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3 Stocks to Bet on From the Prospering Investment Management Industry
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The Zacks Investment Management industry has been thriving of late, propelled by asset growth, digital transformation, evolving investment vehicles, deeper personalization, and strategic scale.
Asset managers are adapting faster than ever to investor needs and technological change. While passive investment products offer lower fees to asset managers than active strategies, firms like T. Rowe Price Group, Inc. (TROW - Free Report) , SEI Investments Company (SEIC - Free Report) and Federated Hermes, Inc. (FHI - Free Report) are likely to keep benefiting from growing assets under management (AUM) balances fueled by increased institutional inflows, expansion into alternatives and innovative products. Higher technology-related costs may hurt profits in the near term, but will support margins in the long run.
About the Industry
The Zacks Investment Management industry comprises companies that manage securities and funds for clients to meet specified investment goals. The companies earn by charging service fees or commissions. Investment managers, also called asset managers, manage hedge funds, mutual funds, private equity, venture capital and other financial investments for third parties. By appointing an investment manager for one’s assets, investors get more diversification options than if they manage their assets independently. Investment managers invest their clients’ assets in different asset classes, depending on their needs and risk-taking abilities. Hence, the diversification, which investors get by appointing asset managers to manage their assets, helps reduce the impacts of volatility and ensures steady returns over time.
3 Investment Management Industry Trends to Follow
Asset Inflows to Continue to Drive AUM Growth: Equity markets globally have performed impressively in the past couple of years, driven by sustained economic growth, resulting in a rise in AUM balances. With interest rates expected to decline in the near term, investors are likely to rotate out of money market mutual funds or short-term investments into higher-yielding assets. Institutional interest also continues to swell, with pension funds, endowments, and insurers significantly ramping up allocations.
Moreover, as investors reassess their risk levels, there has been a rise in asset inflows into alternative investments, such as index funds, private credit funds and exchange-traded funds (ETFs). The steady growth of tokenized assets — the tokenization of traditional assets, such as real estate and equities — has also been attracting investor interest. On the whole, decent economic growth will likely keep driving asset inflows, thereby resulting in robust AUM growth. Although passive investment strategies typically offer lower fees compared with actively managed investment funds, asset managers are still expected to generate enough fees as the demand for passive investment vehicles continues to increase. Thus, growth in AUM balances will positively impact investment managers’ performance fees and investment advisory fees.
Continued Mergers/Partnerships to Help Expand Scale: In order to stay competitive, investment management firms have been engaging in mergers & acquisitions (M&As) and partnerships for a long time now. In a rapidly evolving, tech-driven and fee-compressed industry, consolidations benefit asset managers by driving scale, cutting costs, improving resilience, diversifying products and enhancing distribution.
By joining forces, larger asset managers can spread fixed costs across a bigger AUM base, thus lowering expense ratios and improving profit margins. As passive products and ETFs drive down fees, scale is often the only way to stay profitable. As M&As allow for diversification across asset classes, client types and geographies, it will help firms reduce reliance on one particular option to generate fees. Further, combining resources will enable bigger investments in artificial intelligence (AI), risk analytics and digital platforms. As such, automation and shared infrastructure will help asset managers reduce costs and improve client experience.
Elevated Expenses to Hurt the Bottom Line: Regulations to enhance transparency have increased compliance costs for investment managers for a long time now. Also, as industry players are constantly trying to upgrade technology to keep up with evolving customer needs, technology-related costs are expected to keep rising. Using AI and machine learning to enhance operational efficiencies may lead to increased expenses in the short term, but will ultimately support investment managers' operating margins in the long run.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Investment Management industry is a 36-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #79, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is because of an encouraging earnings outlook for the constituent companies in aggregate. The aggregate earnings estimate revisions show that analysts are gaining confidence in this group’s growth potential. Since April 2025-end, the industry’s earnings estimates for the current year have been revised 2% upward.
Before we present a few stocks from the industry that you may want to invest in, let us check out the industry’s recent stock market performance and valuation picture.
