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Asset Managers Unscathed by Dodd-Frank

Asset manager stocks may be worth a look post Finreg.



) -- Asset manager stocks may be worth a look, as they appear to have largely escaped the toughest provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

A report from Keefe, Bruyette & Woods states asset managers "remained largely out of the bullseye of the sweeping financial regulatory reform bill." KBW says both "traditional" money managers and "alternative" asset managers got off relatively easy from the new rules.

While the KBW report did not mention all of these names in its report, "traditional" money managers refers to companies like

T Rowe Price Group

(TROW) - Get Report


Principal Financial Group

(PFG) - Get Report


Franklin Resources

(BEN) - Get Report

. "Alternative" asset managers refers to private equity and hedge fund firms like

The Blackstone Group

(BX) - Get Report


Och-Ziff Capital management Group




TheStreet Recommends

(BLK) - Get Report

also belongs in the "traditional" money manager camp, though it has flirted with the idea of

competing with investment banks


Goldman Sachs

(GS) - Get Report


Morgan Stanley

(MS) - Get Report

in certain businesses.

For the most part, shares of money managers have fared no better than those of big banks like Goldman, Morgan Stanley,


(C) - Get Report


Bank of America

(BAC) - Get Report

during the sell-off of the past two months. That suggests the poor performance of financial stocks has far more to do with broader economic worries than fears about the Dodd-Frank bill.

Asset managers have typically traded at higher multiples than investment banking-oriented companies, and that dynamic largely remains in place today. While both Goldman and BlackRock have sold off sharply in the past several weeks, BlackRock is still costs more than three times as much as Goldman on a price-to-earnings basis.

There is a compelling reason for that differential, however. Managing other people's money is a great business -- with high margins, and steady fee income. Retail investors are scared, and have pulled out of the market. If a sustainable bull market returns, however, asset managers may be better positioned than investment banks to take advantage of it.


Written by Dan Freed in New York