"We are positive on the opportunity set unfolding for the Alternative Asset Managers to deploy capital in the energy sector given recent market dislocations from the decline in oil prices. All of the alt managers appear well positioned to invest opportunistically," the Dec. 22 report said.
The analysts peg KKR (KKR) as best positioned given its $3.4 billion of energy-related "dry powder," which represents 3.5% of KKR's assets under management, the largest percentage among its peers. In addition, the firm has $2 billion in cash on its balance sheet "that could be deployed to generate enhanced returns for shareholders," Morgan Stanley said. Morgan Stanley also expects Carlyle Group (CG) and Blackstone Group (BX) to raise money to boost their energy-related funds.
"Dislocations create 'buy low' opportunities which often lead to higher future returns and robust cash performance fees," the report said.
On the other hand, lower oil prices could present challenges for traditional asset managers.
Fourth quarter revenue and profitability will likely be "negatively impacted from mark-to-market impact of AuM (assets under management) invested in energy (both equity and credit)," the report said. "Furthermore, when we look to the medium- and longer-term, lower or declining oil prices would likely keep AuM and revenues depressed -- likely below current consensus estimates."
Morgan Stanley believes that AllianceBernstein (AB) is most impacted, given the firm's "outsized AuM exposure to credit/high yield markets, which have come under pressure during the recent oil price decline."
The research analysts took a deep dive across the firm's entire North America coverage universe to assess how a sustained period of lower oil prices would affect various sectors and stocks.
The Dec. 22 report "highlights stocks for which the effect would be most beneficial, or most challenging," it said. The analysts identified more than 30 industries in which "an extended period of low energy prices would have a material effect," and more than 120 stocks where the effects would be either "especially favorable or unfavorable."
Click through to see which alternative asset managers Morgan Stanley likes best and worst if lower oil prices continue into 2015.