Industry vs. Broader Sector
In the past two years, the Zacks Investment Management industry has outperformed the S&P 500 Index and its sector. Stocks in the industry have collectively soared 58.5%, while the S&P 500 composite has rallied 47.5% and the Zacks Finance Sector has appreciated 49.9%.
Two-Year Price Performance
Industry's Current Valuation
One might get a good sense of the industry’s relative valuation by looking at its price-to-tangible book ratio (P/TB), which is commonly used for valuing investment management companies because of large variations in their earnings from one quarter to the next.
The industry currently has a trailing 12-month P/TB of 4.64X. This compares with the highest level of 7.47X, the lowest level of 2.76X and the median of 4.58X over the past five years. The industry is trading at a significant discount compared with the market at large, as the trailing 12-month P/TB for the S&P 500 composite is 12.98X, which the chart below shows.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a low P/TB ratio, comparing investment managers with the S&P 500 may not make sense to many investors. However, the comparison of the group’s P/TB ratio with that of its broader sector seems more meaningful.
When we compare the group’s P/TB ratio with the broader Finance sector, it seems the group is trading at a decent discount. The Zacks Finance sector’s trailing 12-month P/TB of 5.34X for the same period is above the Zacks Investment Management industry’s ratio, which the chart below shows.
Price-to-Tangible Book Ratio (TTM)
3 Investment Management Stocks to Invest In
T. Rowe Price: Headquartered in Baltimore, TROW provides a broad array of mutual funds, sub-advisory services and separate account management for individual and institutional investors, retirement plans and financial intermediaries. As of June 30, 2025, the company had $1.68 trillion in AUM.
Over the last four years (ended 2024), the company’s net revenues saw a compound annual growth rate (CAGR) of 3.4%, with the uptrend continuing in the first half of 2025. The rise has been supported by higher investment advisory fees, despite a shift in AUM toward lower-fee asset classes and reduced capital allocation-based income. TROW’s focus on fortifying its business by enhancing investment capabilities, broadening distribution reach and investing in new product offerings will continue to support revenue growth. The company's shifting focus toward international growth funds is also expected to help increase revenues and investment management margin.
T. Rowe Price’s diverse business model ensures sustainable earnings. Its AUM balance witnessed a CAGR of 2.3% over the last four years (2020-2024), with the upward momentum persisting in the first six months of 2025. A strong brand, consistent investment track record, and decent business volumes are expected to keep supporting AUM growth in the upcoming period.
TROW’s efforts to expand its business operations through alliances and acquisitions have been impressive. In the fourth quarter of 2024, the company announced plans for a partnership with Aspida, which highlights its continued commitment to the expansion of the insurance business. In 2023, TROW acquired Retiree, a fintech firm providing innovative retirement income planning software. Further, T. Rowe Price expanded its footprint and capabilities through the acquisition of OHA in 2021. This bulked up its offerings in the alternative investment market space. As the company is committed to diversifying its revenue streams and meeting customer needs, we believe such endeavors will likely support its long-term prospects.
In the past three months, TROW shares have gained 12%. Over the past 30 days, the Zacks Consensus Estimate for the company’s 2025 and 2026 earnings has been revised 2.5% and 1.8% upward to $9.06 and $9.46, respectively. The company currently carries a Zacks Rank #2 (Buy).
Price and Consensus: TROW
SEI Investments: Headquartered in Oaks, PA, this asset management company is a leading provider of wealth management business solutions in the financial services industry. As of June 30, 2025, AUM was $517.5 billion, and client assets under administration (AUA) were $1.14 trillion.
SEI Investments has been witnessing consistent improvement in revenues, and total assets under management, advisement and administration. Though total revenues declined in 2023, the metric witnessed a CAGR of 5.2% over the last five years (2019-2024), with the uptrend continuing in the first half of 2025. Likewise, total assets under management, advisement and administration recorded a CAGR of 8.2% over the same time frame.
