade.” Warren identifies larger and small winning firms, including BlackRock, TRowe Price and Cohen & Steers, pinpointing the strategies responsible for their successes. For Cohen & Steers, Warren notes the company has “a well-respected brand, well-forged distribution ties, and a profitable niche strategy that has historically produced outsize returns.” Warren also presents questions that research experts use to assess the competitive positioning of U.S.-based asset managers, including the three below:

1. Does the company have a more broadly diversified product set across asset classes, distribution channels, and geographies that would allow it to hold on to investor assets across market cycles?
2. Does the company offer a niche product set that has significantly higher switching costs than the industry overall, providing it with the ability to hold on to investor assets for longer periods?
3. Does the company’s size and scale and breadth of product offerings provide it with access to distribution platforms without having to give up too much in order to garner and retain shelf space?