The best investment managers stocks are great dividend plays. They are asset-light companies with a high return on assets. They are cash-flow rich and usually have little to no debt. Plus, they don’t need to do major capex to grow. Therefore, there is a reasonable amount of cash left for dividend distributions. Top asset managers like Blackrock and T. Rowe Price have had established track records of increasing dividend payments regularly. Blackrock has increased its dividend payments for 10 consecutive years while T. Rowe Price has done that for over 30 years.
The current scenario of the asset management industry is one of free trading and low fees. Exchange-traded funds and index funds have recently become very popular among investors. These funds have also reduced their fees in order to attract more inflows. Vanguard and Blackrock are among the two largest players when it comes to ETFs. Vanguard’s funds have generally been cheaper than those of Blackrock’s.
However, Blackrock is a promising asset management stock to buy. It has lowered its fee on three prominent ETFs to match the fees charged by Vanguard. Blackrock has also seen increased inflows into gold, sustainable, and fixed-income ETFs during the pandemic. While the expense ratios receive plenty of attention, the real moat among the best investment managers stocks 2020 is the customer stickiness. Once a customer invests in an ETF, the slight premium in terms of the fee is something he/she is willing to pay in order to keep the funds parked in that ETF. Changing funds attracts taxes and the outperformance with another fund may not be as high to justify the change.
Companies like Blackrock, that have the scale, brand, and an extensive array of funds to choose from, tend to do well in the asset management industry.