The company’s diversified products and revenue mix, expanding global presence, the acquisition of Atlas Master Trust and solid total assets balance reflect improving prospects. SEIC has been focusing on high-growth areas of business, and in sync with this, it sold its Family Office Service operations to Aquiline in July 2025. The acquisitions of LifeYield (boosting multi-account tax management), Altigo (helping expand in the alternatives investment space) and National Pensions Trust (enhancing its position in the defined contribution market) will likely keep supporting the top line.
Technology is the backbone of SEI Investments’ businesses. Its strategic acquisitions, including Oranj's cloud-native technology platform, Finomial and Novus, support its technological advancement efforts. The company is taking several initiatives to enhance technology to support advisors. These initiatives and constant innovations in software will likely help SEIC win new clients.
In the past three months, shares of SEIC have gained 4.7%. In the past 30 days, the Zacks Consensus Estimate for the company’s 2025 and 2026 earnings has moved 10.2% and 1% upward to $5.38 and $5.45, respectively. Currently, SEI Investments sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: SEIC
Federated: Headquartered in Pittsburgh, PA, Federated is a global asset manager with $845.7 billion in AUM as of June 30, 2025. The company offers world-class active investment management and engagement services across a wide range of asset classes for investors globally.
Acquiring money market assets depicts the buoyancy of Federated in the money market business. The record level of money market AUM will provide the company with various new fund offerings. Management expects the market conditions for money market strategies to remain favorable, with money market fund yields continuing to offer an attractive alternative to direct market instruments and bank deposit rates.
Over the years, the company has inked deals and expanded operations in strategic markets. The buyout of C.W. Henderson and Associates in 2022 expanded FHI’s separately managed account business. The company continues to seek alliances and acquisitions to expand its business globally.
FHI’s inorganic growth efforts are expected to continue to drive the AUM balance in the upcoming period. In the four years ended 2024, AUM witnessed a CAGR of 7.4%, with the uptrend continuing in the first half of this year.
FHI shares have gained 23.9% in the past three months. Over the past 30 days, the Zacks Consensus Estimate for its 2025 and 2026 earnings has been revised 2.1% and 2.9% upward to $4.46 and $4.56, respectively. The company currently sports a Zacks Rank of 1.
Price and Consensus: FHI
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3 Stocks to Bet on From the Prospering Investment Management Industry
The Zacks Investment Management industry has been thriving of late, propelled by asset growth, digital transformation, evolving investment vehicles, deeper personalization, and strategic scale.
Asset managers are adapting faster than ever to investor needs and technological change. While passive investment products offer lower fees to asset managers than active strategies, firms like T. Rowe Price Group, Inc. (TROW - Free Report) , SEI Investments Company (SEIC - Free Report) and Federated Hermes, Inc. (FHI - Free Report) are likely to keep benefiting from growing assets under management (AUM) balances fueled by increased institutional inflows, expansion into alternatives and innovative products. Higher technology-related costs may hurt profits in the near term, but will support margins in the long run.
About the Industry
The Zacks Investment Management industry comprises companies that manage securities and funds for clients to meet specified investment goals. The companies earn by charging service fees or commissions. Investment managers, also called asset managers, manage hedge funds, mutual funds, private equity, venture capital and other financial investments for third parties. By appointing an investment manager for one’s assets, investors get more diversification options than if they manage their assets independently. Investment managers invest their clients’ assets in different asset classes, depending on their needs and risk-taking abilities. Hence, the diversification, which investors get by appointing asset managers to manage their assets, helps reduce the impacts of volatility and ensures steady returns over time.
3 Investment Management Industry Trends to Follow
Asset Inflows to Continue to Drive AUM Growth: Equity markets globally have performed impressively in the past couple of years, driven by sustained economic growth, resulting in a rise in AUM balances. With interest rates expected to decline in the near term, investors are likely to rotate out of money market mutual funds or short-term investments into higher-yielding assets. Institutional interest also continues to swell, with pension funds, endowments, and insurers significantly ramping up allocations.
Moreover, as investors reassess their risk levels, there has been a rise in asset inflows into alternative investments, such as index funds, private credit funds and exchange-traded funds (ETFs). The steady growth of tokenized assets — the tokenization of traditional assets, such as real estate and equities — has also been attracting investor interest. On the whole, decent economic growth will likely keep driving asset inflows, thereby resulting in robust AUM growth. Although passive investment strategies typically offer lower fees compared with actively managed investment funds, asset managers are still expected to generate enough fees as the demand for passive investment vehicles continues to increase. Thus, growth in AUM balances will positively impact investment managers’ performance fees and investment advisory fees.
Continued Mergers/Partnerships to Help Expand Scale: In order to stay competitive, investment management firms have been engaging in mergers & acquisitions (M&As) and partnerships for a long time now. In a rapidly evolving, tech-driven and fee-compressed industry, consolidations benefit asset managers by driving scale, cutting costs, improving resilience, diversifying products and enhancing distribution.
By joining forces, larger asset managers can spread fixed costs across a bigger AUM base, thus lowering expense ratios and improving profit margins. As passive products and ETFs drive down fees, scale is often the only way to stay profitable. As M&As allow for diversification across asset classes, client types and geographies, it will help firms reduce reliance on one particular option to generate fees. Further, combining resources will enable bigger investments in artificial intelligence (AI), risk analytics and digital platforms. As such, automation and shared infrastructure will help asset managers reduce costs and improve client experience.
Elevated Expenses to Hurt the Bottom Line: Regulations to enhance transparency have increased compliance costs for investment managers for a long time now. Also, as industry players are constantly trying to upgrade technology to keep up with evolving customer needs, technology-related costs are expected to keep rising. Using AI and machine learning to enhance operational efficiencies may lead to increased expenses in the short term, but will ultimately support investment managers' operating margins in the long run.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Investment Management industry is a 36-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #79, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is because of an encouraging earnings outlook for the constituent companies in aggregate. The aggregate earnings estimate revisions show that analysts are gaining confidence in this group’s growth potential. Since April 2025-end, the industry’s earnings estimates for the current year have been revised 2% upward.
Before we present a few stocks from the industry that you may want to invest in, let us check out the industry’s recent stock market performance and valuation picture.
Industry vs. Broader Sector
In the past two years, the Zacks Investment Management industry has outperformed the S&P 500 Index and its sector. Stocks in the industry have collectively soared 58.5%, while the S&P 500 composite has rallied 47.5% and the Zacks Finance Sector has appreciated 49.9%.
Two-Year Price Performance
Industry's Current Valuation
One might get a good sense of the industry’s relative valuation by looking at its price-to-tangible book ratio (P/TB), which is commonly used for valuing investment management companies because of large variations in their earnings from one quarter to the next.
The industry currently has a trailing 12-month P/TB of 4.64X. This compares with the highest level of 7.47X, the lowest level of 2.76X and the median of 4.58X over the past five years. The industry is trading at a significant discount compared with the market at large, as the trailing 12-month P/TB for the S&P 500 composite is 12.98X, which the chart below shows.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a low P/TB ratio, comparing investment managers with the S&P 500 may not make sense to many investors. However, the comparison of the group’s P/TB ratio with that of its broader sector seems more meaningful.
When we compare the group’s P/TB ratio with the broader Finance sector, it seems the group is trading at a decent discount. The Zacks Finance sector’s trailing 12-month P/TB of 5.34X for the same period is above the Zacks Investment Management industry’s ratio, which the chart below shows.
Price-to-Tangible Book Ratio (TTM)
3 Investment Management Stocks to Invest In
T. Rowe Price: Headquartered in Baltimore, TROW provides a broad array of mutual funds, sub-advisory services and separate account management for individual and institutional investors, retirement plans and financial intermediaries. As of June 30, 2025, the company had $1.68 trillion in AUM.
Over the last four years (ended 2024), the company’s net revenues saw a compound annual growth rate (CAGR) of 3.4%, with the uptrend continuing in the first half of 2025. The rise has been supported by higher investment advisory fees, despite a shift in AUM toward lower-fee asset classes and reduced capital allocation-based income. TROW’s focus on fortifying its business by enhancing investment capabilities, broadening distribution reach and investing in new product offerings will continue to support revenue growth. The company's shifting focus toward international growth funds is also expected to help increase revenues and investment management margin.
T. Rowe Price’s diverse business model ensures sustainable earnings. Its AUM balance witnessed a CAGR of 2.3% over the last four years (2020-2024), with the upward momentum persisting in the first six months of 2025. A strong brand, consistent investment track record, and decent business volumes are expected to keep supporting AUM growth in the upcoming period.
TROW’s efforts to expand its business operations through alliances and acquisitions have been impressive. In the fourth quarter of 2024, the company announced plans for a partnership with Aspida, which highlights its continued commitment to the expansion of the insurance business. In 2023, TROW acquired Retiree, a fintech firm providing innovative retirement income planning software. Further, T. Rowe Price expanded its footprint and capabilities through the acquisition of OHA in 2021. This bulked up its offerings in the alternative investment market space. As the company is committed to diversifying its revenue streams and meeting customer needs, we believe such endeavors will likely support its long-term prospects.
In the past three months, TROW shares have gained 12%. Over the past 30 days, the Zacks Consensus Estimate for the company’s 2025 and 2026 earnings has been revised 2.5% and 1.8% upward to $9.06 and $9.46, respectively. The company currently carries a Zacks Rank #2 (Buy).
Price and Consensus: TROW
SEI Investments: Headquartered in Oaks, PA, this asset management company is a leading provider of wealth management business solutions in the financial services industry. As of June 30, 2025, AUM was $517.5 billion, and client assets under administration (AUA) were $1.14 trillion.
SEI Investments has been witnessing consistent improvement in revenues, and total assets under management, advisement and administration. Though total revenues declined in 2023, the metric witnessed a CAGR of 5.2% over the last five years (2019-2024), with the uptrend continuing in the first half of 2025. Likewise, total assets under management, advisement and administration recorded a CAGR of 8.2% over the same time frame.
The company’s diversified products and revenue mix, expanding global presence, the acquisition of Atlas Master Trust and solid total assets balance reflect improving prospects. SEIC has been focusing on high-growth areas of business, and in sync with this, it sold its Family Office Service operations to Aquiline in July 2025. The acquisitions of LifeYield (boosting multi-account tax management), Altigo (helping expand in the alternatives investment space) and National Pensions Trust (enhancing its position in the defined contribution market) will likely keep supporting the top line.
Technology is the backbone of SEI Investments’ businesses. Its strategic acquisitions, including Oranj's cloud-native technology platform, Finomial and Novus, support its technological advancement efforts. The company is taking several initiatives to enhance technology to support advisors. These initiatives and constant innovations in software will likely help SEIC win new clients.
In the past three months, shares of SEIC have gained 4.7%. In the past 30 days, the Zacks Consensus Estimate for the company’s 2025 and 2026 earnings has moved 10.2% and 1% upward to $5.38 and $5.45, respectively. Currently, SEI Investments sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: SEIC
Federated: Headquartered in Pittsburgh, PA, Federated is a global asset manager with $845.7 billion in AUM as of June 30, 2025. The company offers world-class active investment management and engagement services across a wide range of asset classes for investors globally.
Acquiring money market assets depicts the buoyancy of Federated in the money market business. The record level of money market AUM will provide the company with various new fund offerings. Management expects the market conditions for money market strategies to remain favorable, with money market fund yields continuing to offer an attractive alternative to direct market instruments and bank deposit rates.
Over the years, the company has inked deals and expanded operations in strategic markets. The buyout of C.W. Henderson and Associates in 2022 expanded FHI’s separately managed account business. The company continues to seek alliances and acquisitions to expand its business globally.
FHI’s inorganic growth efforts are expected to continue to drive the AUM balance in the upcoming period. In the four years ended 2024, AUM witnessed a CAGR of 7.4%, with the uptrend continuing in the first half of this year.
FHI shares have gained 23.9% in the past three months. Over the past 30 days, the Zacks Consensus Estimate for its 2025 and 2026 earnings has been revised 2.1% and 2.9% upward to $4.46 and $4.56, respectively. The company currently sports a Zacks Rank of 1.
Price and Consensus: FHI